Exemption of transfer of bare ownership of primary residence with reservation of the usufruct and renting

The exemption provided for in the LIRPF art.33.4.b is not lost by the fact that the usufructuary, over 65 years of age, rents to a third party the dwelling whose bare ownership was previously transferred to one of her children.

The applicant, who is over 65 years of age, asks the DGT whether the exemption provided for in article 33.4.b of the LIRPF is applicable when transferring the bare ownership to her son, reserving the usufruct, and, if so, whether she would lose the right to it if, as usufructuary, she subsequently rents the property to a third party.

The transfer of the property will generate a capital gain or loss (LIRPF art.33.2). The amount of this is determined by the difference between the respective acquisition and transfer values.

Capital gains arising from the transfer of their primary residence by persons over 65 years of age or by persons in a situation of severe or great dependence in accordance with the Law for the promotion of personal autonomy and care for dependent persons (LIRPF art.33.4.b) are exempt from tax.

It is understood that the taxpayer is transferring his principal residence when such building constitutes his principal residence at that time or would have been considered as such until any day of the two years prior to the date of transfer (RIRPF art.41 bis.3).

It is the Administration’s criterion that the tax benefits related to the taxpayer’s habitual residence are linked to the full ownership, even if it is shared, of the property (DGT 14-10-00 1867-00; DGT CV 4-5-06 V0845-06 and DGT CV 30-6-06 V1278-06).

Based on the above, the DGT concludes:

• In the event that the property transferred complies with the provisions of the RIRPF art.41 bis and, being the applicant over 65 years of age and having full ownership of the property, the capital gain generated by the transfer of the bare ownership of her habitual residence, reserving the usufruct for life, is exempt.
• In relation to the second question raised, taking into account that the usufructuary can use the usufructed thing himself, lease it to another and alienate his right of usufruct, even if it is free of charge (CC art.480), the usufructuary can lease the house without losing the right to the exemption provided in the LIRPF art.33.4 in relation to the prior sale of the bare ownership.