Facts
The case concerns the taxation of gains from the sale of a property by K.S., who was previously active as a construction contractor. The Cantonal Tax Office of Zurich assessed K.S. for federal direct tax for 1995/96 with an average taxable income of CHF 584,300, whereby it taxed the gain from the sale of the multi-family house in D. in 1994 in the amount of CHF 998,305 (average CHF 499,152) as income from self-employment.
K.S. and his wife E.S. filed a complaint against the objection decision. The Federal Tax Appeal Commission partially upheld the complaint and set the taxable income for federal direct tax 1995/96 at CHF 105,400. It was of the opinion that the gain from the sale of the property should not be classified as income from self-employment, but as a tax-free capital gain from the disposal of private assets.
The Cantonal Tax Office of Zurich then filed an administrative court appeal with the Federal Supreme Court.
Considerations
The Federal Supreme Court partially upholds the appeal and confirms the objection decision of the Cantonal Tax Office of Zurich dated August 22, 1996.
The Federal Supreme Court states that according to Art. 18 Paras. 1 and 2 of the Federal Direct Tax Act (DBG), all income from self-employment is taxable, including all capital gains from the sale, realization or book-based revaluation of business assets. The concept of self-employment is to be interpreted more broadly than that of an enterprise, business, operation or trade. Even an activity that goes beyond the mere administration of private assets can be classified as self-employment, provided that it is aimed at earning income as a whole.
In the present case, K.S. was active as a construction contractor and engaged in real estate trading that exceeded the framework of mere asset management from 1967 to 1982. In this context, he also acquired and developed the property in question in D. with a multi-family house. Under these circumstances, it must be…