French Capital Gains Tax When Selling Split-Ownership Property or Shares

The Framework: Why Démembrement Complicates Capital Gains

A standard capital gain is the difference between the sale price and the acquisition cost. Démembrement introduces two variables that change both numbers. First, the who: when usufruit and nue-propriété are held by different parties, the tax liability may fall on one, the other, or both depending on how the sale is structured and whether the proceeds are split between the parties. Second, the what: the acquisition cost of a split right depends on whether it was acquired directly as a split right, carved out of a previously full ownership, or received gratuitously — and each route produces a different calculation.

French tax law treats capital gains on démembrement through two separate regimes: the plus-values immobilières rules for real estate (CGI Art. 150 U and following), and the plus-values mobilières rules for securities and company shares (CGI Art. 150-0 A and following). The principles overlap but are not identical — and the securities rules are significantly more detailed about who is taxable depending on how the sale price is attributed.

Real Estate: Selling One Right in Isolation

When the Right Was Acquired Directly as a Split Right

Where the usufruit or nue-propriété was acquired directly — by gift, inheritance, or purchase — as a split right, the capital gain is the difference between the sale price and the acquisition cost of that specific right. For rights received gratuitously, the acquisition cost is the value declared for gift or inheritance tax at the time of the transfer. For purchased rights, it is the purchase price (CGI Art. 150 VB). An adjustment applies where the démembrement arose from a succession that opened before 1 January 2004: the acquisition cost must be recalculated using the current barème of Article 669 CGI based on the usufruitier's age at the date of the current sale, not the original succession.

When the Right Was Carved Out of a Previous Full Ownership

The more common scenario in family planning: the seller acquired the property in full ownership and subsequently carved out the démembrement — typically by donating the nue-propriété and retaining the usufruit. In this case the acquisition cost of the right being sold is a fraction of the original full purchase price. That fraction is determined using the barème of Article 669 CGI based on the usufruitier's age at the date of the current sale — not the purchase date. All ancillary costs (notarial fees, transfer taxes) are allocated in the same proportion (CGI Annex II Art. 74 SE).

Holding Period — Duration Abatements

For isolated sales, the holding period for the progressive duration abatement on real estate gains (which eliminates the gain entirely after 22 years for income tax and 30 years for social levies) runs from the date the specific right was acquired. A nu-propriétaire who received the nue-propriété by gift five years ago has a five-year holding period — the parent-usufruitier's twenty-year ownership does not carry over.

Real Estate: Selling Both Rights Together

Where the usufruitier and nu-propriétaire sell the full property jointly, each party is in principle taxable on a gain attributable to their own right, calculated on the basis of their respective share of the sale price. The price split between the two rights follows the barème of Article 669 CGI as a practical default — though both parties may agree to use economic valuation instead, provided the same method is used for both rights (BOI-RFPI-PVI-20-10-10 n° 320).

Primary Residence Exemption

The usufruitier who occupies the property as their primary residence can claim the exemption on their share of the gain. The nu-propriétaire who does not occupy the property generally cannot. A taxpayer who holds only the usufruit or nue-propriété of their primary residence is nonetheless treated by the administration as owning that residence — meaning they may be denied the "first sale of a non-primary-residence" exemption when selling another property (CE 15-7-2021 n° 453490). The €15,000 low-value exemption is assessed against the full property value, not just the value of the démembred right being sold.

Real Estate: Selling Full Property After Reunion of the Two Rights

When the usufruit extinguishes on the usufruitier's death and the nu-propriétaire becomes full owner and then sells, the capital gains calculation depends on how each right was originally acquired. The four combinations produce different cost bases and holding periods:

Securities Capital Gains: Post-3 July 2001 Démembrements

For securities and company shares where the démembrement was constituted on or after 3 July 2001, the administration has published detailed rules on who bears the tax depending on how the sale proceeds are attributed (BOI-RPPM-PVBMI-20-10-20-60).

Scenario A: Isolated Sale or Joint Sale with Price Split

Where either party sells their right alone, or the parties sell jointly and actually divide the price between themselves, each party is separately taxable on the gain attributable to their right. Where neither party previously held full ownership — both received their rights simultaneously from the same gratuitous transmission — the cost base is the full property value declared at that transmission. Where one party previously held full ownership and created the démembrement, the cost of the right sold is a fraction of the original full ownership purchase price, split between usufruit and nue-propriété using either the barème or economic valuation — both parties must use the same method.

Scenario B: Joint Sale Without Price Split — Reinvestment with Report of Démembrement

Where both rights are sold but the proceeds are reinvested in new démembred assets rather than split between the parties, the capital gain is taxable in the hands of the nu-propriétaire on the full gain (BOI-RPPM-PVBMI-20-10-20-60 n° 100). The cost base is the original full property acquisition cost (or declared value at gratuitous acquisition).

A special exception exists for securities portfolios (universalités de biens) arising from a succession: with an express and irrevocable option filed with the account-holding bank, the administration accepts that the usufruitier is taxable instead of the nu-propriétaire. This option is only available where the démembrement is of successoral origin — it does not apply where the démembrement arose from a donation.

Scenario C: Joint Sale Without Price Split — Quasi-Usufruit on Proceeds

Where all sale proceeds are attributed to the usufruitier under a quasi-usufruit arrangement, the capital gain is taxable entirely in the hands of the usufruitier (BOI-RPPM-PVBMI-20-10-20-60 n° 100). The nu-propriétaire bears no immediate tax, receiving instead a debt claim against the usufruitier's estate deductible for inheritance tax purposes when the usufruit eventually ends.

The Conseil d'État has ruled that where the nu-propriétaire bears the full tax in a reinvestment joint sale, they may include in their deductible acquisition costs not only the gift tax they themselves paid on the nue-propriété but also the tax paid by the usufruitier on the usufruit — since the nu-propriétaire alone bears the full tax liability (CE 11-5-2017 n° 402479). By analogy, where the usufruitier is taxable under a quasi-usufruit, they should be able to deduct the gift taxes paid by both parties.

Holding Period for Securities Gains

For securities, the holding period runs from the date the taxable person acquired their own right. Where the nu-propriétaire is taxable (reinvestment scenario), the period runs from the nu-propriétaire's acquisition date. A donation of nue-propriété to children shortly before a sale resets their holding period to the gift date — potentially eliminating any duration abatement that the parent's longer holding period would have generated. Note that since 2018, duration-based abatements on securities gains only apply where the taxpayer opts for the progressive income tax rate rather than the flat PFU rate — and only for pre-2018 acquisitions.

Securities: Selling Full Property After Reunion of the Two Rights

For securities, the rules after natural extinction of the usufruit are less generous than for real estate. The default principle is that the usufruit's extinction is at nil cost (it was received free, and Article 1133 CGI ensures no tax at extinction). Therefore the cost base for the nu-propriétaire's subsequent sale of the full portfolio is only the value of the nue-propriété at the time it was acquired — not the full property value as is the case for real estate (BOI-RPPM-PVBMI-20-10-20-60 n° 200).

Pre-3 July 2001 Démembrements

Securities whose démembrement predates 3 July 2001 are subject to the old regime regardless of when they are sold. The main differences from the post-2001 rules:

• Isolated sale or joint sale with price split: each party is taxed on their own gain — identical to post-2001
• Joint sale with reinvestment in démembred assets: nu-propriétaire is taxable — identical to post-2001 in outcome, but the option for the usufruitier to be taxable instead is not available for pre-2001 démembrements, even for successoral-origin portfolios
• Joint sale with quasi-usufruit: the administration has not expressly addressed this for pre-2001 démembrements — the post-2001 analysis (usufruitier taxable) is generally considered to apply by analogy

Where a taxpayer holds securities of the same type, some démembred before 3 July 2001 and some after, two separate weighted average cost base calculations apply, creating significant complexity in any partial sale of the mixed portfolio.

Donation-Avant-Cession: Eliminating Capital Gains Before a Sale

The donation-avant-cession is the most widely used capital gains elimination technique in French wealth planning. Rather than selling an asset and paying tax on a large latent gain, the owner first donates it — resetting the donee's cost base to the current value — and then the donees sell shortly after. Since the sale price equals the value at the time of the donation, the donees' capital gain is nil or minimal.

The démembrement variant is more tax-efficient: donating only the nue-propriété reduces the gift tax base to the barème percentage while simultaneously resetting the nue-propriété's cost base to current value. The gain on the nue-propriété is purged; the donor retains the usufruit and remains taxable on any gain on the usufruit portion at sale. For the strategy to be effective and survive challenge, several conditions are non-negotiable:

• The donation must genuinely and irrevocably precede the finalised sale. A donation made while a sale is under negotiation but before the last condition suspensive is fulfilled has been upheld — courts have validated donations made two days before a property sale and ten days before an option exercise on shares
• The donor must actually divest themselves of the donated asset — the transfer must be real, not nominal
• A legitimate family purpose beyond tax savings is strongly advisable to withstand the abuse-of-law provisions of Articles L 64 and L 64 A of the Tax Procedure Code

This article is provided for general information and educational purposes only. It does not constitute tax advice. Capital gains tax on démembrement is highly fact-specific — the correct analysis depends on the date and method of acquisition of each right, the age of the usufruitier, the type of asset, applicable bilateral tax treaties for non-residents, and the specific terms of any prior gift or inheritance. Always seek advice from a qualified French tax adviser or notaire before any sale involving split-ownership assets.