SUBCHAPTER 5. TRANSFERS SUBJECT TO TAX
N.J.A.C. 18:26-5.4 (2014)
§ 18:26-5.4 Classification of property as real or personal n1
n1 This regulation is intended to conform the treatment of real property under contract of sale or purchase at the time of decedent's death with that of adjoining states (Cf. Estate of Paul, 303 Pa. 330, and In re DeSteur's Estate, 99 N.Y. Supp. (2d.39)), and to revoke previous regulations in conflict herewith.
(a) For purposes of the transfer inheritance tax laws of this State, the doctrine of equitable conversion will not be applied in estates of New Jersey decedents which involve realty situated in New Jersey.
(b) The doctrine of equitable conversion will not be applied in the case of those estates where 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 vendor located in another state, which was under contract of sale at the date of his death, shall be 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 vendee, under a contract in effect at the date of death to purchase real property located in another state, shall be deemed personal property and taxable to the extent of the sum paid on account of the contract price at the time of death. Pursuant to the provisions of N.J.S.A. 54:34-5, as amended, the balance due under the contract shall not be allowed as a deduction in determining the clear market value of decedent's estate subject to tax under the inheritance tax laws of this State.
and, also, where a nonresident decedent was involved as a party to a contract of sale involving realty situated in New Jersey.
Example 1. The interest of a deceased nonresident vendor of real property located in New Jersey, which was under contract of sale at the date of such nonresident decedent's death, shall be 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 shall die intestate, his interest in the New Jersey real property shall, for the purposes of the inheritance tax laws of this State, be deemed to have descended under the intestate laws of this State to his heirs at law;
Example 2. The interest of a deceased nonresident vendee, under a contract in effect at the date of death to purchase real property located in New Jersey, shall be deemed personal property and not subject to tax under the inheritance tax laws of this State;
Note:--This rule will apply 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) Concerning ground rents, or leasehold interests, ground rents or any leasehold interest in land for 99 years or more is deemed to be an interest in real property for the purpose of valuation only under the New Jersey inheritance tax laws; 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 a husband and wife/civil union couple, is held as a tenancy in common, unless the conveyance expressly states they hold as joint tenants. 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 as 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 wife/her husband/civil union partner as tenants by the entirety, is deemed to be a partnership asset and therefore is considered personal property.