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The stock receives stepped up basis. Calculate the mean of the high and low sales prices on the date of death for basis. (If the client died on a weekend, see my earlier posts on how to calculate basis.) If the sales proceeds are more than $600, a 1041 is required, even if the net gain is less than that. This can be a benefit to the beneficiaries because you get to deduct probate fees, attorney fees, and accounting fees (even if not paid yet!) If these deductions are more than the capital gain, the excess is passed to the beneficiaries in the final year of the estate. They can deduct these on Sch A without the 2% haircut.

I agree with Sara. Reference for the step up is IRC 1014(b )(1). https://www.law.cornell.edu/uscode/text/26/1014

Thank you everyone for your thoughtful and supportive comments and advice. I will be sticking to my professional responsibilities on this matter and using your suggestions to be as fair and accurate as possible. I still have until October to try and help him as I feel the need to give extra efforts, not so much that he is a friend, I would do this for anyone. What is at stake is a 6 figure amount with a 3 in front, so this is serious, as is any other tax return. I read this thread before bed last night and must report to you that because of all you said I slept well, no tax nightmares. You should all have RTST after your names, Registered Tax Sleep Therapist. Thank you. Grateful in MA, Bill

Sleep is a wonderful gift..........

Just because he is your friend does not shift the responsibility for these matters to you. All the replies so far have sage wisdom in them. YOU are not responsible for their irresponsible actions or lack of. Keeping in mind the current environment of the IRS holds you responsible for the tax returns you sign. Keep your professional stance, go forward and sleep well.