Partial approval of the administrative court appeal regarding direct federal tax

Facts

The appellant, [X.] , is a winegrower and partner of the collective company Gebrüder [X.] Sanitärinstallationen. His wife earns income from properties and is a shareholder of [A. AG] . The tax administration of the canton of Valais assessed the spouses [X.] for cantonal and communal taxes as well as for direct federal tax for the tax years 1995/96. The appellant appealed to the Tax Appeals Commission of the canton of Valais, which partially approved his appeal and reduced the taxable income for the relevant period for direct federal tax to CHF 177,013.--.

The appellant filed an administrative court appeal with the Federal Court and requested that the decision of the Tax Appeals Commission be revoked insofar as it had not approved his appeal. The Cantonal Tax Administration requested dismissal of the appeal, while the Federal Tax Administration requested partial approval of the administrative court appeal.

Considerations

The Federal Court considered that the administrative court appeal is admissible with regard to direct federal tax, as the timely challenged decision of the Tax Appeals Commission of the canton of Valais is a cantonal final judgment. The Federal Court applies federal law in the administrative court appeal ex officio, without being bound by the reasoning of the parties' requests.

The compensation paid to the appellant by the municipality of [B.] is subject to direct federal tax, as it is a compensation for the non-exercise of a right. The gain on immovable property tax is not levied by the Confederation, and it is not to be considered whether the compensation is subject to gain on immovable property tax or general income tax at the cantonal level.

The Federal Court also found that the appeal is well-founded insofar as the revocation of the contested decision regarding income from movable assets and from properties is requested. The cantonal tax authorities have assessed rental income from properties in the amount of CHF 17,280.--, which was only earned in 1995, although the regime of retroactive assessment applies for the…