Collester, Lynch and Michels.
This is an appeal from a decision of the Transfer Inheritance Tax Bureau (Bureau) concerning the amount of allowable deduction for executor's commissions in determining the inheritance tax in the estate of George Talakowitsh. The issue is whether, in the absence of a court allowance of executor's commissions, the Director of the Division of Taxation (Director) may prescribe by regulation the amount of the allowable deduction for such commissions. We are not concerned with the actual amount which the executor may receive as commissions. We are rather concerned only with the amount thereof which may be used as a deduction for purposes of computing the inheritance tax.
The Director argues that, if he could not limit the allowable deduction as to such commissions, in the absence of a Probate Court's allowance of commissions, taxes could easily be evaded. As he points out, it is not uncommon for one to leave his entire estate to one beneficiary, or a few closely related
beneficiaries, and name a beneficiary as executor. In such instances the executor-beneficiary could easily evade inheritance taxes on his share of the estate by taking that share as "commissions," and thus be able to claim deduction for what in reality is an inheritance.
Pursuant to the power granted to the Director by N.J.S.A. 54:50-1, and in accordance with the Administrative Procedure Act, the Director promulgated N.J.A.C. 18:26-7.10, outlining the method of calculation of executor's commissions which may be allowed as a deduction. So far as pertinent here said regulation excludes from such deduction (a) the value of real property, and (b) jointly held property.
Decedent left a gross estate of $87,513.91. Included in that sum was the value of decedent's homestead ($40,900) and the value of jointly held property ($12,001.35). Pursuant to N.J.A.C. 18:26-7.10, the Bureau excluded the total value of such property ($52,901.35) from the gross estate in calculating the permissible deduction for executor's commissions, thus:
Less: real property $40,900
property 12,001.35 52,901.35
Assets in possession of ...