In its ruling dated 12 December 2018 (case no. 2-K-1952/16), the Rhineland-Palatinate tax court ruled that the derecognition without replacement of shares that have definitively lost their value by the custodian bank leads to a loss from capital assets. This tax court ruling thus opposes the view of the tax authorities in another area of the treatment of capital losses and thus consistently continues the case law of the BFH (including VIII-R-13/15, VIII-R-32/16).

In this case, an investor had acquired 10,000 shares. In the course of the insolvency proceedings under US law, the custodian bank informed the investor that the responsible depositary had categorised the shares as worthless. As no further payment was to be expected, the shares were derecognised from the investor's securities account without replacement.

The tax office subsequently did not recognise the loss in the amount of the acquisition costs, as this was not a sale of the shares. Even if the demise of a capital investment does not constitute a sale in the tax sense, the derecognition of the shares leads to a tax-recognisable loss in the opinion of the court. The loss of the shares upon the demise of the corporation is covered by the substitute offence of "repayment" or "non-repayment". As a result, the tax court affirmed the tax recognition of the loss. As the tax treatment of the loss of a capital investment in the event of the demise or liquidation of a corporation has not yet been clarified by the highest court, the tax court has authorised an appeal in order to further develop the law.

You will find detailed news in the upcoming NWB Inheritance + Assets.

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