Giving up the Intention to Achieve Income

Giving up a business is already a hard thing to do but not to be able to utilize business costs still to be met hurts even more.

What this implies? If you make any turnover then you want to profit from this business. If you obtain any profit that will be subject to taxation. If any money you receive is not subject to taxation then you are excluded from deducting any expenses. If you have only costs and make a loss at the end of the year, you will be able to write off taxes from previous profitable years and will be refunded with paid taxes.

It has so far been considered as standing law that the deduction of any costs after giving up the aim to achieve income is not possible. In the mean time, Finanzgericht (= Tax Court) Brandenburg (re 4 K 787/02 of October 26, 2005) has eased this rule. After giving up the intention to achieve income and continuing the previous activity relevant for income, now you still can deduct such costs that take care of obligations entered while striving for income. The Bundesfinanzhof (= Federal Tax Court) understands as "continuing" to take care of obligations entered prior to giving up. Such costs will be typically paying off loans, or commitment interest.

What not has changed is that obligations entered after giving up the business are still not be deductible.

Published on the old CMS: 2006/12/28
Read on the old CMS till November 2008: 84 reads