-22-
interests, such as dividends and leased property, which may
undergo changes in form as dividends are declared and paid or
rent accrues and is paid. It is those property interests that
exist as of the date of death that are valued if the executor
elects the alternate valuation date. Sec. 20.2032-1(d), Estate
Tax Regs. These date of death property interests remain included
in the estate even if they change in form (such as in a
disposition) between the date of decedent’s death and the
alternate valuation date. Id.
This provision does not support respondent’s argument that
stock received in a tax-free reorganization should be disregarded
and that the pre-reorganization stock should be valued instead.
In fact, the regulation does not discuss tax-free
reorganizations. Nothing in this regulation requires us to
disregard the tax-free reorganization when valuing the property.
We therefore find no authority to treat such an exchange as a
change in form or to disregard the exchange.7
7We note that the fair market value of the post-
reorganization stock must generally equal the fair market value
of the pre-reorganization stock for the reorganization to be tax
free. See Rev. Rul. 74-269, 1974-1 C.B. 87; Rev. Proc. 86-42,
sec. 7.01(1), 1986-2 C.B. 722 (prerequisite to advance ruling
that a type A merger will be tax free is a representation that
the fair market value of the acquirer stock and other
consideration received will be approximately equal to the fair
market value of the target stock surrendered in the exchange);
Rev. Proc. 81-60, sec. 4.03(2)(d), 1981-2 C.B. 680, 682
(prerequisite to advance ruling that a type E recapitalization
will be tax free is a representation that the fair market value
(continued...)
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