Reader Question: If I inherit my mother’s second home in France, which she has had for 40 years, is any subsequent sale exempt from capital gains tax due to the long length of ownership? Or does the exemption ‘clock’ start again with me as the new owner after the inheritance is settled?
Given the €100,000 allowance for inheritances from a parent, it is possible you may pay some French inheritance tax but not capital gains tax (CGT) when you inherit the property from your mother on her death.
You would not pay CGT at that point as you personally would have made no capital gain.
After that, the CGT ‘clock’ starts ticking again with you as the new owner in case you later decide to sell the property.
The taxable gain for CGT in this case would be based on the difference between the value of the home when you inherited it and the value upon sale.
Depending on how much time has passed, some reduction of the gain for length of ownership may also apply.
The ‘acquisition’ value would in this case be the same as that which was used for the calculation of inheritance tax, to which you can add the amount of the inheritance tax you paid and other related expenses, such as notaire’s fees, to reduce the taxable capital gain.
If property prices continue the current trend of stabilising / falling, a CGT liability may not be payable if the property is sold within a few years.