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Major Factors To Consider When Distributing Real Estate In Divorce


Charles F. Vuotto, Jr., Esq. and Cheryl E. Connors, Esq.*


(See our related Podcast on Women and Divorce – Marital Home)

            As matrimonial practitioners we often fall into the trap of concentrating on valuation, tax and other issues only in the context of business valuation and fail to consider that the same issues exist with regard to many other assets that are addressed in divorce including but not limited to real estate.  Part I of these materials will address the appropriate standard of value to be utilized when valuing real estate incident to divorce and whether it is consistent with the standard used in valuing a business.  Part II of these materials will address whether or not real estate owned by a business should be included in the value (i.e., considered an “operating asset” or a “non-operating asset”).  Part III of these materials will address various tax issues incident to real estate including but not limited to the ability to take mortgage interest deductions and capital gains tax exposure depending on various distribution scenarios.  Part IV of these materials will address the appropriate transfer documents and procedures to be employed when distributing real estate at the conclusion of a marriage as well as recent changes in the law concerning those documents and real estate transfer fees.  Lastly, Part V will address a number of practice pointers that will assist practitioners when dealing with real estate incident to divorce.




This portion of these materials will address the question of what “standard of value” should be applied when valuing real estate incident to divorce.  Perhaps the more interesting question is whether there should be one “standard of value” for all assets being valued in the context of divorce.  Unfortunately, no New Jersey matrimonial case specifically discusses the appropriate standard of value to be applied when valuing real estate incident to divorce.  Therefore, we must evaluate standards applied to real estate valuation in other contexts.

The “standard of value” is that standard by which a property or asset is measured.  Shannon Pratt, discussing standard of value, states the following:

The standard of value usually reflects an assumption as to who will be the buyer and who will be the seller in the hypothetical or actual sales transaction regarding the subject assets, properties or business interests.  It defines or specifies the parties to the hypothetical transaction.  In other words, the standard of value addresses the questions: “value to whom?” and “under what circumstances?”  The standard of value, either directly by statute or (more often) as interpreted in case law, often addresses what valuation methods are appropriate and what factors should or should not be considered.[1]


The standard of value sets the criteria upon which valuation analysts rely.[2]  A standard of value is “a definition of the type of value being sought.”[3]  “Among many factors, it dictates whether you use a hypothetical buyer and seller, a market-participant buyer and seller, value to a single person, or a willing or unwilling buyer and seller.”[4]  Before we explore the standard of value applicable to real estate, we will briefly summarize the definitions of the more widely utilized standards.  These are most often, but not always, in the context of business valuation.

The essence of our discussion in this section is an analysis of “value.”  Black’s Law Dictionary defines value as “the significance, desirability, or utility of something” or “the monetary worth or price of something; the amount of goods, services, or money that something will command in exchange.”[5]  Therefore, notwithstanding the numerous standards of value that exist, the standards are essentially divided into two camps (i.e., “value in use” and “value in exchange”).


There are a number of standards of value.  Some, but not all, are defined below:


Value in Exchange: “[T]he value arrived at in a hypothetical sale, with assumptions ranging from the seller departing immediately and competing with his or her former business, to the seller staying on to help transition management.”  Underlying value in exchange are two standards: (1) Fair Market Value and (2) Fair Value.[6]

Fair Market Value:     “[T]he price at which the property would change hands between a willing buyer and a willing seller when the former is not under any compulsion to buy and the latter is not under any compulsion to sell, both parties having reasonable knowledge of relevant facts.”  Sometimes this standard further assumes that the hypothetical buyer and seller are “able, as well as willing, to trade and to be well informed about the property and concerning the market for such property.”[7]

Fair Value:     A context- and geographically-sensitive term, this usually represents a standard of value created by statute and/or precedent for specific circumstances.  In New Jersey, fair value is essentially fair market value without discounts for lack of control or lack of marketability/liquidity, barring extraordinary circumstances.[8]  However, over-application of this general rule is dangerous.  “Extraordinary circumstances” usually relates to the good or bad faith of the shareholders involved in the particular corporate action.  While this concept completely contradicts divorce litigation policy, which makes marital fault irrelevant in deciding the distribution of assets, it is the standard to be used when valuing closely held corporations for purposes of equitable distribution.[9]

“In one context, fair value can entail an exchange, but not necessarily from a willing seller.  Fair value may also assert that a lack of intention to sell a business prevents its valuation as a value in exchange.”[10]  Other fair value cases adhere more to a value to the holder premise.[11]  Because fair value of an asset could be its market value, its intrinsic value, or its investment value, this standard is subject to wider interpretation from a judicial perspective than fair market value.[12]  In the shareholder context, “‘[f]air value carries with it the statutory purposes that shareholders be fairly compensated, which may or may not equate with the market’s judgment about the stock’s value.  This is particularly appropriate in the close corporation setting where there is no ready market for the shares and consequently no Fair Market Value.’”[13]  No reported case in the State of New Jersey (before Brown) has expressly utilized “Fair Value” as a standard of value incident to divorce, although one may interpret various cases as having implicitly utilized this or some other value standard.  In fact, all cases expressly speaking to the issue have specifically used “Fair Market Value.”  The real question is:  Can or should this standard be applied to real estate?

Investment Value/Value to the Holder:        This is the specific value of an investment to a particular investor or class of investors based upon individual investment requirements.[14]  “Application of this standard contemplates value not to a potential hypothetical buyer but rather to a particular buyer, which in the case of divorce is the current owner, hence, value to the holder.”[15]

Intrinsic or Fundamental Value:       The value to an investor of an investment (usually common stock) based upon the perceived characteristics of an asset.  This becomes the basis of the “market value” for the asset.  The methods of calculating intrinsic value are usually based upon finance theory.[16]  This standard of value is based on the assumption that the business or business interest will not be sold.[17]

The standard of value varies from state to state.  It is important to note that courts may refer to one standard of value while in reality the court is applying a different standard of value.[18]  In other words, a court may declare that it is applying a fair market value standard while attributing elements and theory more closely related to investment value.  These “misnomers” are likely a result of the courts’ desires to distribute assets in a fair and equitable manner.[19]

In the context of business valuation incident to divorce, thirty-three states and the District of Columbia fall under a value in exchange premise, including Arkansas, Alaska, Connecticut, Delaware, Florida, Hawaii, Idaho, Illinois, Indiana, Iowa, Kansas, Louisiana, Maryland, Massachusetts, Minnesota, Mississippi, Missouri, Nebraska, New Hampshire, North Dakota, Oklahoma, Oregon, Pennsylvania, Rhode Island, South Carolina, Tennessee, Texas, Utah, Vermont, Virginia, West Virginia, Wisconsin, and Wyoming.[20]  Only two states, Louisiana and Arkansas, have statutes that provide guidance as to the standard of value to be used in divorce, both directing that fair market value be applied.[21]  Ten states fall under some version of a value to the holder premise including Arizona, California, Colorado, Kentucky, Michigan, Montana, Nevada, New Mexico, North Carolina and Washington.[22]  The remaining seven states do not fall into either category.  Breaking down those categories into specific standards of value, eleven states, Arkansas, Connecticut, Florida, Hawaii, Kansas, Louisiana, Missouri, Nebraska, New York,[23] South Carolina, and Wisconsin, specifically direct the use of fair market value by statute or decisional law, and one state, Minnesota, uses the term market value, which could be categorized as fair market value under the circumstances presented in the case law.[24]  In addition to the states that expressly identify fair market value as the standard, it is implicit in case law of numerous states that the fair market value standard is being applied.  These states include Alaska, Delaware, Idaho, Illinois, Iowa, Maryland, Massachusetts, Mississippi, New Hampshire, North Dakota, Oklahoma, Oregon, Pennsylvania, Rhode Island, Tennessee, Texas, Utah, Vermont, and West Virginia.[25]  In contrast, four states, Indiana, Louisiana,[26] Virginia, and Wyoming apply a fair value standard.[27]  Ten states, Arizona, California, Colorado, Kentucky, Michigan, Montana, Nevada, New Mexico, North Carolina, and Washington, apply an investment value.[28]  New Jersey, New York and Ohio have been characterized as hybrid states, applying more than one standard of value.[29]  States that have not identified a definitive standard of value are Alabama, Georgia, Maine and South Dakota.[30]

The below chart illustrates these statistics:


Standard of Value


Standard of Value


1.       Alabama None Identified 2.       Alaska
  • Value in Exchange
  • Fair Market Value
3.       Arizona
  • Value to the Holder
  • Investment Value
4.       Arkansas
  • Value in Exchange
  • Fair Market Value
  • Standard is expressly stated in statute
5.       California
  • Value to the Holder
  • Investment Value
6.       Colorado
  • Value to the Holder
  • Investment Value
7.       Connecticut
  • Value in Exchange
  • Fair Market Value
  • Standard is expressly stated in case law
8.       Delaware
  • Value in Exchange
  • Fair Market Value
9.       Florida
  • Value in Exchange
  • Fair Market Value
  • Standard is expressly stated in case law
10.    Georgia None Identified
11.    Hawaii
  • Value in Exchange
  • Fair Market Value
  • Standard is expressly stated in case law
12.    Idaho
  • Value in Exchange
  • Fair Market Value
13.    Illinois
  • Value in Exchange
  • Fair Market Value
14.    Indiana
  • Value in Exchange
  • Fair Value
15.    Iowa
  • Value in Exchange
  • Fair Market Value
16.    Kansas
  • Value in Exchange
  • Fair Market Value
  • Standard is expressly stated in case law
17.    Kentucky
  • Value to the Holder
  • Investment Value
18.    Louisiana
  • Value in Exchange
  • Fair Market Value
  • Standard is expressly stated in statute
  • Fair Value is also suggested by case law
19.    Maine None Identified 20.    Maryland
  • Value in Exchange
  • Fair Market Value
21.    Massachusetts
  • Value in Exchange
  • Fair Market Value
22.    Michigan
  • Value to the Holder
  • Investment Value
23.    Minnesota
  • Value in Exchange
  • Fair Market Value
  • Standard is expressly stated in case law as market value
24.    Mississippi
  • Value in Exchange
  • Fair Market Value
25.    Missouri
  • Value in Exchange
  • Fair Market Value
  • Standard is expressly stated in case law
26.    Montana
  • Value to the Holder
  • Investment Value
27.    Nebraska
  • Value in Exchange
  • Fair Market Value
  • Standard is expressly stated in case law
28.    Nevada
  • Value to the Holder
  • Investment Value
29.    New Hampshire
  • Value in Exchange
  • Fair Market Value
30.    New Jersey Hybrid
31.    New Mexico
  • Value to the Holder
  • Investment Value
32.    New York Hybrid
33.    North Carolina
  • Value to the Holder
  • Investment Value
34.    North Dakota
  • Value in Exchange
  • Fair Market Value
35.    Ohio Hybrid 36.    Oklahoma
  • Value in Exchange
  • Fair Market Value
37.    Oregon
  • Value in Exchange
  • Fair Market Value
38.    Pennsylvania
  • Value in Exchange
  • Fair Market Value
39.    Rhode Island
  • Value in Exchange
  • Fair Market Value
40.    South Carolina
  • Value in Exchange
  • Fair Market Value
  • Standard is expressly stated in case law
41.    South Dakota None Identified 42.    Tennessee
  • Value in Exchange
  • Fair Market Value
43.    Texas
  • Value in Exchange
  • Fair Market Value
44.    Utah
  • Value in Exchange
  • Fair Market Value
45.    Vermont
  • Value in Exchange
  • Fair Market Value
46.    Virginia
  • Value in Exchange
  • Fair Value
47.    Washington
  • Value to the Holder
  • Investment Value
48.    West Virginia
  • Value in Exchange
  • Fair Market Value
49.    Wisconsin
  • Value in Exchange
  • Fair Market Value
  • Standard is expressly stated in case law
50.    Wyoming
  • Value in Exchange
  • Fair Value
51.    District ofColumbia
  • Value in Exchange
  • Fair Market Value


The standards of value referenced above are the most common.  However, other standards exist in different areas of the law.  For example, in the context of taxes, several standards of value have been applied: full value, full cash value, cash value, fair cash value, full and fair cash value, true value, true and actual valuation, actual value, full and actual cash value, full and true value, true cash value, true value in money, and market value of fair market value.[31]  For purposes of federal gift and estate taxes, fair market value is the statutory standard of value.[32]  The Estate and Gift Tax Regulations set forth requirements for determining the fair market value as follows: the price at which a property would change hands; a willing buyer; a willing seller; neither being under any compulsion; both having reasonable knowledge of the relevant facts; specific value as of a specific valuation date; and applicability of subsequent events.[33]  In contrast, fair value is the mandated standard for financial reporting that is subject to regulation by the Securities and Exchange Commission.[34]  Fair value is also used in almost every state as the standard for dissenting and oppressed shareholder action.[35]  Although the standard of value may be identified in these contexts, “there is no guarantee that all would agree on the underlying assumptions of that standard.”[36]  These examples illustrate the vast array of standards that can be applied, but the question here is: what standard of value is appropriate in valuing real estate?

New Jersey Constitution

To determine the appropriate standard of value for real estate in New Jersey in the context of a divorce, we first turn to the New Jersey Constitution.  The Constitution states:

All real property assessed and taxed locally or by the State for allotment and payment to taxing districts shall be assessed according to the same standard of value, except as otherwise permitted herein, and such real property shall be taxed at the general tax rate of the taxing district in which the property is situated, for the use of such taxing district.[37]

The concept of standard of value for real property is not only addressed in our State Constitution but also in numerous provisions throughout our statutory scheme.

New Jersey Statutes

For instance, in the context of taxation, the Legislature has declared that “Article VIII, Section I, paragraph 1 of the Constitution of the State of New Jersey requires that all real property in this State be assessed for taxation under the same standard of value, which the Legislature has defined as “true” or “market” value.”[38]  The meaning of “true value” in the Constitution and the statutory scheme has been defined by case law as “fair market value” as of the date of tax assessment and as the price in money at a fair sale between a willing seller and willing buyer.[39]

Numerous statutes address the concept of standard of value or specify the standard of value to be applied to real estate or other property rights in a particular context.[40]  Some employ the fair market value standard (e.g., abandoned tenant property, value of computer systems, multifamily housing, library materials, bonds, notes, mortgages, residential mortgages, theft offenses, estates and trusts, agricultural preserves, farmland preservation, tidelands management, garden state preservation trust, pinelands protection, mortgage guarantee insurance, education, eminent domain, sale of state highways, New Home Warranty and Builders’ Registration Act, state property, and tax assessment of personal property);[41] others refer to fair value (e.g., state farmland assessment, conveyance of outstanding interest against certain residential realty, farmland preservation, inland waterways, liabilities of shareholders in corporations, mergers and acquisitions of corporations, rights of dissenting shareholders, and sale of personal property in the education context);[42] several use intrinsic value (e.g., oath of appraisers, time for owner of distrained property to take action, and appointment of appraisers);[43] and finally one refers to value to the holder (e.g., sale of health insurance).[44]

It must be noted that our legislature had the opportunity to expressly mandate a specific standard of value when N.J.S.A. 2A:34-23.1 was added to the statutory framework of divorce law in 1988 (and amended in 1997).  It did not do so.  This must imply that the legislature has accepted the standard adopted by case law at least to that point in time.

New Jersey Cases

Notwithstanding the foregoing, no case in New Jersey directly addresses the appropriate standard of value to be applied to real estate in the context of matrimonial litigation.  However, multiple cases discuss or apply a fair market value standard in assessing the marital home.[45]  For example, in several cases the Appellate Division affirmed the trial court’s findings as to the fair market value of the marital home for purposes of equitable distribution.[46]  Other Appellate Division cases simply refer to fair market value as the standard applicable in valuing the marital home.[47]  One Appellate Division case awarded the husband the difference between the fair market value of the marital home and the sale price in light of the fact that the wife sold the home for less than fair market value.[48]  In one trial court decision, the court rejected the husband’s contention that his house was sold below fair market value.[49]  Even in the case of Brown v. Brown, in which the court set the standard of value for business valuation as fair value, the Appellate Division declined to interfere with the trial court’s equitable distribution of the marital home, which was valued using the fair market value standard by stipulation of the parties.[50]  Moreover, in that case the court distinguished between fair value and fair market value, stating:

“Fair value” carries with it the statutory purpose that shareholders be fairly compensated, which may or may not equate with the market’s judgment about the stock’s value.  This is particularly appropriate in the close corporation setting where there is no ready market for the shares and consequently no fair market value.[51]


As an aside, does the emphasized language regarding a “ready market” suggest that a different standard of value (fair market value) should be utilized if there is a ready market for the subject business?  Putting that question aside, the Brown court further reasoned that “[c]lose corporations by their nature have less value to outsiders, but at the same time their value may be even greater to other shareholders who want to keep the business in the form of a close corporation.”[52]

In the context of real estate, those same concerns may not apply.  Generally, there is a market to sell real estate, or at the very least, market comparisons are readily available to value real estate (even if they require adjustments as discussed in Part V below).  Thus, the court’s reasons for applying a fair value standard in business valuation may not have any relevance in assessing the value of real estate.  However, is it possible to argue that the value of a custodial parent retaining the former marital home for continuity in the children’s lives and other related issues is greater than the value that would result from a sale on the open market?  If so, shouldn’t that value be used in order to be consistent with the precepts of Brown?

In light of the case law using fair market value when valuing real estate, the most logical conclusion is that fair market value is the appropriate standard for valuing real estate.  In fact, “[o]ne of the most common applications of fair market value is in the valuation of real property.”[53]  In the context of valuing real property, it can be referred to as market value rather than fair market value.  Market value is defined as:

A type of value, stated as an opinion, that presumes the transfer of a property (i.e., a right of ownership or a bundle of such rights), as of a certain date, under specific conditions as set forth in the definition of the term identified by the appraiser as applicable in an appraisal.[54]


In assessing the fair market value of real estate, experts generally employ a concept of “highest and best use for the property.”[55]  The phrase “highest and best use” is the “reasonably probable and legal use of vacant land or an improved property that is physically possible, appropriately supported, and financially feasible and that results in the highest value.”[56]  In addition to the requirement that the highest and best use of a property be reasonably probable, it must also meet four implicit criteria: (1) physical possibility; (2) legal permissibility; (3) financial feasibility; and (4) maximal productivity.[57]  These four implicit criteria can be examined through the interaction of four forces, which include social trends, economic circumstances, governmental controls and regulations, and environmental conditions.[58]

One caveat is that the highest or maximally productive use of the property may not always be the highest and best use of the property particularly in the context of valuing a residential home.  In other words, the valuation expert must distinguish between the “highest and best use of the land as though vacant and highest and best use of the property as improved.”  For example, if a single family home used as a residential property is located in a commercial zone, it could potentially be used as a commercial property, which would likely yield the maximum productivity for the property.  However, if the market value for residential use is greater than the market value for the commercial use less demolition and improvement costs, then the highest and best use of the property is continued residential use.[59]

While not often given much consideration in the matrimonial setting, market value may not always be the most appropriate standard to value real estate.  Assume that the wife owns a minority interest in a real estate holding company; the real estate owned by the company is leased by an international bank for use as a retail branch.  The international bank has a thirty-year lease.  The base rent in the lease was set during a downturn in the local real estate market five years prior to the matrimonial proceeding and rents are only set to escalate with inflation.  As such, the rents are significantly below market rates.  The husband obtains a “market value” appraisal of the real estate, which he uses to calculate equitable distribution.  Upon your review of the appraisal, you find that the husband’s appraiser used current market rents based on comparable properties, as opposed to the actual rents paid that are significantly below market.  From an economic perspective, the market value appraisal significantly overestimated the wife’s interest in the real estate holding company because it was based on future income that the company would not receive under the terms of the lease.  There is a separate standard of value “leased fee value” which more appropriately values the property as encumbered by the lease, which would also provide a better basis to determine the value of the wife’s interest in the real estate holding company.  Given this particular fact pattern, the leased fee standard of value is more consistent with the “fair value” standard than “market value.”

In one Appellate Division case, although the court specified the use of “Fair Market Value,” as applied to the value of the marital home, its approach and discussion suggests that some other standard was used.[60]  In that case, the marital home was a two-family house and the parties rented out one unit in the house to the wife’s mother.[61]  The Appellate Division determined that the income production aspect of the home must be considered in the asset’s valuation.[62]  To determine the value, the court capitalized the income production factor, based on the improbable assumption of a constant monthly rent at the current amount for the next eleven years and a 3.5% rate of interest of an annuity.[63]  Such calculations suggest that the court employed an investment value rather than a fair market value standard when valuing a home with an income producing aspect.[64]

Conclusion as to Standard of Value

There are certain conclusions we can reach from the foregoing analysis:  (1) the Legislature has declared that “Article VIII, Section I, paragraph 1 of the Constitution of the State of New Jersey requires that all real property in this State be assessed for taxation under the same standard of value, which the Legislature has defined as “true” or “market” value.”  The meaning of “true value” in the Constitution and the statutory scheme has been defined by case law as “Fair Market Value”;  (2) “Fair Market Value” appears to be the most common “standard of value” referenced in reported matrimonial cases, which address the valuation of real estate including but not limited to Brown v. Brown; (3) “Fair Market Value” may not have any functional difference with “Fair Value” since there is a “ready market” for most real estate addressed in a divorce context and there are usually no minority owners – therefore there should be no need for a Marketability Discount or Minority Interest Discount; and (4) at least one court (i.e., Gemignani) used a different approach when dealing with income producing property that more accurately reflected the benefit to the holder when the facts required such an application and under certain circumstances leased fee value may the appropriate standard of value.

However, if the general conclusion is that “Fair Market Value” or “Market Value” is the “standard of value” to be applied when valuing real estate incident to divorce, the question is how does this jive with Brown’s mandate for “Fair Value” in valuing a business?  This writer respectfully submits that it does not.  Assuming Brown is correct, then shouldn’t all assets in a divorce be valued by the same “standard of value”?  I respectfully answer this question in the affirmative.  It is clear that the “standard of value” follows the area of the law:  (e.g., (1) estate and gift tax is “Fair Market Value”; (2) real estate valuations for taxation is “Fair Market Value”; (3) shareholder disputes is “Fair Value”, etc.)  Our research has not disclosed varying standards of value within an area of law.  This is logical since the “standard of value” is linked to the policy underlying the particular area of law.  Remember the definition of “standard of value”: the standard of value addresses the questions: “value to whom?” and “under what circumstances?”  The answers in the context of divorce are: husband and wives going through a divorce.  The question does not ask, “what kind of property?”  If the policy in divorce is to treat divorcing parties fairly and compensate them for the present value of the lost future benefit of the asset they will not retain (as Brown suggests), then this salutary policy should apply to all assets, not just businesses.  If the value of a closely-held business interest may have more value in the hands of the owner than to a third party purchaser, the same may apply to the value to a custodial parent’s retention of the marital home versus selling it on the market.  How such value may be quantified is problematic.  Perhaps one calculates the present value of the future rental value of the home for the retaining party’s lifetime or fixed period before a contemplated sale.  This writer understands that there are many potential problems with such an approach.  However, that does not mean that one “standard of value” should not be used for all assets, but highlights why the use of “Fair Value” for a business interest is incorrect.  As this writer has stated elsewhere, the correct “standard of value” is “Fair Market Value” and should be applied to all assets in a divorce.




In the context of matrimonial litigation, we have all encountered business valuations where the business owns the real estate upon which it is located.  The issue to be addressed within this section is when and to what extent the underlying real estate should be subsumed in the value attributed to the value of the business or treated as a separate and distinct asset.  The issue comes down to whether the real estate is an “operating” or “non-operating” asset of the business.

An “operating asset” is an asset that contributes to the income from a company’s operations[65] or is otherwise necessary to the continuing operations of the business enterprise.  In contrast, a “non-operating asset” is not necessary to ongoing operations of the business enterprise.[66]  These two simple definitions have led to great debate in matrimonial proceedings due to disagreement between what business assets are “necessary” and what assets are “unnecessary.”  In the case of real estate, the determination of whether real property is non-operating is based on the judgment that:

(1)               The business operations are inextricably connected to the real estate; or

(2)               If relocation is possible, whether it will have a significant impact on the future earnings of the business.

The following examples illustrate each of these points.

Golf Course Valuation: The proper valuation of a golf course involves the valuation of the real estate underlying the golf course, as well as a valuation of the business enterprise.  The real estate valuation will consider the value of the land and improvements – the tangible assets of the golf course, while the business valuation will consider the value of the real estate in addition to goodwill, membership lists and any other intangible assets that the golf course has developed through its business operations.  Back to the question at hand, is the real estate an operating or non-operating asset?  In consideration of item (1) above, the real estate and intangible assets of the golf course, such as goodwill, are inextricably connected.  Stated another way, if the business operations were to relocate to another vacant golf course (if one could be found), the intangible assets (e.g., goodwill) would have to be recreated.  Furthermore, if relocation were an option, the business enterprise would again have to invest in local advertising and marketing to build a membership base – and perhaps have significant capital investments in the course itself to differentiate it from other courses in the area.  Thus, the relocation issues have a significant impact on the future earnings of the business.

Golf courses are just one example of businesses in which the real estate is typically considered an operating asset.  Other examples include quarries, power plants, amusement parks, airports, and highly specialized manufacturing facilities.

Professional Practice Valuation: On the other end of the extreme, we see several professional practices that own real estate.  A professional practice is not typically considered inextricably connected to real estate.  For example, an accounting firm does not necessarily need to own a specific office condo to continue its business operations.  Other office space is typically available, and the impact on future earnings is usually limited to moving related expenses.  Other examples of businesses that own non-operating real estate include retail stores, professional service firms (lawyers, accountants, and physicians), restaurants, general manufacturing facilities, and most other personal service businesses.

Manufacturing Businesses: While the first two examples are relatively clear, there are certain types of businesses in which the determination of the operating/non-operating nature of real estate is not so clear.  Manufacturing businesses are one such example.  Several large scale manufacturers build highly specialized facilities to meet their needs.  Oftentimes, one-of-a-kind machinery is built in place and fixed to the real estate.  As such, the business operations are significantly connected to the real estate, and moving would have a significant impact on the future earnings of the business due to an extended interruption of the business operations and the cost of moving and recalibrating the specialized machinery.  This is a case that would involve significant professional judgment by an appraiser.

One factor that can significantly complicate this issue is if real estate is used in operations but used far below its highest and best use.  Consider a manufacturer with a highly specialized facility, which is necessary for business operations.  However, the land is in a prime location that could be used more productively as a retail store.  The real estate is inextricably connected to the business, yet the highest and best use of the real estate may exceed the business value (including the real estate).  This becomes a matter of the analyst’s judgment.  Certainly, the imminence, or lack of imminence, of prospective development or sale of the real estate will play a role in that judgment.[67]

In sum, the determination of whether real estate in a business is an “operating” or “non-operating” asset of the business is fact specific.  It is also crucial to the determination of whether the value of the real estate should be subsumed in the value attributed to the business or be treated as a separate and distinct asset.  Examples of this distinction occur in the context of a golf course, in which the real estate is typically considered an operating asset, as compared to a professional practice, in which the real estate is typically a non-operating asset to be valued separate and apart from the value of the business.  This is one more layer in the context of real estate valuation that the practitioner needs to consider in the context of a divorce litigation.




For many of the topics in this section, we will assume a typical fact pattern that many of us see every day.  In our fact pattern, the wife/dependent spouse shall remain in the former marital home, which shall continue to be jointly held, until the youngest child reaches the age of 18.  The wife and children shall have sole occupancy of the home.  The husband/obligor spouse shall pay the mortgage and taxes (in addition to his alimony and child support obligations).  Upon the youngest child reaching the age of 18, the former marital home shall be sold and the parties shall equally divide the net proceeds of sale.  Where appropriate, we may alter this fact pattern to highlight variations in the result depending on different facts.

Numerous tax issues related to real estate will arise in the context of a divorce.  These issues range from consideration of suspended losses to the deductibility of mortgage interest to the consequence of capital gains.  This section is not intended to provide a comprehensive analysis of tax consequences related to real estate but merely to discuss the more common issues that should be considered by the practitioner and to which the client should be alerted so that the client can obtain an appropriate financial advisor (i.e., tax accountant or tax attorney) to consult.

As a preliminary matter, Section 1041 of the Internal Revenue Code provides that no gain or loss shall be recognized on a transfer of property to a spouse or former spouse, if the transfer is incident to the divorce.[68]  Thus, for any transfer of real property between spouses or former spouses, provided that the transfer occurs within one year after the termination of the marriage or is related to the cessation of the marriage, no loss or gained will be recognized.

Furthermore, New Jersey courts have held that hypothetical tax consequences resulting from the future sale of marital assets should not be subtracted from present value for equitable distribution purposes.[69]  “Although hypothetical tax consequences should not reduce the present value of marital assets, such a consideration . . . has an important place in the equitable distribution process.”[70]  Stated differently, the hypothetical tax consequence is a factor to be considered with all other factors in determining an equitable distribution of property.[71]  In contrast, any tax consequences resulting from a court-ordered sale or contemporaneous sale of assets necessary to meet an equitable distribution is not speculative and should be deducted from present value.[72]  For example, if the spouse retaining an asset has indicated that he or she must liquidate it to meet his or equitable distribution obligations, the resulting tax liability should be deducted from the value charged to that party in the overall scheme of distribution assuming the promised sale occurs.


Interest paid on a mortgage up to $1,000,000 on a qualified residence is deductible.  Similarly, interested paid on a home equity loan up to $100,000 on a qualified residence is deductible.  “A ‘qualified residence’ is the principal residence, often the marital residence, and one other residence selected by the taxpayer and which is used as a residence ‘for personal purposes.’”[73]  If one spouse leaves the principal residence without an agreement or court order, that spouse will no longer be able to deduct the interest on the mortgage despite continued payments of the mortgage unless the spouse elects the marital residence as the second qualifying residence.[74]

A different result may occur if the spouse paying the mortgage is the sole title owner of the home.  In that case, the payor spouse can deduct the interest on the mortgage, provided that the payee spouse’s occupancy is pursuant to a divorce or separation instrument.[75]  If the payor and payee jointly hold title to the home, the payor can deduct the interest on one-half of the payments (assuming the payor is paying the mortgage), provided that the payee’s occupancy is pursuant to a divorce or separation instrument, and the payee can deduct interest on one-half of the payments for which he or she receives alimony.[76]  Under those circumstances, the payor spouse can also deduct one-half of the mortgage payments as alimony.[77]  If the payee spouse holds 100% title to the house, the payor spouse can deduct 100% of the mortgage payments as alimony, and the payee spouse can deduct the interest, provided that the payee spouse solely occupies the home.[78]

In our fact pattern, the husband pays the mortgage and the taxes on the marital home while the wife remains in the home with the unemancipated children.  If the husband and wife hold joint title to the home, the husband can deduct one-half of the mortgage payments as alimony and can also deduct the interest on the other one-half, provided the wife’s occupancy is pursuant to a divorce or separation instrument.[79]  The wife can deduct interest on one-half of the payments for which she received alimony.[80]

B.                 CAPITAL GAINS TAX

1.                  Sale of a Principal Residence

Pursuant to Section 121(b), a portion of the gain from the sale of a principal residence will be excluded from gross income.  The amount excluded for an individual is $250,000, while a husband and wife filing a joint return may exclude $500,000 of the gain from gross income.[81]  To qualify for the exclusion, the property must have been used as the taxpayer’s principal residence for periods aggregating two years or more during the previous five years.[82]  Spouses filing joint returns will qualify for the $500,000 exclusion if either spouse or both spouses resided in the house as his or her principal residence for two years during the previous five years and if neither spouse has sold a residence that qualified for the exclusion within the previous two-year period.[83]

A spouse or former spouse can tack on the ownership of his or her spouse when a principal residence is transferred.[84]  For example, if a residence in which spouses resided for a cumulative two-year period is owned by one spouse and transferred to the other spouse incident to a divorce, the transferee spouse can qualify for the $250,000 exclusion in less than two years because the former spouse’s ownership will be tacked on.[85]  If one spouse is excluded from the house pursuant to a divorce or separation instrument, the excluded spouse is able to take advantage of the exclusion provided that the remaining spouse is granted use of the house pursuant to the divorce or separation instrument and uses the residence as the principal residence.[86]  In our fact pattern, the husband will be able to benefit from the exclusion when the house is sold when the youngest child reaches eighteen years of age.  In a recent IRS Letter Ruling, it was determined that an individual who met and married another individual after the purchase of his home, thereby requiring a larger home to accommodate the blended family, qualified for the reduced maximum exclusion of gain on a residence that he owned and used for less than two of the preceding five years.[87]

2.                  Deferral of Capital Gains (Like-Kind Exchanges per § 1031)

Pursuant to Section 1031, no gain or loss will be recognized on the sale of property held for trade, business or investment purposes if another property of like kind is purchased for trade, business or investment purposes.[88]  To qualify for a deferral of capital gains tax on such property exchanges, the taxpayer must identify the property to be received in exchange within 45 days after the date the property is relinquished.[89]  In addition, the property in exchange must be received within 180 days after the date of transfer of the property.[90]  Property acquired under Section 1031 will have the same basis as the property exchanged, decreased by the amount of money received by the taxpayer and increased by the amount of gain or decreased by the amount of loss recognized on the exchange.[91]  Real property located in the United States and real property located outside of the United States are not deemed property of a like kind.[92]

Recently, it was determined that taxpayers who sold their vacation home and purchased another were not entitled to exclude the gain under Section 1031 because the properties were not held primarily for use in a trade or business or for investment.[93]  Additionally, the IRS recently updated its guidance on the proper paperwork for home buyers to obtain from sellers to exempt them from having to report information directly to the IRS.  This guidance comports with recent legislation aimed at preventing properties previously shielded under Section 1031 from shielding the deferred gain a second time using the exclusion for the sale of a principle residence.[94]

3.                  Section 453A: Installment Sale

The Internal Revenue Code provides a special method of reporting gains from sales of property that are paid through installments when at least one payment is received in a tax year after the date of sale.[95]  To compute the taxes owed on such installment sales, gains are prorated and taxed in the years in which the installment payments are received.  “Generally, the amount of taxable gain in a given year is determined by multiplying the payments received in that year by the gross profit percentage on the total sale.  The gross profit percentage is the total profit (total price less total cost) divided by the gross selling price.”[96]  Real estate dealers are prohibited from using the installment sale method of recognizing gains.  They must report gains and income from a sale in the year in which the sale occurs.[97]

4.                  New Jersey Tax Law

It is imperative that attorneys refer their clients to an appropriate financial consultant to assess tax consequences resulting from the sale of real estate, particularly in light of the differences in federal and New Jersey tax laws.  For example, New Jersey tax laws draw no distinction between income received from capital gains or other sources such as wages, interest and dividends.[98]  Additionally, New Jersey only permits capital losses to be deducted to the extent of capital gains, which differs from federal law.[99]  Thus, consultation with an accountant or tax attorney is strongly advised.


1.                  Passive Activity Rules

As a general rule, losses from passive activities may only be deducted from income from passive activity.[100]  Passive activities are those trades or businesses in which the taxpayer does not materially participate.[101]  Additionally, rental activity is deemed a passive activity whether or not the taxpayer materially participates in the activity, provided that there is compliance with special rules for real estate rental activities and real estate professionals.[102]  Any passive activity losses that cannot be deducted in a given year because they exceed passive activity income may be carried forward as a deduction in subsequent years indefinitely.[103]  These suspended losses will be allocated to each passive activity and will be carried forward for the particular passive activity.[104]

With respect to rental real estate, passive activity losses may be deducted against non-passive income up to $25,000.  If adjusted gross income of the taxpayer reaches a certain threshold, however, the $25,000 allowance is reduced by 50% of the amount by which the adjusted gross income exceeds $100,000 and is completely phased out if the adjusted gross income reaches $150,000.[105]

If one spouse materially participates in an activity, the other spouse is also deemed to participate, and losses from that activity will not be limited by the passive activity rules.[106]  Participation by one spouse may also prevent the suspension of losses from such activities.[107]  When a couple divorces, this deemed participation of one spouse to another would cease and a formerly non-passive activity would be converted to a passive activity.[108]

Suspended losses are allowed in full when the taxpayer disposes his or her entire interest in the activity in a fully taxable transaction.[109]  As such, suspended losses can have significant tax savings when disposing of an interest in the activity.[110]  On the taxable transfer, suspended losses must first be applied against the net gain from the passive activity and then may be applied against active income.[111]  A transfer of the taxpayer’s interest to a spouse or former spouse, if incident to a divorce, would be treated as a gift and would not be taxable.[112]  Therefore, the suspended losses could not be used as a deduction.[113]

However, if the transfer is incident to a divorce, the suspended losses will be added to the basis of the property, thereby increasing the basis in the property.[114]  The tax savings are realized when the recipient spouse disposes of the passive activity.[115]  If the activity is depreciable (i.e., rental real estate), an additional tax benefit that flows from the suspended losses is that “‘the increase in basis allows the recipient spouse to take depreciation deductions at a higher level.’”[116]

For example, if a husband transfers marital property such as rental real estate that is deemed to be a passive activity to a wife incident to a divorce, the transfer will not be taxable.  The wife will have the benefit of the suspended passive activity losses in the increased basis of the property.  When she sells the property, the tax savings will be realized.  The value of this increase in basis can be used in negotiating an equitable distribution of the property.

2.                  Carryforwards

If a taxpayer has overpaid taxes for the year, the taxpayer can carry forward the overpayment to the subsequent year’s estimated tax.[117]  No case law in New Jersey addresses the distribution of carryforwards in a divorce, but some out of state case law has allowed for distribution of carryforwards, when it was established that the loss carryforward was generated from the sale of marital property.[118]

This carryforward concept arises in the context of capital losses.  Losses from the sale of capital assets “are allowed only to the extent of gains from such sales or exchanges plus up to $3,000 of ordinary income ($1,500 if the return is married, filing separate).”[119]  Losses from the sale of capital assets that cannot be deducted in one year may be carried over to subsequent years for an unlimited time.[120]  If separate returns are filed after a net capital loss was reported on a joint return, each taxpayer is allocated the carryover based on their individual net capital losses for the preceding taxable year.[121]

Net operating losses may also be carried forward.  Such losses, with certain adjustments, may be carried back to the prior two years and forward to the succeeding twenty years as a deduction.[122]  If a taxpayer relinquishes the right to carry back the net operating losses, that election is irrevocable.[123]  If a spouse sustains a net operating loss before the marriage, such losses cannot be used to offset income on a subsequent joint return.[124]  Spouses who filed joint returns and subsequently file separate returns may carryover their share of the joint net operating loss.[125]  Former spouses may share a refund resulting from carryback of a net operating loss, even though the loss was incurred in the business of only one spouse.[126]

Likewise, investment interest expenses may be carried forward into subsequent tax years.  Investment interest is defined as “any interest which is paid or accrued on an indebtedness properly allocable to property held for investment.”[127]  A deduction for investment interest may not exceed the taxpayer’s net investment income for the taxable year.[128]  Any investment interest that is not deductible within a given year may be carried forward to succeeding taxable years.[129]

Carry forward losses are first computed on a separate basis as if the taxpayer filed a separate return.  Those loss carryovers are specifically allocated to that individual.  Joint assets that are sold at a loss which created the carryover would be split equally between the spouses in the separate calculation for the separate return.  Therefore, one spouse may have a net operating loss carry forward and the other none.  This also holds true with capital loss carryovers.  If capital assets are in one spouse’s name, the ownership can be changed without tax consequence in settlement or at anytime during the marriage to the other spouse.  The spouse takes on the same basis that the spouse maintained in the asset prior to the transfer.  Net operating loss carryovers are calculated for each spouse after the divorce by re-computing the prior joint net operating loss as if separately filed and limited to the net operating loss carry forward.

In light of the value of these “loss” deductions, the practitioner should remember to consider capital losses, net operating losses, and investment interest expenses in negotiating a property settlement agreement.


A maximum rate of 25% for capital gains tax will apply to the extent of depreciation claimed on real estate.[130]  Regarding depreciation, capital gains tax would be greater than 15% and ordinary recapture on accelerated depreciation on older properties.

In sum, various tax considerations should be brought to the attention of a client in valuing real estate in the context of matrimonial litigation.  Those considerations include the deductibility of mortgage interest, capital gains tax with respect to the sale of a principal residence, like kind exchanges and installment sales, suspended losses and carry forward taxes, and depreciation.  In view of the complexity of these tax issues, the practitioner should advise her client to consult with an appropriate financial advisor.




We have attached examples of all the standard transfer documents, which can be used as a check list when transferring property incident to divorce.  This section will address each document individually and give a description of the document and its purpose.

1.                  The Deed (Form attached as Appendix A)

A real estate transaction is a transfer of ownership of realty generally through the use and execution of a deed of conveyance, which must be signed and in writing.[131]  A “Deed” is “a written instrument entitled to be recorded in the office of a county recording officer which purports to convey or transfer title to a freehold interest in any lands, tenements or other realty in this State by way of grant or bargain and sale thereof from the named grantor to the named grantee.”[132]

There are a variety of deed forms used in New Jersey.  The customary form is the Deed of Bargain and Sale with Covenants against Grantor’s Acts, under some circumstances referred to as an Executor’s Deed, which protects the grantee against any action that encumbers the title as a result of the grantor’s acts.  Other forms of deeds include:

  • Deed of Bargain and Sale (without covenant) – does not make any promises as to actions of the grantor;
  • General Warranty Deed – warrants clear title against all claims including claims unrelated to grantor;
  • Special Warranty Deed – warrants the marketability of title only against claims against the grantor;
  • Full Covenant and Warranty Deed – affords the most protection to the grantee, as the grantor makes six covenants and warranties:  (1) seisin; (2) right to convey; (3) Quiet Enjoyment; (4) against encumbrances; (5) further assurances; and (6) general warranty; though not commonly used as title insurance is available to protect the grantee rather than relying on the covenants and warranties of the grantor; and
  • Quitclaim Deed – affords the least amount of protection to the grantee, conveying only the grantor’s estate and/or interest in the property, without any covenants or warranties.[133]

The Bargain and Sale Deed with Covenants against Grantor’s Acts is most commonly used in New Jersey because it offers some amount of liability from the grantor to the grantee through the promise contained therein, and any additional protection sought afterwards by a grantee can be obtained through title insurance.  The other forms of deeds are less commonly used as they either offer such a large amount of liability that a grantor is unwilling to execute (i.e,, Full Covenant and Warranty Deed), or they offer so little that a grantee will not accept (i.e., Quitclaim Deed).  Generally, deeds will include information pertaining to the parties in the transaction, the property’s legal description, the amount of consideration for the transfer, warranties, granting clause, and is concluded with an attestation, signature, and seal.[134]

Importantly, in order for a deed to be properly recorded, the amount of consideration must be recited in the deed, acknowledgement, or affidavit of consideration, and the amount of consideration must be considered to be of value.  Generally speaking, the conveyance of property for something like “$1.00” is indicative of nominal consideration.  However, the use of nominal consideration will not necessarily vitiate a deed and may depend upon the circumstances.  As such, if the recited consideration is $1.00, along with “other good and valuable consideration”, as may be provided in a divorce settlement, it will generally be upheld and it will protect the parties involved in the transaction, as well as any subsequent bona fide purchaser.[135]

In the context of a divorce proceeding, when marital real property that is jointly owned is being transferred in accordance with a settlement agreement or divorce decree, equitable distribution principles come into effect.[136]  Indeed, many equitable distribution awards will order a spouse to execute a deed in favor of the ex-spouse in order to transfer the property rights in the real estate.[137]  Under N.J.S.A. 2A:16-7, such a transfer of marital property may be effectuated by recording a certified copy of the judgment or divorce decree in the deed records of the County Clerk or Register.  This is helpful when the transferring spouse refuses to cooperate with the execution of the deed and other transfer documents.

Undeniably, a divorce has important consequences to the transfer of property, particularly with regard to marketable title, mortgages, liens, and encumbrances.  It is also important to keep in mind that the majority of courts that mandate one spouse to transfer property to another spouse further order that “the grantee spouse takes free of judgments docketed against the grantor spouse after the date of entry of the divorce judgment but prior to the date on which the conveyance occurs.”[138]  As such, the below documents are of great significance in the transfer of property in the divorce context.

2.                  Affidavit of Title (Form attached as Appendix B)

The seller in a real property transaction is a critical source of obtaining information relating to the title of the property.  As such, an “Affidavit of Title” is customarily used by a seller in a New Jersey real estate transaction in order to establish the title marketability of the property being sold.  In an Affidavit of Title, the seller makes statements with regard to his or her ownership rights, any existing title defects, improvements that may require permits or tax assessments, easements, mortgages and other encumbrances, and the seller’s marital status and history, all of which may affect the property and clear title.  The Affidavit of Title is generally transferred to the purchaser at the closing, along with the deed and other title documents.  Similarly, the mortgagor generally delivers the Affidavit of Title to the mortgagee.  Generally speaking, the Affidavit of Title will then be included in the title insurance commitment.[139]

Importantly, the Affidavit of Title may also be used as a mechanism to afford additional protection against matters affecting the title to property both on record and off record.[140]  It can be an added source for clarifying ambiguous information in the record title, such as judgments on record against people with the same name as the seller, or state facts that may not otherwise be revealed by a title search, such as divorces of interested parties or improvements to the property.[141]  It goes without saying that it is usually prudent to order a title and judgment search on any real property that is being received by your client so that any encumbrances or title issues may be appropriately addressed.  In fact, it is good practice to insist that your client authorize this expenditure.

In the divorce setting, the Affidavit of Title is particularly important for the receiving spouse.  An attorney representing such a spouse must ensure that the title is free from any of the ex-spouse’s liens or encumbrances, particularly prior to assumption of the mortgage.

3.                  Form 1099‑S Reporting Form (Form attached as Appendix C)

A Form 1099‑S, otherwise known as “Proceeds From Real Estate Transactions” Form, is required in order to report the sale or exchange of real property in a real estate transaction to the Internal Revenue Service.  Specifically, this form is required by § 6045(3) of the Internal Revenue Code, as amended by the Tax Reform Act of 1986.

Generally, you are required to report a transaction that consists of the sale or exchange of property in which you have any present or future ownership interest in any of the following:

  1. Improved or unimproved land, including air space;
  2. Inherently permanent structures, including any residential, commercial, or industrial building;
  3. A condominium unit and its appurtenant fixtures and common elements, including land; and
  4. Stock in a cooperative housing corporation.

As such, when the transaction deals with one of the aforementioned, the seller must provide the closing agent with a correct taxpayer identification number or social security number.  If the seller fails to furnish the requisite information or the identification information to the closing agent for filing, the seller may be subject to civil or criminal penalties imposed by law.[142]

4.                  Form 1099-S Certification Form (Form attached as Appendix D)

Notably, there are certain transactions that are exempt from filing a Form 1099‑S, although parties may still file if they so desire.  Specifically, in the sale or exchange of a principal residence, which includes stock in a cooperative housing cooperation, for an amount equal to or less than $250,000 or equal to or less than $500,000 for a married couple filing a joint return, an acceptable written certification from the seller must also be received in order to be exempt from filing.  The certification must include information that supports the conclusion that the full gain on the sale is excludable from the seller’s gross income.  When joint sellers are involved, certification must be obtained from each seller, whether they are married or not, or otherwise a Form 1099‑S must be filed for any seller who does not make the certification.  Under penalties of perjury, each seller must sign the certification.[143]

If the transaction meets the abovementioned criteria, the certification may be received at any time on or before January 31st of the year following the year of sale.  The certification may be relied upon for determining whether or not to file or furnish Form 1099‑S, unless the buyer is aware of an error or misrepresentation in the certification.  Importantly, the certification must be retained for four years after the year of sale.  It may be retained on paper, microfilm, microfiche, or in an electronic storage system.[144]

Again, a buyer is not required to obtain a certification unless it is determined that a Form 1099‑S will not be filed and furnished because the transaction is equal to or less than $250,000 or $500,000 when dealing with a married couple filing a joint return.[145]

The Form 1099‑S filing is the same for any transfer of real property in a divorce setting.

5.                  Affidavit of Consideration / Realty Transfer Fee (Forms attached as Appendices E and F)

Under New Jersey law, a deed may not be recorded without an inclusion of a statement or an attached certification of the consideration of the transfer.[146]  Likewise, if a transfer is exempt from any realty fee, an affidavit must be attached to the deed setting forth the basis for the exemption.[147]  As such, any person who falsifies the consideration in a deed, acknowledgement, or Affidavit of Title may be guilty of a fourth degree crime.[148]

The realty transfer fee is a tax imposed on the grantor/seller conveying a freehold estate or leases for a period of 99 years or more, although the parties may otherwise decide the responsibility of the fee pursuant to any executed agreements.[149]  The realty transfer fee is calculated by adding a specific dollar amount in accordance with the amount of consideration and has three tiers, along with any additional fees imposed, as discussed below.  Specifically, the realty transfer fee is calculated as follows:

1st Tier – Consideration of $1.00 to $150,000 à         $4.00 per $1,000

2nd Tier – Consideration of $150,001 to $200,000 à $6.70 per $1,000

3rd Tier – Consideration of $200,001 or greater à       $7.80 per $1,000.[150]


An “Affidavit of Consideration” is an attachment to a deed used to express the consideration of the transfer, when it is not otherwise stated in the deed or in an acknowledgement.  Also, when a party is claiming a full or partial exemption from the additional and supplemental realty transfer fees, an Affidavit of Consideration must be filed with the deed, explaining the basis of the exemption, regardless of whether the consideration is expressed in the deed or acknowledgement.[151]  Generally, the Seller pays the transfer fees, unless a contract otherwise provides.

There are numerous full and partial exemptions from the transfer fees.  Still, if a transfer is exempt from the additional and supplemental fees, the deed will not be recorded unless an affidavit stating the basis for the exemption is appended to the deed.[152]

Under New Jersey law, the following transfers may be excluded from the transfer fee and may be relevant to a realty transfer related to a divorce proceeding or settlement:

(a)        For a consideration, as defined in section 1(c), of less than $100.00; . . .

(c)        Solely in order to provide or release security for a debt or obligation;

(d)        Which confirms or corrects a deed previously recorded;

(e)        On a sale for delinquent taxes or assessments;

(f)         On partition;

(g)        By a receiver, trustee in bankruptcy or liquidation, or assignee for the benefit of creditors; . . .

(i)         Acknowledged or proved on or before July 3, 1968;

(j)         Between husband and wife, or parent and child; . . .

(l)         In specific performance of a final judgment; . . .

(n)        Previously recorded in another county and full realty transfer fee paid or accounted for, as evidenced by written instrument, attested by the grantee and acknowledged by the county recording officer of the county of such prior recording, specifying the county, book, page, date of prior recording, and amount of realty transfer fee previously paid; . . .

(p)        Recorded within 90 days following the entry of a divorce decree which dissolves the marriage between the grantor and grantee;

(q)        Issued by a cooperative corporation, as part of a conversion of all of the assets of the cooperative corporation into a condominium, to a shareholder upon the surrender by the shareholder of all of the shareholder’s stock in the cooperative corporation and the proprietary lease entitling the shareholder to exclusive occupancy of a portion of the property owned by the corporation.[153]


Additionally, the basic realty transfer fee will not apply to the following deeds:

(a) (1) The sale of any one-or two-family residential premises which are owned and occupied by a senior citizen, blind person or disabled person who is the seller in such transaction; provided, however, that except in the instance of a husband and wife no exemption shall be allowed if the property being sold is jointly owned and one or more of the owners is not a senior citizen, blind person or disabled person.


(2) The sale of low and moderate income housing.


(b) Transfers of title to real property upon which there is new construction shall be exempt from payment, with respect to all consideration therefore up to $150,000.00, or 80% of the State portion of the basic fee.[154]


Significantly, when the conveyance or transfer of real property is by a former spouse of undivided interest in the property, the transfer may be exempt from the realty transfer fee.  Specifically,

(a) A deed after divorce proceedings from one former spouse to the other conveying the grantor’s undivided interest in their jointly held real property is subject to the realty transfer fee if there is consideration, as defined at N.J.A.C. 18:16-1.1, and the deed is being recorded more than 90 days from the entry of the divorce decree.  The consideration shall include:

1.   That fraction of the amount due on the mortgage which corresponds to the fractional interest of the property conveyed; and

2.   Any other element of compensation constituting part of the consideration paid or to be paid for the transfer.[155]


As such, if the deed is recorded within 90 days or less from the entry of the divorce decree, the property transfer of marital asset would be exempt from the realty transfer fee.

Similarly, in realty transfers in which the consideration is less than $100.00, the deed and transfer will be exempt from the fee, however

the amount of consideration to be recited in the deed and acknowledgement of the Affidavit of Consideration, shall include, in addition to all other consideration passing between the parties, the remaining amount of any prior mortgage to which the transfer is subject or which is to be assumed and agreed to be paid by grantee and any other lien or encumbrance thereon not paid, satisfied or removed in connection with the transfer of title.[156]


Therefore, if in a divorce proceeding or settlement, property is being conveyed for $1.00 consideration, an Affidavit of Consideration must still be attached to the deed, and the balance of any prior mortgages on the property that will be assumed by the grantee-spouse, as well as any other encumbrances on the property not satisfied prior to the transfer, must be included.[157]  By way of example, if the Grantee Spouse is taking title to the marital property subject to an existing mortgage in the amount of $250,000.00, incorporating a deed recital such as the following is common practice:  SUBJECT to the lien of the existing mortgage originally held by Bank in the original principal sum of $250,000.00, dated ___, and recorded on ____ in Book  ___ of Mortgages for ___ County at Page ___.   Consequently, any deed reciting a nominal consideration, although exempt under N.J.S.A. 46:15‑10, may still be subject to the realty transfer fee to the extent that the grantee assumes any existing mortgages, liens, and/or encumbrances.[158]  Moreover, any time consideration is described as “$1.00 and other good and valuable consideration” or other similar language is used, an Affidavit of Consideration must be filed in order to explain the significance or meaning of “other good and valuable consideration.”[159]

Therefore, in order to avoid the realty transfer fee, it is essential that the transfer be recorded within 90 days following the entry of a divorce decree which dissolves the marriage between the grantor and the grantee.  However, when the marital property is being transferred in a divorce proceeding or settlement and the transfer is not exempt because of failure to file the deed within the 90-day period, and the receiving ex-spouse is assuming the mortgage, the consideration total used for calculating the realty transfer fee must include, in addition to any “cash” settlement, any unpaid balance of the mortgage related to the property and any unpaid, unsatisfied, or unremoved liens or encumbrances.[160]

(i)         For Use by Seller (Form attached as Appendix E)

Pursuant to N.J.S.A 46:15‑7.2 and N.J.A.C. 18:16‑2.1(h), 2.5(a), a completed Seller’s Affidavit of Consideration (RFT‑1) must be attached to the deed with respect to which exemption or partial exemption is claimed.  Moreover, a RFT‑1 form must be attached to a deed when a claim for exemption from payment of any portion of the realty transfer fee is being made, if such claim is made for the conveyance of a one or two-family residence owned and occupied by a “senior citizen,” “blind person”, “disabled person”, or conveyance of “low and moderate income housing.”[161]

(ii)        For Use by Buyer (Form attached as Appendix F)

A completed Buyer’s Affidavit of Consideration (RFT‑1EE) must be attached to the deed whether or not an exemption is claimed, if consideration stated in the deed is equal to or in excess of $1,000,000 for the purchase of real estate as classified pursuant to N.J.S.A. 46:15‑7.2  and N.J.A.C.18:16‑2.1(h) and 2.5.

(iii)       The Mansion Tax

The “Mansion Tax” is different from the realty transfer fee in that it is imposed on the grantee, unless otherwise provided in an executed agreement.[162]  The tax only applies to properties being transferred for a consideration in excess of $1,000,000 for properties classified as Class 2 “residential” or Class 3A “farm property” with certain restrictions.[163]

6.                  Seller’s Residency Certification/Exemption – GIT/REP‑3 Form and NonResident Seller’s Tax Declaration – GIT/REP-1 (Forms attached as Appendix G and H)

In accordance with the New Jersey Gross Income Tax Act, any real estate transaction occurring on or after August 1, 2004 must include a Seller’s Residency Certification/Exemption when individuals, estates or trusts sell or transfer real property in New Jersey.  In transactions involving nonresident individuals, estates or trusts, each Seller is required to make an estimated Gross Income Tax payment prior to recording the deed.[164]  Importantly, the payment must be remitted to the Division of Taxation prior to or on the same day as the closing.

The Gross Income Tax is based upon the taxable income resulting from the gain or profit earned by a non-resident Seller from the real estate transaction.[165]  The tax is determined by multiplying the Seller’s gain with the highest Gross Income Tax rate of 8.97%.  The estimated payment cannot be less than 2% of the consideration paid.[166]  For those Sellers prepaying the Gross Income Tax, a Nonresident Seller’s Tax Prepayment Receipt (GIT/REP‑2) form must be filed, along with a 1040ES form.  Otherwise, a Nonresidents Seller’s Tax Declaration (GIT/REP‑1) form, in which payment is made at closing, must be filed.

The purpose of the Seller’s Residency Certification/Exemption (GIT/REP‑3) form is to provide exemption for individuals, estates, trusts, or other entities that are selling or transferring property located in New Jersey that is not otherwise subject to the Gross Income Tax estimated payment requirements.  There exists eight (8) criteria that result in a Seller’s exemption of making a tax payment, falling under the “Seller Assurances” section.  The eight (8) assurances are:

  1. Resident taxpayer of New Jersey pursuant to N.J.S.A. 54A:1-1 et seq. who will file a resident gross income tax return and pay any applicable taxes on any gain or income from the disposition of the property.
  2. The real property that is being sold or transferred is exclusively used as the principal residence of the Seller, in accordance with the meaning provided in § 121 of the federal Internal Revenue Code of 1986.[167]
  3. The Seller is the mortgagor of the property and is selling to a mortgagee in a foreclosure proceeding or in a transfer in lieu of foreclosure with no additional consideration.
  4. The Seller, transferor or transferee is either an agency or authority of the United States or State of New Jersey, the Federal National Mortgage Association, the Federal Home Loan Mortgage Corporation, the Government National Mortgage Association, or a private mortgage insurance company.
  5. The Seller is not an individual, estate or trust and thus, is not required to make an estimated payment.
  6. The total consideration for the property is equal to or less than $1,000 and thus, seller is not required to make an estimated payment.
  7. Any gain from the sale will not be recognized for Federal income tax purposes under I.R.C. §§ 721, 1031, 1033 or is a cemetery plot.  If ultimately, the section does not apply to the real estate transaction, the Seller is obligated to file a New Jersey income tax return for the year of the sale.
  8. A real estate transfer by an executor or administrator of a decedent to a devisee or heir to effect the distribution of the decedent’s estate in accordance with the decedent’s will or the intestate laws of New Jersey.[168]


Importantly, if all the required information is not accurately provided in either the GIT/REP‑3 or GIT/REP-1 Form, the deed will not be recorded.  As such, the appropriate form must be completed at the time of closing and provided to the Buyer or his or her attorney.  Thereafter, the Buyer or his or her attorney must submit the original GIT/REP‑3 or GIT/REP-1 form to the county clerk at the time that the deed is recorded.  Again, failure to submit and file the appropriate form results in the deed not being recorded, as the form will be attached to the deed when it is recorded by the county clerk.

The Seller’s Residency Certificate/Exemption and Nonresident Seller’s Tax Declaration procedure is the same when used in the context of a real estate transaction in a divorce setting.  Specifically, a nonresident seller may be obligated to remit payment to the Division of Taxation for estimated Gross Income Tax in order to properly convey title.  For more information on the Gross Income Tax estimated payment requirements on real estate transactions see the New Jersey Division of Taxation’s web page at www.state.nj.us/treasury/taxation.

Similarly, the standard transfer documents which are used in a residential real estate transaction are the same when the real estate transaction is the result of a divorce.  The Deed, Affidavit of Title, 1099-S Reporting Form or 1099-S Certification Form, Affidavit of Consideration by both Buyer and Seller, and Seller’s Residency Certification/Exemption or Nonresident Seller’s Tax Declaration are the forms required in New Jersey in order to convey title to real estate, whether or not in the context of divorce.




1.                  Rental adjustments

In valuing real estate, a valuation expert will have to make adjustments in comparing properties to assess value.  To reconcile value indicators, a valuation expert may ask the following questions to determine the appropriate and necessary adjustments for using comparable sales to determine fair market value:

  • Is the comparable property similar in terms of physical characteristics and location?
  • Was it developed, rented, or sold in the same market as the subject property?
  • Are the characteristics of the transaction similar to those expected for the subject property?
  • Would a potential buyer of the subject property consider the comparable as a reasonable alternative to the subject?
  • Are the expenses of the comparables appropriate indicators of the expenses of the appraised property?
  • Are the estimates of depreciation in the appraised improvements justified by the comparison of comparable costs and comparable sales?
  • Is one method preferred over another given the data available for each analysis?[169]

Based on the answers to those questions, a valuation expert may make adjustments for differences in the attributes of a property that affect its income such as operating expenses, management quality, tenant mix, and rent concessions.[170]  For example, in determining economic rent, which is “the rental income the property would most probably command in the open market,” time adjustments to the rentals of comparable properties must be made to reflect economic rent on the appraisal date.[171]

2.                  Undervalued leases

In Gemignani v. Gemignani, the court discussed the impact on valuing a marital residence that was a two-family house for which the parties had been leasing an apartment to one spouse’s mother.[172]  Because the parties were leasing the apartment in their residence to a relative, the husband argued that the lease was undervalued.  The court capitalized the income production factor to reflect its present value based on the improbable assumption that the rent, which the husband argued was undervalued, would remain constant for the following eleven years until the child’s emancipation and a 3.5% rate of interest of an annuity.[173]  Based on that calculation, the court concluded that the wife’s share of equitable distribution would be much higher than the assessed value of the house considered by the trial court.[174]  In making this calculation, the court did not consider the husband’s argument that the rental payments made by his mother-in-law were below fair market value.[175]  The court likely declined to consider this argument because the husband did not offer expert proofs to support his contention.[176]

B.                  LIS PENDENS

Notice of lis pendens must be filed in any action in which the purpose is to enforce a lien on real estate or to affect title to real estate.[177]  The notice must be filed in the county where the real estate is located and must set forth the title of the cause, the general object thereof, and a description of the affected real estate.[178]  No notice of lis pendens may be filed in an action to recover money or damages only.[179]

In the context of a matrimonial action, a notice of lis pendens may be filed in an action in which the filing party seeks to protect an interest in any property potentially subject to equitable distribution.[180]  Such property includes property held in the name of one spouse or the parties jointly.[181]  Any person claiming to have acquired an interest or lien on the subject property after the notice of lis pendens has been filed is deemed to have notice of the suit and will be subject to the judgment rendered as if a party in the suit.[182]

The purpose of a notice of lis pendens is to provide notice to a prospective purchaser of the real estate of the pendency of the action involving the property so that the interest of any subsequent purchaser or lienor will be subject to the outcome of the litigation.[183]  Although no timeframe is proscribed by the statute for the filing of a lis pendens after the institution of suit, a bona fide purchaser or mortgagee will be deemed not to have had constructive notice of the suit until the filing of a notice of lis pendens or before the entry of a final judgment in the action.[184]  On the flip side, a lis pendens will not be effective if it is filed prior to the filing of the complaint.[185]

A court may discharge a lis pendens if the plaintiff fails to diligently prosecute the lis pendens or for other good cause shown.[186]  Additionally, after five years, a notice of lis pendens is no longer effective.[187]  Any party claiming an interest in property affected by the notice of lis pendens may move for “a determination as to whether there is a probability that final judgment will be entered in favor of the plaintiff sufficient to justify the filing or continuation of the notice of lis pendens.”[188]  After hearing and within ten days, the court must make a determination, and if the court finds that there is not a sufficient probability of success, the notice of lis pendens will be discharged.[189]  Once a judgment is paid, satisfied or performed, or an action is settled, the party who filed the notice of lis pendens must file a warrant of satisfaction with the clerk and the clerk must note in the margin of the record of the lis pendens notice the discharge thereof.[190]  If the party who filed the notice fails to file a warrant of satisfaction, the court may order that the real estate be discharged of all claims in the complaint.[191]

C.                   TAX ESCROWS

In valuing real estate, such as the marital home, it is important to remember the tax escrows.  Tax escrows held by a lien holder are part of the value of that property and should be considered in negotiating Matrimonial Settlement Agreements and in preparing for trial.


In Wadlow v. Wadlow, the court held that a hypothetical brokerage commission should not be deducted from the value of the marital residence “in the absence of evidence that the property will be sold to a third person.” [192]  In that case, the court found nothing in the record indicating that the property would be sold in the future, or if it was sold, that a real estate commission would be sustained as an expense in the sale.[193]  Rather, the record showed that the plaintiff, who would retain the residence, would be able to purchase the home from the defendant with funds available to her, thereby avoiding any real estate commission expense.[194]  Because the expense of a real estate commission was pure conjecture, the court concluded that no basis existed to charge the defendant “with the speculative cost of a speculative sale to a third party.”[195]

E.                  RIGHT OF FIRST REFUSAL

The right of first refusal “limits the right of the owner to dispose freely of his property by compelling him to offer it first to the party who has the first right to buy.  Nor may the owner accept an offer made to him by a third party.”[196]  The right of first refusal must be distinguished from an option.  An option “compels performance within the time limit specified, or if none is mentioned, then within a reasonable time, whereas the right of first refusal has no binding effect unless the offeror decides to sell.”[197]  The right of first refusal has been referred to not as an option but as a “valuable prerogative.”[198]

The New Jersey Supreme Court recently addressed a matrimonial settlement agreement containing a right of first refusal in Pacifico v. Pacifico.[199]  The agreement in that case provided that the marital residence would be sold upon certain triggering events, and that upon the first happening of one of the triggering events, the wife would have the first right to purchase the husband’s interest.[200]  If the wife declined to exercise this right, the husband would have the same option to purchase the wife’s interest before the marital residence was sold to third parties.[201]  The wife wanted to exercise her right to purchase based on the value of the house at the time of the divorce, while the husband argued that the house should be valued at the time the option was exercised.[202]

The Court remanded the matter to the trial court to adduce the intent of the parties at the time they entered the agreement.[203]  In ordering the remand, the Court declared that “where the sale of a marital asset is to abide a future event, for example the coming of age of a child, and no alternative is provided, current market value as of the time of the triggering event is presumed.”[204]  Thus, the party seeking to apply a valuation based on the date of the divorce will bear the burden of establishing that the date of divorce was the intent of the parties and will furthermore bear the burden of persuasion to exclude a portion of the marital property from distribution.[205]

The practice pointer to be derived from this case is that a right of first refusal provision in a matrimonial settlement agreement must specify the date of valuation to be applied at the time a party exercises the option to purchase.


In the context of many divorces, the distribution of the primary marital asset, the marital home, may not be desirable or even feasible given that it may be in the best interests of the children to remain in the home until emancipation.  Under those circumstances, a court may order, or spouses may agree, that one party will retain the home and the other will forego his or her entitlement until the emancipation of the children when the home will then be sold.  To address the non-occupant spouse’s interest in the marital asset, New Jersey courts have held that title may be conveyed to the occupant spouse subject to a mortgage in favor of the non-occupant spouse with a reasonable interest rate.[206]  A matrimonial settlement agreement should address triggering events for the sale of the marital home such as remarriage of the occupant spouse or cohabitation with an unrelated third-party or emancipation of the children.

In Gemignanisupra, the court determined that title in the marital home would be conveyed to the wife subject to her giving a mortgage in favor of the husband for his equitable share in the home.[207]  In that case, the trial court found that the wife should remain in the marital home with the children until their emancipation so that she could properly rear the children and further found that the parties could not hold joint title to the house until the children’s emancipation due to the animosity and hostility between them.[208]  Based on those findings, the trial court distributed the marital residence to the wife and the other marital assets to the husband.  Although the appellate panel agreed with the trial court’s findings, it concluded that the trial court’s distribution of the marital assets was inequitable, as the husband was given an inequitable share of the marital assets given that the marital residence was the parties’ primary asset.[209]

To resolve the inequity, the court decided that “where the primary asset is the marital residence and the judge, for good reason, determines that it should neither be immediately sold nor that joint title should be returned pending a future sale, but rather that the wife should continue to reside therein for either an extended or an indefinite period,” the court must determine the appropriate percentage of total value to which each spouse is entitled.[210]  “To the extent that assets awarded to the husband are insufficient to reach that percentage, title to the residence should be conveyed to the wife subject to her giving a mortgage in favor of the husband in the amount of the difference.”[211]  The court further determined that the interest rate for the mortgage should be set by the trial court and the interest and principal should not be payable until a designated future time such as six months after the emancipation of the youngest child.[212]

The court in Daly v. Daly concluded that the principles of Gemignani were both “sound and practical” and thus decided that title in the marital home should be transferred to the plaintiff and the defendant should retain an equity interest.[213]  The trial court ordered that the plaintiff maintain complete control of the house and execute a second mortgage in favor of the defendant with a 4% simple interest rate.  Troubled by the 4% interest rate in light of the double-digit inflation rate existing at that time, the appellate panel noted that “predicting fluctuations in interest rates and the appreciation, or depreciation, of single-family residential real estate” over a period of ten years is a difficult prospect.[214]  To remedy this unpredictability, the court remarked that a second mortgage with a reasonable and flexible interest rate based on a recognized indicator could be appropriate under circumstances where a house would be sold in less than ten years.[215]

Because the defendant’s realization of his distributive share is delayed, it must be remedied by a reasonable rate of interest, which the court determined exceeded the 4% interest rate established by the trial court.[216]  With respect to the costs incurred for the house, the court held that the plaintiff would be responsible for ordinary and reasonable maintenance and that the parties would share capital improvement costs.[217]  The court further ordered that plaintiff would pay the mortgage payments and receive a credit against the defendant’s share in the asset for one-half of the principal reduction of the mortgage and insurance premiums.[218]

Finally, in Schaeffer v. Schaeffer the court held that a wife’s remarriage would not always trigger the immediate or accelerated realization of the husband’s share of the marital home.[219]  The court reasoned that a spouse’s right to occupy the home was not primarily tied to an alimony obligation, but rather is ordinarily based on the financial and emotional needs of the children.[220]  However, the court recognized that “remarriage does constitute a change in circumstances ordinarily requiring some revision of the exclusive-occupancy arrangement, if not sale of the residence, for the purpose of equitably offsetting the alimony component of the original arrangement which a remarried former wife is no longer entitled to enjoy.”[221]  The court suggested several methods to offset the alimony obligation including: requiring the occupant spouse to pay all of the carrying costs, requiring the occupant spouse to make periodic payments to the non-occupant spouse, acceleration of an existing mortgage, or crediting the non-occupant spouse with an amount equal to the fair market value of the occupant spouse’s tenancy from that of the children.[222]


In Stiffler v. Stiffler, the court held that a party cannot insulate a liquid asset by transforming it into a non-income producing asset.[223]  The plaintiff in that case received an inheritance that was exempt from equitable distribution.  The plaintiff used the inheritance to purchase a home and therefore invested the money in a non-income producing asset.  In reaching its holding, the court relied on Aronson v. Aronson,[224] in which the court held that income generated by an asset exempt from equitable distribution may be considered in assessing alimony.[225]  The court reasoned that “an inheritance, which generates no income solely because its owner has altered its capacity to earn interest, should not be automatically exempt from the alimony calculus.  It is its potential to generate income which is germane.”[226]  If the court did not consider the asset’s potential to earn income, a litigant could easily avoid Aronson’s mandate.  Thus, the court concluded that a litigant cannot shelter liquid assets in a non-income producing asset such as a home to avoid its consideration in the alimony calculus, and thus, interest income can be imputed to such an asset.[227]

However, applying principles of equity, the court recognized that both parties were left with a need to obtain a new home as a result of the divorce action.[228]  The court found it equitable to allow the plaintiff to use a portion of his inheritance to obtain a home consistent with the marital lifestyle.[229]  Therefore, the plaintiff would be permitted to exempt from the alimony calculus the portion of his inheritance needed to purchase a home consistent with the marital lifestyle.[230]

This principle of disallowing a shelter for liquid assets has been applied in the context of computing child support.  The Appellate Division has held: “In child support cases where a parent has received an inheritance and invested all or a portion of it in a non-income producing asset [such as real estate], or even dissipated it, the inheritance and its capacity to produce income may be considered when computing child support.”[231]

Applying the same reasoning, the New Jersey Supreme Court in Miller v. Miller determined that a reasonable income should be imputed from the plaintiff’s investments comparable to a prudent use of such investments.[232]  In that case, the plaintiff was earning 1.6% interest on substantial investments because he had invested in growth stocks designed to produce income through appreciation in stock values as opposed to an investment designed to provide a fixed, steady stream of income.[233]  Although the circumstances did not involve sheltering liquid assets in real estate, the holding in Miller confirms that sheltering money in investment assets or inheritances that produce no income or substandard income cannot, as a general proposition, avoid the asset’s consideration in alimony, except when equitable considerations allow for a former spouse to purchase a residence consistent with the marital lifestyle.

H.                  JUDGMENTS

1.                  Creditors’ Ability to Levy and Execute Against the Former Marital Home

The effect of a lien on the marital home by a creditor of one spouse depends on whether the lien is perfected before or after the judgment of divorce.  If a creditor’s lien “‘is not perfected until after the divorce judgment is entered, as by an execution to satisfy a judgment, the equitable distribution scheme is entitled to priority, and the extent of the executing judgment creditor’s lien is limited to whatever interest in the property the debtor spouse has been accorded by the divorce judgment.’”[234]  Moreover, a mortgagee holding an interest in only one spouse’s interest in a tenancy by the entirety who executes a mortgage after a divorce complaint has been filed “takes on notice and subject to equitable distribution.”[235]

The New Jersey Supreme Court addressed the effect of a lien perfected prior to the entry of a divorce judgment in Freda v. Commercial Trust Company of New Jersey.[236]  The issue in that case was whether an order for distribution of marital property extinguished a mortgage lien on the husband’s interest after the conveyance to the wife.[237]  The parties owned their house as tenants by the entirety.  While the parties were separated, the husband obtained a loan to provide funds for his failing business that was secured by the subject mortgage.  Without the wife’s knowledge, her signature was forged on the note and the mortgage to obtain the loan.[238]  Still unaware of the mortgage, the wife was awarded title to the residence in the judgment of divorce.[239]  Several years later, when the husband defaulted on the loan and filed a petition for bankruptcy, the wife discovered the existence of the mortgage.

The court held that “after equitable distribution to the non-debtor spouse of the debtor-spouse’s interest in property held in a tenancy by the entirety, the mortgage continues as a lien on that interest, subject to the non-debtor spouse’s right of survivorship.”[240]  In reaching that conclusion, the court found no distinction between a lien arising under a mortgage and one arising under a perfected judgment.[241]  The court reasoned that a mere transfer of an asset from one spouse to the other spouse does not extinguish a third party’s valid lien.[242]  Moreover, the court noted that as between a mortgagee and a tenant who is accepting the property in an equitable distribution, the tenant is the party who should bear the risk.[243]  Such a tenant can conduct a lien search to determine whether any liens exist on the property; such a search, the court remarked, is relatively easy and inexpensive.[244]

The practice pointer for the practitioner is to run a title/lien search to ensure that no unknown liens, mortgages or other encumbrances exist on the real estate being distributed pursuant to a divorce.

2.                  Attorney Lien

The statute governing an attorney’s lien provides:

After the filing of a complaint or third-party complaint or the service of a pleading containing a counterclaim or cross-claim, the attorney or counsellor at law, who shall appear in the cause for the party instituting the action or maintaining the third-party claim or counterclaim or cross-claim, shall have a lien for compensation, upon his client’s action, cause of action, claim or counterclaim or cross-claim, which shall contain and attach to a verdict, report, decision, award, judgment or final order in his client’s favor, and the proceeds thereof in whose hands they may come. The lien shall not be affected by any settlement between the parties before or after judgment or final order, nor by the entry of satisfaction or cancellation of a judgment on the record. The court in which the action or other proceeding is pending, upon the petition of the attorney or counsellor at law, may determine and enforce the lien.[245]


Because this statute provides an attorney with a lien for compensation on an award in his client’s favor, it allows for a lien to be placed on a spouse’s equity interest in the marital home or other marital real estate.

The procedural requirements for filing an attorney’s lien were outlined in H&H Ranch Homes v. Smith[246] and subsequently in Rosenfeld  v. Rosenfeld.[247]  To obtain an attorney’s lien, the attorney must make an application to the court, by way of petition, setting forth the facts upon which she relies.[248]  The petition must also request scheduling for the filing of an answer by the defendant and dates for the completion of pre-trial discovery, a pre-trial hearing, and trial.[249]  The court must establish a short day upon which the schedule will be fixed and the matter will proceed as a plenary suit to be tried in the Law Division, with or without a jury depending on the demand made, or tried in the Chancery Division, without a jury.[250]

Before an attorney may make such an application to the court, she must first advise the client of the remedy of arbitration pursuant to Rule 1:20A-3.[251]  The Appellate Division has described what constitutes adequate notice to the client:

A letter to the client, court, and substituting counsel would suffice as would properly worded language on or attached to the written substitution of attorney.  The notice should be as specific as possible.  It should set out the intent to rely upon N.J.S.A.2A:13-5, the amount of fees being sought, the retainer agreement with the client, and the basis of the fee calculation.  It is at this point that pre-action notice, pursuant to Rule 1:20A-6 should be given to the former client so that if arbitration is requested it can be initiated expeditiously.[252]

Finally, the filing of a petition need not await the expiration of thirty days after service of the pre-action notice.[253]  However, although the petition itself may be filed before the expiration of the thirty-day period, the court must not actually determine or enforce the lien before the expiration of thirty days.[254]

If the above procedure is followed, an attorney may obtain a lien against real property such as the marital home.  In Steiger v. Armellino,[255] the court determined that the attorney’s lien attached to the proceeds from the sale of the parties’ home.  In that case, the attorney sought to declare the validity of the attorney’s lien against the wife, a former client, in a matrimonial action.  After the attorney withdrew from the case, the complaint was amended to add the parents of the husband as third party defendants.  The wife claimed that her name had been forged on a note and mortgage on the marital home in favor the husband’s parents.  The settlement between the husband and wife distributed $37,500 to the wife as payment in full of her share of the marital home.  The wife’s attorney sought to enforce the attorney lien to prevent the wife from receiving the $37,500 held in escrow.  The wife argued that the funds were a product of the awarded claim she filed against her husband’ s parents, after the plaintiff attorney was no longer her attorney.  In essence, she claimed he had nothing to do with the recovery of $37,500.

The Steiger court rejected the wife’s position, finding that the attorney lien did apply to the $37,500, regardless of whether these particular funds were received as a result of a claim raised after plaintiff had already withdrawn from the case.[256]  In reaching its decision, the Steiger court expressed that the attorney’s lien provided for in N.J.S.A. 2A:13-5 attaches to the client’s recovery on the whole action, not just those parts of the action that were actually pled or litigated by the attorney filing the lien.[257]  Thus, given that the Steiger court allowed an attorney’s lien against the proceeds from the sale of the marital home and expressly states that the lien attaches to the whole action, the practitioner should be able to secure an attorney’s lien against the marital home if it is part of the recovery on the whole action.



EQUITY TAX-FREE                                                                                    

In the context of equitably distributing the marital home, the issue of capital gains taxes may arise in valuing each party’s interest in the house.  For instance, if the wife retains the home and the husband receives an equitable share of the value of the home, the wife may argue that the husband is entitled to a lesser share because he is avoiding the capital gains tax.  To counter this argument, the husband can assert that the wife is entitled to a lesser share because she can access the equity in the home without incurring any capital gains tax through the use of a home equity loan.

Link to Appendix A – H


*The authors extend special thanks to Kelly Erhardt-Wojie, Esq. and Melinda Colon, Esq. of Wilentz, Goldman & Spitzer, PA and Kyle Garcia, CFA, ASA, CBA, MBS, Scott A. Maier, CPA, JD, and Keith Balla, CPA, PSA of Rosenfarb Winters, LLC for their work on this article.


[1] Shannon P. Pratt, Robert F. Reilly & Robert P Schweihs, Valuing a Business – The Analysis and Appraisal of Closely Held Companies 28 (4th ed. 2000).

[2] Jay E. Fishman, Shannon P. Pratt & William J. Morrison, Standard of Value: Theory and Applications xvii (2007) [hereinafter “Fishman I”].

[3] Pratt, supra note 1, at 28.

[4] Fishman I, supra note 2, at xvii.

[5] Black’s Law Dictionary 1586 (8th ed. 2004).  The fifth edition of Black’s Law Dictionary defined value as “the utility of an object in satisfying, directly or indirectly, the needs or desires of human beings, also called by economists ‘value in use,’ or its worth consisting in the power of purchasing other objects, called ‘value in exchange.’”  Black’s Law Dictionary 1391 (5th ed. 1979).

[6] Fishman I, supra note 2, at 167.

[7] Jay E. Fishman & Bonnie O’Rourke, Value: More Than a Superficial Understanding is Required, 15 J. Am. Acad. Matrimonial Law. 315, 316-17 (1998) [hereinafter “Fishman II”].

[8] See Fishman I, supra note 2, at 91.

[9] Brown v. Brown, 348 N.J. Super. 466, 471, 475, 483, 487-88 (App. Div.), certif. denied, 174 N.J. 193 (2002).

[10] Fishman I, supra note 2, at 180.

[11] Ibid.

[12] Id. at 4-5.

[13] Id. at 91 (quoting Lawson Mardon Wheaton, Inc. v. Smith, 160 N.J. 383 (1999)).

[14] Pratt, supra note 1, at 28.  See also Fishman II, supra note 7, at 320 (defining investment value as “value perceived by a specific buyer based on a specific set of circumstances”).

[15] Fishman I, supra note 2, at 181.

[16] See Fishman II, supra note 7, at 320 (stating that intrinsic value is “often used interchangeably with investment value and is often thought of as the value as a going concern, to a particular owner, without taking into consideration the marketability of the business or practice”).

[17] Fishman I, supra note 2, at 167.

[18] Id. at 172.

[19] Ibid.

[20] Id. at 226.

[21] Id. at 186-87.

[22] Id. at 242.

[23] New York is also categorized as a hybrid state because it has case law that directs the use of investment value.

[24] Fishman I, supra note 2, at 192-93 (citing Ark. Code Ann. § 9-12-315; Tortorich v. Tortorich, 902 S.W.2d 247 (Ark. Ct. App. 1995); Dahill v. Dahill, 1998 Conn. Super. LEXIS 846 (Conn. Super. Ct. Mar. 30 1998); Christians v. Christians, 732 So. 2d 47 (Fla. Dist. Ct. App. 1999); Antolik v. Harvey, 761P.2d 305 (Haw. Ct. App. 1988); Bohl v. Bohl, 657 P.2d 1106 (Kan. 1983); La. Rev. Stat. Ann. § 9:2801; Bateman v. Bateman, 382 N.W.2d 240 (Minn. Ct. App. 1986); Hanson v. Hanson, 738 S.W.2d 429 (Mo. 1987); Taylor v. Taylor, 386 N.W.2d 851 (Neb. 1986); Beckerman v. Beckerman, 511N.Y.S.2d 33 (N.Y. App. Div. 1987); Hickum v. Hickum, 463 S.E.2d 321 (S.C. Ct. App. 1995); Sommerfeld v. Sommerfeld, 454 N.W.2d 55 (Wis. Ct. App. 1990)).

[25] Id. at 196-98 (citing Richmond v. Richmond, 779 P.2d 1211 (Alaska 1989); E.E.C. v. E.J.C., 457 A.2d 688 (Del. 1983); Chandler v. Chandler, 32 P.3d 140 (Idaho 2001); In re Marriage of Zells, 572 N.E.2d 944 (III. 1991); In re Marriage of Hoak, 364 N.W.2d 185 (Iowa 1985); Prahinski v. Prahinksi, 582A.2d 784 (Md. Ct. Spec. App. 1990); Goldman v. Goldman, 554 N.E.2d 860 (Mass. App. Ct. 1990); Singley v. Singley, 2003 Miss. LEXIS 283 (Miss.);Hanson v. Hanson, 738 S.W.2d 429 (Mo. 1987); Taylor v. Taylor, 386 N.W.2d 851 (Neb. 1986); In re Watterworth, 821 A.2d 1107 (N.H. 2003);Sommers v. Sommers, 660 N.W.2d 586 (N.D. 2003); Ford v. Ford, 840 P.2d 36 (Okla. Civ. App. 1992); Marriage of Maxwell, 876 P.2d 811 (Or. Ct. App. 1994); Butler v. Butler, 663 A.2d 148 (Pa. 1995); Moretti v. Moretti, 766 A.2d 925 (R.I. 2002); Alsup v. Alsup, 1996 WL 411640 (Tenn. Ct. App. July 24, 1996); Nail v. Nail, 486 S.W.2d 761 (Tex. 1972); Sorenson v. Sorenson, 839 P.2d 774, 775-76 (Utah 1992); Goodrich v. Goodrich, 613 A.2d 203 (Vt. 1992); May v. May, 589 S.E.2d 536 (W. Va. 2003)).

[26] Although Louisiana has a statute directing the use of fair market value, the language used in one decision suggests fair value.

[27] Fishman I, supra note 2, at 198 (citing Bobrow v. Bobrow, 711 N.E.2d 1265 (Ind. 1999); Ellington v. Ellington, 842 So. 2d 1160 (La. Ct. App. 2003);Howell v. Howell, 523 S.E.2d 514 (Va. Ct. App. 2000); Neuman v. Neuman, 732 P.2d 208 (Ariz. 1987)).

[28] Id. at 198-200 (citing Mitchell v. Mitchell, 732 P.2d 208 (Ariz. 1987); Golden v. Golden, 75 Cal. Rptr. 735 (Cal. Ct. App. 1969); In re Marriage of Huff, 834 P.2d 244 (Colo. 1992); Clark v. Clark, 782 S.W.2d 56 (Ky. Ct. App. 1990); Kowalesky v. Kowalesky, 384 N.W.2d 112 (Mich. Ct. App. 1986); In re Marriage of Hull, 712 P.2d 1317 (Mont. 1986); Ford v. Ford, 782 P.2d 1304 (Nev. 1989); Mitchell v. Mitchell, 719 P.2d 432 (N.M. Ct. App. 1986);Poore v. Poore, 161 S.E. 532 (N.C. 1931); In re Marriage of Fleege, 588 P.2d 1136 (Wash. 1979)).

[29] Id. at 200 (citing Brown v. Brown, 348 N.J. Super. 466 (App. Div.), certif. denied, 174 N.J. 193 (2002); Dugan v. Dugan, 92 N.J. 423 (1983); Moll v. Moll, 722 N.Y.S.2d 732 (N.Y. Sup. Ct. 2001); Beckermansupra, 511 N.Y.S.2d 33; Goswami v. Goswami, 787 N.E.2d 26 (Ohio Ct. App. 2003); Kahn v. Kahn, 536 N.E.2d 678 (Ohio Ct. App. 1987)).

[30] Id. at 199.

[31] John P. Ludington, Requirement of full-value real property taxation assessments, 42 A.L.R. 4th 676 (1985).

[32] Fishman I, supra note 2, at xix.

[33] Id. at 84-85.

[34] Id. at xix.

[35] Ibid.

[36] Id. at 1.

[37] N.J. Const. art. VIII, § 1, ¶ 1.

[38] N.J.S.A. 54:1-35.40; see also N.J.S.A. 54:4-2.25 (“All real property subject to assessment and taxation for local use shall be assessed according to the same standard of value, which shall be the true value of such real property and the assessment shall be expressed in terms of the taxable value of such property . . . to be applied uniformly throughout the county.”).

[39] Town of Kearny v. Div. of Tax Appeals, 137 N.J.L. 634, 635 (Sup. Ct. 1948), aff’d, 1 N.J. 409 (1948); Murphy v. Town of West New York, 132N.J.L. 111, 114 (Sup. Ct. 1944).

[40] See, e.g.N.J.S.A. 54:4-2.44.

[41] Fair market value is referenced in numerous statutes in a variety of contexts, including real property.  See, e.g.N.J.S.A. 2A:18-77 (abandoned tenant property); N.J.S.A. 2A:38A-2 (value of computer systems); N.J.S.A. 2A:42-138 (multifamily housing); N.J.S.A. 2A:43A-1 (library materials); N.J.S.A.2A:50-3 (bonds and notes); N.J.S.A. 2A:50-22 (bonds, notes and mortgages); N.J.S.A. 2A:50-63 (foreclosure on residential mortgages); N.J.S.A. 2C:1-14 (theft offenses); N.J.S.A. 3B:19B-4 (estates and trusts); N.J.S.A. 4:1B-8 (agricultural preserves); N.J.S.A. 4:1C-31 (farmland preservation); N.J.S.A. 12:3-12.1 (tidelands management); N.J.S.A. 13:8C-32 (garden state preservation trust); N.J.S.A. 13:18A-39 (pinelands protection); N.J.S.A. 17:46A-2 (mortgage guarantee insurance); N.J.S.A. 18A:20-4.1 (education); N.J.S.A. 20:3-6 (eminent domain); N.J.S.A. 27:12-1.1 (sale of state highways); N.J.S.A.46:3B-4 (New Home Warranty and Builders’ Registration Act); N.J.S.A. 52:31-1.5 (state property); N.J.S.A. 54:4-9.1 (tax assessment of personal property).

[42] Fair value is referenced in numerous statutes, including some involving real property.  See, e.g.N.J.S.A. 54:23.20 (state farmland assessment); N.J.S.A.54:5-104.100 (conveyance of outstanding interest against certain residential realty); N.J.S.A. 4:1C-31 (farmland preservation); N.J.S.A. 12:6-19 (inland waterways); N.J.S.A. 14A:5-6 (liabilities of shareholders in corporations); N.J.S.A. 14A:10-5.1 (mergers and acquisitions of corporations); N.J.S.A.14A:11-6 (rights of dissenting shareholders); N.J.S.A. 18A:18A-45 (sale of personal property in education context).

[43] See N.J.S.A. 2A:17-22 (oath of appraisers); N.J.S.A. 2A:33-9 (time for owner of distrained property to take action); N.J.S.A. 3A:8-3 (appointment of appraisers).

[44] See N.J.S.A. 17B:26-45 (sale of health insurance).

[45] Genovese v. Genovese, 392 N.J. Super. 215, 222 (App. Div. 2007) (affirming the trial court’s findings as to the fair market value of the marital home for purposes of equitable distribution); Overbay v. Overbay, 376 N.J. Super. 99, 102 (App. Div. 2005) (discussing trial court’s findings on fair market value of marital residence); Elkin v. Sabo, 310 N.J. Super. 462, 474 (App. Div. 1998) (accepting trial court’s valuation of marital home based on fair market value standard); Chambon v. Chambon, 238 N.J. Super. 225, 229 (App. Div. 1990) (stating that court-appointed expert’s report acknowledged that valuation of business did not include the fair market value of real estate owned by the business and that such real estate should have been considered in the valuation);Arnold v. Anvil Realty Investment, Inc., 233 N.J. Super. 481, 484, 487 (App. Div. 1989) (awarding husband difference between sale price of marital home as sold by wife and fair market value); Pascarella v. Pascarella, 165 N.J. Super. 558, 564 (App. Div. 1979) (acknowledging that trial court properly considered the present fair market value of the marital residence, less the outstanding mortgage, as an asset of the marriage); Orgler v. Orgler, 237 N.J. Super. 342 (App. Div. 1989) (accepting fair market value as the standard applicable to value the marital home); Gemignani v. Gemignani, 146 N.J. Super. 278, 282 (App. Div. 1977) (referring to fair market value as the proper standard for assessing the value of the marital home); Colucci v. Colucci, 252 N.J. Super. 73, 79 (Ch. Div. 1991) (rejecting husband’s contention that his interest in marital home was sold below fair market value).

[46] Genovesesupra, 392 N.J. Super. at 222; Overbaysupra, 376 N.J. Super. at 102; Elkinsupra, 310 N.J. Super. at 474; Pascarellasupra, 165 N.J. Super. at 564.

[47] Orglersupra, 237 N.J. Super. 342; Gemignanisupra, 146 N.J. Super. at 282.

[48] Arnoldsupra, 233 N.J. Super. at 484, 487.

[49] Coluccisupra, 252 N.J. Super. at 79.

[50] 348 N.J. Super. 466, 471, 475, 483, 487-88 (App. Div.), certif. denied, 174 N.J. 193 (2002).

[51] Id. at 487 (emphasis added).

[52] Ibid.

[53] Fishman I, supra note 2, at 31.

[54] Ibid.

[55] Ibid.  The phrase “highest and best use” was first recognized as a requirement for fair market value of real estate in St. Joseph Stock Yards Co. v. United States, 298 U.S. 38, 60 (1936), in which the court held that two adjacent pieces of land should be valued at the same rate per square foot even though one piece of land was being used in its highest and best use and the other was not.

[56] Appraisal Institute, The Appraisal of Real Estate 305 (12th ed. 2001).

[57] Id. at 307.

[58] Id. at 43-44; see also Stephen C. Gara & Craig J. Langstraat, Property Valuation for Transfer Taxes: Art, Science, or Arbitrary Decision?, 12 Akron Tax J. 125, 143-44 (1996).

[59] Id. at 306.

[60] Gemignanisupra, 146 N.J. Super. at 283.

[61] Ibid.

[62] Ibid.

[63] Ibid.

[64] See ibid.

[65] Definition per www.InvestorWords.com.

[66] 1 Jay E. Fishman et al., PPC’s Guide to Business Valuations Appendix 2A, at 2-40 (17th ed. 2007).

[67] Pratt, supra note 1, at 250.

[68] I.R.C. § 1041(a) (2007).

[69] See Orgler v. Orgler, 237 N.J. Super. 342, 355 (App. Div. 1989).

[70] Id. at 355-56.

[71] Id. at 356.

[72] Ibid.

[73] Melvyn V. Frumkes, Frumkes on Divorce Taxation § 2.5.2 n.131 (2006).

[74] Ibid. (citing Treas. Reg. §1.163-10T(p)(3)(iv)(B)).

[75] Id. §

[76] Ibid. (citing Temp. Treas. Reg. § 71-IT Q&A 6).

[77] Ibid.

[78] Ibid.

[79] Id. §

[80] Ibid.

[81] I.R.C. § 121(b); see also Robin C. Bogan, The Art of Valuing and Allocating Real Estate Investments.

[82] I.R.C. § 121(a).

[83] Id. § 121(b)(2)(A), (3).

[84] Frumkes, supra note 73, § 2.3.8.

[85] Ibid. (citing I.R.C. § 121(d)(3)(A)).

[86] Id. § 2.3.9 (citing I.R.C. § 121(d)(3)(B)).

[87] 252 Family Law Tax Guide 6 (July 31, 2007) (citing IRS Letter Ruling 2007-4001, ¶ 10,006).

[88] I.R.C. § 1031(a).

[89] I.R.C. § 1031(a)(3)(A).

[90] I.R.C. § 1031(a)(3)(B).

[91] I.R.C. § 1031(d).

[92] I.R.C. § 1031(h)(1).

[93] Family Law Tax Guidesupra note 87, at 6.

[94] Id. at 2 (citing Rev. Proc. 2007-12, ¶ 10,005).

[95] I.R.C. § 453A; see also Bogan, supra note 81, at 8.

[96] Bogan, supra note 81, at 8.

[97] Id. at 9 (citing I.R.C. § 453).

[98] Ibid.

[99] Ibid.

[100] Frumkes, supra note 73, at § 15.2.

[101] Ibid. (citing I.R.C. § 469(h), (c)(1)).

[102] Ibid.

[103] Ibid. (citing I.R.C. § 469(b)).

[104] Ibid. (citing I.R.C. § 469(j)(4)).

[105] Id. § 15.2.1 (citing I.R.C. § 469(i)(1), (i)(3)).

[106] Id. § 15.4.

[107] Ibid.

[108] Ibid.

[109] Id. § 15.5.

[110] Ibid.

[111] Ibid. (citing I.R.C. § 469(g)(1)(A)).

[112] Ibid. (citing I.R.C. § 1041).

[113] Ibid.

[114] Ibid. (citing I.R.C. § 469(j)(6)(A)).

[115] Ibid.

[116] Ibid. (quoting Marjorie A. O’Connell, Divorce Taxation § 6201).

[117] Id. § 9.2.1.

[118] See, e.g.Mills v. Mills, 663 S.W.2d 369 (Mo. Ct. App. 1983); Finkelstein v. Finkelstein, 268 A.D.2d 273 (N.Y. App. Div. 2000).

[119] Frumkes, supra note 73, at § 9.10.3 (citing I.R.C. § 1211(b)).

[120] Ibid. (citing I.R.C. § 1212(b)).

[121] Ibid. (citing I.R.C. § 1212(b)(1); Treas. Reg. 1.1212-1(c)(2)).

[122] Id. § 9.9 (citing I.R.C. § 172).

[123] Ibid.

[124] Ibid.

[125] Ibid. (citing Huckle v. Commissioner, T.C. Memo 1968-45).

[126] Ibid.

[127] Ibid. (citing I.R.C. § 163(d)(3)).

[128] Id. § 9.10.2 (citing I.R.C. § 163(d)(1)).

[129] Ibid. (citing I.R.C. § 163(d)(2)).

[130] Id. §

[131] 1 Handbook N.J. Title Prac. § 3701.

[132] N.J.S.A. 46:15-5.

[133] 1 N.J. Title Prac. § 3703.

[134] Id. at § 3702.

[135] Id. at § 3720.

[136] 2 N.J. Title Prac. § 7614.

[137] Id. at § 7617.

[138] 2 N.J. Title Prac. § 7618.

[139] 13A N.J. Prac. § 35:52; 1 Handbook of N.J. Title Prac. §§ 2301-02, 2305.

[140] 21 N.J. Prac. § 35:52; 1 N.J. Title Prac. § 2302.

[141] Ibid.

[142] N.J.S.A. 46:15-9.

[143] Instructions for Form 1099‑S, http://www.irs.gov/pub/irs-pdf/i1099s.pdf.

[144] Instructions for Form 1099‑S, http://www.irs.gov/pub/irs-pdf/i1099s.pdf.

[145] Instructions for Form 1099‑S, http://www.irs.gov/pub/irs-pdf/i1099s.pdf.

[146] N.J.S.A. 46:15-6(a); N.J.A.C. 18:16-2.2.

[147] N.J.S.A. 46:15-6(b); N.J.A.C. 18:16-2.2, 2.5.

[148] N.J.A.C. 18:16-7.1.

[149] N.J.S.A. 46:15-7.2; 1 N.J. Title Prac. §§ 4001-02.

[150] 1 N.J. Title Prac. §§ 4003-3A.

[151] N.J.S.A. 46:15-6.

[152] N.J. Trans. Guide § 104.222.

[153] N.J.S.A. 46:15-10 (emphasis added).

[154] N.J.S.A. 46:15-10.1.

[155] N.J.A.C. 18:16-6.2. (emphasis added).

[156] N.J.A.C. 18:16-2.7(a).

[157] Ibid.

[158] N.J.A.C. 18:16-2.8.

[159] N.J.A.C. 18:16-2.2; N.J.S.A. 46:15-5(c).

[160] N.J.A.C. 18:16-4.2.

[161] N.J.A.C. 18:16-2.5.

[162] N.J.S.A. 46:15-7.2.

[163] Ibid.N.J.A.C. 18:12-2.2.

[164] N.J.S.A. 54A:1-1 et seq.

[165] 1 N.J. Title Prac. § 4008.

[166] Ibid.

[167] 26 U.S.C. § 121.

[168] Seller’s Residency Certification Exemption (GIT/REP‑3) Form.

[169] Appraisal Institute, The Appraisal of Real Estate 446 (12th ed. 2001).

[170] Id. at 457.

[171] Nat’l Westminster Bank New Jersey v. City of Brigantine, 11 N.J. Tax 502, 510 (Tax 1991).

[172] 146 N.J. Super. 278, 283 (App. Div. 1977).

[173] Ibid.

[174] Ibid.

[175] Id. at 281.

[176] Ibid.

[177] N.J.S.A. 2A:15-6; see also Guidebook to Chancery Practice in New Jersey § V.B (2005).

[178] Ibid.

[179] Ibid.see also Polk v. Schwartz, 166 N.J. Super. 292 (App. Div. 1979).

[180] Di Iorio v. Di Iorio, 254 N.J. Super. 172, 187 (Ch. Div. 1991); Guidebook to Chancery Practicesupra note 177, at § V.B.

[181] Ibid.

[182] N.J.S.A. 2A:15-7(a).

[183] Guidebook to Chancery Practicesupra note 177, at § V.B (citing Wendy’s of South Jersey, Inc. v. Blanchard Mgmt. Corp., 170 N.J. Super. 491, 496 (Ch. Div. 1979)).

[184] N.J.S.A. 2A:15-8.

[185] Guidebook to Chancery Practicesupra note 177, at § V.B. (citing Schwartz v. Grunwald, 174 N.J. Super. 164 (Ch. Div. 1980)).

[186] N.J.S.A. 2A:15-10.

[187] N.J.S.A. 2A:15-11.

[188] N.J.S.A. 2A:15-7(b).

[189] Ibid.

[190] N.J.S.A. 2A:15-17.

[191] Ibid.

[192] 200 N.J. Super. 372, 383 (App. Div. 1985); see also McGee v. McGee, 277 N.J. Super. 1, 12-13 (App. Div. 1994) (holding that the realtor’s fee should not be subtracted from the value of property when it is not being sold to a third party).

[193] Id. at 384.

[194] Ibid.

[195] Ibid.

[196] Laielli Mazzeo v. Kartman, 234 N.J. Super. 223, 229 (App. Div. 1989).

[197] Ibid.

[198] Ibid.

[199] 190 N.J. 258 (2007).

[200] Id. at 262.

[201] Ibid.

[202] Id. at 266-67.

[203] Id. at 268-69.

[204] Id. at 269.

[205] Ibid.

[206] Daly v. Daly, 179 N.J. Super. 344, 349-50 (App. Div. 1981); Gemignanisupra, 146 N.J. Super. at 284.

[207] 146 N.J. Super. at 284.

[208] Id. at 281-82.

[209] Id. at 284.

[210] Ibid.

[211] Ibid.

[212] Ibid.

[213] 179 N.J. Super. at 349-50.

[214] Id. at 350.

[215] Ibid.

[216] Ibid.

[217] Id. at 351.

[218] Ibid.

[219] 184 N.J. Super. 423, 428 (App. Div. 1982).

[220] Ibid.

[221] Id. at 429.

[222] Ibid.

[223] 304 N.J. Super. 96, 102 (Ch. Div. 1997).

[224] 245 N.J. Super. 354 (App. Div. 1991).

[225] Stifflersupra, 304 N.J. Super. at 99-100.

[226] Id. at 102.

[227] Ibid.

[228] Id. at 103.

[229] Ibid.

[230] Ibid.

[231] Connell v. Connell, 313 N.J. Super. 426, 433 (App. Div. 1998).

[232] 160 N.J. 408, 424 (1999).

[233] Id. at 421, 423.

[234] Gibau v. Klein, 329 N.J. Super. 227, 236-237 (App. Div. 2000) (quoting Vander Weert v. Vander Weert, 304 N.J. Super. 339, 346-47 (App. Div. 1997).

[235] Vander Weertsupra, 304 N.J. Super. at 351.

[236] 118 N.J. 36 (1990).

[237] Id. at 38.

[238] Id. at 39.

[239] Ibid.

[240] Ibid.

[241] Id. at 42.

[242] Id. at 46.

[243] Ibid.

[244] Id. at 47.

[245] N.J.S.A. 2A:13-5.

[246] 54 N.J. Super. 347 (App. Div. 1959).

[247] 239 N.J. Super. 77 (Ch. Div. 1989).

[248] H&H Ranch Homessupra, 54 N.J. Super. at 353-54.

[249] Ibid.

[250] Ibid.

[251] Rosenfeldsupra, 239 N.J. Super. at 80.

[252] Martin v. Martin, 335 N.J. Super. 212, 224 (App. Div. 2000).

[253] Shallit v. Shallit, 32 N.J. Super. 351, 353 (Ch. Div. 1991).

[254] Ibid.

[255] 315 N.J. Super. 176 (1998).

[256] Id. at 180.

[257] Id. at 180-81.

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