In estate and succession planning, a bare ownership donation with a lifetime usufruct reserved for the donors is a common legal transaction. However, splitting ownership has immediate tax consequences for both parties.<\/p>\n
The donee pays Inheritance and Gift Tax. The donor, for their part, must assess how the transfer affects their Personal Income Tax.<\/p>\n
The General Directorate of Taxes has clarified how to assess these cases. In particular, it defines how the donor must calculate the change in net worth.<\/p>\n
A lifetime gift of bare ownership changes the composition of the donor\u2019s assets. Under Personal Income Tax rules, this change creates a gain or a loss.<\/p>\n
To calculate it, the donor compares two figures: the acquisition value and the transfer value of the ownership interest.<\/p>\n
Since a donation is a gratuitous transfer, the Inheritance and Gift Tax rules set the transfer value. However, this value can never exceed the fair market value.<\/p>\n
The main difficulty is splitting the property\u2019s value correctly. In other words, the donor must determine which share corresponds to the bare ownership and which to the reserved usufruct.<\/p>\n
For this, the Personal Income Tax Law refers to Article 26 of the Inheritance and Gift Tax Law. For a lifetime usufruct, the value depends on the usufructuary\u2019s age:<\/p>\n
Therefore, the transfer value of the bare ownership is the property\u2019s total value minus the usufruct value at the time of the gift.<\/p>\n
In addition, the donor must apply the same proportion to the property\u2019s original cost. This gives the acquisition value for the calculation.<\/p>\n
The law treats gains and losses very differently in a bare ownership donation:<\/p>\n
A donation with a reserved usufruct is a useful tool for transferring assets in an orderly way. However, it requires tax planning in advance. Otherwise, the donor may face an unexpected and substantial tax bill.<\/p>\n
For this reason, it is essential to calculate the acquisition and transfer values correctly and to apply the age-based usufruct rules carefully.<\/p>\n
At CYSAE, our corporate and estate tax team designs asset restructuring strategies. We ensure full regulatory compliance and maximum tax efficiency for our clients.<\/p>\n","protected":false},"excerpt":{"rendered":"
In estate and succession planning, a bare ownership donation with a lifetime usufruct reserved for the donors is a common legal transaction. However, splitting ownership has immediate tax consequences for…<\/p>\n","protected":false},"author":49,"featured_media":3453,"comment_status":"closed","ping_status":"open","sticky":false,"template":"","format":"standard","meta":{"footnotes":""},"categories":[18,15],"tags":[],"class_list":{"0":"post-64423","1":"post","2":"type-post","3":"status-publish","4":"format-standard","5":"has-post-thumbnail","7":"category-legaltech","8":"category-smart-contract"},"yoast_head":"\n