Sale of shares held
in split ownership

The essentials

• The principle. Where the holder of the usufruit and the bare owner sell together, « le prix se répartit entre l'usufruit et la nue-propriété selon la valeur respective de chacun de ces droits, sauf accord des parties pour reporter l'usufruit sur le prix » [the price is apportioned between the usufruit and the nue-propriété according to the respective value of each of those rights, unless the parties agree to shift the usufruit onto the price] (C. civ. art. 621).
• Who pays the capital gains tax. Usufruit shifted onto the price: the holder of the usufruit pays all of it. Price necessarily reinvested in other shares whose income goes to the holder of the usufruit: the bare owner pays all of it. Failing either: each pays on the value of his own right (CE 2 avril 2021, n° 429187).
• The word that decides. A reinvestment left as a « simple faculté à la main des seuls usufruitiers » [a mere option in the hands of the holders of the usufruit alone] shifts nothing. The clause must impose an obligation, must bear on shares, and must define its amount.
• The date that counts. The clauses are assessed as at the date of the sale. A reinvestment decided afterwards has no bearing (CE 12 mars 2026, n° 497808).
• What has changed on death. A debt of restitution bearing on a sum of money over which the deceased had reserved the usufruit is no longer deductible from the estate; one bearing on a sale price still is, but on proof (CGI art. 774 bis).
• The crossover. The route that relieves the bare owner of the capital gains tax is precisely the one that exposes his claim to inheritance tax. Arbitrating means choosing who pays what, and when.

The three routes open before the sale

What does the law say when the holder of the usufruit and the bare owner sell together?

The law lays down a rule for apportioning the price, and allows the parties to depart from it in order to shift the usufruit onto that price. The provision is short: « En cas de vente simultanée de l'usufruit et de la nue-propriété d'un bien, le prix se répartit entre l'usufruit et la nue-propriété selon la valeur respective de chacun de ces droits, sauf accord des parties pour reporter l'usufruit sur le prix » [where the usufruit and the nue-propriété of an asset are sold simultaneously, the price is apportioned between the usufruit and the nue-propriété according to the respective value of each of those rights, unless the parties agree to shift the usufruit onto the price] (C. civ. art. 621). Three distinct situations come out of that sentence, and not two: the parties may apportion the price and bring the démembrement (the split of ownership between usufruit and bare ownership) to an end; they may shift the démembrement onto the price itself; or they may provide that the price will be used to acquire other shares, onto which the démembrement will carry over. Tax law does not create those three routes, it draws the consequences from them. That is why the question of who pays the tax is never settled in the code général des impôts (the French tax code) alone: it is settled first in the terms of the deed that created the démembrement.

Can either of them sell without the other's consent?

Neither the holder of the usufruit nor the bare owner can sell the full ownership alone, and a sale made without the consent of the holder of the usufruit cannot be set up against him. The second paragraph of the same provision says so without circumlocution: « La vente du bien grevé d'usufruit, sans l'accord de l'usufruitier, ne modifie pas le droit de ce dernier, qui continue à jouir de son usufruit sur le bien s'il n'y a pas expressément renoncé » [the sale of an asset burdened with a usufruit, without the consent of the holder of the usufruit, does not alter that person's right, who continues to enjoy his usufruit over the asset unless he has expressly renounced it] (C. civ. art. 621). The sanction is therefore not the nullity of the sale but its neutrality towards the holder of the usufruit, who keeps his right over the asset once it has passed into the buyer's hands. For a buyer the consequence is a practical one: buying split-ownership shares without the signature of the holder of the usufruit amounts to buying shares whose income will continue to go elsewhere. Gathering both signatures is not a matter of comfort, it is the condition for the buyer to receive what it believes it is paying for.

Is the choice between the three routes made before or after the sale?

Before, and the Conseil d'État (the French supreme administrative court) looks to the clauses « en vigueur à la date de la cession » [in force at the date of the sale]. The phrase recurs twice in the recent decisions, and it closes the door on after-the-event tidying up: what counts is the state of the contractual terms on the day ownership is transferred, not the intention the parties express afterwards. In a case decided in 2026, funds had been reinvested five weeks after the sale to subscribe for capitalisation contracts, in accordance with an agreement signed six days beforehand: the circumstance was set aside « comme sans incidence » [as having no bearing], the court having relied « sur les clauses contractuelles en vigueur à la date de la cession » [on the contractual terms in force at the date of the sale] (CE 12 mars 2026, n° 497808). In other words, the arbitration is played out in the deed of gift, often drawn up years earlier, and sometimes without any thought for the sale that would come. Re-reading that deed is the first task to carry out when a buyer comes forward.

Why does that choice bear on two taxes at once?

Because the same clause designates who is liable for the capital gains tax and governs the fate of the bare owner's claim on the death of the holder of the usufruit. Those two effects were built separately: one by the tax case law, from 2012 and above all since 2021; the other by the legislature, in the loi de finances pour 2024 (the Finance Act for 2024). They meet on the same ground, and they pull in opposite directions. Shifting the usufruit onto the price relieves the bare owner of the capital gains tax, but subjects his claim for restitution to a condition of proof on death. Imposing a reinvestment in other shares does the reverse: the bare owner pays tax immediately on a price he does not receive, and his claim escapes the 2024 regime since none arises. Arbitrating between the two therefore means quantifying both taxes together, which calls for a case-by-case examination.

First route: apportion the price and end the démembrement

Who is the seller when the price is apportioned?

The holder of the usufruit and the bare owner are two sellers, and each realises his own capital gain. This is the default solution, the one that applies where nothing has been provided for: « L'imposition de la plus-value […] se répartit entre l'usufruit et la nue-propriété selon la valeur respective de chacun de ces droits » [the taxation of the capital gain is apportioned between the usufruit and the nue-propriété according to the respective value of each of those rights] (CE 2 avril 2021, n° 429187). Each is taxed on the fraction of the price corresponding to his right, less the acquisition cost of that right. The démembrement is extinguished by the apportionment, since each receives outright the share of the price due to him. For a bare owner who needs cash during the lifetime of the holder of the usufruit, this is the only route that actually provides it. For the holder of the usufruit, it is the route that costs him the enjoyment he had reserved, since he will receive only a fraction of the price instead of the income from the whole.

On what value is the price apportioned?

The law lays down a criterion, « la valeur respective de chacun de ces droits » [the respective value of each of those rights], but it does not say how that value is to be measured. The provision stops at the criterion and leaves the method open (C. civ. art. 621). Two methods are used in practice. The first applies the statutory valuation scale, which fixes the value of the usufruit and of the nue-propriété as fractions of the full ownership according to the age of the holder of the usufruit (CGI art. 669). The second discounts the future income of the split asset, so as to show what the usufruit actually yields given the return on the shares and the life expectancy of its holder. The gap between the two is not marginal, and it does not run in the same direction depending on age and yield: it is a quantified arbitration, to be conducted before the apportionment key is fixed in the sale agreement.

Does the tax scale have to be followed when a sale price is apportioned?

The point is debated, and it should not be presented as settled. The scale is written for the assessment of transfer duties: that is the office for which it is laid down (CGI art. 669). Part of the academic writing infers from this that it does not bind the parties when they apportion the price of a split asset between themselves, that apportionment being a matter of freedom of contract; resorting to the scale would then be a convenience, not an obligation. The proposition is defensible, but it is carried by no provision that says so expressly, and an apportionment departing appreciably from the scale in favour of one of the holders may invite a challenge. Prudence calls for the method adopted and the parameters underpinning it to be documented in the deed itself, rather than leaving the tax authorities to reconstruct after the event the key that was applied.

What becomes of the succession planning the démembrement had prepared?

It stops: the share of the price received by the holder of the usufruit enters his own estate and will feature in his succession. That is the cost of this first route, and it is often underestimated. The démembrement had been set up so that the increase in the value of the shares would escape transfer duties on death, the reunion of the usufruit and the nue-propriété giving rise to no taxation. By apportioning the price, the parties bring that mechanism to an end: the sums received by the holder of the usufruit, and the assets he acquires with them, will be subject to inheritance tax in the hands of his heirs. The route is therefore justified where the bare owner's need for cash prevails, or where the succession strategy has lost its purpose. It is poorly justified where the objective of passing the business on remains.

Second route: carry the démembrement over to other shares

How does the démembrement carry over to new shares?

The parties stipulate that the price will be used to acquire other shares, and the démembrement carries over to those shares by subrogation. The holder of the usufruit does not receive the price; he receives, over the new shares, the same right of enjoyment as he had over the shares sold. The bare owner, for his part, keeps a nue-propriété which now bears on another asset. Nothing is extinguished, only the object changes. For a family that has organised a transfer of wealth, this is the route that preserves the mechanism: on the death of the holder of the usufruit, the increase in the value of the new shares will pass to the bare owner by the mere extinction of the usufruit, which comes to an end in particular « par la mort de l'usufruitier » [by the death of the holder of the usufruit] (C. civ. art. 617). But the clause must still be drafted so that the carry-over is compulsory, and not merely permitted.

Who pays the capital gains tax on this route?

The bare owner, and he alone. The rule is laid down in strict terms: « lorsque les parties ont décidé que le prix de cession sera nécessairement remployé dans l'acquisition d'autres titres dont les revenus reviennent à l'usufruitier, la plus-value réalisée n'est imposable qu'au nom du nu-propriétaire » [where the parties have decided that the sale price will necessarily be reinvested in the acquisition of other shares whose income goes to the holder of the usufruit, the capital gain realised is taxable in the name of the bare owner alone] (CE 2 avril 2021, n° 429187). Three elements of that sentence carry the solution and must be found in the clause de remploi (the reinvestment clause): the reinvestment is imposed « nécessairement » [necessarily], it bears on « d'autres titres » [other shares], and the income from those shares « reviennent à l'usufruitier » [goes to the holder of the usufruit]. If one of the three is missing, the rule does not apply, and the tax falls either on the holder of the usufruit alone or on both in proportion to their rights. The drafting is therefore not the trimming of the transaction: it determines who is liable.

Does the bare owner pay on a price he never receives?

Yes, and that is the main drawback of this route. The bare owner pays the capital gains tax even though the price has been used to acquire new shares whose income he will not receive, that income going to the holder of the usufruit. He must therefore find elsewhere the cash needed to pay the tax, which, in a family where the children are bare owners of most of the wealth without drawing any income from it, is not a theoretical difficulty. The question is dealt with upstream, by a clause providing for that tax charge to be borne, or by setting aside a fraction of the price for payment of the tax before the reinvestment. Left unanswered in the deed, it surfaces at the time of the tax return, when the funds have already been invested.

Can the reinvestment be made in any asset at all?

Not if the capital gains tax is to be shifted: the rule refers to reinvestment « dans l'acquisition d'autres titres » [in the acquisition of other shares]. The wording is that of the Conseil d'État, repeated identically in 2021 and in 2026, and it is narrower than reinvestment in an asset of any kind (CE 12 mars 2026, n° 497808). A clause requiring the price to be used to acquire a building, or any asset other than shares whose income goes to the holder of the usufruit, does not fall within the case the case law has provided for in order to make the bare owner the only taxpayer. The point deserves to be checked line by line in older deeds, where the clause de remploi is often drafted in broad terms, because it was conceived as a protection of family wealth and not as a key for allocating tax.

Third route: shift the démembrement onto the price

What is a quasi-usufruit over a sale price?

It is a usufruit bearing on a sum of money: the holder of the usufruit may spend it, subject to returning it at the end of the usufruit. The mechanism is an old one and its text has remained unchanged since 1960: « Si l'usufruit comprend des choses dont on ne peut faire usage sans les consommer, comme l'argent, les grains, les liqueurs, l'usufruitier a le droit de s'en servir, mais à la charge de rendre, à la fin de l'usufruit, soit des choses de même quantité et qualité soit leur valeur estimée à la date de la restitution » [if the usufruit includes things which cannot be used without being consumed, such as money, grain or liquor, the holder of the usufruit is entitled to use them, subject to returning, at the end of the usufruit, either things of the same quantity and quality or their value assessed at the date of restitution] (C. civ. art. 587). Applied to the price of a sale of shares, the quasi-usufruit (a usufruit over a sum of money) gives the holder of the usufruit free disposal of the whole price, and the bare owner a claim for restitution which will only be exercised on death. It is the most flexible route for the holder of the usufruit, and the most uncertain for the bare owner.

Who pays the capital gains tax where the usufruit is shifted onto the price?

The holder of the usufruit, for the whole of it. The rule is stated in these terms: « lorsque les parties ont décidé, par les clauses contractuelles en vigueur à la date de la cession, que le droit d'usufruit serait, à la suite de la cession, reporté sur le prix issu de celle-ci, la plus-value est alors intégralement imposée entre les mains de l'usufruitier » [where the parties have decided, by the contractual terms in force at the date of the sale, that the usufruit would, following the sale, be shifted onto the price arising from it, the capital gain is then taxed in full in the hands of the holder of the usufruit] (CE 2 avril 2021, n° 429187). The solution has its economic logic: the person who receives the whole price is the only one who is enriched, and it is he whom the tax reaches. It does, however, depart from the civil law analysis, under which the seller of the shares is the bare owner. For the bare owner the effect is comfortable: he receives nothing and pays nothing. The bill is presented to him later, on death, where the 2024 regime has changed the terms.

What is left to the bare owner?

A claim for restitution against the estate of the holder of the usufruit, whose value depends on how the agreement is drafted. If the agreement provides for restitution in value, the claim will follow the increase in the value of the successive reinvestments of the price, and not the nominal amount first received. If it is silent, or stipulates a nominal amount, the bare owner will receive only the initial sum, bearing the monetary erosion himself. To that is added a purely practical difficulty of proof: decades may pass between the sale and the death, and the trace of the successive reinvestments must be kept for the claim to be quantified. Lastly, the claim is worth only what the estate is worth: if the price has been consumed or placed outside the estate, it may prove irrecoverable.

Must the quasi-usufruit agreement be notarised or registered?

Yes, if one wishes to be able to argue later about the deductibility of the claim: the chambre commerciale (the commercial division of the Cour de cassation, the French supreme court for civil and commercial matters) has held that the inheritance tax return is not enough to establish it. The decision dates from 27 November 2024 and concerns securities: proof that the debt of restitution is certain does not follow from the inheritance tax return alone, even where that return quantifies the values in question exactly; a notarised or registered quasi-usufruit agreement is required (Cass. com., 27 novembre 2024, n° 23-12.151). It is the most operational point in the file, and the easiest to miss: without a document in due form, the discussion on deductibility does not even open, and the debate on the mainly tax purpose becomes moot for want of a debt to set up against the tax authorities.

The clause that decides who is liable

Option or obligation: why does the word change everything?

A reinvestment left to the discretion of the holder of the usufruit is equivalent, for tax purposes, to shifting the usufruit onto the price: it is the holder of the usufruit who pays everything. The reasoning is explicit: « lorsque l'usufruitier conserve la faculté de remployer ou non le produit de la cession des titres dont il a l'usufruit, le droit d'usufruit doit être regardé, pour l'imposition des plus-values résultant de la cession, comme reporté sur le produit de cette cession, rendant ainsi l'usufruitier intégralement redevable de l'imposition » [where the holder of the usufruit keeps the option of reinvesting or not the proceeds of the sale of the shares over which he holds the usufruit, the usufruit must be regarded, for the taxation of the capital gains arising from the sale, as shifted onto the proceeds of that sale, making the holder of the usufruit liable for the tax in full] (CE 2 avril 2021, n° 429187). The court of appeal had been reversed for having concluded that the bare owner was taxable « sans rechercher si ce remploi du produit de cession était une obligation pour les parties à l'acte ou s'il n'était qu'une simple faculté à la main des seuls usufruitiers » [without examining whether that reinvestment of the proceeds of the sale was an obligation on the parties to the deed or no more than a mere option in the hands of the holders of the usufruit alone]. A clause that authorises reinvestment therefore produces none of the effects of a clause that requires it.

What must a clause de remploi contain in order to hold?

A defined amount, failing which the clause organises nothing. In the 2021 case, a side agreement to the gift did require the donees to contribute a « fraction » [fraction] of the shares to a société civile immobilière (a non-trading property company). That was not enough: « ces stipulations ne peuvent être regardées comme organisant une clause de remploi à due concurrence de cette fraction, dès lors qu'aucune stipulation n'en définissait le quantum » [those stipulations cannot be regarded as organising a reinvestment clause to the extent of that fraction, since no stipulation defined its amount] (CE 2 avril 2021, n° 429187). A clause that serves its purpose therefore states what share of the price is concerned, in what shares the reinvestment is to be made, that the income from those shares goes to the holder of the usufruit, and that the operation is compulsory and not optional. A clause that refers to a later agreement between the parties, or that leaves the share to be reinvested undetermined, falls on the side of the mere option.

At what date is the clause assessed?

At the date of the sale, and that requirement appears in the decisions themselves. The two judgments use the same formula, « les clauses contractuelles en vigueur à la date de la cession » [the contractual terms in force at the date of the sale], the 2026 one expressly extending it to the case of compulsory reinvestment (CE 12 mars 2026, n° 497808). The consequence is twofold. First, an amendment signed after the transfer of ownership does not alter the tax treatment, the triggering event having already occurred. Second, an old deed whose clauses have never been reviewed continues to produce its tax effects: in the 2026 case, gifts made in 1994, 1996 and 2001 still governed the treatment of a sale carried out in 2010, the stipulations not having been « remises en cause » [called into question] by that date. Changing the clause therefore means doing so beforehand, by a deed bearing a certain date.

Does a reinvestment decided after the sale cure the clause?

No: the reinvestment actually carried out, being later than the sale, has no bearing on who is liable. The point has been decided twice. In 2021, the applicants relied on the fact that the price had actually been reinvested; the answer was that they could not « utilement se prévaloir de la circonstance, postérieure au fait générateur de l'imposition que constitue le transfert de propriété, selon laquelle le prix de cession des titres aurait été effectivement remployé » [usefully rely on the circumstance, subsequent to the transfer of ownership which constitutes the triggering event for the tax, that the sale price of the shares had actually been reinvested]. In 2026, a reinvestment made five weeks after the sale, and a quasi-usufruit agreement signed six days before it, were both set aside « comme sans incidence » [as having no bearing] (CE 12 mars 2026, n° 497808). What was done with the funds does not correct what the deed provided for: it is the contractual arrangement, and it alone, that designates who is liable.

What shows, in a deed, that the usufruit is shifted onto the price?

A cluster of stipulations that deprive the bare owner of any control over the price and entrust its management to the holder of the usufruit. The analysis carried out in 2021 is instructive for re-reading a deed: that deed « interdi[sai]t aux nus-propriétaires d'aliéner ou de nantir les titres sans l'accord des usufruitiers » [prohibited the bare owners from disposing of or pledging the shares without the consent of the holders of the usufruit], gave « mandat exclusif à ces derniers pour gérer les fonds issus de la cession des titres » [an exclusive mandate to the latter to manage the funds arising from the sale of the shares], and provided that, in the event of a disposal, the bare owners undertook not to « demander le partage en toute propriété du prix représentatif de ceux-ci » [seek the division, in full ownership, of the price representing them]. Hence the conclusion: « Il ressortait donc de l'acte à l'origine du démembrement des titres que le droit d'usufruit était, en cas de cession, reporté sur le prix issu de celle-ci » [it therefore followed from the deed that gave rise to the split of ownership in the shares that the usufruit was, in the event of a sale, shifted onto the price arising from it] (CE 2 avril 2021, n° 429187). An exclusive management mandate, an account controlled by the holder of the usufruit alone, a prohibition on seeking division: all of these are indicators that the usufruit has been shifted.

What has become of the bare owner's claim

What changed on 29 December 2023?

A debt of restitution bearing on a sum of money over which the deceased had reserved the usufruit ceased to be deductible from the estate. The provision is unambiguous: « Ne sont pas déductibles de l'actif successoral les dettes de restitution exigibles qui portent sur une somme d'argent dont le défunt s'était réservé l'usufruit » [debts of restitution which have fallen due and which bear on a sum of money over which the deceased had reserved the usufruit are not deductible from the estate] (CGI art. 774 bis). Until then, the bare owner could set his claim against the liabilities of the estate of the holder of the quasi-usufruit, which allowed him to take the estate assets while reducing the duties by the same amount. It is precisely that effect the legislature set out to reach. The regime was introduced by article 26 of the loi de finances pour 2024 and has not been amended since. The reach of the provision depends entirely, however, on a second paragraph, which reserves a different fate for debts arising from a sale price.

Is an older arrangement caught?

Yes: the triggering event is the death, not the gift or the agreement. The provisions apply to estates opened on or after the promulgation of the Act, that is from 29 December 2023. A quasi-usufruit set up in 2010 or in 1998 is therefore caught by the provision as soon as the death of the holder of the usufruit occurs after that date, without any transitional provision preserving earlier situations. That is the heaviest aspect of the regime for families that organised a transfer of wealth long ago, and it is also the one on which the academic writing has voiced the most serious criticism, observing that the legislature could have attached the application of the provision to deeds entered into after promulgation rather than to deaths. Those criticisms were not put to the Conseil constitutionnel (the French constitutional court), the regime not having been examined when the Finance Act for 2024 was referred to it.

Giving shares or giving a sum of money: what difference does it make?

All the difference: a gift of the bare ownership of a sum of money falls under a prohibition that admits no proof to the contrary, whereas the sale of shares that were given opens a way out. The second paragraph of the provision sets aside the prohibition for « les dettes de restitution contractées sur le prix de cession d'un bien dont le défunt s'était réservé l'usufruit, sous réserve qu'il soit justifié que ces dettes n'ont pas été contractées dans un objectif principalement fiscal » [debts of restitution contracted on the price of sale of an asset over which the deceased had reserved the usufruit, provided it is shown that those debts were not contracted for a mainly tax purpose] (CGI art. 774 bis). The published guidance of the tax authorities confirms that « sont concernées notamment par ces dispositions les donations de biens avec réserve d'usufruit suivies de la cession de ces biens avec report de l'usufruit sur tout ou partie du prix de vente » [these provisions concern in particular gifts of assets with reservation of the usufruit followed by the sale of those assets with the usufruit shifted onto all or part of the sale price]. A gift of shares followed by their sale therefore falls within conditional deductibility, and not within a flat prohibition. The evidence still has to be produced.

Who bears the cost, and in what way?

The bare owner alone, on his own share, the other heirs being untouched. The published guidance is explicit: « Cette réintégration de la dette de restitution à l'actif successoral ne pèse ainsi que sur le nu-propriétaire et non sur les éventuels autres héritiers. » [this reinstatement of the debt of restitution in the estate therefore bears only on the bare owner and not on any other heirs]. Mechanically, the taxable estate is reduced by the amount of the debt, and the corresponding sum is then taxed in the share of the creditor bare owner alone, at the rates of inheritance tax calculated according to his degree of kinship with the holder of the usufruit (CGI art. 774 bis). Two corrective measures soften the charge. The duties paid on the initial gift are set off, « même si les droits de donation ont été acquittés par le donateur » [even where the gift duties were paid by the donor], without any excess being refundable. And the aggregation of earlier gifts is set aside for that value, which makes the allowance available again.

And if the claim turns out to be irrecoverable?

It is not taxed to the extent of what cannot be recovered. The published guidance provides for the case: « Dans l'hypothèse où l'actif successoral ne permet pas au nu-propriétaire de recouvrer totalement sa créance ou, à tout le moins, ne lui permet de la recouvrer que partiellement, celle-ci ne sera pas imposable à concurrence du montant irrécouvrable. » [where the estate does not allow the bare owner to recover his claim in full or, at the very least, allows him to recover only part of it, the claim will not be taxable to the extent of the irrecoverable amount]. That clarification has a direct practical reach for arrangements in which the price has been placed in a life insurance policy, the death benefit falling outside the estate: the bare owner then runs the risk of not recovering his claim, but he will not be taxed on what he does not receive. The right answer remains to plan ahead, by designating the bare owner as beneficiary for consideration by way of repayment of his claim, rather than relying on that corrective.

The evidence the bare owner must produce

What must be shown, and on whom does the burden fall?

On the bare owner, who must establish that the debt was not contracted for a mainly tax purpose. The provision is drafted in the passive voice, but the published guidance of the tax authorities identifies the person on whom the burden falls: « Pour prétendre au bénéfice de cette exception, il incombe au redevable d'être en mesure de justifier que la dette n'a pas été contractée dans un objectif principalement fiscal. » [to claim the benefit of that exception, it falls to the taxpayer to be in a position to show that the debt was not contracted for a mainly tax purpose]. The taxpayer is the bare owner, since it is he who owes the duties. The evidence is therefore to be assembled by the person who, most often, neither drafted the deed of gift nor negotiated the quasi-usufruit agreement: a child, sometimes a minor at the time. It is prepared during the lifetime of the holder of the usufruit, by keeping whatever establishes the family and wealth reasons for the transaction, and not on death, when those who witnessed the decision are no longer there to explain it.

What is an « objectif principalement fiscal »?

A notion more demanding than that of abus de droit (abuse of law): withstanding an abuse of law challenge is not enough to satisfy the condition. The published guidance says so expressly: « La notion d'objectif principalement fiscal est plus large que celle de but exclusivement fiscal au sens de l'article L. 64 du LPF, relatif à l'abus de droit fiscal » [the notion of a mainly tax purpose is wider than that of a purely tax aim within the meaning of article L. 64 of the livre des procédures fiscales, which deals with abuse of law in tax matters] (LPF art. L. 64). The difference is substantial. An arrangement that pursues a genuine family and wealth objective, but one secondary to the tax advantage sought, escapes abuse of law and nonetheless fails the condition laid down by the second paragraph. No statutory definition clarifies the notion, and no decision has yet applied it: to date, the provision has given rise to no case law at all. Its assessment therefore rests, for the time being, on the cluster of indicators adopted by the tax authorities alone.

On what matters do the tax authorities take a view?

Three indicators: the time elapsed, the family and wealth reasons for the sale, and the latitude left to the holder of the usufruit. The first works in the taxpayer's favour as the arrangement ages: « plus la durée écoulée […] est longue, moins la dette de restitution […] est susceptible d'être regardée comme poursuivant un but principalement fiscal » [the longer the period elapsed, the less the debt of restitution is liable to be regarded as pursuing a mainly tax aim]. The second concerns the reason for selling, the example given being to « pallier l'insuffisance de liquidités nécessaires pour s'acquitter de dépenses d'hébergement de l'usufruitier » [make up for a shortage of the cash needed to meet the accommodation costs of the holder of the usufruit]. The third is the most favourable where it is well constructed: in the event of a sale of the nue-propriété at market price, the exercise by the bare owner of his rights to allow the sale and the shifting of the usufruit « permettent de déduire que la dette de restitution à son profit n'a pas été contractée dans un objectif principalement fiscal » [allow the inference that the debt of restitution in his favour was not contracted for a mainly tax purpose]. Those indicators are neither ranked nor binding on a court.

Is there a case where the evidence cannot be produced?

Yes: where the transaction has already been held to be abusive. The published guidance closes the door without reservation: « En revanche, la preuve de l'absence de but principalement fiscal ne pourra pas être apportée lorsque la donation de la nue-propriété d'un bien avec réserve d'usufruit suivie de la cession du bien a été qualifiée d'abusive en application de l'article L. 64 du LPF et sous le contrôle du juge. » [conversely, proof of the absence of a mainly tax aim cannot be produced where the gift of the bare ownership of an asset with reservation of the usufruit, followed by the sale of the asset, has been characterised as abusive under article L. 64 of the livre des procédures fiscales and under the supervision of the court]. The consequence is that abuse of law litigation, conducted during the lifetime of the holder of the usufruit on income tax grounds, determines in advance the fate of the claim on death. The criterion that carries the characterisation of abuse is known and it is chronological: a quasi-usufruit agreement concluded after the sale deprives the gift of its irrevocable character, and makes it a sham (CE 14 octobre 2015, n° 374440).

Does reinvestment in other shares escape the provision?

Yes: without a debt bearing on a sum of money, the regime does not apply. The published guidance places outside the scope of the provision the case where the usufruit and the nue-propriété are carried over by subrogation to an asset other than a sum of money, « le report ne cré[ant] pas de dette de restitution portant sur une somme d'argent » [the carry-over not creating a debt of restitution bearing on a sum of money]. A compulsory reinvestment in shares, in a capitalisation contract or in a shareholder current account therefore leaves ordinary deductibility intact, with no condition of proof. That is the exact counterpart of the tax rule applicable to compulsory reinvestment: the route that makes the bare owner pay the capital gains tax is also the one that shelters his claim from the 2024 regime. The tax authorities have, moreover, extended the scope of the provision to « opérations assimilables » [transactions equivalent] to a sale, an extension which several authors consider open to challenge in the light of the wording of the Act.

The day of signing

Who receives the price at closing?

The person designated by the deed of gift, and not the one the parties settle on when the day comes. That is the practical consequence of the rule on the clauses in force at the date of the sale: the route of the price is already written. If the usufruit is shifted onto the price, the price goes to the holder of the usufruit, who has free disposal of it. If a compulsory reinvestment in other shares is stipulated, the price must be applied to that acquisition. If there is neither, the price is apportioned according to the respective value of the rights. A buyer who pays the price without having checked which of those three routes applies runs the risk of paying into the wrong hands, and the sellers run the risk of seeing their tax treatment determined by a payment that contradicts their deed.

What purpose does an escrow serve when the shares are held in split ownership?

To hold the price for as long as it takes for the route laid down by the deed actually to be followed, and to write that down in an agreement signed by all three parties. An escrow on a compte CARPA (the escrow account operated by the funds-handling body of the Paris Bar) makes it possible to release the funds only once the conditions set out in writing are met: evidence of the reinvestment where it is compulsory, signature of the quasi-usufruit agreement where it must precede the sale, or production of the apportionment key where the price is to be divided. Above all, it avoids the costliest situation, the one in which the price is paid first and the deeds tidied up afterwards: the case law has held twice that a later reinvestment and a later agreement do not correct the tax treatment. The escrow holds together the chronology of the deeds and the movement of the funds.

When must the quasi-usufruit agreement be signed?

Before the sale, and in a form that gives it a certain date. Two requirements are cumulative and they have different sources. The first is a tax requirement: the clauses taken into account are those in force at the date of the sale, a later agreement having no bearing on who is liable for the capital gains tax. The second is a question of evidence: a notarised or registered agreement is necessary to establish that the debt of restitution is certain, the inheritance tax return not being enough (Cass. com., 27 novembre 2024, n° 23-12.151). To that is added the risk of abuse of law where the agreement follows the sale. An agreement signed on the eve of closing satisfies the chronology, but prudence calls for it to be written into the deed of gift itself where the split of ownership is set up with a foreseeable sale in mind.

What must be checked in the deed of gift before signing?

Four points, which together determine both taxes. First, is the reinvestment an obligation or an option, and in whose favour is the option open. Next, if it is compulsory, does the clause define its amount, does it bear on shares, and does it provide that their income goes to the holder of the usufruit. Then, does the deed contain the stipulations that reveal a shifting of the usufruit onto the price: an exclusive management mandate in favour of the holder of the usufruit, an account he alone controls, a prohibition on the bare owner seeking division. Lastly, is the quasi-usufruit agreement, if there is one, in due form and earlier in date. That re-reading governs the quantification of both taxes, and its consequences call for a case-by-case examination.

The three routes in a table

The crossing of the last two columns is the arbitration to be carried out: the route that relieves the bare owner of the capital gains tax is the one that exposes his claim to inheritance tax, and the route that makes him pay immediately on a price he does not receive is the one that shelters his claim.

Common mistakes

• Deciding the fate of the price on the day of the sale. The clauses taken into account are those in force at the date of the sale. The arbitration is played out in the deed of gift, sometimes signed twenty years earlier.
• Believing that a clause de remploi is enough in itself. A reinvestment left as a « simple faculté à la main des seuls usufruitiers » [mere option in the hands of the holders of the usufruit alone] makes the holder of the usufruit pay, exactly as if there were no clause at all.
• Drafting a reinvestment without an amount. A clause requiring a « fraction » [fraction] of the shares to be contributed without defining how much organises no reinvestment.
• Providing for reinvestment in an asset of any kind. The rule that makes the bare owner the only taxpayer refers to reinvestment « dans l'acquisition d'autres titres » [in the acquisition of other shares] whose income goes to the holder of the usufruit.
• Tidying things up after closing. An actual reinvestment made afterwards and a quasi-usufruit agreement signed afterwards have both been set aside as having no bearing, and the later agreement also feeds the complaint of abuse of law.
• Relying on the inheritance tax return to establish the claim. It is not enough, even where exactly quantified: a notarised or registered agreement is required.
• Treating a 2015 arrangement as settled. The triggering event under the 2024 regime is the death: older quasi-usufruits are caught as soon as the death occurs after 29 December 2023.
• Confusing the two paragraphs of the provision. A gift of the bare ownership of a sum of money is struck down with no proof to the contrary admitted; the sale of an asset whose bare ownership was given opens a conditional deductibility.
• Believing that escaping abuse of law is enough. The mainly tax purpose is a notion « plus large que celle de but exclusivement fiscal » [wider than that of a purely tax aim].
• Forgetting the bare owner's cash position. On the compulsory reinvestment route, he pays the tax without receiving the price or the income from the shares acquired.

Frequently asked questions