Tax deduction prohibitions and losses from the granting of loans by partnerships - how do they fit together?

Tax deduction prohibitions are a constant focus of tax audits and are therefore extremely prone to disputes. Particularly well-known are deduction prohibitions that are supposed to apply when a loan receivable becomes worthless and the borrower is “controlled” by the lender. Due to the vague wording of the corresponding provisions of the Income Tax Act and Corporation Tax Act, the tax authorities apply the provisions very generously. The BFH and the Münster tax court have put the brakes on the tax authorities with two recent rulings and have reduced the scope of application in a pleasingly clear and dogmatically comprehensible manner. In this article, Raphael Baumgartner summarizes which cases the courts have ruled on and what remains unclear.