For over 50 years, Bloomberg BNA’s renowned flagship daily news service, Daily Tax Report® has helped leading practitioners and policymakers stay on the cutting edge of taxation and...
May 16 — A New Jersey man whose partner of 31 years died six days before the couple planned to wed isn't entitled to a $101,041 estate tax deduction as a surviving spouse because the couple was neither married nor in a civil union, the New Jersey Tax Court ruled.
In an unpublished opinion posted on the court's website May 12, New Jersey Tax Court Judge Patrick DeAlmeida ruled that being registered as a same-sex domestic partner under New Jersey's Domestic Partnership Act (DPA) doesn't qualify the surviving partner to be treated as a spouse for estate tax purposes, and the couple failed to take advantage of other options that would have afforded tax relief.
John M. Loalbo, a partner in the Tax and Trusts and Estates Department at Riker Danzig Scherer Hyland & Perretti LLP in Morristown, N.J., called the court's ruling “draconian” and a “very strict reading of the statute” that seems ripe for appeal.
Plaintiff Rucksapol Jiwungkul and his partner Maurice R. Connolly, Jr. registered as domestic partners in 2004, but chose not to enter into a civil union as a matter of principle, according to the opinion. After court rulings opened up the option of marriage to same-sex couples, Jiwungkul and Connolly made plans to marry June 8, 2014. Connolly died unexpectedly June 2, six days before the wedding.
“Although the plaintiff and decedent were eligible to enter into either a civil union or a marriage as of the date of the decedent's death, they did neither,” DeAlmeida wrote, adding that New Jersey's statute on domestic partnership is “unequivocal” in providing exemptions only for personal income and inheritance taxes—not the estate tax. “This court must apply the DPA as it is written, not as this court thinks it ought to be written, or as plaintiff would prefer it to be written.”
Jiwungkul, as executor of his partner's estate, initially filed a return without considering the marital deduction and paid the tax, according to the opinion. Later he filed an amended return, requesting a refund of $101,041 in New Jersey estate tax. On May 14, 2015, the Division of Taxation denied the refund request, and Jiwungkul filed a complaint.
The couple clearly intended to marry to comply with New Jersey's most recent laws and were “within inches” of completing their union, Loalbo told Bloomberg BNA May 13. “What if they were standing at the altar and the guy drops dead? I guess that wouldn’t have been good enough either.”
The court could have awarded a benefit in this case based on exceptional circumstances, Loalbo said. Such a ruling wouldn't have set a bad precedent because the facts in the case are so unique, he said.
“They were so close, they were right on the edge,” Loalbo said. “Unfortunately they didn't make it.”
Passed in 2003 and effective July 10, 2004, the DPA was the first chance same-sex couples in New Jersey had to receive some of the rights and benefits afforded to married couples. New Jersey later enacted the Civil Union Act in 2007, which allowed same-sex partners who entered into a civil union to be treated the same as opposite-sex spouses for purposes of calculating the New Jersey estate tax, the decision said. Also, as a result of the Supreme Court's opinion in Garden State Equality v. Dow, same-sex couples have been able to marry in New Jersey since Oct. 21, 2013, DeAlmeida wrote.
“Plaintiff and decedent had a nearly seven-year window to enter into a civil union and a more than seven-month window to enter into a marriage,” DeAlmeida wrote. “Had they entered into a civil union during the many years it was available to them, or married sooner after the decision in Garden State Equality, decedent’s unexpected passing would not have resulted in the estate tax liability contested in this case.”
New Jersey has both an estate tax and an inheritance tax, and taxpayers must pay the higher of the two, Douglas A. Fendrick, a certified public accountant and estate planning specialist at Fendrick & Morgan LLC in Voorhees, N.J., told Bloomberg BNA May 16. The estate tax kicks in for estates of more than $675,000, so a $100,000 estate tax bill would mean the estate was valued at between $1.8 million and $1.9 million, Fendrick estimated.
The DPA was always fairly “clear cut” that domestic partners got a break only on inheritance taxes, Fendrick said.
“It got you around the inheritance tax but not the estate tax. It wasn’t a gray area,” said Fendrick, who has given talks around New Jersey about estate planning for same-sex couples.
To contact the reporter on this story: Leslie A. Pappas in Philadelphia at email@example.com
To contact the editor responsible for this story: Ryan Tuck at firstname.lastname@example.org
The opinion is at http://src.bna.com/eY9.
All Bloomberg BNA treatises are available on standing order, which ensures you will always receive the most current edition of the book or supplement of the title you have ordered from Bloomberg BNA’s book division. As soon as a new supplement or edition is published (usually annually) for a title you’ve previously purchased and requested to be placed on standing order, we’ll ship it to you to review for 30 days without any obligation. During this period, you can either (a) honor the invoice and receive a 5% discount (in addition to any other discounts you may qualify for) off the then-current price of the update, plus shipping and handling or (b) return the book(s), in which case, your invoice will be cancelled upon receipt of the book(s). Call us for a prepaid UPS label for your return. It’s as simple and easy as that. Most importantly, standing orders mean you will never have to worry about the timeliness of the information you’re relying on. And, you may discontinue standing orders at any time by contacting us at 1.800.960.1220 or by sending an email to email@example.com.
Put me on standing order at a 5% discount off list price of all future updates, in addition to any other discounts I may quality for. (Returnable within 30 days.)
Notify me when updates are available (No standing order will be created).
This Bloomberg BNA report is available on standing order, which ensures you will all receive the latest edition. This report is updated annually and we will send you the latest edition once it has been published. By signing up for standing order you will never have to worry about the timeliness of the information you need. And, you may discontinue standing orders at any time by contacting us at 1.800.372.1033, option 5, or by sending us an email to firstname.lastname@example.org.
Put me on standing order
Notify me when new releases are available (no standing order will be created)