My father passed away on November 2. He had a non-retirement account consisting almost entirely of highly appreciated securities. Their values, of course, have gone down since them. The bulk of his assets were in retirement accounts, for which tax basis is irrelevant, and all the IRA's are of course passing to the named beneficiaries. The only other asset of any consequences is the house, which is left to me. The estate's expenses are mainly loans that one of my brothers and I made to pay the nursing home and funeral home, and state inheritance tax (the amount is will under the Federal limit).
If the estate sells the securities to pay the expenses, in theory the estate will have a tax loss, which will be of no use. If the securities were to be left to the heirs per the will, they could sell them and make use of the tax loss. But after the estate pays the expenses, there won't be any securities left.
FWIW the heirs are three children and one grandchild.
Any brilliant ideas on how to get use of the tax loss (assuming the market doesn't recover anytime soon)? Could the executor (probably me; that's a tiny bit complicated) settle debts "in-kind" - if someone loaned the estate $25,000, could I give that person $25,000 market value worth of securities, which might have a cost basis of $30,000 or $35,000?