By Fredrick P. Niemann, Esq. of Hanlon Niemann, a Freehold New Jersey Estate Administration Attorney
This is part 2 of a 3 part blog discussing the calculation of executor commissions on real estate. In this case, the Estate argued that NJ Law authorizes the deduction of “ordinary expenses of administration, including the fees allowed executors and administrators,” in determining the fair market value of the property for Inheritance Tax purposes. The amount of the deduction, the Estate argued, is calculated by taking 5% of the first $200,000 of the gross value of the estate. Accordingly, the Estate contends that the allowable deduction from for an executors commission from the taxable estate should be 5% of $172,500 or $8,625.
The Director of taxation argued that the term “ordinary expenses of administration” and “ordinary fees allowed executors and administrators,” did not allow a gross value calculation under the law. The director cited his authority to promulgate regulations to help determine what the Legislature meant by allowing the deduction for the “ordinary expenses of administration, including the ordinary fees allowed executors and administrators,” in determining the clear market value of the property. Pursuant to that authority, the Director argued that these regulations only allow the estate to deduct “ordinary expenses of administration” based on the net value of the Estate’s assets, after all encumbrances are deducted.
Moreover, the Director contended that it has construed the “ordinary expenses of administration” deduction pursuant to NJ laws consistently for nearly thirty years. The Director argued that since this long-standing administrative construction of NJ laws has remained undisturbed by the Legislature, it must be accorded substantial weight as evidence of conformity with the legislative intent of the statue. In my next post, I will explain the Court’s decision.
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