I TAX LAW I Sale of Divided Ownership Shares: Who Pays Capital Gains Tax?

The French Conseil d’État Rules on March 12, 2026: What Decision No. 497808 Changes

In the event of the transfer of split ownership securities, who bears the capital gains tax: the usufructuary or the bare owner?

When the usufructuary and the bare owner jointly sell the securities, the capital gain is taxed between them according to the respective value of their rights.
However, contractual clauses can completely change this outcome.

There are two contractual exceptions:

• Quasi-usufruct: if, on the date of the transfer, the clauses provide that the usufruct is transferred to the sale proceeds, then the capital gain is taxed entirely in the hands of the usufructuary
• Reinvestment agreement: if, on the date of the transfer, the clauses require mandatory reinvestment of the proceeds into other split ownership assets, the capital gain is taxed entirely in the hands of the bare owner

Decision No. 497808 of March 12, 2026: The Conseil d’État rules that the tax treatment of capital gains arising from the transfer of split ownership securities must be assessed in light of the contractual clauses in force on the date of the transfer.

There is no retroactive effect, and no ex post assessment. What matters is the agreement as it stands at the time of the sale.

In this specific case, the deeds of gift by which the securities were split provided an option between reinvestment or transferring the split ownership to the proceeds.
In the absence of a formal reinvestment decision on the date of the transfer, the usufructuaries were deemed to have received the proceeds in the form of a quasi-usufruct.

In practice, it is essential to ensure that the relevant documents (articles of association, gift-partition deed, shareholders’ agreement, etc.) clearly set out the chosen mechanism before the transfer.
An ambiguous clause or one amended after the fact will have no tax effect.

Article by Amaury DE CARLAN, Partner, and Clémence DUBOUIS, Associate.