In my July 22nd post “Something New” I talked about a new wrinkle to NJ state income taxes that I had come across when a client attempted to sell a two-family home that had once been rental property. I was asked by the client’s lawyer to fill out a “bulk sale” certificate and calculate an estimated tax payment.
As it turned out no such certificate was required in the situation because the two-family home was not currently “income producing”.
I just discovered in the WHAT’S NEW section of the NJ Division of Taxation website the following –
“P.L. 2011, Chapter 124, which was signed into law on September 14, 2011, takes effect immediately and also applies retroactively to sales, transfers and assignments made on or after August 1, 2007. It amends P.L. 2007, c. 100, § 5 (N.J.S.A. 54:50-38, ‘Bulk Sale Act’) by exempting from application of the Act, the transfer or assignment of ‘a simple dwelling house’ if the seller, transferrer or assignor is an ‘individual’, ‘estate’, or ‘trust’ as those terms are used for the purposes of the ‘New Jersey Gross Income Tax Act’, N.J.S.A. 54A:1-1 et seq. By ‘individual’ is meant ‘a single-person, married or civil union couple, spouse or civil union partner’.”
The notice went on to explain – “A ‘simple dwelling house’ may include an attached or detached dwelling unit, but not more than a two-family building or structure. . .” And that “a seasonal rental unit, including a timeshare estate” is also exempt from bulk sale reporting.
So a NJ homeowner would not be required to file the “Notification of Sale, Transfer, or Assignment in Bulk” and “Asset Transfer Tax Declaration” if the property being sold was “not more than a two-family building”, or, as in the case of my client, an actual two-family building.
WhiIe the notice does state the exemption “does not include a structure or structures containing commercial property including, or in addition to, the units of dwelling space”, I see nothing in the notice that says the exemption does not apply if the two-family building, seasonal rental unit, or timeshare estate is income producing. Residential rental property is not commercial property.
This is good news – less work for us!
What of NJ homeowners who had already sold a two-family house, with one rental unit, in 2011, and had made an estimated tax payment? According to the notice –
The Bulk Sale Section is currently returning checks that are received by those parties who are now exempt from the Bulk Sale Act, with a letter clearing the seller, transferee or assignee and citing the law change to the original Act.