-21-
2032(a)(1). Property that has not been distributed, sold,
exchanged, or otherwise disposed of within 6 months after the
decedent’s death is valued as of the date 6 months after the
decedent’s death. Sec. 2032(a)(2). The election to use the
alternate valuation date may only be made if it has the effect of
decreasing the value of the gross estate and the sum of the
estate tax and the generation-skipping transfer tax imposed with
respect to decedent’s property. Sec. 2032(c).
There is an exception for tax-free reorganizations under
section 368(a). Stock exchanged for stock of the same
corporation in a tax-free reorganization is not treated as
distributed, exchanged, sold, or otherwise disposed of under
section 2032(a). Sec. 20.2032-1(c)(1), Estate Tax Regs.
Accordingly, the Kohler stock is not treated as disposed of on
the date of the reorganization and is not valued as of May 11,
1998, the date of the reorganization, but on the alternate
valuation date instead. See sec. 2032(a)(2); sec. 20.2032-
1(c)(1), Estate Tax Regs.
2. Respondent’s Argument That We Should Value Pre-
Reorganization Stock
Respondent also argues that we should value the pre-
reorganization stock, rather than the post-reorganization stock,
as of the alternate valuation date. We disagree. Respondent’s
argument relies on section 20.2032-1(d), Estate Tax Regs. This
regulation addresses the rules for certain types of property
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