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Expenses of Major Repairs as Personal Debt of the Bare Owner
In the realm of property ownership, it is crucial to understand the division of responsibilities and debts between the bare owner and the usufructuary. One key aspect to note is that only the expenses related to major repairs are considered a personal debt of the bare owner. This means that the usufructuary is not burdened with such costs.
Furthermore, when it comes to the Impôt sur la Fortune Immobilière (IFI), the usufructuary is typically taxed based on the full ownership value of the property. However, they are obligated to conduct maintenance work on the property. It’s important to distinguish between maintenance expenses and major repair expenses, as the latter is the sole responsibility of the bare owner. The expenses incurred for major repairs can be deducted from the taxable assets of the bare owner.
Usufructuaries and Deduction of Improvement Expenses
In a specific case involving taxpayers who held usufruct rights over both real estate and shares in a civil company, they utilized funds provided by the company to carry out various works on the property. These works included demolition, reconstruction of a larger dwelling, construction of a swimming pool, and landscaping. However, the tax authorities contested the deduction of the cost of these works as major repairs, arguing that they fell under the responsibility of the bare owner.
Initially, the Court of Appeal rejected the request for relief from taxation imposed on the usufructuaries. However, the Court of Cassation subsequently overturned the decision. The Court of Cassation based its decision on the fact that Article 606 of the Civil Code explicitly defines major repairs and the expenses incurred in the present case were not considered as such. Instead, they were deemed as improvement expenses that could be deducted from the patrimony of the usufructuary.
This ruling highlights the importance of accurately categorizing expenses and understanding the legal framework surrounding the responsibilities of the bare owner and the usufructuary. By considering the distinction between major repairs and improvement expenses, the Court of Cassation ensured that the correct tax treatment was applied in this particular case.
Maître Grégory Damy, Lawyer Nice, IFI
