Facts
The heirs of X.A. were the owners of a commercial building in Zurich. To sell the property without mortgage encumbrance, the existing mortgages were terminated prematurely against a prepayment penalty of CHF 2,415,083. The Real Estate Tax Commission of the City of Zurich did not allow this prepayment penalty to be deducted in the determination of the real estate gain. The heirs of X.A. then filed a complaint with the Federal Supreme Court.
Considerations
The Federal Supreme Court states that a prepayment penalty paid upon the full and final termination of the mortgage debt relationship can be deducted from the taxable proceeds subject to real estate capital gains tax as "investment costs" pursuant to Art. 12 para. 1 StHG or § 219 StG/ZH, if it is inextricably linked to the impending sale of the property and corresponds to an effective and value-enhancing expenditure made by the seller.
In the present case, the prepayment penalty meets these requirements. The full termination of the fixed-rate mortgage was undisputedly carried out with a view to the planned sale of the property, so that the compensation was inextricably linked to it. Furthermore, it represents effective expenditures…