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URL:  http://boards.fool.com/each-heirs-distribution-will-probably-in-shares-24729762.aspx

Subject:  Re: Trust Taxes Date:  10/22/2006  8:51 PM
Author:  Wradical Number:  89197 of 121585

Each heir's distribution will probably in shares of the equities,thus getting a stepped-up basis for each stock.
My question is will the trust have to pay capital gains tax on all stocks appreciation once the distribution to the heirs occurs?

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There is really not enough information given.

Generally, a trust does not recognize a gain on distributions - although it could elect to, by electing to treat the assets as being sold to the beneficiaries.

And there may or may not be a step-up in basis at your MIL's death;
If the trust was the subject of a QTIP election at your FIL's death, to qualify the trust for the marital deduction, it would be includible in your MIL's estate, and subject to a basis step-up at her death.

You need to discuss this with the attorney who is handling MIL's estate, who I assume is familiar with the trust, as well as the will.

Bill
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