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view in original language (German)In practice, partnerships raise numerous tax law issues - from the distinction between private and business assets to property gains in the monistic and dualistic system and succession constellations with prior-year losses. Using practical case studies, Susanne Schreiber and Toni Hess show how self-employment, business asset qualification and the taxation of copyrights are to be assessed for tax purposes. The solutions provide you with the necessary tools to recognize typical stumbling blocks for partnerships and to structure them correctly for tax purposes.
In 2008, A. entered into a contract with B. to form a simple partnership for the purpose of carrying out a real estate project. The contract for the simple partnership contains a clause stating that one of the partnership’s objectives is for A. to personally receive Apartment No. 106.
The properties are located in a canton that taxes real estate gains under a dualistic system.
In the 2011 financial statements, which A. attaches to his tax return, the general partnership reports three properties (Nos. 104 and 107 (apartments; value approx. CHF 330,000) as well as Nos. 103 and 106 (apartment and parking space), value approx. CHF 200,000), with the apartment including parking space Nos. 103 and 106 allocated to A.
The tax administration assumes that in 2011, A transferred properties No. 103 and 106 from business assets to private assets and calculates taxable income of over CHF 1 million for federal, cantonal, and municipal taxes.
A. formed a general partnership with B. for the purpose of carrying out a real estate project involving a piece of land. The property is located in the Canton of Zurich, which taxes capital gains on real estate under a monistic system. The general partnership holds the property in question as joint ownership, and A. holds a 20% interest in the general partnership. Subsequently, the general partnership is dissolved, and the property is divided among the partners of the general partnership through the allocation of condominium ownership. As part of the dissolution, A. assumes only 18% of the total value of the apartments.
Does the allocation of condominium ownership trigger real estate gains tax for A. under the monistic system?
Hans Koch is the owner of Parcel No. 1, on which stands the single-family home he himself inhabits. The property is part of his private assets.
Auto Koch AG, a company wholly owned by Hans Koch, is the owner of the neighboring parcel No. 2. The company building (repair shop and showroom) is located on this parcel. The properties are located in the canton of St. Gallen.
Hans Koch has joined forces with the construction company Bual (e.G.) to build an apartment building as part of a construction consortium / cost-sharing arrangement. The construction company Bual consists of Auto Koch AG and the independent Immo AG. It negotiates on behalf of the construction consortium with the banks, the architect, and the contractors.
Auto Koch AG sells Parcel No. 2 to the Bual Construction Company. Subsequently, the two properties, No. 1 and No. 2, are merged to form Parcel No. 3. Co-ownership is established for this property: Hans Koch is entered in the land register as a co-owner with a 3/10 share, and the Bual Construction Company with a 7/10 share. After the demolition of the two existing buildings, condominium ownership is established on Plot No. 3 by assigning special rights to specific parts of the building to the previous co-ownership shares and setting corresponding value quotas. Subsequently, a multi-family residence is constructed on Plot No. 3.
Hans Koch acquires—in accordance with his share in property No. 3—two condominium units and three parking spaces in the underground garage. He intends to live in one apartment himself and rent out the other.
The remaining five apartments are sold. The corresponding profits flow in full to the construction company Bual, in proportion to its share.
Hans Koch’s trustee takes the position that the above-mentioned procedure has no tax consequences for Hans Koch. The two STWEs, including the parking spaces, remain part of his private assets, as before.
A. works as an orthopedic surgeon and runs his own practice. To expand his self-employed business to include work as an affiliated physician, he entered into a shareholders’ agreement with the shareholders of D. AG, who are also affiliated physicians at D. AG. Under the shareholders’ agreement, A. undertook to acquire 400 shares of D. AG within the following ten years, whereby he was only permitted to begin working as an affiliated physician at D. AG after he had acquired at least 40 shares of D. AG.
Against this backdrop, in 2014, A. purchased 250 shares of D. AG for a total price of CHF 150,000 using funds from his private bank account. His status as an affiliated physician enabled and required A. to use D. AG’s infrastructure (including, for example, radiology) for surgical procedures to the extent possible. Three years later, in view of a merger between D. AG and F. AG, A. sold his stake in D. AG for a total price of CHF 775,000.
How should the profit realized from the sale of the shares be treated for tax purposes with respect to A.?
After running his own practice as a sole proprietorship for over 10 years, A. ceases his self-employment and transfers his entire practice to D. AG. The sole proprietorship has assets with a book value of CHF 2,500,000, with hidden reserves amounting to CHF 1,000,000. The balance sheet equity amounts to CHF 1,500,000. With the transfer of the practice to D. AG, the share capital is increased by CHF 900,000, and in return, A. receives a corresponding stake in D. AG. In addition, hidden reserves amounting to CHF 600,000 are formed.
A. does not transfer his entire business to D. AG, but only his electrosurgical device (book value CHF 300,000; market value CHF 600,000). Otherwise, A. continues to run his practice. Based on the contributed asset, A. receives a 30% stake in D. AG.
A. is a self-employed attorney, and his core business consists of advising and assisting foreign private clients and companies, with a focus on international, cross-border tax planning.
In 2014, he acquired 50% of all shares in C. AG for a total of CHF 800,000. The purpose of C. AG is to carry out fiduciary and auditing mandates, and its registered office is located at the same address as A.’s law firm. The plan was for A. to be involved with C. AG in providing general legal advice, strategic consulting, and tax optimization services; however, A. ultimately had to be more heavily involved than originally planned. From 2013 to 2018, approximately one-third of A.’s revenue on average consisted of fee payments from C. AG.
In 2019, A. sold his shares in C. AG for CHF 1,400,000.
Was the sale of the stake in C. AG made from private or business assets?
Mr. Baumann (59) is the owner of a sole proprietorship based in the canton of Schwyz. It is an established, high-revenue electrical installation business with the usual fixed assets necessary for operations. The sole proprietorship has carryforward losses from the previous year totaling CHF 0.9 million, which arose five years ago in connection with the cancellation of a major project.
In addition to his business operations, Mr. Baumann has long held two equity investments, which he declares in his private assets in his securities portfolio:
Neither the equity investments nor the current account receivable are recognized on the sole proprietorship’s balance sheet; he pays taxes on the securities and interest income privately.
Mr. Baumann is planning his succession and would like to (i) transfer the electrical installation business to his daughter and (ii) at the same time also gift part of the non-operating assets to his descendants.
Note
: Since the Canton of Schwyz does not levy a gift tax, the tax consequences of the gift are not addressed.
Following the announcement of the film "La dernière nuit" about his family in** 2019, Jean Noir** decided to write his memoirs (mes mémoires) for his three children so that they could learn the truth about their family. He anticipated that the film would cast his family in a negative light.
Jean Noir comes from an old French noble family. He has lived in Geneva for years. Professionally, he is a “man of independent means”; he is not active as a book or film publisher.
From the very beginning (2019), Jean Noir was certain that it would have been pointless to oppose the film’s release.
In the fall of 2019, he began writing his memoirs (“A Retrospective – How It Really Was”), which he completed in 2021. At no point did Jean Noir pursue any commercial purpose in writing his memoirs.
The film premiered in France in February 2021.
In December 2022, Jean Noir was persuaded by the publisher “Édition Nocturne” (Publisher) to publish the memoirs as a book.
The publisher entered into the following “fixed-term publishing agreement” with Jean Noir:
Same facts as in the main case with the following change: No publisher approached Jean Noir. Rather, Jean Noir spent a long time looking for a publishing house willing to publish his memoirs. In doing so, he also created a “promotional brochure.” He was less concerned with justice and his family’s reputation than with financial interests. He found the publisher he was looking for in “Édition Nocturne.”
Does this variation in the facts change the tax treatment of the following compensation payments:
a. One-time compensation?
b. Royalties?
c. Advance payment?
Same facts as in the basic scenario (book publisher persuaded Jean Noir to publish his memoirs as a book) with the following addition:
The book became a success. Jean Noir was contacted by various film producers to assign the rights to the book for the production of a series or a film. The assignment agreement was concluded with the French “Société Eli Morel.” Jean Noir also agreed to advise “Société Eli Morel” during filming. This included, among other things, accompanying the production team to the Noir family’s historical locations. Separate consulting agreements were concluded for this purpose.
Payments from “Société Eli Morel” to Jean Noir:
How should the compensation be treated:
a. Option fee?
b. Remuneration for exercising the option?
c. Compensation for consulting services?
d. Compensation for the use of the work per season (as part of a series)?
In April 2009, C. GmbH transferred patents to A. at a below-market price. A. was employed by C. GmbH as a developer. In June 2010, A. in turn sold the patents to B. AG at a below-market price. There is evidence suggesting that A. engaged in activities related to the management of the patents between April 2009 and June 2010. It has not been proven whether A. engaged in self-employment between April 2009 and June 2010 or whether he transferred the patents to his business assets in April 2009.
Did A transfer the patents from his business assets to his personal assets prior to the sale to B. AG?
