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For a swap of real property for publicly traded stock within an estate prior to distribution , how do you value the stock?

Rancho Santa Fe, CA |

My brother wants the land, and I want cash, but there is not enough cash - he wants to give me stock. We got an appraisal for the land, however valuing the stock seems more complex. I want to do what is usual and customary. I see two issues: 1) how do we handle the variability of the stock- the price over the past year has ranged from 53 - 68 and 2) I want cash and clearly stock is not cash because of the long term capital gains and possible AMT. Is it logical to subtract the projected tax from the stock value to get the "cash value?" Given the cost basis and stock price right now, the tax liability would be about 10 percent of the share price. The land is valued by a current appraisal and if it were sold for that price there would be no long term capital gains because of the basis.

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Attorney answers 3

Best Answer

You could have the executor of the estate sell the stock and then distribute the cash to you equal to the appraised value of the land.

Regarding the tax on the sale of the stock, the stock will have a "stepped up" basis equal to its fair market value on decedent's date of death, so it may be that little or no tax is owed and any tax due would be paid by the estate.


If the stock is publicly traded, valuation should be the current market price. Valuation is generally only an issue where the stock is closely held, or very thinly traded (e.g. OTC on the Pink Sheets).



You need to make a deal that both feel is fair. Of course the value of the stock changes daily as does the value of the real estate, although more slowly. Unless the document specifies otherwise you two will have to decide on a date for value and then live with that decison. The suggestion to have the executor sell the stock, if both are residuary heirs, will split the tax impacts of the sale. However, all assets recived a step u in basis to FMV at death so perhaps the gain is smaller than you thin,k

The answers on this discussion board are general in nature and NOT intended as legal advice. Responding to questions does not constitute an attorney-client relationship. Always see a lawyer about your individual situation

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