Management Package: Case Study

A taxpayer who served as the chief financial officer of a company had, pursuant to a purchase agreement granted to him, sold shares and interests in companies belonging to that company’s group.

He had believed that the capital gain realized was tax-exempt because the securities were held in a PEA.

Following a tax audit,administration that the price of certain shares sold exceeded their actual value. They concluded that the difference between the value of the shares sold and their actual value should be treated as hidden compensation and taxed as deemed distributed income.

Before the Administrative Court of Appeal, however,administration that the companies whose shares had been sold were taxed under the partnership tax regime and therefore could not generate distributed income for the taxpayer.

She then attempted to justify the adjustment by arguing that the promise to purchase the shares granted to the taxpayer was compensation for his work as chief financial officer and that the income generated should therefore not be considered a capital gain but rather salary.

The Administrative Court of Appeals will, however, note that:

• there was "no alignment between the taxpayer's business investment and the potential gain that could subsequently be derived from exercising" the option;

• the option could be exercised even if the taxpayer had left the company

• the terms under which the option was offered did not have "the purpose or effect of guaranteeing [the taxpayer], from the outset—particularly in light of the minimum price it established—a virtually certain gain upon exercise"

The Court therefore finds that the promise to purchase the shares does not constitute consideration for the services performed by the taxpayer and that the capital gain realized is not wages.

She believes that capital gains realized through a PEA are indeed tax-exempt.

CAA Nancy, Nov. 27, 2025, No. 23NC01784

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