Distribution of assets which the estate owned at the time of the decedents death is not income and no income tax will be due (either from the estate or the heirs). Instead it is used to value the estate for inheritance tax purposes. The proceeds from the sale of the house will be inheritance, not income for the heirs income tax purposes.
I would not expect to generate a k-1 unless you have a 1099-INT or DIV from the estate.
