1. Yes, you do not have to report the income. I am reading the trust sold the house and is handling all the paperwork, tax requirements, etc. You received a distribution of the principal since it was sold below FMV. My concern is the sale below FMV actually creates a loss that can be passed to you.
2. The trust may issue a Schedule k-1, if there is reportable income/ loss. The trust return is not due yet so you may still receive a form in late March or April. You may want to check with the trustee to see if it is safe for you to file.
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