One Hand Giveth and The Other Hand Keepeth

The list of inevitable things in life grew a bit shorter last October in light of the unexpected defeat of the New Jersey Division of Taxation in Mack-Cali Realty, LP, et al. v. Clerk of Bergen County, et al., 25 N.J. Tax 243 (2009). As a result, tax and real estate attorneys may have a greater opportunity to challenge certain denials of realty transfer tax exemptions.

New Jersey charges a fee for recording conveyances, but has an exception when a transfer is for nominal consideration. Plaintiff Mack-Cali, a limited partnership, conveyed two pieces of real property to two limited liability companies which were wholly-owned by Mack-Cali, in exchange for “$10 and other good and valuable consideration.” Mack-Cali argued that the transaction between it and the LLCs fell within the statutory exemption from the realty transfer fee (RTF) for conveyances where consideration is less than $100. The Division of Taxation denied Mack-Cali’s request for an exemption on the grounds that “there can be no conveyance . . . between legal entities for a [sic] consideration of less that $100.” Instead, the division adopted a regulation which denied the use of the nominal consideration exemption for transfers between commonly owned entities, and based the RTF on the value of the property.