Facts
The spouses X. operated a bakery business in their own property until 2001. The bakery was located on the ground floor, and the upper floors contained three apartments, including a 7 1/2-room maisonette apartment occupied by the appellants themselves. After the bakery business was discontinued, the Nidwalden Cantonal Tax Authority assessed the spouses X. for federal direct tax in 2001, including a capital gain from the transfer of the property from business to private assets. The appellants filed an administrative court appeal against this decision.Considerations
The Federal Court decided that the 7 1/2-room maisonette apartment occupied by the appellants themselves should be allocated to the private assets. According to the case law of the Federal Court under the old law (Federal Council Decree on the Levying of a Direct Federal Tax), such an allocation of the private residence to the business assets was only exceptionally considered appropriate if living in the business premises enabled or significantly promoted efficient business management. These requirements are even more narrowly defined under the new law (Federal Act on Direct Federal Tax), as the apartment must "serve the self-employed activity entirely or predominantly".
The Federal Court explains that the actual circumstances have changed compared to previous cases. Traditional businesses such as bakeries often now obtain their sales goods from large suppliers and have discontinued their own production. Similarly, the importance of smaller businesses has declined with the emergence of shopping centers. Therefore, in today's social circumstances, it can no longer be claimed that rational business management is only enabled or significantly…