Building maintenance costs: The “Dumont practice” (really) abolished

The legislator had abolished the Dumont practice in 2010 by expressly allowing the deduction, as maintenance costs, of “costs for the restoration of recently acquired real estate” (art. 32 al. 2 LIFD). The Federal Court had then partially revived this practice – at least in spirit – by adopting an economic approach to confirm the refusal of deduction of renovation works which, by their extent, were economically equivalent to a new construction (“wirtschaftlicher Neubau”). The Federal Court has recently reversed its case law (9C_677/2021 of February 23, 2023, intended for publication): in the case of a couple who had acquired a farmhouse to be renovated from top to bottom and to whom the tax authorities, followed by the cantonal judicial authorities, had refused the deduction of the renovation costs on the grounds that they were similar to a new construction, the Federal Court departed from its case law and, in essence, accepted the taxpayers’ appeal: it finally considered that it was contrary to the will of the legislator to adopt an overall economic assessment of a renovation project in order to refuse the deduction of costs which, considered individually and objectively, are indeed costs aiming at maintaining (and not increasing) the value of a building; it therefore referred the case back to the lower court for examination of the costs invoked by the taxpayers.