When the matrimonial property regime changes the calculation of a capital gain or loss

Facts

Mrs T told me that her husband held shares in company X in an ordinary securities account, which were transferred to her after his death in 2012.

Company X recently carried out a compulsory buyback^[1] resulting in the sale of shares to the issuer and triggering capital gains tax on the sale for the holder. However, Mrs T disputed the document used to calculate the capital gain drawn up by her account keeper at the time of the compulsory buyback of X company shares.

In response to her complaint, the account keeper informed her that the weighted average price (WAP) to be taken into account when calculating the capital gain or loss was not the initial purchase price of the shares, but the share price on the day of her husband's death.

Mrs T. argued that she and her husband were married under the regime of joint ownership of property, and therefore, in her view, the value to be taken into account was that of the day on which her husband acquired the X shares.

Depending on whether the WAP used was the price of the X share on the day of acquisition or on the day of Mr T's death, Mrs T would either incur a capital loss in the former case or a taxable capital gain in the latter.

As her request for rectification was rejected by the account keeper, Mrs T. asked me to intervene.

Investigation

I questioned the account keeper and reminded him that in the case of a matrimonial regime of joint ownership of property with a full attribution clause, the assets of the predeceased spouse are transferred in their entirety to the surviving spouse. This means that the estate is only opened on the death of the second spouse.

Furthermore, the Bulletin officiel des impôts (BOFIP), in its section on “Capital gains on intangible movable property-Tax basis-Calculation of net gains on disposal-Acquisition price or value-Acquisition price free of charge”, clearly specifies that when the advancement of matrimonial property is constituted for the benefit of the surviving spouse by the effect of a marriage agreement, the gain on disposal of the securities collected in respect of this advancement of matrimonial property is calculated on the basis of the original acquisition value of the securities.

I therefore informed the account keeper that the value to be used in calculating the WAP was not the value of the shares on the date of Mr T's death, but rather the value of the securities on the date of their original acquisition, it being specified that the file did not show any transactions involving the shares that would have since had an impact on the cost price of this line of shares.

In response to my request, the account keeper confirmed that Mr and Mrs T’s matrimonial regime of joint ownership of property was subject to an attribution clause in favour of the surviving spouse.

He acknowledged that he had wrongly attributed to the X shares a WAP corresponding to their value on the day of Mr T's death, when they were transferred into Mrs T's name in 2012.

Recommendation

The account keeper therefore agreed to issue an amended single tax statement (IFU) in Mrs T's name, so that she could justify to the Treasury her claim for repayment of the capital gains tax wrongly deducted in respect of the compulsory buyback of the X shares.

As a result of the correction made, Mrs T had in fact recorded €3,456.55 in capital losses rather than the €400.08 in capital gains that were erroneously reported and resulted in an undue tax of €140, which the account keeper offered to reimburse as a goodwill gesture.

The lesson to be learned

First of all, even though the AMF has no jurisdiction in tax matters and I am not authorised to interpret tax provisions or to intervene when the grievance is purely tax-related, I can, however, take up the case if the error made by the institution in question, the subject of the dispute, is not tax-related but has tax consequences, which was precisely the case in this instance (related to the matrimonial property regime).

Furthermore, as I had occasion to point out in my Journal in November 2020, under the regime of joint ownership of property, all assets, present and future, regardless of their date of acquisition or origin, are jointly owned. The implementation of a full attribution clause ensures the future of the surviving spouse by granting them the entirety of the common estate upon the first death, without any formalities being required. 

The surviving spouse therefore becomes the full owner of the securities comprising the deceased spouse's share portfolio, retroactively from the day of their acquisition. From a tax point of view, this means that the value to be used for calculating capital gains or losses is the original acquisition price of the shares, and not their value on the day of the first spouse’s death.

It should be noted that the situation would have been different in the case of a PEA rather than a securities account. The death of the holder, regardless of the matrimonial regime, results in the closure of the plan^[2], which cannot be transferred as is. It is then up to the heirs to decide what to do with the securities in the portfolio of the deceased. They can choose to keep them in a dedicated securities account or sell them. In this case, the value of the securities to be taken into account for the calculation of social security contributions is that on the day of the holder's death and not that of their acquisition date.