Yes, it's considered a disposition and the suspended losses may be claimed on the decedent's final tax return.
However, the losses in this situation are limited to the amount that the losses exceed the step-up in basis of the asset in the hands of the beneficiary. (IRC section 469(g)(2)).
For example, a passive investment has an adjusted basis of $60,000 and suspended passive losses of 25,000. If the asset has a fair market value of $75000 as of the date of death, the heirs will have a step up in basis of $15,000 ($75,000-$60,000). The amount of losses that can be claimed on the decedent's final return is only $10,000 ($25,000-$15000). The $15,000 is lost.
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