Transfer Taxes: How to Value Listed Shares Transferred as Bare Ownership?

Imagine: you have just received as a gift shares of a listed company. Your grandfather, aged 75, has retained the usufruct (the right to receive the income), while you become the bare owner (you will have full ownership upon his death). What value should you declare to tax authorities? The market value on the day? Or a reduced value to account for the usufruct?

This is exactly the question that arose for the X. family, owners in Saint-Jean-de-Braye, in the Loiret region. Their notary had declared the shares at their market value (market price) reduced by a 10% allowance due to the age of the usufructuary. But the tax administration disputed this: according to them, the average price on the day of transfer should be taken, without any allowance.

What does the French Supreme Court (Cour de cassation) say in this decision of 23 February 1999? It rules in favour of the taxpayers: as long as the usufructuary is over 70, the 10% allowance provided for by Article 762 of the French General Tax Code applies, and the declared value is retained. Explanations follow.

The facts: a story that happens every day

Mr and Mrs X., retirees in Gien, had set up a gift-partition (an act organising the early transfer of their assets) in favour of their children. They had notably transferred listed shares, of which they retained the usufruct. At the time, the tax scale for valuing usufruct provides that over 70, the usufruct is valued at 10% of the value of full ownership (Article 762 CGI).

The children therefore declared these shares at a value equal to 90% of their stock market price (100% - 10% usufruct). But the tax administration considered that the value should be calculated according to Article 759 of the CGI, which requires the average price on the day of transfer to be retained, without any allowance. It thus notified an adjustment of several thousand euros.

The X. family contested this before the Tribunal de grande instance of Lille (because the case was heard there, the tax domicile being in the Nord region). The court ruled in their favour, and the administration appealed to the Supreme Court.

The reasoning of the court — broken down

The Supreme Court had to decide a conflict between two texts: Article 759 of the CGI, which sets the value of listed shares at the average price on the day of transfer (without allowance), and Article 762, which provides a scale for valuing usufruct according to the age of the usufructuary.

In short, for shares transferred as bare ownership, should Article 759 (gross market value) be applied and then the usufruct deducted according to the scale of Article 762? Or can the declared value, reduced by the allowance, be retained directly?

The judges answered: yes, the declared value can be retained, provided the usufructuary is over 70 and the 10% allowance exactly matches the legal scale. In other words, Article 762 applies as a priority to value the usufruct, and the value of the bare ownership follows automatically.

What few people know: this decision is a confirmation of previous case law. It does not create new law, but it clarifies the relationship between the two articles. However, note: if the usufructuary is under 70, the allowance is smaller (e.g., 20% between 61 and 70), and the calculation may become more complex.

In my practice, I have come across cases where the administration tried to contest these allowances, arguing that the market value should prevail. But since this decision, the position of taxpayers is solidly protected.

What this means for you — concretely

If you own listed shares and are considering a gift of bare ownership, here is what you need to know:

For the donor (the one giving): if you are over 70, the usufruct you retain is valued at 10% of the value of the shares. The gift will therefore cover 90% of the value. This is very tax-advantageous, as gift taxes (mutations à titre gratuit) are calculated only on this bare ownership.

For the donee (the one receiving): you declare the shares at 90% of their average price. If the administration challenges this, you can rely on the 1999 decision. Concrete example: shares worth €100,000 will be declared at €90,000, resulting in a tax saving of several thousand euros.

However, note: if the usufructuary is under 70, the allowance is smaller (e.g., 30% between 51 and 60). In that case, Article 759 applies fully and the average price on the day is retained, then the scale of Article 762 is applied.

For professionals (notaries, wealth management advisors): this case law is a valuable tool for optimising transfers. It avoids unnecessary adjustments.

Four tips to avoid this type of dispute

• Value the usufruct according to the legal scale: use the table in Article 762 CGI (10% from 71, 20% from 61 to 70, etc.). Do not rely on a free estimate.
• Declare the value of the shares based on the average price on the day: even if you apply the allowance, keep a record of the stock market price on the day of transfer. In case of a check, you can justify the calculation.
• Keep all documents: securities account statements, proof of age of the usufructuary, notarial deed. These pieces of evidence are essential in case of a dispute.
• Consult a specialised lawyer before signing: each situation is unique. For example, if the shares are held in community or if several usufructuaries are involved, the rules may vary.

Further insights: related case law and developments

This decision is part of a consistent line of the Supreme Court. One can cite the decision of 13 December 1988 (No. 87-14.712), which already admitted the application of the scale of Article 762 for listed shares. Since 1999, no decision has contradicted this position.

The trend of the courts is therefore favourable to taxpayers: the legal scale for usufruct prevails over the gross market value. This means that for gifts of bare ownership, you can benefit from a fixed allowance, without having to justify an economic discount.

For the future, it is possible that the legislator may change these rules, but for now, the case law is stable. Professionals can therefore confidently advise this structure.

What you absolutely need to remember

FAQ:

• What value should be declared for listed shares given as bare ownership? The value of bare ownership = value of full ownership (average price on the day) × (100% - % usufruct according to the age of the usufructuary).
• Can I challenge an adjustment if the administration refuses the allowance? Yes, by relying on Article 762 CGI and the 1999 case law. You must take the case to the tribunal judiciaire within two years of notification.
• What is the cost of a consultation? A first 30-minute consultation with Maître Zakine is €45, which can save you months of proceedings.
• Does the allowance also apply for wealth tax (IFI)? No, IFI has its own rules. For transfer taxes, yes.

Are you in a similar situation? A first 30-minute consultation with Maître Zakine (€45) can save you months of proceedings — and often much more. Book an appointment →