New Jersey Administrative Code
Title 18 - TREASURY - TAXATION
Chapter 26 - TRANSFER INHERITANCE AND ESTATE TAX
Subchapter 3A - ESTATE TAX-DECEDENTS DYING AFTER DECEMBER 31, 2001, BUT BEFORE JANUARY 1, 2017
Section 18:26-3A.2 - Amount of the tax and certain valuations
Universal Citation: NJ Admin Code 18:26-3A.2
Current through Register Vol. 56, No. 18, September 16, 2024
(a) The tax is, at the discretion of the person or corporation liable for its payment, either:
1. The maximum credit that would have been
allowable under the provisions of the Internal Revenue Code in effect on December
31, 2001, against the Federal estate tax that would have been payable under the
provisions of the Internal Revenue Code in effect on December 31, 2001, on account
of taxes paid to any state or territory of the United States or the District of
Columbia; or
2. An amount determined
pursuant to the simplified tax system set forth in N.J.A.C. 18:26-3A.3. The
simplified tax system may not be used in those cases where a Federal estate tax
return is filed or required to be filed. The simplified tax system is not intended
for use in all estates. It may not be used when:
i. The surviving spouse/civil union partner is not
a U.S. Citizen;
ii. The estate contains
trusts for the purpose of sheltering assets from estate tax (such as marital trusts,
qualified terminable interest property (QTIP) trusts, and credit shelter or bypass
trusts); or
iii. In situations where the
tax liability produced under the simplified tax system is not similar to the tax
liability determined pursuant to (a)1 above.
(b) The following principles are applicable in making valuations and calculating the tax where family limited partnerships are involved:
1. A family limited partnership is a
limited partnership where more than 50 percent of the partners are related by blood
or marriage/civil union/domestic partnership and does not have a true business
purpose. It may or may not hold an interest in another partnership or other asset
that has a true business purpose. One indication of a true business purpose is that
the family limited partnership has and engages in business or commercial
transactions with customers, clients, persons, or entities other than the partners
of the family limited partnership, their family members, or other related
individuals or entities.
2. In an estate
where a Federal estate tax return is required to be filed and where the discounts
for an interest in a family limited partnership claimed have a Federal estate tax
consequence, the discounts, if any, permitted by the Internal Revenue Service will
generally be permitted for New Jersey estate tax purposes unless deemed by the
Director to be excessive.
3. In an
estate where a Federal estate tax return is not required to be filed and where the
tax is computed in accordance with the provisions of (a)1 above (maximum credit) and
in an estate where a Federal estate tax return is required to be filed but where the
discount claimed for an interest in a family limited partnership has no Federal
estate tax consequence:
i. If an interest in a
family limited partnership was created or funded within one year of a decedent's
death, it is presumed that the value of the interest is the value of the underlying
assets on the date of death of the decedent unless conclusive proof to the contrary
is submitted that clearly indicates a different value. Discounts are not permitted
unless the Director determines that they are warranted by the interest in the
partnership and/or the nature of and risk associated with the underlying assets.
Discounts totaling more than 10 percent are not permitted unless the Director
determines that a greater total discount is warranted by the nature and risk
associated with the underlying assets.
ii. If an interest in a family limited partnership
was created or funded more than one year prior to a decedent's death, the interest
is valued based upon the interest in the partnership and the value of the underlying
assets on the date of death of the decedent. Discounts totaling more than 10 percent
are not permitted unless the Director determines that a greater total discount is
warranted by the nature and risk associated with the underlying assets.
4. In an estate where a Federal estate
tax return has not been filed and is not required to be filed and the tax is
computed in accordance with (a)2 above (simplified tax system), an interest in a
family limited partnership is valued at the value of the underlying assets on the
date of the death of the decedent. Discounts are not permitted for an interest in a
family limited partnership unless the Director determines that they are warranted by
the nature of and risk associated with the underlying assets.
Disclaimer: These regulations may not be the most recent version. New Jersey may have more current or accurate information. We make no warranties or guarantees about the accuracy, completeness, or adequacy of the information contained on this site or the information linked to on the state site. Please check official sources.
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