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Thegonnec, Judge
Category: French Law
Satisfied Customers: 90
Experience:  15 years experience as judge at Paris Industrial Tribunal
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I own a French ski apartment 'en indivision' with a friend,

Customer Question

Hi, I own a French ski apartment 'en indivision' with a friend, which is on the market for 115,00 Euros, but the only offer so far is for about 93,000. I need the money for my 50% share, but my co-owner would like to hang on for an offer near the asking price. I don't mind that, but there is a chance that I can persuade him to buy my half for a discount at, for example, about 40,000- 42,000 euros. What would be the tax and stamp duty likely costs for him and would there be a problem transacting at below the market price? What legal fees might he expect, and is the process cheaper or easier than a sale to a third party? Our asking price is already below our purchase price. Thank you so much
Submitted: 2 years ago.
Category: French Law
Expert:  Thegonnec replied 2 years ago.
The taxes and deed fees would cost him about 7% of the net price paid - this varies slightly on a local basis.Transacting at below market price could raise suspicion from tax authorities, although it would seem that the market price would anyhow be below purchasing price (i.e. no capital gain tax anyway!)
Customer: replied 2 years ago.

Are there other reasons a transaction below the market price might concern the tax man besides CGT?

Also, f he then sells the property at a price which is lower than the original joint purchase price BUT higher than 2X the price I sell him my half for, I'm guessing he would have to pay capital gains on the half he bought from me.....?

(It might even be worse than that and his whole purchase price could be considered for tax purposes at the price of 2 times what he paid me, making him be in profit at a lower price for his half he has now.) But most probably I'm guessing he could off-set the loss on one previous half he owes against the profit of the later half he bought. Is that the case? If that is so, after he buys me out, which price is on record as the existing purchase price, i.e. at what price in such a case would a sale 'flag' the tax man: purchase price number 1 , 2- see brackets above-, or some mix of the 2?

Expert:  Thegonnec replied 2 years ago.
The taxman may suspect a hidden cash transaction if the price is grossly underestimated. Yet the transaction you are referring to is most likely too small to really attract much attention on this count.You're right. If he sells at price higher than your selling price +all fees, he will be liable for capital gain tax on that part. But this will be assessed globally if and when he sells the entire property.The price on record will be a 50-50 mix of both transactions.