N.J. Admin. Code § 18:26-3A.2 - Amount of the tax and certain valuations

(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.

Notes

N.J. Admin. Code § 18:26-3A.2

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