Estate of Warshaw
The Tax Court of New Jersey (the “Court”) held, that the Estate of Warshaw (the “Estate”) was entitled to a refund of New Jersey Estate Tax (“NJET”) paid where the Estate subsequently learned the decedent was a victim of the Ponzi scheme of Bernard Madoff. The decedent died on May 27, 2006 and the executors made estimated tax payments before filing a New Jersey Estate Tax return on July 30 2007. The decedent’s IRA was managed by Madoff’s investment advisory firm and its assets were held by its related custodian.
The Estate paid New Jersey Estate Tax based upon a one-line statement provided by the Custodian that valued the IRA at $1,463,733 at date of death. In December 2008, Mr. Madoff was arrested, pled guilty on March 12, 2009 and was sentenced on June 29, 2009. The Estate submitted a refund claim on January 12, 2009. The NJET is based upon federal estate tax law which holds that the value at death is determined without regard to subsequent events. Federal estate tax law does permit the consideration of subsequent events to establish the value at time of death. The Court held that the subsequent events revealed that the IRA was worthless at the time of death. Federal law relies on a willing buyer-seller test to establish value and a willing buyer would have demanded a list of assets in the IRA before consummating the purchase. Taxpayers sometimes believe incorrectly that this line of cases can be used to support a lesser price resulting from a downward trend in market conditions.
Sales And Use Tax – Letter Ruling Regarding the Purchase of Commercial Gases
The ruling states that various gases, including oxygen, acetylene, argon, and other mixes are exempt from New Jersey sales tax. Taxpayers should avail themselves of opportunity to request a ruling from the State as it provides certainty for taxpayers on issues critical to the long-term health and success of their business.
State Business Tax Climate
The Tax Foundation Background Paper No. 62, 2012 State Business Tax Climate Index ranked New Jersey as the least favorable state for small business.
Governor Christie vetoed a measure that would increase the income tax rate to 10.75% from 8.97% on incomes $1,000,000.