Postmortem Sale of Securities

In Estate Planning and the Pending Deal: Lessons from the Merger Arbitrage Market, 31 ACTEC J. 338 (2006), Espen Robak (Senior Vice President in the New York City office of FMV Opinions, Inc.,) provides “[a]n examination of the treatment of pending transactions on valuation in both estate tax and estate planning situations.”  Here is the summary of his article:

Numerous court decisions have indicated that the gain from a postmortem sale of securities will not be considered IRD unless the decedent was truly “entitled” to the proceeds from the sale and all remaining acts were insignificant and “ministerial” in nature. This is similar to how such pending deals ought to be treated and valued in the estate planning context. Data from merger arbitrage can help the valuation analyst determine the proper weighting of deal and no-deal scenarios when determining the fair market value of a stake in a possible acquisition target. A thorough analysis and proper empirical support can result in significant tax savings compared with naively using the anticipated deal value.