Taxation of insurance benefits (excluding pensions) and other capital benefits

Case 1: Traffic accident and various benefits

Facts

Ivan Invalido suffered a cervical sprain and severe craniocerebral trauma as a result of a traffic accident on 28 July 2014. Despite IV retraining measures and several attempts at work, it was no longer possible to integrate the accident victim into working life. The motor vehicle passenger insurance scheme paid disability insurance capital of CHF 350,000, which is calculated according to a so-called limb scale. In the same year he then receives an IV capital of CHF 65,000 from the pension fund. The UVG insurer paid an integrity compensation of CHF 50,400 (= 40% of CHF 126,000).

Question

How do you assess this situation?

Case 2: Household damage and disability pension

Facts

Mrs X suffered a skiing accident through no fault of her own on 1 February 1998 and her health has been impaired since then. At the time of the accident she was a housewife, mother and not gainfully employed. The liability insurance paid contributions to additional expenses (Spitex, therapies, transport, etc.) and from 1998 - 2000 CHF 15,000 per year for household damage. By decree of 11 January 2001 with effect from 1 March 1999, Mrs. X was certified as having a degree of disability of 56 percent and was granted half an IV pension. At the end of the year, the IV pensions accrued up to that date were paid to her in the total amount of CHF 38,198.

Questions

1. How should compensation for household damage by the liability insurance be treated for tax purposes?
2. How is the disability pension treated for tax purposes?

Case 3: Household damage, compensation and loss of earnings

Facts

In December 2010, Mrs. X suffered a traffic accident. Since then she has been incapacitated. In November 2016, a compensation agreement was reached with the liability insurance of the person who caused the accident, according to which the liability insurance recognised a payment totalling CHF 1,235,000 under the title "Household Damage and Satisfaction". CHF 1,245,000 (including CHF 10,000 interest on arrears) was paid to Mrs. X, of which CHF 35,000 had already been paid out on account at an earlier date, the remaining CHF 1,210,000 was paid in February 2017. Mrs. X declared CHF 1.2 million as non-taxable in her 2017 tax return under the title "Budgetary loss", "Compensation for liability loss". She declared CHF 10,000 as taxable income.

Questions

1. How do you assess this situation?
2. How would you assess the facts of the case if Ms X had transferred her residence to Canton Y in December 2016?

Case 4: Pension arrears payment / offsetting against social welfare benefits

Facts

In March 2006, the Swiss Federal Disability Insurance granted Mr. X a full disability pension with retroactive effect from May 1, 2003. In October 2006, the Stiftung Auffangeinrichtung BVG additionally awarded Mr. X a full disability pension and two children's pensions from occupational benefits, which also began to run from 1 May 2003. On the basis of these two decrees, Mr. X received a pension arrears payment of CHF 127,455 in 2006, which was transferred directly to the Social Directorate. The latter balanced the social assistance account held for Mr. X and transferred the surplus of CHF 3,466.55 to him.

Mr X has been informed by the tax administration that the pension payments are taxed in the year in which they were paid out. In addition, repayments to the Social Directorate could not be deducted.

Question

How do you assess this situation?

Case 5: Disability related costs / accident costs / further questions

Facts

The 17-year-old Daniel H. is on his way through Frauenfeld on his bicycle. At the height of a fast-food restaurant, he is hit and seriously injured by an oncoming car whose handlebars black out. As a result of the accident, Daniel H. is constantly and to a considerable extent dependent on the help of third parties. His mother gives up her employment and cares for her son. Among other things, the motor vehicle liability insurer provides a "nursing and care damage pension" amounting to CHF 7,500 per month.

Question

How do you assess the facts

Case 6: Disability related costs

Facts

In 2005, spouses X had acquired an undeveloped plot of land and had a detached house built on it. Since Mr. X is paraplegic, the spouses X have decided not to build a basement underneath the house and not to build any additional floors. This construction method allows Mr. X to reach all rooms easily with his wheelchair.

Spouses X argue that dispensing with stairs and thus with additional floors would require a larger floor area. They state that the additional floor space required is 68.4 m2 , which resulted in additional costs of CHF 20,351 when purchasing land. According to spouses X, this amount is to be deducted from their income as disability related costs.

Question

How do you assess this situation?

Case 7: Lump-sum payment and satisfaction in the event of death

Facts

Spouses X and Y, both retired, live in St. Gallen. Their son Z, who lives in Boston (USA), and his wife and their unborn child died in the attacks in New York (USA) on 11 September 2001. In 2002, X and Y received compensation payments of USD 350,000 and USD 600,000 respectively, and in 2004 they were paid a further USD 2,094,910 each from the September 11th Victim Compensation Fund of 2001 established by the US government.

Questions

How are these compensation payments to be treated for tax purposes?

Case 8: Capital payment for obstruction-related costs

Facts

The injured disabled person receives a lump-sum benefit from the liability insurance under the title "Disability-related additional costs". Disabled persons incur various costs which they would like to deduct for tax purposes. These include the following expenses:

• Therapy costs
• Tailor-made clothes / custom-made shoes Transport costs in therapy
• Home care costs
• Additional costs for holidays suitable for disabled persons

Questions

How do you assess this situation?