The lack of a grandson's repayment of sums lent by his grandmother amounted to an indirect donation

It is not unusual for a grandparent to choose to give his grandchild a certain amount of money at a key point in their life in the form of a loan rather than a donation to avoid paying taxes or to avoid favoring one grandchild rather than others. However, the sum must actually be reimbursed, otherwise the tax authority is entitled to consider that it is actually an indirect donation and to proceed to an adjustment in this respect.

It is indeed in this way that the Court of Cassation ruled on March 7, 2018, approving the Court of Appeal for having considered that the grandmother's liberal intention emerged from the existing relationship with her alleged debtor and especially from the absence of any repayment by her grandson of the sums lent.

In the present case, the loan contract was granted for a period of two years, repayable at one time and then extended for ten years. However, seven years after the extension, the alleged debtor had made no payment, nor had he paid interest.

The tax administration therefore sent a proposal for a correction of the wealth tax of the grandson, finding that the loan was in fact an indirect donation and that the latter could not therefore integrate the debt liability in his patrimony subject to the wealth tax, which the grandson contested.

The Court of Cassation approved the Court of Appeal to have deduced from the elements of the case the liberal intention of the grandmother and thus the nature of indirect donation of the unpaid loan.