No. of Recommendations: 2
<I'm still not clear whether I have to take the distributions based on his life expectency or can spread them out based on my own.>

Both Loki and Charlie are more knowledgable than I am, on the subject of bonds.

I have experience with inheritances, including IRAs. Like your father, my mother was taking distributions, when she died.

The rules are complex. You have to do everything correctly, to avoid triggering excess taxes and penalties.

1. The inherited IRA should not be commingled with your own IRA. It should be designated as an inherited IRA -- beneficiary designated account.

2. You benefit most by taking an MRD (Minimum Required Distribution) based on your own age. This is calculated by dividing the value of the IRA on the last day of the previous year (e.g. 12/31/05) by the "applicable divisor" for your age this year. (see the Table in Publication 590, on

3. The MRD is reported on a 1099-R. You pay taxes as ordinary income.

4. If you had to pay any estate tax on your father's estate (we had to pay a 55% estate tax on my mother's estate), the same percent should be excluded from taxation of the MRD (every year, until the Inherited IRA is depleted -- and, if your investments do better than the MRDs, there could still be assets left when you die). This already-taxed percentage is reported as "Income In Respect of a Decedent," which is a miscellaneous deduction that isn't subject to a percentage limit of your income.

My condolences on the loss of your father.
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