Matthews, Seidman and Horn. The opinion of the court was delivered by Matthews, P.J.A.D.
This is an appeal from a determination of the Transfer Inheritance Tax Bureau in the Division of Taxation, Department of the Treasury, that certain real property owned by decedent and his wife as tenants by the entirety, and under contract of sale by them at the date of his death, was subject to inheritance tax to the extent of one-half of the proceeds of the sale thereof less the amount deposited by them toward the purchase of a new residence, that determination being based upon the doctrine of equitable conversion pursuant to N.J.A.C. 18: 26-5.4(a) promulgated by the Director of the Division.
On February 24, 1975 decedent and his wife entered into a contract to sell their residence in the Borough of Brielle, Monmouth County, which they held as tenants by the entirety. At about the same time they entered into an agreement for the purchase of a condominium in a retirement community. Horace Houghton died March 17, 1975 and neither transaction was completed before his death.
The Transfer Inheritance Tax Bureau (Bureau) determined that one-half the proceeds of the Brielle sale were includible in decedent's estate for inheritance tax purposes. Credit was allowed to the estate for the sum deposited on the retirement community purchase. The Bureau's decision resulted in the payment under protest of $907.05 of additional inheritance tax.
The Bureau based its imposition of tax upon N.J.A.C. 18:26-5.4. That provision of the Administrative Code, adopted August 13, 1973, reads in pertinent part:
(a) For purposes of the transfer inheritance tax laws of this State, the doctrine of equitable conversion will be applied in all estates of New Jersey decedents which involve realty situate in New Jersey.
By virtue of the regulation, the Brielle property formerly held by the Houghtons as tenants by the entirety was converted to personalty taxable in part under the general provisions of N.J.S.A. 54:34-1(a) which impose a tax upon
property transferred at death. Property held by spouses as tenants by the entirety has traditionally been exempt from the reach of the statute.
A tenancy by the entirety in realty is an estate held by husband and wife by virtue of title acquired by them jointly after marriage. The tenancy is the creature of common law, created by legal fiction and based wholly on the common law doctrine that husband and wife are one. It is a peculiar and anomalous estate, sui generis in character. Estates by the entirety have no moieties; each owner holds the entirety and each receives per tout et non per my. * * * Upon the death of one of the spouses the entire estate and interest belongs to the other, not by virtue of survivorship but by reason of the title that vested under the original limitation. [ Dorf v. Tuscarora Pipe Line Co., Ltd. , 48 N.J. Super. 26, 32 (App. Div. 1957)]
Absent a transfer there is nothing to tax. Ten Eyck v. Walsh , 139 N.J. Eq. 533 (Prerog. 1947); In re O'Neill , 111 N.J. Eq. 378 (Prerog. 1932).
Decedent's widow, individually and as executrix, contends that the Director of the Division of Taxation (Director) exceeded his authority in promulgating a regulation which would increase the reach of the taxing statute through use of the legal fiction of equitable conversion. Consequently, we are asked to decide whether the doctrine of equitable conversion may properly be applied under circumstances where the sole issue is one of taxation, and, in any event, whether that doctrine, under existing law, can be invoked by the Director by the adoption of an administrative regulation.
The authority of the Director to make and enforce rules and regulations to carry into effect the provisions of the Tax Act is undisputed. N.J.S.A. 54:50-1. However, a rule or regulation so adopted must be within reasonable contemplation of the authority delegated by the enabling statute, and not conflict with it. See Southern Jersey Airways v. Nat. Bk. of Secaucus , ...