Kenneth Vercammen & Associates, P.C.
2053 Woodbridge Ave.
Edison, NJ 08817
(732) 572-0500

Tuesday, June 24, 2014

18:26-2.16 Ratio tax on transfer of nonresident's property


N.J.A.C. 18:26-2.16 (2014)

§ 18:26-2.16 Ratio tax on transfer of nonresident's property

   (a) In the case of a nonresident decedent's estate containing real or tangible personal property located in this State which passes to a transferee wherever situated, except by means of a specific devise, the tax on such transfer shall be computed as follows:

The tax is first computed on the entire estate as if the decedent were a resident of New Jersey and all of his or her assets were located here and then prorated (multiplied) by the proportion (ratio) which the New Jersey real and tangible personal property bears to the entire estate.

(b) The following are illustrations of the provisions of (a) above:

Example (1):

Mr. "A" a California domiciliary, died intestate, on July 3, 1997 leaving as his sole heir a nephew, Mr. "B". Mr. "A's" estate consisted of the following: real property of the value of $ 10,000 in New Jersey; $ 20,000 in cash located in an Illinois bank; and $ 70,000 in real and personal property located in California.

The New Jersey property is subject to the ratio tax and the tax on such transfer is computed as follows:

First, a tax is computed on the value of the entire estate as if such estate were located in New Jersey, (i.e., $ 100,000 x 15%, the rate applicable for property passing to a Class "D" transferee or $ 15,000).

Second, the tax so computed is then multiplied by a fraction whose numerator is the value of the real or tangible personal property located in this State and whose denominator is the value of all property, real or personal, tangible or intangible, wherever situated, in the estate (i.e. 10/100 x $ 15,000 = $ 1,500, which is the ratio tax on the property passing to Mr. "B").

If Mr. "A" had specifically devised the property in New Jersey to his nephew, said property would not be subject to the ratio tax, but rather, it would be taxed directly to the devisee at the resident rates.

Example (2):

Same facts as Example (1) except that Mr. "A" died testate and bequeathed $ 10,000 held in a bank account to his nephew and the rest of his estate to his wife/civil union partner/domestic partner.

First, a tax is computed as if Mr. "A" had been a New Jersey domiciliary, i.e., as to "B", $ 10,000 x 15% = $ 1,500; as to "A's" wife/civil union partner/domestic partner, $ 90,000, all of which is exempt.

Second the total of tax, i.e., $ 1,500 is multiplied by 1/10, the ratio of the property subject to tax to the entire estate, i.e., 1/10 x $ 1,500 = $ 150.00, the amount of tax due.

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