Trust & Taxes?

I inherited a spendthrift trust.
where I get income every month (in kind transfer of funds/stocks) ..no cash...from my dads trust at EdwardJones to my own account at EJ.

As long as I dont sell it and use it .... its no taxes period.

If I cash it and use it as income (will till mid 2008) then I pay cap gains (15% max I guess) ..

After mid2008 I plan to use very little of it for personal spending (I am currnetly using 90% of it to paydown debt and some to max out my ira.

In 2008, I plan to also max out my wifes IRA.
Wil rarely use the balance ..but will likley want it available.

Per the inheritance being below the threshold and the fact that I will only get 6%/12 of whatever the trust is worth.

Is the only time I need to worry about taxes is when I cash the monthly transfer from the trust/inhertiance?

1. Any thing (money and property) that you inherit, is not taxable as far as federal tax is concerned.

2. If you inherit a stocks, your cost basis is the valuation (Fair Market Value) of the stocks at the date of the decedent's death or the FMV (Fair Market Value) on the alternate valuation date if the personal representative for the estate elects to use alternate valuation.

3. If you sell the inherited stocks at a price up to your cost basis you don't have any taxes due. However, if you sell the stocks at price more than the cost basis to you, then you pay the taxes on the profit (sale price minus your cost basis). Report the sale on schedule D of Form 1040. All the profit from the sale of stocks is long term capital gains.

4. It will be taxed at 5% or 15% tax rate. If your highest tax rate is more than 25%, then it is taxed at 15%, otherwise, it will be taxed at 5%.

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