Income tax: BFH allows speculative losses to be offset even years later

Published on 06.11.2006

*by Johannes Fiala, Lawyer (Munich), Mediator (Univ.), MBA Financial Services (Univ.Wales), MM (Univ.), Certified Financial and Investment Advisor (A.F.A.), EC Expert (C.I.F.E.), Lecturer (Univ. of Cooperative Education), Banker (www.fiala.de)
Offsetting losses from the period since 1999: The Federal Fiscal Court (Bundesfinanzhof, BFH) apparently has a heart for stock market investors as well. According to its ruling (Ref. IX R 21/04), investors can offset their losses from speculative transactions against profits for all years since 1999.
Final tax assessments are not an obstacle: The offsetting of losses is not prevented by the fact that final tax assessments have already been issued for the years since 1999. Especially for the successful stock market year 2005, it is interesting to bring in losses in order to save taxes.
Taxpayers decide which profit year to offset against:
The taxpayer enjoys numerous benefits from the BFH ruling. He alone decides for which profit year the previous losses are used for offsetting. Prompt formal documentation in the earlier years, with a corresponding notice to offset the losses is not required. The possibility of offsetting losses in any year means an optimisation option for a massive tax reduction, especially for those years in which the top tax rate is reached.