N.J. Admin. Code § 18:26-5.4

Current through Register Vol. 56, No. 21, November 4, 2024

Section 18:26-5.4 - Classification of property as real or personal

(a) The doctrine of equitable conversion is not applicable to estates of New Jersey decedents that involve real property situated in New Jersey for the purposes of the transfer inheritance tax.

(b) The doctrine of equitable conversion is not applicable to those estates where:

1. A New Jersey decedent was a party to a contract of sale involving real estate situated in a foreign jurisdiction.

Example 1. The interest of a deceased resident seller located in another state, which was under contract of sale at the date of his or her death, is deemed to be an interest in real property, the transfer of which is not subject to tax under the inheritance tax laws of this State.

Example 2. The interest of a deceased resident buyer, under a contract of sale in effect at the date of death for the purchase of real property located in another state, is deemed personal property and taxable to the extent of the sum paid on account of the contract price at the time of a decedent's death. Pursuant to the provisions of N.J.S.A. 54:34-5, the balance due under the contract will not be allowed as a deduction in determining the clear market value of a decedent's estate subject to tax under the inheritance tax laws of this State;

2. A nonresident decedent was involved as a party to a contract of sale involving real property situated in New Jersey.

Example 1. The interest of a deceased nonresident seller of real property located in New Jersey, which was under contract of sale at the date of such nonresident decedent's death, is deemed to be an interest in real property, the transfer of which shall be taxable under the inheritance tax laws of this State. If such nonresident dies intestate, the interest in the New Jersey real property is, for the purposes of the inheritance tax laws of this State, deemed to have descended under the intestate laws of this State to the decedent's heirs at law.

Example 2. The interest of a deceased nonresident buyer, under a contract in effect at the date of death to purchase real property located in New Jersey, is deemed personal property and is not subject to tax under the inheritance tax laws of this State; and

3. N.J.A.C. 18:26-5.4are applicable regardless of whether a decedent died testate or intestate, or where real property is specifically devised but is under contract of sale at the date of death.

(c) Ground rents or any leasehold interest in land for 99 years or more are only deemed to be an interest in real property for the purpose of valuation under the New Jersey transfer inheritance tax; however, as to succession under the laws of descent and distribution of this State, such an interest is personal property. Such an interest, when held by spouses/civil union couple/domestic partners, is held as a tenancy in common, unless the conveyance expressly states that it is held as a joint tenancy. There can be no tenancy by the entirety in such an interest. Unaccrued ground rent on property located outside this State and owned by a resident decedent is deemed to be foreign real property and, therefore, not subject to tax; however, ground rent accrued prior to the date of death on property located outside the State of New Jersey owned by a resident decedent is subject to tax because it is deemed to be personal property.

(d) Partnership real estate. Any real property held by a partnership of which a decedent is a partner even if held by the deceased partner and his or her spouse/domestic partner/civil union partner as tenants by the entirety, is deemed to be a partnership asset and, therefore, is considered personal property.

N.J. Admin. Code § 18:26-5.4

Adopted by 50 N.J.R. 1624(a), effective 7/16/2018