Tag: Allocation vs taxation of income

Germany vs "B KG", January 1981, Bundesfinanzhof, Case No IR 153/77

Germany vs “B KG”, January 1981, Bundesfinanzhof, Case No IR 153/77

In 1964, B KG had waived claims totalling … against B S.A. in France, in which it held an 88% interest. In the course of an audit of B KG’s profits for 1964, the tax authorities did not regard the waiver as a commercial transaction. Instead, they found that the amount waived was a contribution under company law, resulting in additional acquisition costs for the shareholding. A partial write-off of the investment itself was out of the question. B KG’s appeal to the Fiscal Court was dismissed the appeal. The Fiscal Court held that, under Article 5 of the DTC of 21 July 1959 between Germany and France, the reduction in profits resulting from the waiver of the claims could not be taken into account for tax purposes in Germany due to lack of business purpose. B KG appealed against that decision, alleging an infringement of substantive law. Judgment of the Federal Fiscal Court The Court referred the case back ... Read more