Current problems of taxation of partnerships (2017)

Case 1: Self-employed person - travel to work

Facts:

Kuno Meier runs a sole proprietorship at business location A and travels daily by company car from his residence B to business location A. The daily return journeys are 60 km.

Question:

Are the costs of travel to work subject to a tax cap?

Variant I

Kuno Meier is a general partner in the general partnership Meier & Keller and is involved in its management. He travels daily by company car from his place of residence B to his place of business A. The daily outward and return journeys are 60 km.

Question:

Are the costs of travel to work subject to a tax cap?

variant II

Claudia Müller is a limited partner in Kommanditgesellschaft Meier & Co. She works as a clerk in the company and uses the company car for the journey from residence C to business location A. The daily outward and return journeys are 60 km.

Question:

Are the costs of travel to work subject to a tax cap?

Case 2: Photovoltaic system on another roof

Facts:

Olaf Klein, cantonal councillor of the Green Party, "rents" the large barn roof from his neighbour, farmer Gross, and installs a raised photovoltaic system on it. The investment costs amount to CHF 200,000, and the electricity produced is fed into the local power station's grid. In addition to the feed-in tariff, he has received an investment contribution of CHF 30,000 from the canton.

Questions:

1. How do you assess this plant from a property law perspective?
2. Tax treatment of Olaf Klein and the farmer Gross?

Case 3: General partnership - operation?

Facts:

In the 1990s, X. (married, living in Kt. Schwyz) and a partner realized and sold a development in A. Since then, X. has been treated for tax purposes as a commercial property dealer. Together with two partners, X. acquired a residential and commercial building in Schwyz as "einfache Gesellschaft Y." and renovated it. Individual residential units were sold between 2001 and 2003. The proceeds were taxed as income from self-employment.

At the end of 2008, the three shareholders each held a 1/3 interest in "einfache Gesellschaft Y.".

On 19 February 2009, X. and one of the two partners registered the general partnership Z. in the Commercial Register of Canton Schwyz as 50% partners each (with their 2/3 holding in the "simple partnership Y.").

On 14 April 2009, the public limited company Z. AG with its registered office in B. was entered in the Commercial Register of Kt. X. and his partner colleague held a 50% stake in the company.
By purchase agreement dated 6 May 2009, the third partner, who had a stake in the "Einfache Gesellschaft Y.", sold his share to Z. AG.

With retroactive effect as of 1 July 2009, the General Partnership Z. transferred assets within the meaning of Art. 69 et seq. FusG, the general partnership transferred all assets and liabilities to Z. AG. The transferred assets include

• 4 apartments in condominium ownership
• 4 underground parking spaces
• 4 shares in P. AG
• 4 shares in Q. AG

The tax administration of Kt. Schwyz calculates at X. (and his wife) income from commercial real estate trading of CHF 238,477 due to the transfer of assets for the purposes of direct federal tax and assesses a total taxable income of CHF 401,500. X. does not agree with this and asks you the following questions.

Questions:

1. In any event, does participation in a 'simple partnership' constitute self-employment?
2. Is it true that the general partnership Z. cannot transfer its assets and liabilities to Z. AG in a tax-neutral manner for the purposes of direct federal tax and thus trigger income taxation for X.? If so, why not?
3. If the transfer of assets is not possible in a tax-neutral way and the two general partners would have clarified the question of tax-neutral transfer before its implementation: Could the two general partners have transferred the assets and liabilities to private assets and claimed liquidation profit taxation (Art. 37b DBG, Art. 11 para. 5 StHG) instead of a transfer to an AG?

Case 4: Commercial real estate dealer business?

Facts:

X. (widowed) is a resident of the Canton of Zurich and was qualified as a commercial real estate agent years ago. He currently owns three properties, a 50% stake in an industrial building (A-Strasse 2) and two apartment buildings at B-Strasse 10 and C-Strasse 25, from which he generates substantial annual rental income (see income statement below).

In recent years, X. neither bought nor sold any land.

The three plots of land mentioned above form at X. Business assets. In view of his estate planning - he has several children - he now wishes to transfer the properties in a tax-neutral manner to a newly established public limited company.

Question:

1. the tax advisor of X. wonders whether X. can bring the three properties into a corporation in a tax-neutral manner, against the background of the BGer of 24 May 2016?
The balance sheet as at 31 December 2016 and the income statement for 2016 are shown on the following page.

2. if the contribution to the corporation in the first half of 2017 is not tax-neutral with retroactive effect as of 31 December 2016 (for whatever reasons), X. wonders whether the first half of 2017 until the entry of the corporation in the commercial register is considered one of the last two financial years within the meaning of Art. 37b DBG and Art. 11 para. 5 StHG.

Case 5: Self-employment and employment - occupational pension scheme

Facts:

Severin Klug is an independent lawyer. In addition, he pursues various sideline activities as a self-employed person, including teaching at a university. For his work as a teacher, he is insured with the pension fund of the canton. The regular employee contributions amount to CHF 4,000. For his self-employment, Mr. Klug pays 20% of his self-employment income or CHF 30,000 into the tied pension plan (pillar 3A).

In the accounts, he books 50% of the contribution to pillar 3A to the pension expense account and the remaining 50% to the capital account.

Questions:

1. Assessment from the perspective of BVG law?
2. Tax consequences?

Case 6: Securities trading lover

Facts:

X. works as an auditor and consultant in the field of auditing. Originally he completed a commercial apprenticeship and the "professional examination for trustees".

X. has a cash balance of CHF 20.62. As of 1 January 2010, X. will start trading warrants on the stock exchange in 2010. X. generates losses of approximately CHF 37,013, CHF 41,042 and CHF 10,031 from stock exchange trading in the years 2010 to 2012. On 31 December 2010, he has an account balance of CHF -3,103.52, his average securities assets in 2010 amounted to a maximum of CHF 8,000.

In the tax period 2010, the transaction volume of warrants (sum of all purchase and sale prices) amounted to CHF 620,000. X. traded exclusively in options. which were used for speculation. It carried out a total of 200 transactions and the holding period of the options proved to be short. He often held the options for only a few hours, which is why X.'s average daily securities assets in 2010 amounted to only CHF 12,000.

X. took out a bank loan of CHF 32,500 with GE Money Bank in 2010. However, this amount was offset against a portion of the loan already drawn in 2009, which is why he actually only received CHF 8,000 in 2010. In the same year he also received a gift of CHF 11,700 from his father.
In his 2010 tax return, X. deducts the loss of CHF 37,000 from his taxable income, on the grounds that this loss stems from his self-employment.

Question:

Does the option trading of X. qualify as self-employment?

Case 7: Holding and management of real estate

Facts:

Harald Mutig, a pensioner, is the owner of a sole proprietorship which, after abandoning industrial production, has the purpose of "holding and managing real estate". Fabienne Moser is responsible for the management. The annual rental income amounts to approximately CHF 600,000.

The sole proprietorship granted Verlust AG an interest-free loan of CHF 50,000, with the loan agreement being signed by Fabienne Moser for both the creditor and the debtor. Shortly after the loan was granted, Verlust AG went bankrupt and the loan of CHF 50,000 was written off as irrecoverable in the sole proprietorship.

Mrs. Moser has commissioned Maler AG to repaint part of the factory building due to conversion. The invoiced services of CHF 200,000 were capitalized and depreciated at the end of the financial year at CHF 180,000. No quotations were obtained for this order. The assessment authority has doubts about the value of the painting work and demands proof of the business justification.

Questions:

1. How do you assess the loan agreement and the subsequent write-off?
2. How can proof be provided that the painting work was carried out in accordance with business practice and what would be the consequences of incomplete proof?

Case 8: Sale of an investment from business assets - partial taxation

Facts:

X. is a sole proprietor (trustee) and holds a 9% stake in Y. as of 1 January 2015 in the business assets. AG, which he had acquired shortly before. Y. AG provides facility management services.

On 10 October 2015, X. acquired a further 11% of Y. AG. On 1 July 2016, X. can sell the 20% stake to an independent third party at a lucrative price.

Questions:

1. Can X. claim partial taxation on the capital gain pursuant to Art. 18b DBG?
2. Variant: Can X. claim partial taxation on the capital gain pursuant to Art. 18b DBG if he already held a 10% stake on 1 January 2015, acquired a further 11% on 10 October 2015 and sold 21% on 1 July 2016?