Partial Gift of a Home: Federal Supreme Court Paves the Way for Tax Optimization

The Decision and Its Background

A married couple from the canton of St. Gallen transferred their single-family home to their son well below market value. The canton then demanded immediate payment of that portion of the real estate capital gains tax attributable to the compensated part of the transfer. The Federal Supreme Court overturned this practice with ruling 9C_271/2025, thus settling a fundamental issue for all of Switzerland.

The highest judges decided: The real estate capital gains tax for a mixed gift can only be deferred in full or not at all. Splitting into an immediately taxable and a latent part is contrary to the Federal Tax Harmonization Act. Since the ruling was published as a landmark decision, it is binding on all cantons, including those with previously differing practices.

Why the Tax Is Deferred for Partial Gifts

According to consistent jurisprudence, the deferral of tax on a gift is justified by the fact that the givers do not realize a gain. At the same time, the recipient takes over the property at the tax basis of the predecessor. If the new owner sells the property later, they must pay tax on the total appreciation accrued since the original acquisition.

According to the Federal Supreme Court, this logic also applies when the transfer is not completely free of charge. What matters is that the transfer is predominantly characterized as a gift. Typical arrangements include the child taking over the existing mortgage, granting the parents a lifelong right of residence, or an advance inheritance offset against the inheritance of other descendants.

Practical Example

Suppose a married couple acquired a single-family house in 2010 for 1,000,000 francs. In 2026, the market value is 1,500,000 francs. The parents transfer the house to their daughter at a price of 1,100,000 francs, consisting of the takeover of the existing mortgage and a capitalized right of residence. The non-compensated part thus amounts to 400,000 francs.

Under the old practice, the canton would have levied the real estate capital gains tax immediately on the compensated part. According to the Federal Supreme Court decision, the tax is now fully deferred. If the daughter sells the house in 2030 for 1,700,000 francs, she pays tax on the entire gain compared to the parents' purchase price. In Zurich, at a tax rate of around 20 percent on this gain, about 140,000 francs would be payable. The actual tax burden varies from canton to canton: from about 5 percent for long holding periods to over 50 percent for very short holding periods.

Who Benefits From the Decision

The main beneficiaries of the new legal situation are families in which ownership of residential property remains within the family for a long time. In most cantons, the real estate capital gains tax drops significantly with increasing ownership duration, in some cases to a fraction of the initial value. If children take over the parental home today and live in or rent it out for decades, the latent tax burden can be greatly reduced by the time it is eventually sold.

Parents also gain planning certainty: They can transfer part of their assets during their lifetime without triggering an immediate tax burden. This facilitates complex succession solutions, for instance, when one of the children is to continue living in the parental home while the other heirs are compensated with other assets or settlement claims.

What Buyers Need to Consider

The ruling shifts the tax burden to the child. If they sell the property shortly after taking it over, the entire real estate capital gains tax will be due on the appreciation since the parents’ purchase. According to the Federal Supreme Court, the actual price paid for the takeover is not recognized as a new acquisition value. For individuals, this means: Anyone who takes over the house only to resell it quickly may have to pay significantly more tax than if the parents had sold it directly.

Therefore, a thorough analysis of the family and tax situation is recommended before making a partial gift. This includes, in particular, the child's long-term intent to use the property, the cantonal tax progression, and any compulsory share claims by other siblings. Matrimonial and inheritance law consequences should also be clarified, for example with a notarized deed of gift that is coordinated with a will or inheritance contract.

Cantonal Differences Remain

Although the landmark ruling applies throughout Switzerland, the real estate capital gains tax continues to be regulated at the cantonal level. Tax rates, holding period surcharges, and holding period discounts vary considerably. The canton of St. Gallen has announced that it will adjust its practice immediately. Basel-Landschaft, Bern, Lucerne, and Vaud will likely need to revise their previous policies as well. In other cantons, the full deferral practice was already established, so little will change there.

In practice, this means: Before a transfer, the tax office in the canton where the property is located should be consulted. Many cantons offer binding advance rulings that confirm the specific tax deferral and avoid later inquiries.

Recommendations for Transferring Real Estate

Anyone planning to transfer their home to the next generation should consider the following steps:

• Obtain market value appraisal: An independent appraisal documents the market value at the time of transfer and forms the basis for the tax assessment.
• Clarify mortgage affordability: The transferee must meet the lender's affordability and loan-to-value requirements. If there is a change of debtor, a new credit assessment is usually required.
• Capitalize right of residence or usufruct: The value of a lifelong right of residence affects gift tax and subsequent real estate gains tax. Proper capitalization in accordance with cantonal regulations is essential.
• Obtain binding tax ruling: Before notarization, the tax deferral should be coordinated with the responsible tax office.
• Regulate inheritance equalization: Compulsory portions and equalization claims of other descendants should be included in the gift agreement or in a will.

According to the Federal Supreme Court decision, the partial gift is a tax-attractive tool for handing over the family home. If properly structured, it combines early succession planning with considerable tax savings for the next generation. The key is to embed it within a comprehensive asset and estate plan, based on a sound market value assessment.