A taxpayer gifted each of his children the bare ownership of shares in a company engaged in rental property management and real estate brokerage and believed he was entitled to apply the 75% exemption on transfer taxes, as permitted under the Dutreil Agreement.
Following a tax audit, the French Tax Authority (administration ) challenged this reduction. It determined that the condition regarding the existence of a predominant commercial activity had not been met because the non-commercial activity of rental property management was more significant than that of real estate investors.
The tax assessment was then challenged all the way to the Court of Cassation.
The court will then rule that the Court of Appeals was entitled, in determining the predominant business activity, to rely “on criteria based on the revenue from each of the activities in question and the proportion of gross assets allocated to the commercial activities of a real estate dealer and developer” as of the date on which the tax liability arose.
It finds that the court correctly applied the “weighing of evidence” method in determining that the civil activity was predominant and that the exemption did not apply.
Commercial Court of Cassation, Nov. 4, 2026, No. 25-17.110, published
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