Value sacrifice theory
The theory of value sacrifices is a term from German and Austrian tax law that was developed in several decisions of the Reichsfinanzhof and the Administrative Court (VwGH) in the 1930s.
The value sacrifice theory applies in cases in which a property with an existing building is acquired and the old building is subsequently torn down and a new building is erected. In these cases it may be necessary to include the demolition costs and the previous book value of the demolished house when determining the production costs of the new building . The sacrificed value of the old building can also result in an increase in the value of the property.
If the purchaser of an objectively technically or economically unused building allows it to be demolished after the acquisition, both the sacrificed value due to extraordinary wear and tear and the demolition costs can be deducted as operating expenses or business expenses if the building was acquired without the intention of demolition. Demolition within three years of purchase is deemed to be prima facie evidence that the purchaser has acquired the building with the intention of demolishing. If such a building has been purchased with the intention of demolition, the (book) value and the demolition costs, if the demolition serves to produce a new asset , belong to its production costs and otherwise to the acquisition costs of the land.
Individual evidence
- ^ BFH decision of June 12, 1978 - GrS 1/77; BStBl II 1978, 620.
