Michael J. Morley, III, Executor, etc. v. Director, Division of Taxation

*
NOT FOR PUBLICATION WITHOUT APPROVAL OF
THE TAX COURT COMMITTEE ON OPINIONS
________________________________________
MICHAEL J. MORLEY, III, : TAX COURT OF NEW JERSEY
EXECUTOR OF ESTATE OF : DOCKET NO. 007443-2020
LINDA A. CERRITELLI, :
:
Plaintiff, :
:
v. :
:
DIRECTOR, DIVISION OF TAXATION, :
:
Defendant. :
_______________________________________ :
Decided: June 7, 2021
Francis P. Maneri argued the cause for plaintiff
(Francis P. Maneri, Kristen L. Behrens, and Sarah Gremminger, on the
brief; Dilworth Paxson, LLP, attorney).
Heather Lynn Anderson for defendant
(Gurbir S. Grewal, Attorney General of New Jersey, attorney).
SUNDAR, P.J.T.C.
This opinion decides the parties’ respective summary judgment motions as to the amount
includible in the above captioned estate for purposes of the New Jersey Estate Tax laws regarding
plaintiff’s survival claim action litigation. Under New Jersey law, a decedent’s wrongful death
provides two separate causes of action: one on behalf of the beneficiaries (a wrongful death claim
action) under N.J.S.A. 2A:31-1 to -6, and one on behalf of the estate (a survival claim action)
under N.J.S.A. 2A:15-3. The parties agree that the wrongful death claim action is not includible
in the decedent’s gross estate, whereas the survival claim action is an asset of the decedent and
includible in the estate. Therefore, the former is not subject to the New Jersey estate tax, but the
latter is so subject.
Approved for Publication
In the New Jersey
Tax Court Reports

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New Jersey’s precedent has consistently held that under the New Jersey Estate Tax statute,
N.J.S.A. 54:38-1 to -16, the amount includible in, and taxed to, a decedent’s estate is the “value”
of an asset as of the decedent’s date of death. This standard is the same under the New Jersey
Transfer Inheritance Tax statute, N.J.S.A. 54:34-1 to 37-8 which unlike the estate tax, imposes the
tax on the beneficiaries. Per plaintiff, therefore, the amount includible for estate tax purposes is
the date of death value of the decedent’s interest in her survival claim action, which, as opined by
a third-party appraiser, is $2,690,600. Per defendant, the amount includible is $6,709,231.08, the
net proceeds received by the decedent’s estate from settlement of the survival claim action, because
the plain language of N.J.A.C. 18:26-5.3(a), a Transfer Inheritance Tax regulation, requires that
“any sum recovered under the New Jersey Death Act representing damages sustained by a decedent
between the date of injury and date of decedent’s death” must be “included in the decedent’s
estate.”
The court finds that the Estate Tax and Transfer Inheritance Tax statutes can and should be
read in pari materia because both laws address the same subject: the corpus or the taxable estate
of a decedent, and because assets includible in the estate for estate tax purposes are those which
are transferred to a beneficiary for inheritance tax purposes. The Legislature has, under the
Transfer Inheritance Tax statute, determined that the taxable date-of-death value of a survival
claim action is the amount actually recovered for such claim. Consequently, the amounts
includible in the decedent’s gross estate is the amount recovered by the estate (here, through
settlement) for the survival claim action pursuant to N.J.A.C. 18:26-5.3. Therefore, the court
grants defendant’s cross-motion for summary judgment and denies plaintiff’s motion for summary
judgment.

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FACTS AND PROCEDURAL HISTORY
Decedent, a New Jersey resident, died testate on March 4, 2014 from a natural gas
explosion which occurred when a utility company struck a gas line while performing underground
electrical work in front of her home.
Sometime in 2015, plaintiff filed a wrongful death claim action and a survival claim action
lawsuit in the New Jersey Superior Court, as executor of decedent’s estate. See N.J.S.A. 2A:31-
4; 2A:15-3. These are two separate causes of action arising from the same triggering event, the
death of the decedent, however the beneficiaries of the wrongful death claim action are the
decedent’s survivors whereas the beneficiaries of the survival claim action are the estate and
creditors of the decedent. See Soden v. Trenton & Mercer County Traction Corp., 101 N.J.L. 393,
398 (E & A 1925) (in a wrongful death action, the “recovery goes, not to the estate of the deceased
person, but to certain designated persons or next of kin” and the recovery amount “is not liable to
the debts of the deceased, nor is it subject to disposition by will”); Alfone v. Sarno, 87 N.J. 99,
107-08 (1981) (“[u]nlike an action for wrongful death, the survival action inheres in the estate and
is therefore subject to devise and the claims of creditors”); Smith v. Whitaker, 160 N.J. 221, 231
(1999).1
1 In 1848, our Legislature enacted “the Wrongful Death Act, now codified as N.J.S.A. 2A:31-1 to
-6” and in 1855 enacted “the Survivor’s Act, now codified as N.J.S.A. 2A:15-3.” Smith, 160 N.J.
at 231 (citations omitted). While “both types of actions arise from” the death of the plaintiff “they
serve different purposes and are designed to provide a remedy to different parties.” Ibid. The
Wrongful Death Act is to “compensate survivors for the pecuniary losses they suffer” due to
another’s “tortious conduct.” Ibid. The Survivor’s Act permits “a decedent’s representatives the
right to bring an action for trespass to person or property in the same manner as if the decedent
had been living.” Id. at 233 (citations omitted). See also Alfone, 89 N.J. at 108, n.4 (“The survival
action . . . seeks to compensate the estate for the pain and suffering of the deceased and the loss of
earnings by him prior to his death” and permits claim “for “funeral and burial expenses,” while
“[h]ospital, medical and funeral expenses may alternatively be sought in a death action” under
N.J.S.A. 2A:31-5).

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The lawsuit eventually settled on November 30, 2017 for $20,000,000. The Superior Court
entered an Order Directing Disbursement of Funds whereby the settlement proceeds be first offset
by counsel fees and expenses, and the balance $13,418,462.15 be distributed 50% towards the
wrongful death claim action ($6,709,231.08 payable to Michael Morley) and 50% towards the
survival claim action ($6,709,231.08 payable 50% to Michael Morley and 25% each to his two
sons in a settlement trust, but after deduction for all estate taxes and expenses). The estate received
$6,709,231.08 on December 5, 2017.
In August 2015, the estate filed a New Jersey estate tax return which did not reference the
value of the survival claim action.2 After the settlement proceeds were received, plaintiff filed an
amended estate tax return on January 25, 2018 to include receipt of the survival claim action
proceeds in the decedent’s gross estate. Plaintiff also paid the consequent estate tax of $720,933.
On August 7, 2019, plaintiff filed a second amended estate tax return to change the
includible amount of the survival claim action to $2,690,600 as being its “value” as of the
decedent’s date of death. The valuation was based on the conclusion of a third-party appraiser,
Management Planning, Inc., which produced a report in this regard. The report outlined the
methodology, assumptions, and data used to support the appraiser’s value conclusion. Based on
this valuation, plaintiff requested an estate tax refund of $484,504.
By letter of September 6, 2019, defendant (Taxation) denied the refund claim. It rejected
the proffered valuation report because it determined that “tax is on the sum actually received.”
The valuation report “reflect[ed] a potential reward” which, per Taxation, “does not apply.”
Plaintiff timely protested this denial to Taxation’s Conference and Appeals branch
contending that under N.J.A.C. 18:26-8.8 (titled “Valuation”), “the operative valuation date” for
2 Counsel for plaintiff in this matter was not involved in the preparation and filing of this return.

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New Jersey’s estate tax was the decedent’s date of death, therefore, valuation of any estate asset
must only be as of this date. This was, plaintiff contended, in conformance with the federal estate
tax law (citing Treas. Reg. §20.2031-1(b) which provides that the value of property includible in
the estate is its fair market value at the time of decedent’s death).
By final determination letter dated February 28, 2020, Taxation upheld its refund denial
relying upon N.J.A.C. 18:26-5.3(a). It noted that “a survival action claim is includible but, any
sum recovered under the New Jersey Death Act as compensation for wrongful death of a decedent
is not includible in the decedent’s estate.” Such inclusion, it further noted, is in conformance with
the federal estate tax law that “wrongful death proceeds are not includible in the decedent’s gross
estate . . . because the wrongful death action cannot exist until the decedent has died,” however,
“to the extent that any recoverable damages are for the pain and suffering of the decedent, the
value thereof is includible in the gross estate.” (citing Rev. Rul. 75-127, 1975-1 C.B. 297).
Taxation concluded “to the extent that any recoverable damages are for the pain and suffering of
the decedent, the value thereof is includible in the gross estate.”
ANALYSIS
(1) Appropriateness of Summary Judgment
Summary judgment will be granted “if the pleadings, depositions, answers to
interrogatories and admissions on file, together with the affidavits, if any, show that there is no
genuine issue as to any material fact challenged and that the moving party is entitled to a judgment
or order as a matter of law.” R. 4:46-2(c); Brill v. Guardian Life Ins. Co. of Am., 142 N.J. 520,
523 (1995). Here, the parties agree that the survival claim action is an asset of the estate and must
be included in the gross estate for New Jersey’s estate tax purposes. The sole issue is the amount

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to be included, the resolution of which entails pure statutory interpretation. Therefore, summary
judgment is an appropriate method to dispose the matter.
(2) Assets Includible in Gross Estate for New Jersey Estate Tax Purposes
In Rev. Rul. 75-127, 1975-1 C.B. 297, the Internal Revenue Service (IRS) explained
whether and what is includible in an estate vis-à-vis a wrongful death action as follows:
At common law, no recovery was available for damages resulting
from a wrongful act after the death of the injured party. Any cause
of action for personal injury abated at the death of the injured party.
To abrogate this rule, the various states have enacted what are
commonly called “wrongful death acts.” Generally, these acts take
one of two forms: “death acts” or “survival acts.” “Death acts”
include the type discussed in Rev. Rul. 54-19, 1954-1 C.B. 179,
(involving New Jersey law) where the statute creates a new cause of
action, after the death of the injured party, for the benefit of certain
beneficiaries. Under a “survival act,” the cause of action for personal
injury resulting in death survives the victim’s death and passes to
his personal representative to be pursued as an asset of the probate
estate.
The IRS concluded that it
will no longer take the position under . . . the law of any State having
a wrongful death statute . . . that the value of wrongful death
proceeds is includible in the decedent’s gross estate. However,
where it can be established that such proceeds represent damages to
which the decedent had become entitled during his lifetime (such as
for pain and suffering and medical expenses) rather than damages
for his premature death, the value of these amounts will be
includible in the decedent’s gross estate.
[Ibid.]
The cross-referenced revenue ruling addressing New Jersey law stated that the “[a]mounts
receivable in settlement of claims under the New Jersey ‘Death by Wrongful Act’ statute . . . are
not includible in the decedent’s gross estate for Federal estate tax purposes” because the statute
created the cause of action and determined “distribution of the proceeds of the recovery.” Rev.
Rul. 54-19, 1954-1 C.B. 179 (emphasis added). This means that “the decedent had no right of

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action or interest in the proceeds at the time of his death,” therefore, “nothing ‘passed’ from the
decedent to the beneficiaries.” Ibid. Cf. Alfone, 87 N.J. at 108 (“The survival action merely
perpetuat[es] the right of action which the deceased himself would have had, to redress his own
injuries, but for his death.”) (citation and internal quotation marks omitted).
Here, the parties agree that the wrongful death claim action is not includible in the
decedent’s gross estate. They also agree that the survival claim action is an asset of the estate and
is includible in the decedent’ gross estate for New Jersey estate tax purposes.
(3) Amounts Includible for New Jersey Estate Tax Purposes
The Estate Tax statute, N.J.S.A. 54:38-1 to 38-16, imposes an “estate or transfer tax” upon
the “transfer of” the estate of any New Jersey resident which would have been subject to the federal
estate tax in effect on December 31, 2001. N.J.S.A. 54:38-1(a)(2)(i). This means that if the estate
was subject to federal estate tax as of December 31, 2001, then it would be taxed by New Jersey
also. The tax is imposed upon and paid by the estate of the decedent. See N.J.S.A. 54:38-11
(estate tax “shall be paid out of the same funds as those from which federal estate taxes are
payable”). The tax is “due at the date of death of the decedent.” N.J.S.A. 54:38-5.3
There are no specific provisions in the estate tax statute explicating the computation or
methodology as to the amount of the assets includible in an estate. Nor is there any specific
statutory provision addressing a survival claim action. Plaintiff is correct that precedent requires
inclusion of an asset’s fair market value as of the date of death in a decedent’s gross estate. See
Estate of Warshaw v. Dir., Div. of Taxation, 27 N.J. Tax 287, 292 (App. Div. 2013) (value of gross
estate is the value of “all property in the estate at the time of death,” and such value is determined
under a willing buyer-willing seller test) (citing Internal Revenue Code (I.R.C.) §2036; Treas. Reg.
3 There is no New Jersey estate tax for estates of decedents dying on or after January 1, 2018.

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§20.2031-1(b)4). In Estate of Warshaw, the court agreed with Taxation that the reported value of
the asset (an Individual Retirement Account or IRA) at the time of the decedent’s death cannot be
changed even if it was later found to be worthless being part of Madoff’s Ponzi scheme because
“events subsequent to death are not considered in fixing fair market value of a decedent’s gross
estate.” 27 N.J. Tax at 292 (citation omitted). Rather, “[b]ecause property is valued as of the date
of death, the only relevant facts are those that this hypothetical buyer and seller could reasonably
have been expected to know at that time.” Ibid. (citation omitted).
In contrast, the State’s Transfer Inheritance Tax statutes, N.J.S.A. 54:34-1 to 37-8, address
these issues. See N.J.S.A. 54:34-1(a) (tax is imposed upon the “transfer of property, real or
personal, of the value of $500.00 or over, or of any interest therein or income therefrom, in trust
or otherwise, to or for the use of any transferee, distributee or beneficiary”); N.J.S.A. 54:34-5
(transfer inheritance tax “shall be computed upon the clear market value of the property
transferred”). This tax is in addition to the estate tax but is imposed upon certain classes of
beneficiaries or transferees of the decedent. See N.J.S.A. 54:38-1(a); N.J.A.C. 18:26-3.1(a).5
As to damages received from wrongful death actions, the Transfer Inheritance Tax statute
provides that the tax is normally “due and payable at the death” of the decedent, “but with respect
to any sum recovered as compensation for death of a person caused by a wrongful act, neglect or
4 I.R.C. §2031(a) provides that “[t]he value of the gross estate of the decedent shall be determined
by including. . . the value at the time of his death of all property, real or personal, tangible or
intangible, wherever situated.” Treas. Reg. §20.2031-1(b) provides that “every item of property
includible in a decedent’s gross estate” is valued at “its fair market value at the time of the
decedent’s death” unless the estate selects an alternate valuation. The fair market value is “the
price at which the property would change hands between a willing buyer and a willing seller,
neither being under any compulsion to buy or to sell and both having reasonable knowledge of
relevant facts.” Ibid.
5 Thus, the same event (death) can trigger two separate taxes: an estate tax imposed on the estate
and a transfer inheritance tax imposed upon the transferees or beneficiaries (with a credit for
inheritance tax paid, see N.J.S.A. 54:38-1(c)).

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default, whether by award of damages or settlement of compromise, taxes thereon shall be due and
payable on the date of said award or settlement.” See N.J.S.A. 54:35-1 (titled “Date when tax
due”). This exception was included by L. 1978, c. 172, which was titled as an Act “providing for
the date on which certain property is includible in the estate of a decedent for transfer inheritance
tax purposes, and amending sections 54:35-1, 54:35-3 and 54:35-4 of the Revised Statutes.”6 The
Sponsor’s Statement to Senate No. 348 notes that “[t]his bill redefines the date on which certain
property is includible as a decedents estate for transfer inheritance tax purposes.” See also Sen.
Rev., Fin. and Approp. Comm. Statement to Senate, No. 348 (Jan 26, 1978) (law amended “with
respect to sums recovered under the Death By Wrongful Act Statute” so that “taxes shall become
due and payable on the date of the award of damages or settlement of compromise, rather than the
date of death of the decedent”).
This same law also enacted N.J.S.A. 54:35-4.1, which provides that as to “any sum
recovered as compensation for death of a person caused by a wrongful act, neglect or default,
interest shall accrue at the rates and in the manner provided . . . if the [transfer inheritance] tax is
not paid within 30 days of the receipt of an award or settlement therefor.” The law was to “remove
an inequity” which was that “persons entitled to the amount recovered under the” wrongful death
statute had “not only to pay inheritance tax but also pay interest on the tax on a decedent’s estate
when that estate was settled after the” time to file an inheritance tax return post-death had expired.
Sen. Rev., Fin. and Approp. Comm. Statement to Senate, No. 348.
Taxation promulgated an inheritance tax regulation on inclusion in the decedent’s estate,
sums “recovered under the New Jersey Death Act” as follows:
6 The enacted law deleted the proposed law’s reference to “N.J.S.A. 2A:31-1 et seq.” and the
phrase “wrongful death of a decedent.” See Senate No. 348 (Second Official Reprint).

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(a) Moneys recovered under New Jersey Death Act (N.J.S.A.
2A:31-1 et seq.). Any sum recovered under the New Jersey Death
Act representing damages sustained by a decedent between the date
of injury and date of decedent’s death (such as the expenses of care,
nursing, medical attendance, hospital, and other charges incident to
the injury), including loss of earnings and pain and suffering are to
be included in the decedent’s estate.
1. Where an action is instituted under the New Jersey Death
Act and terminates through settlement by a compromise
payment without designating the amount to be paid under
each count, the amount so recovered is first applied toward
the payment of funeral expenses, the expenses of care,
nursing, medical attendance, hospital, and other proper
charges incident to the injury and is fully includible in the
estate of the decedent.
[N.J.A.C. 18:26-5.3(a).] 7
Taxation also provided that other than the above, no other amounts recovered are taxable. See
N.J.A.C. 18:26-6.6 (“[a]ny sum recovered under sections 1, 2, 3, and 4 of the New Jersey Death
Act (N.J.S.A. 2A:31-1 et seq.) as compensation for the wrongful death of a decedent is not subject
to” inheritance tax “except as provided in N.J.A.C. 18:26-5.3(a)”).
Plaintiff contends that the law is “well settled” that an estate is to be valued at the death of
the decedent, see Estate of Warshaw, therefore, it is the “value” of the survival claim action as of
decedent’s death that is includible in the estate, which here is $2,690,600, as per the third-party
appraiser’s opinion. Plaintiff maintains that Taxation’s resort to N.J.A.C. 18:26-5.3(a) to tax the
actual amount of the net damages received is arbitrary and capricious since it is contrary to estate
tax law, and that the regulation is inapplicable since it pertains to the transfer inheritance tax.
7 The authority for this regulation is stated to be N.J.S.A. 54:34-1a, the inheritance tax statute. See
Supplement to Title 18 (March 31, 1972). In the 1972 version of the regulation, subsection (a)
simply introduced the asset and thus read: “(a) Moneys recovered under New Jersey Death Act
(N.J.S.A. 2A:31-1 et seq.).” Subparagraph 1 was what is now contained in subsection (a) except
for the word “decedent’s” and without the ellipses. Paragraph 2 was what is now contained in
paragraph 1.

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Taxation agrees that under the estate tax law, what is includible in an estate, and thus
subject to estate tax, is the value of an asset as of the date of the decedent’s death. However, it
claims, Estate of Warshaw is inapplicable because in a survival claim action the decedent has no
interest as of the date of death, whereas in the cited case, the decedent had such interest in the IRA.
Taxation also argues that the precedent on including an asset’s date-of-death value does not apply
here since the survival claim action is a “different” type of an asset. This “different” asset is
addressed in N.J.A.C. 18:26-5.3(a) which plainly states that the “sum recovered” is includible in
the estate, which Taxation contends can only mean that amounts actually received are included
and taxed regardless of when received.
The court initially dismisses as illogical Taxation’s argument that Estate of Warshaw is
inapplicable. In its final determination, Taxation stated that “a survival act claim is includible” in
the decedent’s estate. This means Taxation agreed that the survival claim action is property of the
estate, and that the decedent had an interest in the same as of the date of her death. To now argue
to the contrary should then vitiate Taxation’s final determination and require a refund of the entire
amount of estate tax paid by plaintiff. Instead, Taxation filed a cross-motion for summary
judgment seeking affirmance of its refund denial.
As to the substantive contention of when and how much are includible in an estate where
the asset is a survival claim action, there are no estate (or transfer inheritance) tax cases on this
issue in New Jersey. The IRS’ revenue rulings state what is and what is not includible in gross
estate. However, they do not analyze or reconcile their conclusions with our transfer inheritance
tax regulations or law (which is entirely reasonable because inheritance taxes are a matter of pure
state law). Therefore, they are do not assist in resolving the instant inquiry.

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It is appropriate to apply the State’s Transfer Inheritance Tax statute to determine the
inclusion amount of a survival action claim for estate tax purposes. Both the New Jersey Estate
tax laws and the New Jersey Transfer Inheritance Tax address the same subject for purposes of
imposing the respective taxes: the corpus or estate of a decedent. Bothe are “transfer” taxes, i.e.,
the tax is due to, and upon the transfer of an asset of, the decedent’s death. See e.g. Jiwungkul v.
Dir., Div. of Taxation, 30 N.J. Tax 70, 75 (Tax 2016) (the “[t]ransfer inheritance tax and the estate
tax are separate assessments occasioned by a person’s death,” with the former being a tax upon
“succession to property transferred . . . through a will or by intestacy” and the latter being a tax on
the “transfer of the estate . . . which would have been subject to” a federal estate tax), aff’d, 450
N.J. Super. 257 (App. Div. 2017). The assets comprising the taxable estate and subject to estate
tax, are also those which pass to beneficiaries (designated by a will or intestacy laws) for transfer
inheritance tax purposes.
Taxation’s regulations recognize the interdependence between the two transfer taxes. The
definitional section, Subchapter 1 of Chapter 26 of Title 18, is titled as applying to both estate and
inheritance taxes and specifies that the regulatory reference to the “Act” or “Law” or “Tax Act”
means “Chapters 33 through 38 of Title 54.” See N.J.A.C 18:26-1.1. Thus, for instance, the
definition of the term “estate and property” (the “interest of the testator” which passes to a specific
person, ibid.), or “gross estate” (“the value as of the date of a decedent’s death of all property
wherever situated, which is included in the decedent’s estate for inheritance tax purposes,” ibid.),
applies to both taxes. So does the defined term “[m]arket value--date determined” (the “value of
property as of the date of death of the transferor, whether or not the transfer was made during the
lifetime of the transferor.” Ibid.).

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The court therefore finds that the Estate Tax statute and the Transfer Inheritance Tax statute
can and should be read in pari materia as to what and how much is includible in a decedent’s estate.
See Milltown Indus. Sites v. Borough of Milltown, 12 N.J. Tax 581, 585 (Tax 1992) (“statutes
relating to the same or similar subject matter – statutes in pari materia – are to be construed
together”) (citation and internal quotation marks omitted), aff’d, 15 N.J. Tax 144 (App. Div. 1993);
Richard’s Auto City, Inc. v. Dir., Div. of Taxation, 140 N.J. 523, 540 (1995) (statutes are in pari
materia when they have “the same purpose or object”) (citations omitted). See also Estate of
Dieleman v. Dep’t. of Revenue, 222 N.W.2d 459, 461 (Iowa 1974) (holding that estate tax and
inheritance tax statute “should be construed in pari materia” in determining whether a claim for
wrongful death is an asset of the estate, i.e., whether the decedent had an interest in such claim on
his death).
Here, the transfer inheritance tax laws dictate what is included in the estate (“any sum
recovered as compensation for death of a person caused by a wrongful act, neglect or default,
whether by award of damages or settlement of compromise”), and when (date of recovery of the
“award or settlement”). N.J.S.A. 54:35-1; N.J.A.C. 18:26-5.3(a). The regulations also indicate
what is not taxable, and therefore, what is not includible in an estate. N.J.A.C. 18:26-5.3; 18:26-
6.6.8 Therefore, construing the statutes in pari materia, the court finds that the legislative intent
8 While N.J.S.A. 18:26-5.3 (a) cites to “N.J.S.A. 2A:31-1 et seq.” as the “New Jersey Death Act,”
the includible amounts pertain to damages “sustained between the date of injury and date of
decedent’s death . . . including loss of earnings and pain and suffering.” These are damages
allowable in a survival action claim. See Smith, 160 N.J. at 234, 236 (“The Survivor’s Act was
intended to” provide a remedy “to the estates of those who” suffered “injuries causing death . . .
by allowing the decedent’s estate to recover any loss to the decedent that accrued between injury
and death,” and the “the primary damages recoverable in a survival action sounding in tort are for
the decedent’s pain and suffering between the time of injury and death”) (internal citation and
quotation marks omitted). See also Senate No. 348, supra, n.6.

14
was to include in the decedent’s estate, the sums recovered pursuant to the survival claim action,
whether the recovery resulted from a trial or a settlement.
Thus, the sums actually recovered by the decedent’s estate in the survival claim action
represents the value of that claim, which here is $6,709,231.08. Although received or recovered
later, this amount is deemed to be the value of the survival action claim as of the decedent’s date
of death. The legislative changes implemented by L. 1978, c. 172, while noting that it was as to
the “date on which certain property is includible in the estate of a decedent for transfer inheritance
tax purposes,” sought to address the inequity as to timing of the payment of the tax so that “taxes
shall become due and payable on the date of the award of damages or settlement of compromise,
rather than the date of death of the decedent.” Even if some ambiguity exists whether this law
addresses the timing of the tax payment or the date on which an asset is to be valued, it is resolved
by the unambiguous intent that (1) the “property” to be included in the decedent’s estate are the
“sums recovered under the Death By Wrongful Act Statute,” and (2) the date such “property” is
includible in the estate (and therefore subject to tax) is “the date of the award of damages or
settlement” and not the date of death. Sen. Rev. Fin. and Approp. Comm. Statement to Senate,
No. 348.
It would be counterintuitive to maintain that the same asset (survival claim action) is to be
included in the same estate (decedent’s) but argue that the tax base, i.e., amount subject to tax,
should be different for each type of tax: for the estate tax, it should be an amount based on an
appraiser’s value conclusion (what is the asset’s alleged market value as of the date of death), but
for transfer inheritance tax purposes it is the amount recovered under N.J.A.C. 18:26-5.3.
Construing the Estate Tax and Transfer Inheritance Tax statues in pari materia will avoid this
absurdity. The court’s conclusion does not sidestep the ruling in Estate of Warshaw because there

15
the asset at issue was not a survival action claim and the case did not involve applicability of the
Transfer Inheritance Tax laws.
The court also finds that although the inheritance tax regulations concerning survival claim
actions (N.J.A.C. 18:26-5.3; N.J.A.C. 26-6.6) appear to be promulgated prior to the 1978
amendments to N.J.S.A. 54:35-1 and enactment of 35-4.1, they are not arbitrary, capricious, or
unreasonable. Rather, the authority for the regulations arose under the Transfer Inheritance Tax
statute, and although the nomenclature differs (alluding to sums recovered under the New Jersey
Death Act, N.J.S.A. 2A:31-1et seq.,) their substance accord with the existing well-established law
on survival claim actions and their includability in a decedent’s estate. See Smith, 160 N.J. at 231,
234, 236; Rev. Rul. 54-19, 1954-1 C.B. 179.
In sum, based on the court’s pari materia analysis, the court finds that amounts to be
included for New Jersey’s estate tax purposes are the sums actually recovered for a survival claim
action, whether by settlement or jury verdict, because this is what the Legislature intended. Such
sums are deemed to be the value of the claim as of the decedent’s date of death. Therefore,
application of N.J.A.C. 18:26-5.3(a) to require inclusion of the amounts actually recovered for this
claim in the decedent’s gross estate for New Jersey estate tax purposes is reasonable and within
the intendment of the Legislature.
CONCLUSION
For the aforementioned reasons, the court denies plaintiff’s summary judgment motion and
grants Taxation’s cross-motion for summary judgment.9
9 Taxation notes that should this court decide in favor of plaintiff, it does not contest plaintiff’s
appraiser’s “value” conclusion of the survival claim action. This concession does not mean that
the court (1) also accepts plaintiff’s appraiser’s value conclusion, or (2) agrees with plaintiff that
survival actions can be credibly subject to valuation under a market-value theory or any other
valuation theory.