In a case that was recently heard in the French Supreme Court, the Cour de Cassation, an owner contested the payment of capital gains tax of nearly €73,000 on the sale of a property they considered to be their principal residence.

The property in question comprised a main residence, to which was attached a separate studio.

The studio was furnished, with a kitchen and bathroom, and had access to the outside, allowing it to be used independently of the other parts of the property. The owners claimed that the studio had been purchased to increase the size of the main residence.

In court it was disclosed that the studio had been rented on a renewable annual contract, although the tenant vacated the property 11 days prior to its sale.

The sellers claimed that during those 11 days the studio was occupied by one of their children.

As a result, the owners argued that it formed part of the main residence, which was therefore entirely exempt from capital gains tax and social charges.

However, the court considered that they had not produced sufficient evidence of the occupation by their child and, moreover, that such a short occupation was not enough for the studio to be regarded as part of the principal residence. In addition, the child concerned was not part of their taxable household.

The court also considered that the functional independence of the studio from the rest of the property was not sufficient for it to qualify as part of the main residence.

As a result, the court rejected their claim.

It is noteworthy that the courts have made similar decisions in the past, on which we have reported, at French Capital Gains Tax on a Chambre d’Hôte and Estate Grounds Not Exempt.