The value of SCI shares does not always increase in line with the value of the asset held on the date of sale
A real estate development company was subject to a tax audit, following whichadministration that the sale of shares in an SCI (real estate investment company) carried out in 2016 had been made at an undervalued price. The tax authorities then assessed the company for an abnormal management act and also taxed the individuals who had acquired the shares for deemed distributed income they would have received as a result of this reduced price.
The company had sold the shares in the real estate investment company (SCI) at a price set forth in a memorandum of understanding signed with the individuals on January 15, 2015, whereasadministration it should have sold the shares at a price corresponding to the value of the property held by the SCI as of the date of the sale, that is, in 2016. According toadministration, the price difference amounted to more than ten million euros.
The Administrative Court of Appeal then noted that the memorandum of understanding entered into in 2015 was intended to allow individuals who did not yet have the necessary funds to acquire shares in the SCI at a later date. The memorandum therefore provided for the company to acquire the shares and subsequently transfer them to the individuals. The individuals agreed to pay, in addition to the purchase price, interest of 5% per year.
The Court held thatadministration couldadministration use the date of transfer to determine the value of the SCI’s shares.
She also notes that theadministration methodadministration valuing the SCI’s sole asset—a property complex used almost exclusively as a garage—by comparing it to sales of commercial and residential properties was not appropriate.
In fact, the Court notes that:
the building was not intended for the same purpose;
the premises were in very poor condition, the basements were contaminated, and the walls contained asbestos;
the area was zoned as non-buildable at the time the agreement was signed;
The signing of the agreement followed the collapse of a purchase agreement.
Finally, the Court finds that the value set forth in the 2015 protocol is supported by an expert report that combined the direct comparison method, the income capitalization method, and the land cost method.
The tax assessment is therefore rescinded.
CAA Versailles, June 26, 2025, No. 23VE00596
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