Justia Tax Law Opinion Summaries

Articles Posted in Supreme Court of New Jersey
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Walter and Mary Van Riper transferred ownership of their marital home to a single irrevocable trust. Walter passed away shortly after transfer of the property to the trust. Six years later, after Mary passed away, the trustee distributed the property to the couple’s niece. In this appeal, the issue presented for the New Jersey Supreme Court was whether the New Jersey Division of Taxation (Division) properly taxed the full value of the home at the time of Mary’s death. Walter and Mary directed that, if sold, all proceeds from the sale of their residence would be held in trust for their benefit and would be utilized to provide housing and shelter during their lives. Walter died nineteen days after the creation of the Trust. Mary died six years later, still living in the marital residence. Mary’s inheritance tax return reported one-half of the date-of-death value of the marital residence as taxable. However, the Division conducted an audit and imposed a transfer inheritance tax assessment based upon the entire value of the residence at the time of Mary’s death. Mary’s estate paid the tax assessed but filed an administrative protest challenging the transfer inheritance tax assessment. The Division issued its final determination that the full fair market value of the marital residence held by the Trust should be included in Mary’s taxable estate for transfer inheritance tax purposes. The Appellate Division affirmed the Tax Court’s conclusion, rejecting the estate’s argument that transfer inheritance tax should only be assessed on Mary’s undivided one-half interest in the residence. The Supreme Court agreed with both the Tax Court and the Appellate Division that the Division properly taxed the entirety of the residence when both life interests were extinguished, and the remainder was transferred to Marita. The property’s transfer, in its entirety, took place “at or after” Mary’s death, and was appropriately taxed at its full value at that time. “In light of the estate-planning mechanism used here, any other holding would introduce an intolerable measure of speculation and uncertainty in an area of law in which clarity, simplicity, and ease of implementation are paramount.” View "Estate of Mary Van Riper v. Director, Division of Taxation" on Justia Law

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In this appeal, the New Jersey Supreme Court considered whether the 2000 and 2001 financial agreements between plaintiffs EQR-Lincoln Urban Renewal Jersey City, LLC (EQR-Lincoln), and EQR-LPC Urban Renewal North Pier, LLC (EQR-North Pier), and defendant, the City of Jersey City (City), incorporated 2003 amendments to the Long Term Tax Exemption (LTTE) Law, N.J.S.A. 40A:20-1 to -22. Plaintiffs were limited liability companies that qualified as urban renewal entities under the LTTE Law. Each plaintiff entered into a separate financial agreement with the City to obtain a property tax exemption relating to an urban renewal project involving construction of an apartment building. Among other things, the financial agreements required plaintiffs to pay the City an “annual service charge” in lieu of property taxes. Plaintiffs filed a two-count complaint seeking a declaratory judgment against the City seeking: (1) a judgment declaring that the applicable law and financial agreements permitted plaintiffs to pay “excess rent” to affiliated entities under certain ground leases, with the effect of eliminating the “excess net profit” that plaintiffs might otherwise owe to the City; and (2) a judgment declaring that the parties’ financial agreements incorporated future changes to applicable law, such that plaintiffs could calculate their “allowable profit rate” in accordance with the 2003 amendments to the LTTE Law. The trial judge granted partial summary judgment on Count II, reasoning that the express language of the contract, “as amended and supplemented,” demonstrated that the parties agreed to incorporate future amendments to the LTTE Law in their financial agreements. The trial judge further concluded that the 2003 amendments to the LTTE Law applied to the financial agreements, and that legislative history supported his conclusions. The trial judge denied the City’s motion for reconsideration. The Appellate Division reversed, finding LTTE Law did not sanction plaintiffs’ unilateral changes to their financial agreements. The Supreme Court affirmed the Appellate Division. View "EQR-LPC Urban Renewal North Pier, LLC v. City of Jersey City" on Justia Law