Deduction of Renovation Costs in the Case of "Economic Reconstruction"

Facts

A.A. and B.A. live in the Canton of Fribourg. In 2018, they acquired a farmhouse in the Canton of Jura that was in need of extensive renovation. They carried out comprehensive renovations on the property in 2018 and 2019. In their 2018 tax return, they claimed real estate maintenance costs of a total of CHF 73,971, of which CHF 50,653 related to the property in the Canton of Jura.

However, the Cantonal Tax Administration of Fribourg only accepted a deduction of CHF 19,326 for the cantonal tax and CHF 22,369 for the direct federal tax. The reduction for the costs of the property in the Canton of Jura was justified by the fact that value-enhancing expenses could not be deducted.

By filing an appeal with the Federal Supreme Court, the spouses A. requested the annulment of the judgment of the Cantonal Court of Fribourg and the assessment taking into account the entire declared real estate maintenance costs.

Considerations

The Federal Supreme Court partially upholds the appeal. It states that according to the version of Art. 32 para. 2 DBG that entered into force on January 1, 2010, the costs of renovating newly acquired properties can be deducted as maintenance costs. The previous Dumont practice, according to which the costs of maintenance work carried out immediately after the acquisition of the property could generally not be deducted from income, was thus abolished by the legislator.

However, the Federal Supreme Court does not uphold the case law on "economic reconstruction". This practice, according to which the complete renovation as well as the complete conversion or…