Tax law and revocable trust assets

[viper6383]

What is the name of your state (only U.S. law)? Kansas


My father in law recently passed at 67yo. His major assets included his home worth 150K or so, and an IRA now only worth 85K. MY wife is the trustee of the trust and beneficiaries include my wife, her brother, and each of their 1 children at equal shares. The trust gives the trustee decisive powers to value and disperse assets as she deems prudent.

My questions really come into taxation of assets. It is my understanding that proceeds from the home sale will not incur taxation upon passing to the beneficiaries and would be deemed an inherited asset and does not reach the max threshold???

Regarding the IRA, my wife and I both have our own small businesses. I was curious, since money coming out of the IRA is taxable like income, can we use this money in a sole-proprietorship and offset the income with business spending? ie, if we lose half the money anyway, are we permitted to use the funds to invest in the business?

Also, regarding tax of the IRA, I was curious how the taxes are paid? Does the Trust pay the taxes and then hand over the remaining funds to a beneficiary or does the trust hand over gross funds and the beneficiary claims the moneys on their tax returns? This question would also apply for the home above if taxes are applicable.