Facts
The complainants, [A.S.] and [B.S.] , were taxed by the Cantonal Administration for the direct federal tax of Glarus for the years 1997 and 1998. The tax administration assumed that the shares of [Y. AG] , which [A.S.] had purchased from [X. AG] , had been sold at an undervalued price, resulting in a hidden profit distribution to the sole shareholder in the amount of CHF 138,400.--. This extraordinary income was subject to annual taxation. The complainants lodged an objection and appeal, which were rejected.
In 1998, [A.S.] received dividends from [X. AG] and [Y. AG] in the amount of CHF 420,000.--. The tax administration considered these payments as extraordinary income and subject to annual taxation. The complainants also lodged an objection and appeal against this, which were rejected.
The complainants filed a complaint with the Federal Supreme Court and requested that the judgments of the Administrative Court be set aside.
Considerations
The Federal Supreme Court examined whether the monetary benefit paid to [A.S.] in connection with the sale of the shares of [Y. AG] was subject to special taxation. It found that the list of income in Art. 47 DFTA is exhaustive and that the monetary benefit does not fall under the income listed in Art. 47 DFTA.
The Federal Supreme Court further examined whether the dividends of CHF 420,000.-- received by [A.S.] in 1998 from [X. AG] and [Y. AG] were subject to special taxation. It found that this fact does not lead to the levying of an annual tax, as the Federal Act on Direct Federal Taxation does not generally cover all extraordinary income, but only those explicitly mentioned in Art. 47 DFTA.
The Federal Supreme Court decided that the administrative complaints were well-founded and that…