Hopefully not too lame a question.
Settlor died and the Trust owned the house before death. 1041 filing and Trust pays taxes. Probable no pass-through K-1 option. Basis is stepped up at DOD. 9 years after death, house sold but wasn't rented out during those 9 years. Large gain from sale. Is the income/gain taxed at the capital gains tax of 20% or at the regular tax for income, i.e. $3,500 plus 37% over $14,450 because it wasn't held to produce income? Thanks