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extraordinary burdens

November 6, 2011 | 30,00 EUR | answered by Oliver Burchardt

Dear Sir or Madam,

The move into a single-family house, which was supposed to take place in 09/08, was planned for a house to be built between 06/08 and 09/08. Since 08/2008, I have been in a legal dispute with the construction company, which has prevented the house from being completed to this day. From the legal dispute and the resulting impossibility of moving into the house, the following significant costs have arisen (and continue to arise):

- Legal fees
- Costs for a self-appointed expert
- Costs for an expert appointed by the court
- Rent (which should not have been incurred since 09/08)
- Provisional interest for the construction loan
- Interest on the construction loan

In my tax return for 2008, I claimed these expenses as extraordinary burdens to reduce taxes. The tax office has also fully taken these costs into account to reduce taxes.

In the tax return for 2009, these costs (this time roughly tripled) were again claimed as extraordinary burdens. This time, however, the tax office did NOT take them into account because, according to the tax office, they are not considered extraordinary burdens.

The Federal Fiscal Court (BFH) has now decided on 12.05.2011 (case no. VI R 42/10) that the costs of a civil lawsuit are considered extraordinary burdens. To the extent that the BFH requires a likelihood of success in the pending lawsuit, it is assumed here that this is the case, as the expert appointed by the court has already identified defects amounting to several 10,000.00 euros.

From the above, the following questions arise for me:

1. Does the BFH decision cover all of the above-mentioned costs or only the direct litigation costs, such as legal fees and expert costs?
2. Can the extraordinary burdens claimed for 2009 and not recognized by the tax office (in my opinion, unjustly) be claimed again in the tax return for 2010, with reference to the BFH decision? Or do I have to limit myself to the costs incurred in 2010?

Another question on a different topic:

In the tax return for 2009, a computer costing €484.00 was claimed as advertising costs, with reference to the total purchase price of €1452.00 and depreciation over 3 years. The tax office confirmed the 3-year depreciation period and concluded that only €40.00 (FORTY) could be considered for tax reduction. Unfortunately, I missed the deadline for appeal. Is it possible to claim the depreciation for 2009 (of course, minus the recognized €40.00!) again as advertising costs in the tax return?

Kind regards

Oliver Burchardt

Dear questioner,

Thank you for your question, which I would like to answer as part of an initial consultation.

The decision of the Federal Fiscal Court (BFH) you mentioned highlights in its reasoning that the costs of a civil lawsuit arise inevitably and can therefore be qualified as extraordinary burdens, as you as a citizen and taxpayer in a constitutional state can only assert your rights in this way. In my opinion, only direct legal costs are covered by the new case law of the BFH. Therefore, only the costs that have arisen in the course of legal enforcement are considered extraordinary burdens. Costs such as rent and interest do not arise due to the legal dispute, but are a direct consequence of the poor performance of your contractual partner.

Unfortunately, the German income tax law follows the principle of inflow and outflow. Applied to your case, this means that the costs incurred in 2009 can only have tax implications in that year. Therefore, it is not possible to consider the expenses of 2009 in 2010.

Unfortunately, a change in case law is not a reason to amend a final tax assessment, so I cannot provide you with a positive answer here.

However, please check if the tax assessment for the year 2009 can still be amended, as it was issued subject to review.

A similar principle applies to the depreciation of the computer. If the tax assessment for 2009 is already final, you cannot easily catch up on depreciation in the following year. In your case, I can imagine that the computer was purchased in December 2009 and the tax office has calculated a partial depreciation, while you have claimed the full annual depreciation. In this case, you can of course claim the full depreciation in 2010 and 2011, while in 2012 you can deduct 11/12 of the depreciation as expenses.

I hope my explanations have been helpful to you.

Best regards,

Oliver Burchardt
Certified Public Accountant
Tax Advisor