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Real Estate

Cedric Roos

Remo Keller

Restructuring and reorganization, including replacement of real estate

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Workshop on the occasion of the ISIS) seminar of 12 November 2020 entitled "Real Estate and Taxes".

11/2020
The corresponding case solutions can be purchased for CHF
120.00
(introductory price)
be on sale in the shop
The case solutions and other documents can be obtained free of charge in the shop.

1st case - introductory case

Procurement of replacements for operating companies

X-AG, an operating company based in Zurich, purchased an operating property (also in Zurich) for CHF 3,200,000 in 2010. During the period of ownership, X-AG capitalized value-enhancing expenses in the amount of CHF 800,000 and carried out ordinary depreciation in the total amount of CHF 600,000. The book value as of 31 December 2019 is CHF 3,400,000.

In 2020, X-AG sells the operational real estate for CHF 5,000,000 for reinvestment in a new operational real estate. The following options are being examined:

Variant A

Purchase of a company property in Zurich at a price of CHF 6,000,000.

Variant B

Purchase of a company property in Zurich at a price of CHF 3,500,000.

Variant C

Purchase of a commercial property in Zurich for CHF 4,000,000, with value-enhancing expenses of CHF 500,000 expected in addition to the purchase price.

Questions

  1. What are the consequences for X-AG in terms of direct federal tax?
  2. What are the consequences for X-AG in terms of real estate profit tax?
  3. What are the consequences for the X-AG in terms of state and municipal taxes?

2nd case - property management company and property dealer

Procurement of replacements for real estate companies

X-AG, a pure property management company based in Berne, has a broad portfolio of owner-occupied and third party-rented properties in Berne. In 2020, X-AG is considering replacing its administrative headquarters on the one hand and an investment property on the other.

Questions

  1. How do you assess the replacement of the administrative headquarters?
  2. How do you assess the replacement of an investment property?
  3. Does your assessment change if X-AG is a real estate broker?

Supplement to the facts

X-AG belongs to the X Group and holds all properties of the X Group. This includes the Group headquarters and the properties of the X Group used for operations by other Group companies. It lets the properties to the other Group companies at market rents.

Question

  1. Does the factual supplement change your assessment?

Case 3 - Update on the ISIS Seminar of March 10, 2016, Case 6

Replacement procurement for real estate investments

In 2010, X-AG, an operating company based in Liestal, acquired a 60 percent stake in a real estate company ("Immo-AG I") for CHF 600,000. Immo-AG I holds an apartment building in Liestal.

In 2020, X-AG will sell its investment for CHF 1,000,000, and value adjustments of CHF 60,000 have been made until the sale. The profit tax value of the participation before sale is CHF 540,000, the cost price per sale is CHF 600,000.

In the same year 2020, X-AG again purchases a share in a real estate company ("Immo-AG II") with properties in Liestal, namely a 60 percent share for CHF 900,000.

Questions

  1. What are the consequences for X-AG in terms of direct federal tax?
  2. What are the consequences for X-AG in terms of real estate profit tax?
  3. What are the consequences for the X-AG in terms of state and municipal taxes?
  4. What are the consequences for X-AG regarding the property transfer tax?
  5. How do you assess the situation if the X-AG is domiciled in Luxembourg?

Supplement to the facts 1

Immo-AG I acquired the apartment building in 2010 for CHF 3,000,000. During the holding period, Immo-AG I made ordinary depreciation of CHF 300,000 and a one-off value adjustment of CHF 100,000.

Question

  1. Will the sale by X-AG result in tax consequences for Immo-AG I?

Supplement to the facts 2

Immo-AG I will sell the apartment building in 2021 for CHF 4'000'000. The profit tax value is CHF 2'600'000. Apart from the sale of the participation by X-AG, there were no other changes in the shareholder structure.

Question

  1. What are the tax consequences for Immo-AG I on the sale in 2021?

4th case - spin-off of a real estate portfolio

Spin-off of a real estate portfolio from the operative business

X-AG, an operating company with headquarters and operational real estate in Basel, plans to separate its business operations from its real estate portfolio. To this end, the real estate portfolio is to be transferred to a newly founded subsidiary, which will subsequently be distributed to the shareholder of X AG (so-called "old-law demerger"). After the demerger, the properties will be rented to Group companies. The newly founded company will employ one person (full-time position) to manage the properties.

Real Estate and Taxes Land Restructuring Reorganization Replacement Real Estate Seminar Isis Isis tax taxlaw Tax Law Seminar Real Estate Portfolio Real Estate

Variant A

The estimated target rental income is CHF 2,500,000.

Variant B

The estimated target rental income is CHF 1,900,000.

Variant C

The estimated target rental income amounts to CHF 1,500,000. In addition to the existing properties, X-AG was able to secure the right to purchase another property. The estimated target rental income for this property is CHF 1,000,000.

Questions

  1. What are the consequences for X-AG in terms of direct federal tax?
  2. What are the consequences for X-AG in terms of cantonal taxes?
  3. What are the consequences for X-AG in terms of real estate profit tax?
  4. Are there any further tax consequences for the X-AG?

Case 5 - Restructuring of pension schemes

Replacement for legal entities

X Group has a pension fund in the legal form of a foundation ("X-PK") with its registered office in Lucerne. The purpose of the foundation is to provide occupational benefits for the employees of X Group and therefore X-PK is subjectively exempt from profit tax pursuant to Art. 56 lit. e DBG and § 70 para. 1 lit. e StG-LU. X-PK plans to transfer its real estate portfolio to a real estate investment foundation in return for surrendering 5 percent of the claims (participation) in the investment foundation.

Questions

  1. What are the consequences for the X-PK in the direct federal tax?
  2. What are the consequences for X-PK in state and municipal taxes?
  3. What are the consequences for X-PK in terms of property gains tax?
  4. What are the consequences for X-PK in terms of hand transfer taxes?
  5. If there are further tax consequences for the X-PK
CHF
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