Acquiring a home in a jointly-owned residence (PPE), a simple co-ownership, or common ownership?

👉 The taxpayers had purchased a plot of land in joint ownership with third parties. Their share was 20% of the total. The co-owners wanted to build a small block of flats under the PPE scheme. Once construction was complete, the taxpayers wished to acquire a PPE unit. Some of the co-owners withdrew from the project. The taxpayers’ share in the project remained at 20%, whilst that of the other co-owner rose to 80%. The building was converted into a PPE. The simple co-ownership was wound up, with the taxpayers acquiring exclusive ownership of the desired PPE unit during the liquidation process. During the liquidation process, the other co-owner’s share increased.

The tax authorities considered that the division of co-ownership and the allocation of a PPE unit constituted a taxable event for capital gains tax. The cantonal judges found
1️⃣ that according to practice, the disposal of undivided co-ownership through the acquisition of a condominium unit is fiscally neutral, provided that the condominium unit exactly corresponds to the share in the co-ownership – which is not the case here
2️⃣ that in reality, exiting co-ownership is already a disposal.

Federal judges dismiss the reasoning of cantonal judges: the ideal share must be adhered to, which is transformed into an individual share and compared to see if both shares remain identical. Any reduction in share generates capital gains tax on the reduced portion.

The ruling is in German. It is a Zurich ruling. Publication in the ATF is planned.

TF, ruling 9C_279/2024, of 14 February 2025