What is 88 out of 99
A. - I.
The procedure concerns the question of whether § 22 No. 3 EStG may exclude the compensation and deduction of losses in other income from the rental of movable property. The complainants had made losses by renting a sailing yacht in an assessment period.
1. Income tax law generally provides for loss offsetting. It allows positive and negative income to be offset against the "sum of income" within an assessment period (loss compensation) and also allows the negative results to be offset against the positive results of the past and future assessment periods in accordance with Section 10d EStG (loss deduction), if with other income, insufficient positive results have been achieved in the assessment period of the losses generated (Section 2 (3) EStG).
2. The Income Tax Act provides exceptions to these offsetting options in Section 2a for foreign losses, in Section 15 (4) for losses from commercial animal breeding, in Section 15a for losses of limited partners, insofar as the losses exceed their liability capital, in Section 23 (3) sentence 4 for income from speculative transactionsas well as in § 22 No. 3 EStG - terminologically according to the status of the Income Tax Act 1934 - for income from other services. Since the revision of the Income Tax Act in the announcement of January 24, 1984 (Federal Law Gazette I 1984 p. 113), § 22 No. 3 EStG has read:
Section 22 Types of Other Income
Other income is
Other income is
3. Income from services, insofar as they do not belong to other types of income (Section 2 (1) No. 1 to 6) nor to income within the meaning of numbers 1, 1a, 2 or 4, e.g. income from occasional brokerage and rental movable objects. Such income is not subject to income tax if it was less than 500 German marks in the calendar year. If the income-related expenses exceed the income, the excess amount may not be offset when determining the income; it may also not be deducted in accordance with Section 10d;
a) § 22 No. 3 EStG takes a special position within these exceptions: Only here the deduction of losses within the same type of income is also excluded. In the case of all other income, offsetting against future profits from these activities is permitted; For the income according to §§ 2a, 15 Abs. 4 and 15a EStG, this results directly from the law; for the income from speculative transactions according to § 23 EStG, this follows from the handling of this fact by the case law of the Federal Fiscal Court (see BFH, BStBl II 1991 p. 916 ).
b) Income and income-related expenses are generally only taken into account after the date of receipt (Section 11 EStG). This regulation can be applied to other income within the meaning of of § 22 No. 3 EStG lead to an accumulation of the inflows that are to be recorded as positive income for income tax purposes in one calendar year and to an accumulation of negative income from the same activity that is not considered for income tax purposes in another year (see already Kaemmel / Bacciocco, Commentary on the Income Tax Act 1934, § 9 marginal number 6; Enno Becker, StuW 1936 I, column 513 ).However, § 22 No. 3 EStG does not provide for offsetting the positive results of one assessment period with losses from the same activity in previous or future assessment periods.
aa) The case law of the Reichsfinanzhof and the Bundesfinanzhof mitigates this legal consequence in the special case that this income is based on one-off payments. These services deviate from the basic standard of Section 11 of the Income Tax Act. The jurisprudence has modified the fact of the other income similar to the fact of the income from speculative transactions (cf. BFH, BStBl II 1991 p. 916 [917 f.]) So that the entire income from a one-time service is the entire with it economically related expenses can be compared and deducted. This applies regardless of the calendar years in which the expenses, which are netted with the respective inflows and belong to the other income, were incurred and outflowed (cf. RFH, RStBl 1936 p. 123 ; BStBl II 1992 p. 1017 [1018 ff .]; FG Nürnberg, EFG 1961, p. 494 ; FG Düsseldorf, EFG 1978, p. 78; that. EFG 1987, p. 116). The case law reduces the restrictions on loss compensation and loss deduction in that the overall success of the activity is not determined separately according to calendar years and assessment periods, but rather all inflows and outflows for a specific activity are summarized over the individual assessment periods. Loss compensation is only excluded to the extent that the activity as a whole results in a loss. This extended application of §§ 11, 22 No. 3 EStG is justified by the fact that literal application of §§ 11, 22 No. 3 sentence 3 EStG "leads to unjust results that the legislature may not want" (cf. FG Nürnberg, EFG 1961, p. 494 ).
The case law thus mitigates the effects laid down in Section 22 No. 3 EStG of a combination of the fundamental prohibition of loss compensation and the accrual delimitation of inflows and outflows in accordance with Section 11 EStG. It already corresponds to theIncome Tax Act 1934, criticism of the interaction between the prohibition of loss offsetting for other income and the basic standard of Section 11 of the Income Tax Act (cf. 218). The case law thus avoids the consequences of a year-related delimitation and allocation of income and business expenses, which for the remaining income either through the cross-period loss deduction (Section 10d EStG) or in the case of income with limited loss offsetting through internal offset options (Section 2a (1) sentence 3, Section 15 Paragraph 4, Section 15a Paragraph 2 EStG).
bb) However, the Federal Fiscal Court applies in cases in which the income within the meaning of p. of § 22 No. 3 EStG are not based on one-off, but ongoing services, this modified case law does not apply. In the case of ongoing benefits that result in income within the meaning of of § 22 No. 3 EStG, the income is determined separately for each year of activity; an annual loss determined in this way is subject to the prohibition of offsetting losses under Section 22 No. 3 Sentence 3 EStG (cf. BFH, BStBl II 1992, p. 1017 ).
1. The complainants chartered a sailing yacht in the 1984 assessment period. The yacht was not entered in the ship register. The charter business resulted in a loss of DM 5,500, which the complainants claimed in their 1984 income tax return as business losses. However, the tax office, the tax court and the federal tax court qualified this activity as "other income" within the meaning of § 22 No. 3 EStG: With this qualification, the loss compensation and loss deduction prohibition according to § 22 No. 3 sentence 3 EStG applies, so that the Loss cannot be offset against other income for the same year or against future profits from this activity.
A classification of the income from the ship chartering as income from renting and leasing (§ 21 EStG) was differentIn the opinion of the tax court, based on the wording of Section 21 (1) No. 1 EStG, because the chartered sailing yacht was not entered in the ship's register. The activity of chartering could also not lead to income from commercial operations (Section 15 (2) sentence 1 EStG). The complainants had only had business relationships with one company. This in turn chartered the yacht to the individual sailors. The complainants therefore did not take part in general economic traffic.
2. With the appeal, the complainants reiterated their view that chartering the sailing yacht is a commercial activity within the meaning of Section 15 of the Income Tax Act. In addition, the decision of the tax court met constitutional concerns. The qualification of the income as "other income" within the meaning of § 22 No. 3 EStG is incompatible with the principle of taxation according to the ability to pay, the exclusion of loss compensation leads to unjustifiable hardship: If there is a loss in one year, a profit in the next , only the profit is taxed without taking the previous loss into account. The taxpayer is regarded as productive to the extent of his positive income, without the losses being taken into account as an expression of reduced performance. Taxation that only charges positive income without taking previous losses into account is confiscatory and thus also violates Article 14.1 sentence 1 of the Basic Law.
The Federal Fiscal Court, citing the decisions of the tax courts and its own case law, rejected the appeal as unfounded. The rental income is to be classified as other income within the meaning of Section 22 No. 3 EStG.
With the constitutional complaint, the complainants allege the violation of their rights under Article 3, Paragraph 1, Article 12, Paragraph 1 and Article 14, Paragraph 2 of the Basic Law. In particular, you object to the exclusion of loss compensation regulated in Section 22 No. 3 Sentence 3 EStG.
The constitutionally guaranteed principle of taxation based on performance is also expressed in loss compensation and loss deduction. Losses directly affect the ability of the taxpayer to pay: If losses were not taken into account, income tax would still arise if the total result achieved over various years was DM 0. If a loss of DM 5,000 was made in 1984 and 1985 and a profit of DM 5,000 in 1986 and 1987, the total result would be DM 0, but income tax at a tax rate of 40% would be DM 4,000.
If you consider other exclusions of loss compensation and loss deduction regulated in the Income Tax Act - §§ 15 para.4, 15a, 2a EStG - it shows that they are in any case based on a specific legislative program, such as agricultural policy control measures or the fight against undesired foreign loss allocation models. Such a program is lacking in Section 22 No. 3 Sentence 3 EStG. No objective reason can be found for the exclusion of loss compensation.
The President of the Federal Fiscal Court, the Prime Minister of Schleswig-Holstein and, on behalf of the Federal Government, the Federal Minister of Finance have commented on the constitutional complaint.
The constitutional complaint is well founded.
1. Art. 3 GG demands the equal treatment of "all people" before the law and forbids any discrimination or preferential treatment because of personality-related peculiarities. The principle of equality is stricter, the more it affects the individual as a person and the more open to legislative arrangements, as general living conditions accessible to legal arrangements are regulated (cf. BVerfGE 96, 1 [5 et seq.]).
2. The same structure applies to the subject area of tax law. The legislature has extensive room for maneuver when selecting the tax item and determining the tax rate. According to the regulation of this initial state of affairs, however, he has to consistently implement the burden decision once made in the sense of burden equality (cf. BVerfG, established case-law, most recently BVerfGE 93, 121 ).
Income tax covers the income that the taxpayer earns "from" a certain income (Section 2 (1) EStG). According to § 2 Paragraph 1 and 2 EStG, the prerequisites are a basis of acquisition (state of affairs), its use (state of affairs) and a resultant profit or surplus (state of success). In principle, the Income Tax Act burdens the types of income specified in more detail in § 2, §§ 13 ff. Insofar as income tax law distinguishes between several types of income and is linked to different legal consequences, these must be justified on special objective reasons. Only the systematic differentiation by the legislature cannot justify the unequal treatment in the legal consequences (cf. BVerfGE 84, 348 [363 f.]; 96, 1 ).
According to this standard, the complete exclusion of the offsetting of losses for current income from the rental of movable objects by § 22 No. 3 sentence 3 EStG violates the equal treatment requirement of Article 3, Paragraph 1 of the Basic Law.
1. The current income tax law taxes the income that has been achieved using the markets opened by the legal community and the state legal system. This charge reason is actually regulated in the Income Tax Act in the respective types of income of § 2 Paragraph 1 No. 1 to 7 in conjunction with §§ 13 ff. EStG. Income taxable is only the income generated from the use of one of the income bases named in Section 2 (1) of the Income Tax Act.
2. The income from services in accordance with § 22 No. 3 EStG take up this income tax burden reason and add themselvesinto the debit principle of the Income Tax Act. The fact of income from services has the same priority as the other types of income under the Income Tax Act. In spite of the fact that § 22 No. 3 EStG is still in force, it does not in particular open up a general fact that declares any enrichment - regardless of the reason for the income tax burden - to be taxable. Enno Becker (cf. StuW, 1936 I, column 1669 [1671 f.]) Has already drawn attention to the danger associated with the broad wording of Section 22 No. 3 EStG and the need for a restrictive interpretation. Accordingly, in consistent case law, the offense is limited with recourse to the burden principle on which income tax is based. Increases in value that have been realized through the sale of private assets may only be taxed on the additional condition of an acquisition basis. The Federal Fiscal Court specifies the facts of Section 22 No. 3 EStG in such a way that other services can be any act, toleration or omission provided for the sake of payment, provided that it is not a matter of sales or similar sales in the private sector (see BFH, BStBl II 1993 p. 200 ; BStBl II 1990 p. 1054; RFH, StuW 1934 II, no. 659), is based in addition to the act of providing services - also on a state of affairs - the market-related, non-private income base .
3. In principle, income tax law satisfies the requirement of equal treatment of the types of income insofar as it provides for the compensation and deduction of losses for all types of income.
a) Section 2 (2) of the Income Tax Act ensures that the seven types of income are treated equally, provided that the principle is justified there for all types of income to compare the income from the income to the expenses and allow them to be deducted. The legislature covers all types of income according to the net principle, which allows expenses resulting from gainful employment to be deducted because they reduce the disposable income available for income taxation.
b) The Income Tax Act clarifies this principle in this respectfar than it allows a deduction of acquisition expenses even if the acquisition expenses are not incurred in the assessment period of the receipt of the acquisition income. This also applies - to a limited extent - to income with only limited loss offsetting; Even there, offsetting within the individual types of income is usually permitted.
4. In the context of this statutory tax system, § 22 No. 3 Clause 3 EStG disadvantages taxpayers with income from other current services if acquisition expenses and income arise in different assessment periods. The income from acquisition is then fully subject to income taxation, without the acquisition expenses being taken into account in the assessment period in which they arise or in the assessment period in which the income is recorded. There are no justifying reasons for this unequal treatment.
a) It is not evident that income from services is typically used for undesirable tax arrangements that would have to be contained to a greater extent than with other income. The materials and the history of § 22 No. 3 EStG also do not give any reasons why the loss offsets for "other" income are restricted to a greater extent than for other income with limited loss offsetting.
Rather, the comprehensive prohibition of any loss offsetting has been implemented from the outset (see Kaemmel / Bacciocco, loc. Cit .; Enno Becker, loc. Cit.) And also currently (cf. of the income tax commission 1964, series of publications of the BMF, issue 7, p. 218; Jansen, in: Herrmann / Heuer / Raupach, commentary on the Income Tax Act, § 22 margin no. Keuk, DB 1972, p. 1130 [1132 f.], Tipke / Lang, Steuerrecht, 15th ed., 1996, § 9 marginal number 67) understood as an inappropriate regulation that "leads to a conflict that can hardly be resolved under the law" (see Heinicke, in: Schmidt, EStG, 17th edition, 1998, § 22 note 143).
b) The income from services according to § 22 No. 3 EStG accruesSection 41 (1) no. 2 EStG 1925 (cf. RGBl I 1925 p. 189) - "other performance gains" - but did not yet provide for any loss compensation or deduction restrictions for these "other performance gains". The service income according to § 41 EStG 1925 included in § 41 para. 1 No. 1 EStG the one-off sales transactions - since the Income Tax Act 1934 in § 23 as speculative transactions - and in § 41 para. 1 No. 2 the other power gains - since the Income Tax Act 1934 regulated in § 22 No. 3 as other income. According to Section 41 of the Income Tax Act 1925, "in particular income from occasional brokerage and from the rental of movable objects including ships that are not entered in the shipping register" was taxable; According to the legal position of the Income Tax Act 1925, income from the rental of movable property, including ships not entered in the shipping register, was treated as equivalent to other income.
The "other performance gains" were systematically assigned to other income by the Income Tax Act 1934 (cf. RGBl I 1934 p. 1005). The prohibition of loss compensation was introduced in Section 22 No. 3 Sentence 3 EStG and has been retained to this day. In the official justification for the Income Tax Act 1934 (cf. RStBl 1935 p. 33 ) there is only a reference to the exclusion of loss compensation that the ban on compensating losses from service income is new. Otherwise, the 1934 Income Tax Act did not intend to make any changes to this income (see justification for the 1934 Income Tax Act, loc. Cit.); the income from services i.S. of § 22 EStG 1934 corresponded factually to the income from other activities within the meaning of p. of Section 41, Paragraph 1, Item 2 of the Income Tax Act 1925.
Regarding the question of the basic income taxability and the justification of the taxability of the "performance income" of Section 41 of the Income Tax Act 1925, the materials for the Income Tax Act 1925 stated that one-off activities could also be taxable and that an exhaustive list of such taxable activities was not possible (see negotiations of the Reichstag , 3rd WP, 1924/25, RTDrucks 1924/25, Vol. 400, No. 795, p. 59), the tax freeHowever, it is not possible to allow income of this kind to be allowed, because this would contradict the principles of tax performance (see RTDrucks, loc.cit., p. 25).
c) The restrictions on the offsetting of losses in other income cannot be justified because this income typically does not generate any surpluses. Such activities called "hobby" are irrelevant for income tax purposes because they are not designed to achieve a total profit or total surplus. "Hobby" is an activity not pursued for the purpose of generating income out of private inclination; it is therefore not subject to income tax as a whole - with its income as well as its expenses. The "services" are set out in Section 22 No.3 EStG, however, recorded as a "gain in performance", presuppose an income basis aimed at generating a surplus.
d) However, this condition of § 22 No. 3 EStG is not clearly delimited in the text of this provision, but must be inferred from the system of the Income Tax Act. Therefore, the legislature would be authorized to compensate for the vagueness of the state of affairs of § 22 No. 3 EStG typifying by a limitation of the loss offsetting and thereby reliably to exclude the activities not aimed at surpluses from the facts. However, the regulation contained in Section 22 No. 3 Sentence 3 EStG does not suffice for such a permissible modification.
5. In accordance with the subject of the constitutional complaint, the unconstitutionality of Section 22 No. 3 Sentence 3 EStG is only established to the extent that it relates to current income from the rental of movable property. The unconstitutionality results in the invalidity of the provision to the extent of factual and temporal scope determined in the operative part. This means that the losses from the rental of movable objects within the meaning of of Section 22 No. 3 Sentence 3 EStG for the past assessment periods in accordance with the general rules governing loss compensation and loss deduction, which are determined by the Income Tax Act. For the future, it is the responsibility of the legislature to adopt the general principles of loss offsetting in accordance with Section 2 (3) and Section 10d of the Income Tax Actand to adjust the regulation of § 22 No. 3 EStG to these principles in an equitable manner.
The decision on costs is based on Section 34a (2) BVerfGG.
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