In your case it sounds like as of the date of death you have cash (on deposit with the accomadator) and not the original property. I suppose you could value it as cash - then your basis in the new property would be the same as if you had purchased it for that cash subject to a mortgage. The troubling portion is the 1031 compliance. Once the 1031 starts you must complete it for income tax purposes and since the person died between properties, I'm not sure how the reporting would be.

The deferred gain on a 1031 goes away at death and a step up in basis is calculated as if you had never done an exchange. I'm not sure if you would lose any exchange expenses incurred before the death that would normally affect the basis of replacement property. This is a really good question. I'd like to see how some others would tackle it.

Mary Kay Foss

Now here is the interesting thing.  The cash held with the accomodator made up over 35% of the decedent's estate.  The decedent' was actively involved in the management of the property before she died, and I argued had it not been for her heart attack that she would have been actively involved with the replacement property.  I applied for a 6166 election on it.  It took a little longer than usual to get an answer, but the IRS went ahead and granted it.