Facts
[B. AG], headquartered in U./NW, of which [A.] was the sole shareholder, acquired a hotel property in V./D. in 2003 for a total of CHF 7,136,927. However, the property was recorded in B. AG's accounts at only CHF 1,865,995. When the property was sold in 2015 as part of the liquidation of [B. AG], it resulted in a gross revenue of EUR 5,546,357.60.
By tax assessment decision dated October 5, 2018, the Cantonal Tax Office of Nidwalden assessed [A.] an amount of CHF 2,275,164 as income for the 2015 tax year. [A.] filed an objection, which was dismissed by the Administrative Court of the Canton of Nidwalden.
[A.] then filed an appeal with the Federal Supreme Court, requesting the annulment of the Administrative Court's decision and the determination of the taxable income at CHF 49,705.
Considerations
The Federal Supreme Court concluded that the gratuitous assumption of debt by [A.] is to be qualified as a concealed capital contribution to the company. Concealed capital contributions generally fall under Art. 20 para. 3 of the Federal Direct Tax Act (DBG) and can therefore be repaid tax-free.
The Federal Supreme Court rejected the lower court's argument that concealed capital contributions do not fall under Art. 20 para. 3 DBG. The wording, the systematic structure of the law, and the legislative history of the provision…