Valuation of a temporary usufruct: Taking the company’s tax status into account may result in the disallowance of a tax adjustment

A holding company acquired the temporary usufruct of shares in SCEA in 2007. Following a tax audit,administration that the purchase price of this temporary usufruct had been overstated and issued a tax assessment against the holding company.

The reassessment was challenged all the way to the Administrative Court of Appeals.

It will then point out that the valuation of company securities should yield a figure corresponding to what a third party would have paid to acquire those securities.

In this specific case,administration used the "discounted cash flow" method, also known as "DCF," to value the temporary usufruct. This method is based on the expected future cash flows at the time of the purchase of the usufruct.

The holding company challenged the calculation method used byadministration it had taken into account the method of financing the securities.

The Court notes thatadministration acknowledged that it had deviated from the method used by valuation professionals. It therefore rules that "the valuation of the future income expected by the beneficial owner must be assessed on the basis of projected distributions and not in accordance with the tax regime of the target company."

The Court therefore held that theadministration valuation method didadministration yield a price close to what a third party would have paid.

The tax reassessment of the holding company is therefore rescinded.

CAA Bordeaux, April 23, 2026, No. 24BX01413

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