State Inheritance Tax – Valuation of Shares Inherited by the Decedent

On February 2, 2012, the New Jersey Tax Court decided Estate of Claire Schinestuhl, By Its Executrix, Mary T. Acquardo v. Director, Division of Taxation, Docket No. 007133-2011, wherein the Court determined that shares of a publicly traded company must be valued as of the decedent’s date of death and not two (2) years later when the proceeds were distributed.

Here, Claire Schinestuhl was the sole beneficiary of the assets of her brother Prescott Schinestuhl, who died on September 13, 2004.  Claire Schinestuhl died shortly thereafter, but more than forty-five (45) days later.   Following the deaths, a cousin was appointed Executor of Claire Schinestuhl’s estate.  Then, the same individual filed pleadings to become Executor of the Estate of Prescott Schinestuhl and the relief was granted.

One of the inherited assets was approximately 22,000 shares in Paxar Corporation.  Plaintiff/Executor argued that Claire’s interest in the shares was contingent because Prescott’s Will had not yet been probated and that this interest became fixed when Prescott’s estate liquidated the shares and distributed same to Claire’s estate about two years after her death.  Ultimately, the Court rejected the argument noting that post-death events do not control the date when property is deemed transferred and the tax deemed imposed.  Rather, the shares must be separately valued and Claire’s date-of-death was the controlling valuation date.

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