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Why in-kind gifts of shares should be registered

25/01/2017

There is no obligation to declare an in-kind gift (don manuel) to the tax authorities unless this gift is revealed or recalled at the time of a future gift or estate.

Yet the spontaneous declaration of an in-kind gift of shares, along with the payment of gift tax, is advisable for a number of reasons.

In terms of the transfer, it allows the beneficiary to benefit from a tax allowance and the lower tranches of the tax rates for duties applicable to free transfers every 15 years after the last gift.

Under the Dutreil inheritance scheme, if the securities are held for certain periods of time, the tax base may be reduced by 75%.

Another implication exists in that, when the shares are sold, the taxable gains are, in principle, equal to the difference between the securities' sales price and, if they are acquired at no cost, the value used to determine the transfer duties. Be careful, however: in order for the value of the shares on the day the gift is revealed to be taken into account, the in-kind gift must be declared before the transfer of the securities that generates the tax on gains. A taxpayer who sold shares received as successive in-kind gifts but who only registered these gifts after they were sold was not able to apply the "gift" value of the shares to calculate the gains (EC 25 November 2015).

N.B.
A beneficiary must declare an in-kind gift of shares to the tax authorities before the disposal of said shares in order to claim the gift when calculating the gains from the disposal.

Authors

Sylvie Lerond
Sylvie Lerond
Counsel
Paris