Deduction of property maintenance expenses in the absence of rental value

Facts

A.X. and B.X. (the taxpayers) were co-owners of an apartment in Y. which they occupied in 2002. On September 24, 2002, they acquired a building in Z. which they renovated before moving in on March 3, 2003. In their 2002 tax return, the taxpayers deducted CHF 3,294 in maintenance expenses related to the building in Z., but the Geneva Cantonal Tax Administration refused this deduction on the grounds that the building did not yet have a rental value in 2002. The taxpayers contested this decision up to the Federal Tribunal.

Considerations

According to the Federal Tribunal, property maintenance expenses constitute organic expenses for the acquisition of rental income and are generally deductible, even in the absence of rental income. Art. 9 para. 1 LHID generally defines acquisition expenses as deductible, without requiring perfect symmetry between the income and the deducted expenses. Only an abuse of law could justify the refusal of the deduction.

In this case, the disputed maintenance expenses are in principle deductible, as they are not expenses for the renovation of a neglected building. The fact that the building did not yet generate rental value in 2002…