Technically, the trust receives the step-up in basis on the date of death because it is then a "completed gift".
If these were both personal use properties, then a loss on the sale will not be deductible
Since the trusts received the 1099-S Forms, then I am assuming the trusts sold the properties, so the sales will have to show on each trust return because IRS will expect to see the 1099-S reported on each return.
Each trust return will show a Sch D sale of a capital asset, acquisition date INHERIT, adjusted basis is the fmv on date of death + closing costs for sales expenses only + any required improvements required for sale. Selling price is self-explanatory, as well as it is a long term holding period.
Then, at some time, the executor of each of the trusts will begin distributing cash and assets out of the trusts to the beneficiaries and they will receive k-1s with their "taxable" portions on them for tax purposes
