TLDR: In the event of partial disposal or donation of usufruct/bare ownership, the latent capital gain is recalculated only on the shares or rights actually transferred. The calculation is based on the comparison between the disposal gain and the latent capital gain, proportionally to the assets involved. For usufruct or bare ownership, the taxable base depends on the context (transfer of tax residence, disposal or donation) and the possible application of the scale provided in Article 669 of the French General Tax Code (CGI).
General principle of recalculation
The latent capital gain is recalculated exclusively on the shares or rights (usufruct, bare ownership) actually disposed of or donated. This principle applies to establish the comparison between the disposal gain and the latent capital gain, limiting the calculation to the portion of the estate concerned by the transaction.
Special cases: donation and partial disposal
In the event of a donation, the increase in the value of the shares since their entry into the estate is determined by retaining the value applicable for the transfer duties of a French resident. If the event (disposal or donation) concerns only part of the shares, no tax relief or refund is granted if the actual capital gain is lower than the latent capital gain retained pro rata for the shares concerned.
Calculation of the capital gain for usufruct or bare ownership
The capital gain is determined by the difference between:
- the value of the usufruct or bare ownership at the time of the transfer of tax residence outside France or, if the overall latent capital gain on the shares concerned is higher than the capital gain realised upon disposal or donation, the value of the usufruct or bare ownership at the date of this transaction;
- the acquisition value of these rights.
Valuation methods
To determine the value of the usufruct or bare ownership:
- in the event of a disposal, the taxpayer can choose between an economic valuation or the use of the scale provided in Article 669 of the CGI;
- in the event of a donation, the use of the scale is mandatory. The age of the usufructuary is considered on the day of the transaction.
Comparison with the latent capital gain and taxable base
Two scenarios arise for the taxable base:
- If the disposal gain net of the allowance (calculated on the day of disposal) is lower than the latent capital gain net of the allowance (calculated on the day of the transfer of tax residence), the taxable base is equal to the disposal gain reduced by the allowance for the holding period determined on the day of disposal.
- If the disposal gain net of the allowance is higher than the latent capital gain net of the allowance, the taxable base is equal to the latent capital gain reduced by the allowance for the holding period determined on the day of disposal.
Specific case: capital gain higher than the latent capital gain on bare ownership
If, in the event of a donation, the capital gain (increase in the value of the shares since their entry into the estate) is higher than the latent capital gain on the bare ownership, the calculation of the fraction of tax due takes into account the amounts of the latent capital gains calculated both on the bare ownership and on the full ownership.
Partial disposal and tax deferral
In the event of partial disposal, the deferred capital gain is taxable in proportion to the assets disposed of.
Tax limitation in the event of lower capital gain
If, in the event of a transaction (disposal or donation), the amount of the disposal gain or the increase in the value of the shares is lower than the capital gain determined under the prescribed conditions, the tax calculated on the latent capital gain is retained up to the amount of its recalculated value. This recalculation is based on the difference between the price or value of the shares on the date of the event and their purchase price or value, taking into account any soulte (equalisation payments).