Farmer loses tax battle after burning farm for insurance payout
A farmer who intentionally burned down his own property has lost a prolonged tax dispute over his car insurance payout. German authorities ruled that the compensation must be treated as special income, subject to standard taxation. The case reached the Federal Fiscal Court before a final decision was made.
The dispute began when the farmer received a state farm insurance payment after setting fire to his farm. The local tax office, the Finanzamt, classified the sum as a special gain under tax law. This meant the money had to be included in his taxable income according to § 13a(6) No. 4 EStG.
A lower fiscal court initially rejected the tax office’s classification. However, the Federal Fiscal Court later overturned that ruling. The higher court agreed with the Finanzamt’s position, confirming the payout should be treated as special income. The case has now been sent back to the Tax Court for further review. Judges will determine the exact amount of compensation and the correct assessment year for taxation.
The final ruling confirms that the farmer’s car insurance payout is taxable as special income. The Tax Court must now calculate the precise figures and the relevant tax year. This decision sets a clear precedent for similar cases involving deliberate property destruction.
