capital loss since the courts have view it as investment property - thus allowing the loss in their view. the IRS, in your situation - non rental, regards it as personal property and thus not allowing either a capital or operating loss. upon termination, and not before, any unused capital loss carryovers would be distributed pro-rata to the beneficiaries.
see a trust and estate lawyer to see if there is a way to get around the minor being a beneficiary.
part of the answer also lies in the trust document which you should bring if you are going to see a lawyer
