The IRS does not have to accept the assessed value of the land on the date of passing as the basis. It is optimum to secure a date of death appraisal by a licensed real estate appraiser.
If the trust pays the tax on the gains, then the portion allocable to the beneficiaries (and to income) should indeed be zero.
The trust will then pay the tax and distribute cash proceeds as corpus and tax-free to the beneficiaries.
