Primary Residence Exemption: It's Not the Size (of the Lot) That Matters

Several nuns who lived on a property consisting of two houses, a private chapel, and a large adjoining lot sold the property. For the purposes of the sale, part of the lot was considered building land. The nuns believed that the capital gain realized on this sale qualified for the exemption for a primary residence.

Following a tax audit, the French Revenue Agency (administration ) determined that only a portion of the property was eligible for this exemption and issued a tax assessment corresponding to the taxation of the capital gain on the other portion of the land.

The assessment was challenged, and the Administrative Court of Appeals ruled in favor of the taxpayers. The Minister challenged this decision before the Conseil d'Etat.

The ruling will then specify that a building lot may indeed be considered an immediate and necessary appurtenance to a primary residence and thus qualify for the exemption applicable to the residence.

He further contends that the Administrative Court of Appeals did not misinterpret the facts when it ruled that, in this case, the building lot was indeed an outbuilding, since the sisters argued—and the “administration ” did not dispute this—“that the area on which the individual sewage system for the residential homes was located was essential to their use, that the other ancillary structures and features on the property—namely, the pond, the chapel, the terrace, and the tennis court, had always been used exclusively by her and her sisters, that these facilities were functionally linked to the residential houses, and that the various green spaces—whether gardens, lawns, or wooded areas—were also used exclusively for recreational purposes.”

The tax assessment is therefore definitively rescinded.

CE, Chapters 9 and 10, Sept. 30, 2026, No. 511096, Lebon T.

This legal watch produced by Mispelon Avocat, a law firm specializing in French tax audit and French tax litigation. You can follow this legal watch subscribing to the newsletter via this link.