Because of their peculiar income tax character, items of income in respect of decedent1 require careful planning attention, particularly with respect to post-death dispositions.2 With IRD assets not receiving a new income tax basis at death,3 the pre-death basis carries over to the estate or heirs with the gain taxable to the estate, the heirs, a beneficiary or a specific or residuary legatee.4 The income recognition event can lead to substantial income tax liability inasmuch as the income tax basis is often zero for the more common IRD items.5
Harl, Neil E.
"Disposition of Income-in-Respect-of-Decedent Assets,"
Agricultural Law Digest: Vol. 19
, Article 1.
Available at: http://lib.dr.iastate.edu/aglawdigest/vol19/iss15/1