                                NOT FOR PUBLICATION WITHOUT THE
                               APPROVAL OF THE APPELLATE DIVISION
        This opinion shall not "constitute precedent or be binding upon any court ." Although it is posted on the
     internet, this opinion is binding only on the parties in the case and its use in other cases is limited. R. 1:36-3.




                                                        SUPERIOR COURT OF NEW JERSEY
                                                        APPELLATE DIVISION
                                                        DOCKET NO. A-5634-18T1

VALERIE SHEDLOCK AND
JUDITH SOLAN, CO-EXECUTORS
OF THE ESTATE OF ANTHONY
CALLEO,

          Plaintiffs-Respondents,

v.

DIRECTOR, DIVISION OF
TAXATION,

     Defendant-Appellant.
_______________________________

                   Argued telephonically August 10, 2020 –
                   Decided August 26, 2020

                   Before Judges Whipple and Enright.

                   On appeal from the Tax Court of New Jersey, Docket
                   No. 8644-2018, whose opinion is reported at 31 N.J.
                   Tax 175 (Tax 2019).

                   Miles Eckardt, Deputy Attorney General argued the
                   cause for appellant (Gurbir S. Grewal, Attorney
                   General, attorney; Melissa H. Raksa, Assistant
                   Attorney General, of counsel; Miles Eckardt, on the
                   briefs).
            Stephen L. Klein argued the cause for respondents.

PER CURIAM

      Eighty-seven-year-old Anthony Calleo (decedent) deeded his two-family

Lodi home (property) to his nieces, Valerie Shedlock and Judith Solan (heirs),

for less than $100 on July 24, 2013. The deed included no provisions giving

decedent any right, title, interest, control, or power over the property. On the

same date, decedent executed a will devising his entire estate to the heirs. After

the transfer of the property by deed, decedent continued to live on the property

and collect rent from a tenant, which he deposited into a joint savings account

he shared with Shedlock. The account was used to pay maintenance expenses

on the property. Decedent paid the taxes on the property, and he reported

maintenance expenses and the rental income from the tenant on his 2015 federal

income tax return.

      Decedent died on August 29, 2016, more than three years after the July

2013 transfer of his property to the heirs by deed. The heirs filed a New Jersey

inheritance tax return for decedent's estate but did not include the property. The

Division of Taxation (Taxation) audited the inheritance tax return and issued a

notice of assessment on May 7, 2018, that included the property, which was

valued at $425,000 on the date of decedent's death. The heirs paid the taxes and

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                                        2
interest due under the notice of assessment to Taxation, but then filed a

complaint in the Tax Court seeking a refund and costs of suit. Cross-motions

for summary judgment were filed, and on May 20, 2019, the Tax Court entered

an order invalidating the notice of assessment and refunding the taxes and

interest paid. The Tax Court's order was based on its conclusion, set forth in its

published opinion Shedlock v. Director, Division of Taxation, 31 N.J. Tax 175

(Tax 2019), that the transfer of the property was not made in contemplation of

death, nor was it intended to take effect at or after death under N.J.S.A. 54:34-

l(c)1 and N.J.S.A. 54:34-1.1.2 The Tax Court also denied Taxation's motion for

reconsideration.3 Taxation filed this appeal.


1
   N.J.S.A. 54:34-1(c) provides that transfers of real property by deed without
adequate valuable consideration within three years prior to the death of the
grantor are taxable as if made in contemplation of the death of the grantor, but
"no such transfer made prior to such three-year period shall be deemed or held
to have been made in contemplation of death."
2
   N.J.S.A. 54:34-1.1 provides that where a property is transferred by deed
"wherein the transferor is entitled to some income, right, interest or power," it
"shall not be deemed a transfer intended to take effect at or after transferor's
death if the transferor, more than [three] years prior to death, shall have executed
an irrevocable and complete disposition of all reserved income, rights, interests
and powers in and over the property transferred."
3
   With its order denying Taxation's motion for reconsideration, the Tax Court
also issued a corrected opinion on July 16, 2019, that corrected the court's
analysis of N.J.A.C. 18:26-5.8(b), but which did not impact the outcome of the
matter.
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                                         3
      On appeal, Taxation argues decedent did not completely and irrevocably

divest his interest in the property at the time the deed was signed and filed, and

that rather, the transfer was intended to take effect at the transferor's death and

was subject to the transfer inheritance tax. Taxation argues the Tax Court's

decision misconstrued the statutory requirement that transfers intended to take

effect at or after death are subject to the inheritance tax. Taxation asserts the

transfer of the property by deed on July 24, 2013, had the effect of a transfer at

death because decedent remained in possession of the property and continued to

receive rental income from the property.

      We disagree and affirm for the reasons expressed in the cogent written

decision of Tax Court Judge Vito Bianco and add the following comments.

      We recognize that "judges presiding in the Tax Court have special

expertise; for that reason their findings will not be disturbed unless they are

plainly arbitrary or there is a lack of substantial evidence to support them."

Hackensack City v. Bergen Cty., 405 N.J. Super. 235, 243 (App. Div. 2009)

(quoting Alpine Country Club v. Borough of Demarest, 354 N.J. Super. 387,

390 (App. Div. 2002)). "Our scope of review in a case such as this 'is limited to

determining whether the findings of fact are supported by substantial credible

evidence with due regard to the Tax Court's expertise and ability to judge


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                                        4
credibility.'" First Republic Corp. of Am. v. E. Newark Borough, 17 N.J. Tax

531, 536 (App. Div. 1998) (quoting Phillips v. Twp. of Hamilton, 15 N.J. Tax

222, 226 (App. Div. 1995)).

        While we defer to the Tax Court's findings of fact, we review its legal

decisions de novo. N.J. Tpk. Auth. v. Twp. of Monroe, 30 N.J. Tax 313, 318

(App. Div. 2017). "The meaning of a tax statute must be discerned according to

the general rules of statutory construction." Presbyterian Home at Pennington,

Inc. v. Borough of Pennington, 409 N.J. Super. 166, 180 (App. Div. 2009)

(citing Oberhand v. Dir., Div. of Taxation, 193 N.J. 558, 568 (2008)). The court

examines the statute's plain language and, if the language is clear, interprets the

statute consistent with its plain meaning. Ibid. But, if the language is unclear,

the court must review the legislative history to determine the legislative intent.

Ibid.

        After reviewing the plain language of N.J.S.A. 54:34-1(c) and N.J.S.A.

54:34-1.1, as well as the legislative purpose and history of each and relevant

case law, Judge Bianco explained:

             It is undisputed by the very terms of the deed of transfer
             that [d]ecedent retained no interest, right to possession
             or income in, of, and from the [p]roperty. There is no
             statement in the deed of transfer that establishes
             [d]ecedent's exclusive right to receive rental income
             from the tenant or to remain in the [p]roperty until his

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                                         5
death. At all times, the [h]eirs had full control over,
and the right to the rental income. Decedent only had
a right to use the funds in the joint bank account.
Decedent merely handled the fund[s] in the joint bank
account to maintain the [p]roperty. It is undisputed that
the [h]eirs allowed [d]ecedent to handle the fund[s] of
the joint bank account because [d]ecedent did not use
the rental income for the benefit of himself, but rather,
he used the income for the benefit of the [p]roperty,
which was owned by the [h]eirs.

       [Taxation] further relies on the Tax Court's
decision in Estate of Riper v. Dir., Div. of Taxation, 31
N.J. Tax 1 (Tax 2017) to argue that [d]ecedent retained
a de facto life estate in the [p]roperty. This court,
however,      finds    Estate    of     Riper    factually
distinguishable. In Estate of Riper, "the express
purpose of the trust was 'to provide a residence' for 'the
lifetime' of the transferors." Id. at [5]. Also, in Estate
of Riper the trustee was required to use the proceeds of
the sale of the property to provide shelter and housing
for the transferors. Ibid. n.1. Therefore, clear and
convincing evidence was presented that the transferors
retained an interest in the property. Here, by contrast,
[d]ecedent did not have any interest in the [p]roperty.
The court could not find any statement entrusting a life
estate or any interest to [d]ecedent in the deed.
Therefore, the court concludes that all of [d]ecedent's
right and interest in the [p]roperty was transferred on
July 24, 2013.

       Our State's Supreme Court in In re Estate of
Lingle, 72 N.J. 87 (1976) concluded that three factors
must usually exist in the inter vivos transactions to
determine that the transfer was intended to take effect
at or after death:



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                            6
      (1) the grantor or settlor must transfer some
      property, or interest therein, while
      retaining for his lifetime some or all of the
      economic benefits therefrom; (2) there
      must be a consequent postponement of
      enjoyment on the part of the grantee,
      promisee or other beneficiary; and (3) both
      the grantor's retention and the grantee's
      postponement of enjoyment must be for a
      period determinable by reference to the
      grantor's death.

      [Id. at 95.]

Immediately after the above statement, the Court
rephrased the above factors and concluded that:

      Conversely, lifetime transfers will be held
      not to come within the "at or after death"
      clause where (1) the retention of benefits
      by the grantor is not determined by
      reference to the duration of his life; (2) the
      grantor has completely divested himself of
      his entire interest in the transferred
      property; or (3) there was full and adequate
      consideration for the property transferred.

      [Ibid. (emphasis          added)   [(citations
      omitted)].]

       [Taxation] argues that the transfer by [d]ecedent
meets the factors in Lingle as [d]ecedent received rental
income and the [h]eirs postponed enjoyment of the
[p]roperty until the death of the [d]ecedent.
[Taxation]'s argument fails, however, because
[d]ecedent only received the rental income and
remained in the [p]roperty at the discretion of the
[h]eirs; the transfer of the [p]roperty was complete and

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                            7
            [d]ecedent's title was conveyed without any reference
            to a right to receive rental income or retain a life estate.
            Accordingly, the court finds that "the grantor has
            completely divested himself of his entire interest in the
            transferred property," ibid., and therefore has met one
            of the three elements delineated by the Court in In re
            Estate of Lingle. The [p]roperty should therefore, not
            be included in [d]ecedent's estate for inheritance tax
            purposes.

      Based upon our review of the record, we are persuaded that Judge Bianco's

findings and conclusions were amply supported by credible evidence and a

correct interpretation of the statutory principles.

      Affirmed.




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