12. Transfer or extinction of real rights of enjoyment over real estate
Regulations: Art. 37.1.k) Law Income Tax
Specific valuation standards
As a general rule, the capital gain or loss is calculated by the difference between the transfer value (which is zero in the case of termination of the right) and the acquisition value.
If the holder of the real right of enjoyment or use of real estate leased it, the amortization of the usufruct may be deducted as an expense in determining the corresponding real estate capital income (with the limit of the gross income received from the lease). Therefore, when the right is transferred or extinguished, the acquisition value must be reduced by the amount of the amortization that could be deducted for tax purposes.
In the case of real rights of enjoyment or use established on real estate that do not generate real estate capital returns, the right is consumed by use, so the acquisition value must be reduced proportionally to the time of use.
Real rights of enjoyment or use over real estate acquired before December 31, 1994
In this case, if a capital gain is obtained, the part of the capital gain generated before January 20, 2006 (the only one to which the reduction or abatement coefficients are applicable) must be distinguished from that generated after said date, to which the reduction or abatement coefficients are not applicable.
The determination of the capital gain generated prior to January 20, 2006 and the application, where applicable, of the reduction coefficients will be carried out in accordance with the distribution rules discussed in this same Chapter.
Example: Transfer or extinction of real rights of enjoyment over real estate
On 2 January 2002, Mr AMC acquired a temporary usufruct for a period of 20 years on an urban property, paying an amount equivalent to 60,000 euros. The urban property was leased from 2002 to 2006, with the owner of the right charging an annual rent equivalent to 3,000 euros during 2002 and 4,200 euros during each of the remaining years.
On January 2, 2020, this right was transferred for an amount of 34,000 euros.
Determine the amount of the capital gain or loss obtained from the transfer of said real right.
Solution:
Transfer value: 34,000
Acquisition value: 6,000 (1)
Capital gain (34,000 - 6,000) = 28,000
Notes to the example:
(1) For the years 2007 to 2019 in which the property was not leased, the acquisition value of the real right will be reduced in the proportion that said periods represent with respect to the duration of the right. The following operations must therefore be carried out:
Purchase amount: 60,000
Reduction corresponding to the years 2007 to 2019 (60,000 ÷ 20) x 13 = 39,000
Reduced acquisition amount (60,000 – 39,000) = 21,000
Less tax-deductible amortizations: (2)
Total amortization value 2002 to 2006 (3) (3,000 x 5) = 15,000
Total acquisition value (21,000 – 15,000) = 6,000 (Back)
(2) Since this is a temporary usufruct, the deductible annual amortization will be the result of dividing the acquisition cost of the right paid by the number of years of duration of the same, without said amount being able to exceed the amount of the gross income derived from the right. That is, 60,000 ÷ 20 = 3,000 euros. (Back)
(3) The limit of tax-deductible amortization cannot exceed the amount of income received in each of the financial years. (Back)