Inheritance taxes are not deductible upon the liquidation of a trust

In 2014, a taxpayer inherited a portion of the assets held by his father in a trust located in Bermuda.

Following a tax audit,administration a tax assessment for the 2014 tax year, specifically regarding the calculation of the trust’s liquidation surplus, as the trust was liquidated in 2014.

In particular,administration that the taxpayer was not entitled to deduct the inheritance tax paid to acquire the trust’s shares when calculating the trust’s liquidation surplus.

The Administrative Court of Appeals, to which the case was referred, held that Article 12 of the General Tax Code permits the deduction of expenses only for the purpose of generating or preserving income.

In this specific case, the Court held that the inheritance taxes paid on an inheritance were not related to the generation of income and were therefore not deductible. According to the Court, they enabled the acquisition of an asset rather than the generation of income.

The tax assessment is therefore confirmed.

CAA Versailles, March 26, 2026, No. 24VE00035

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