Valuation of stakes – Sequence for offsetting reversals of impairment losses

If a corporation’s stakes in another corporation have been written down to lower going concern values partially for tax purposes and partially without affecting tax then, in the opinion of the Federal Fiscal Court (Bundesfinanzhof, BFH), as expressed in its ruling from 19.8.2009 (case reference: I R 2/09), any subsequent reversal of impairment losses should, first of all, be offset against the tax-exempt portion of the write-down and only then against the taxable portion. The BFH, in its ruling from 13.2.2019 (case reference: I R 21/17) has now clarified that this sequence, which is generally favourable for taxpayers, should also be used in the case of reversals of impairment losses on investments in fund units at life/health insurance companies if, in the past, the units had been written down for both tax purposes and with no effect on tax. In this respect, there is no chronological offsetting sequence such that the write-down that was made first of all has to be reversed last.