Facts
The case concerns the taxation of income earned by a deceased person in 2002 and 2003 from a fraudulent investment scheme with a pyramid character. The deceased had invested a total of CHF 370,000 in the system and received the income in cash or left it in the system. The tax authorities of the canton of Solothurn and the Federal Tax Administration assessed the deceased with additional taxes for the years 2002 and 2003. The heirs of the deceased appealed against the assessments and argued that the income was not taxable because it came from an unlawful system.
The lower court dismissed the appeal and the heirs appealed to the Federal Court. The Federal Court had to decide whether the income from the pyramid scheme was taxable and whether the lower court had rightly dismissed the appeal.
Considerations
The Federal Court examined the appeal and came to the conclusion that the income from the pyramid scheme was taxable. It based its decision on the case law according to which income from a pyramid scheme is generally taxable as long as it is not neutralized by a lawsuit.
The court also examined whether the income was realized at the time of crediting or payment. It came to the conclusion that the income was realized at the time of crediting, since the asset manager was still making payments to other investors at that time and there were no indications that the heirs were treated differently.
The court also rejected the heirs' complaint that…