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here would not constitute income in respect of a
decedent in the hands of a hypothetical buyer. Income
in respect of a decedent can only be recognized by: (1)
the estate; (2) the person who acquires the right to
receive the income by reason of the decedent's death;
or (3) the person who acquires the right to receive the
income by bequest, devise, or inheritance. 26 U.S.C. �
691(a)(1). Thus, a hypothetical buyer could not buy
income in respect of a decedent, and there would be no
income tax imposed on a hypothetical buyer upon the
liquidation of the accounts. * * *
Id. at 629.
We think that this distinction is the reason that all of
petitioner’s arguments in this case are meritless. The tax or
marketability burden on the IRAs must be borne by the seller
because the IRAs cannot legally be sold and therefore their
inherent tax liability and marketability restrictions cannot be
passed on to a hypothetical buyer. Therefore, there is no reason
a hypothetical buyer would seek to adjust the price of the
marketable securities that are ultimately being purchased. By
the same token, a hypothetical seller would not accept a downward
adjustment in the value of the securities for a tax liability
that does not survive the transfer of ownership of the assets. A
hypothetical buyer would not purchase the IRAs because they are
not transferable. The buyer would purchase the IRAs’ marketable
securities and would obtain a tax basis in the assets equal to
the buyer’s cost. See sec. 1012. The buyer would only have
taxable gain on the disposition of the marketable securities to
the extent they appreciated in value subsequent to the time of
acquisition. Therefore, the buyer would be willing to pay the
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