Facts
The appellant [A.A.] (widow of the testator [C.A.] ) was, together with her children, co-heir of the shares in [C. AG] and [D. AG] . Brother-in-law [B.A.] founded [E. AG] in autumn 2013, into which he contributed his holdings, except for 450 shares of [D. AG] .
On 1 December 2014, [B.A.] sold 450 shares of [D. AG] (50% of 900 shares) for CHF 1,639,250.-- to the heirs. On the same day, the heirs sold 150 shares of [C. AG] (50% of 300 shares) for CHF 1,191,400.-- to [E. AG] . On 19 December 2014, [B.A.] assigned his claim of CHF 1,639,250.-- against the heirs to [E. AG] ; after set-off, the heirs still owed [E. AG] CHF 447,850.--. The purchase agreement provided for payment by 29 December 2014.
On 15 July 2015, [C. AG] distributed a substance dividend of CHF 1,955,000.-- to [E. AG] . The Tax Administration of the Canton of Valais assessed the appellant in the supplementary tax proceedings for the tax period 2014 (assessment of 15 December 2016) with income from movable assets of CHF 533,929.--. It classified a portion of CHF 977,500.-- of the substance dividend as non-operating, already existing and distributable substance and, as a result of partial taxation, included 60% of it as income from indirect partial liquidation.
The objection of 16 January 2017 was dismissed on 23 January 2017. The appeal of the appellant was dismissed by the Valais Cantonal Tax Appeals Commission by judgment of 28 May 2020. By public law appeal of 20 August 2020, the appellant requested that this judgment be set aside. The lower court and the Federal Tax Administration requested dismissal.
Issue in dispute: Whether the appellant, as seller, participated in the financing of the purchase price through withdrawal of substance from the target company within the meaning of Art. 20a para. 2 DFTA.
Considerations
Standing and admissibility: The Federal Supreme Court notes that the public law appeal is open against the decision of the last cantonal instance (Art. 82 ff. FSCA in conjunction with Art. 146 DFTA and Art. 73 DTHA). The appeal of the appellant, who has standing under Art. 89 para. 1 FSCA, is admitted as formally and timely filed. The community of heirs is not an appellant, as only the appellant participated in the proceedings before the lower court.
Elements of indirect partial liquidation: Pursuant to Art. 20a para. 1 lit. a DFTA, Art. 7a para. 1 lit. a DTHA and Art. 16a para. 1 lit. a StA/VS, indirect partial liquidation exists where the proceeds from the sale of a holding of at least 20% flow from private assets into the business assets of another person and, within five years, with the participation of the seller, non-operating, already existing and commercially distributable substance is distributed. Participation exists where the seller knows or must know that funds are withdrawn from the company to finance the purchase price and not returned (Art. 20a para. 2 DFTA). The subjective element is to be examined with respect to the seller (judgment 2C_702/2018 E. 8.1).
No genuine share exchange: The Federal Supreme Court rejects a share exchange between private persons. The heirs sold their package to [E. AG] (business assets), while they took over the package from [B.A.] out of his private assets. The set-off of claims under Art. 120 para. 1 CO was only possible because [B.A.] assigned his claim to [E. AG] on 19 December 2014.
Objective criteria and participation: Whether a partial liquidation exists must be assessed, according to settled case law (BGE 115 Ib 249 E. 2e), on the basis of objective criteria and all circumstances relevant to the financing. The purchase agreement was not settled simultaneously (Zug um Zug); the purchase price was only settled on 19 December 2014 by set-off. It would be contrary…