How should compensation received by one co-owner in exchange for another co-owner’s exclusive use of a building be taxed?

During divorce proceedings, a family court judge granted one spouse the right to use a furnished residence in exchange for the payment of a monthly allowance. The property was subsequently sold, and the former husband then paid his ex-wife an allowance, which she reported as property income.

She subsequently filed a complaint withadministration , arguing that she had made a mistake and that, since the property was furnished, the income should have been reported as business income.

This claim was denied, and the denial was subsequently challenged in the courts and before the Administrative Court of Appeals.

The court will then hold that the compensation paid was not in exchange for the use of the property but was intended to “compensate for the harm caused to the joint ownership by the loss of the property’s fruits and income, taking the place of those benefits and assuming their characteristics.”

The Court concludes that the compensation received constitutes taxable income from taxable real property, in accordance with the General Tax Code, as property income.

It therefore confirms the denial of the claim.

CAA Marseille, July 15, 2026, No. 25MA00199

This legal watch produced by Mispelon Avocat, a law firm specializing in French tax audit and French tax litigation. You can follow this legal watch subscribing to the newsletter via this link.