Market value of a property

The market value of a property corresponds to the price that can be achieved when sold. Usually, this value is estimated by an expert who evaluates the location of the property and the building itself. Nevertheless, the actual selling price can be above or below the estimate if it is influenced by other factors such as the buyer's subjective preferences or aversions.

Which factors influence the market value?

The market value of a property is the price that can be achieved on sale. For this, an expert usually makes an assessment which takes a closer look at the location (view, neighborhood, accessibility, sun exposure, noise level, local tax rate, and demand in the region) and the property itself. Factors such as living space, room volume, construction standard, age, layout, or architecture are analyzed. The expert makes an estimation which then serves as the basis for the market value. However, the actual selling price does not always correspond to the expert's estimate, as the selling price is often influenced by individual interests. For example, a need to sell or subjective preferences or aversions of the buyer can influence the selling price.

No recognized valuation method for the tax-related determination of market value

In the Federal Court decision 2C_181/2018, the judges dealt with a Zug property that had no valuation at the time of sale. The respondent had purchased the property on December 7, 2010, for 2 million Fr. It was part of his business assets, as he was engaged in commercial land trading. Unable to find a buyer for the property, he also sold it on October 7, 2011, to a corporation under his ownership for 2 million Fr. Just 10 days later, on October 17, 2011, the property was sold by the corporation for now 3.65 million Fr. to a third party. The Zug tax authorities assigned the profit of 1.65 million Fr. to the corporation and not to the income of the respondent. The Federal Tax Administration disagreed and took the case to the Administrative Court of the Canton of Zug and, due to further rejections, to the Federal Court.

The FTA argued that the increase in value of 1.65 million Fr. did not occur within the 10 days between the sale to the corporation and the sale to the third party, which is why the capital gain should be attributed to the respondent's income. The Federal Court disagreed. There is no single recognized valuation method to be used for determining the market value. The tax-related market value does not correspond to a mathematically precisely determinable size. Regular estimations and comparisons have to be made, which, however, are associated with variations and certain inaccuracies. It must be permissible to determine the market value (and the asset tax value) of properties based on cautious, schematic approximations, even if this leads to the determined values deviating to some extent from the actual market values. In the present case, no appraisal had been submitted, which is why external circumstances had to be considered. The selling price of October 17, 2011, would speak of a so-called lover's price, which would escape the usual mechanism of supply and demand.

Since the claim of the FTA represents a tax-increasing fact, the burden of proof - contrary to what the FTA claimed - lies with it and not with the taxpayer, who would be responsible for proving tax-reducing claims. Since the FTA could not provide evidence for its claim, the complaint was dismissed.

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