Building purchased, demolished, rebuilt and resold; what property gain?

👉 The taxpayers jointly acquired land on which three buildings stood. They demolished the main building and constructed a new building in its place.

The tax authorities estimate that the demolished building was worth a certain percentage of the land, and therefore reduce the acquisition price of the whole accordingly for the calculation of the capital gain on resale.

The cantonal judges believe that the purchase price, rather than a fraction of it, must be taken into account (consideration 5.1).

Federal judges recall their case law: «When calculating taxable property gains, investment costs for constructions that no longer exist must not be classified as expenses within the meaning of Art. 12 para. 1 of the Income Tax Act. [...] this solution is also necessary because the principle of congruence not only ensures that investment costs and proceeds relate to the same property in its current state but also because this principle has a delimiting function with regard to income tax. If buildings on land held in private assets are destroyed by fire, lightning or other natural events, this is initially a private asset loss that has no impact on income tax. The same applies if a building is demolished and replaced by a new building. From the perspective of tax systematics, it is therefore not conceivable to take this loss into account when calculating taxable property gains by recognising the investment costs of buildings that existed at the time of acquisition and have since been destroyed as expenses.» (consideration 5.2).

Federal judges note that cantonal courts are redefining the concept of congruence while the conditions are not met. Even though the Federal Court has changed its jurisprudence regarding income tax, there is no reason to adjust the jurisprudence on capital gains tax, «because [...] the costs associated with a replacement reconstruction still do not constitute tax-deductible value maintenance expenses for income tax.» (rec. 5.2 end).

The judgment is in German. It is a St. Gallen case. A BGE publication is planned.

Judgment 9C_622/2024, of 29 December 2025