Under New Jersey law, as revised in 2007, real estate transactions are included in among the exchanges covered by the state’s Commercial Bulk Sales Act. The statute covers the sale of rental property, real estate used in a trade or business, real estate owned by a business entity, deeds in lieu of foreclosure for income producing properties, auction sales not ordered by a court, and like-kind exchanges under Section 1031. The law does not include property transferred through a sheriff’s sale, property sold from inventory by a builder, broker, dealer or agent, of sales of single family homes.
A party purchasing business assets in a bulk sales transaction must give notice to the New Jersey Division of Taxation (“DOT”) at least 10 days before the closing of the sale. Failure to do so may lead to liability for any outstanding New Jersey tax liabilities of the seller. Once the DOT has been notified of the impending bulk sale, the DOT will advise the purchaser of the amount that must be placed in escrow.
The DOT will also request information about the seller, including the completion of form TTD (the Asset Transfer Tax Declaration). This includes an estimate of the taxable gain on the sale, as well as any information on outstanding tax balances or unfiled tax returns. If a seller fails to provide the required notice to the DOT, an escrow may be withheld at the time of closing.
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