For affirmance -- Chief Justice Hughes, Justices Mountain, Sullivan, Pashman, Clifford and Schreiber and Judge Conford. For reversal -- None. The opinion of the Court was delivered by Mountain, J.
Our limited grant of certification in this matter, 69 N.J. 80 (1975), brings before us for review the single narrow issue as to the validity of certain portions of N.J.A.C. 18:26-7.10, a regulation adopted by the Director, Division of Taxation, concerning the deductibility of executors' or administrators' commissions under the Transfer Inheritance Tax Act, in the absence of a judicial determination as to the amount of commissions to be allowed. The Appellate Division sustained the regulation. 134 N.J. Super. 307 (App. Div. 1975).
In calculating the amount of inheritance tax due in respect of any estate, the executor or administrator, in determining the clear market value of property transferred, is entitled to take as a deduction,
[t]he ordinary expenses of administration, including the ordinary fees allowed executors and administrators and the ordinary fees of their attorneys.
To implement this statutory provision the Director promulgated N.J.A.C. 18:26-7.10, which defines and limits the amount of the deduction allowable in respect of the payment of commissions to a personal representative. The pertinent portions of the regulation state:
(d) In addition, executor's or administrator's commissions are not allowed on:
1. Real estate specifically devised, except where the personal estate is not sufficient to pay the debts and costs of administration of the estate;
2. Real estate not specifically devised, except where the personal estate is not sufficient to pay the debts and costs of the administration of the estate, or to pay pecuniary legacies.
[ N.J.A.C. 18:26-7.10(d)]
In the case before us the testator's will specifically devised to his stepdaughter a parcel of real estate identified as "my old homestead." The valuation of $91,400 placed upon the property by the executrix was not challenged by the Transfer Inheritance Tax Bureau. It refused, however -- relying upon the foregoing regulation -- to permit the inclusion of the value of this property in calculating the amount of commissions allowable as a deduction.
The statute, N.J.S.A. 3A:10-2, provides that corpus commissions of a fiduciary shall be determined as a percentage of the "corpus that ...