BFH: insolvent trader deducts administrator fees pro rata, may provide

An insolvency administrator's fees for regular insolvency proceedings can be deductible as current or subsequent business expenses of the insolvent debtor where the administrator's management serves to satisfy business liabilitiesBundesfinanzhof — and where the debtor still determines profit by balance-sheet comparison, a provision for the not-yet-due fee claim may be formedBundesfinanzhof. In its judgment of 25 June 2026 (III R 35/23), the III. Senat of the Bundesfinanzhof overturns the Finanzgericht Rheinland-PfalzBundesfinanzhof, which had denied both the deduction and the provision outrightBundesfinanzhof, and remands for findings on amounts and allocationBundesfinanzhof.

The case concerned a sole proprietor running a liquid-gas transport business with eight employees, whose insolvency opened in 2015; the administrator allocated 87.83 percent of his fees to the business sphere by the ratio of business to private assets for realisation, and formed provisions for the administrator's remuneration in the 2016 and 2017 balance sheets. The tax office disallowed them, arguing only advances requested from the insolvency court could reduce profit; the Finanzgericht went further, holding that fees are never business expenses where private debts coexist alongside business debts, and that in any event no provision was possible because the fee claim was not economically caused in the disputed years.

Both holdings fail. On deductibility, the court distinguishes its consumer-insolvency case law (VI R 47/13) and its private-disposal case law (IX R 29/23): here the proceedings undisputedly and overwhelmingly concerned the satisfaction of business liabilities remaining with the debtor after a 2015 asset deal, so the objective business connection and the administrator's subjective purpose of serving the business cannot be denied from the outsetBundesfinanzhof. Neither the debtor's management shortcomings that caused the insolvency, nor the insolvency petition as such, nor the prospect of residual debt discharge breaks that connectionBundesfinanzhof — just as advisory costs for a restructuring remain deductible despite management errors. And mixed business-private expenses are apportionable under the Grand Senate's GrS 1/06 principlesBundesfinanzhof: where a separable business share is beyond doubt, it is estimated under section 162 AO and section 96 FGO rather than disallowed wholesaleBundesfinanzhof; the court signals no objection to borrowing the VAT apportionment keyBundesfinanzhof — the ratio of registered business to private liabilities, apparently over 90 percent business here — while the lower court must still pin down the exact ratioBundesfinanzhof.

On provisions, the fee claim arises with the assumption of management and accrues as work is performed — the Federal Court of Justice held it arises already with actual work in the proceedings — so at the 2016 and 2017 balance-sheet dates a legally arisen, economically caused liability uncertain only in amount existedBundesfinanzhof, for which section 249(1) sentence 1 of the Commercial Code mandates a provisionBundesfinanzhof via the section 5(1) sentence 1 EStG conformity principleBundesfinanzhof; maturity is irrelevantBundesfinanzhof. The section 5(2a) EStG capitalisation ban does not apply, since the obligation encumbers assets already present rather than depending on future receipts. Open on remand: whether balance-sheet accounting was still permitted at all after the asset deal (otherwise only subsequent expenses upon outflow qualify), correction of the 2015 preliminary-administration fee to its proper year, the actual provision figures, and valuation under section 6(1) no. 3a EStGBundesfinanzhof.

Legal basis: § 4 Abs. 4 EStG; § 5 EStG; § 6 Abs. 1 Nr. 3a EStG; § 249 HGB; §§ 63 ff. InsO; BFH judgment III R 35/23 of 25 June 2026.