The income reported on Form 1041 Box 4a is a long-term capital gain, which is fully taxable. The credit reported for Box 14 Code H is an adjustment of that income for calculation of Net Investment Income tax. The two entries together eliminate your Net Investment Income so you don't pay any additional tax for that activity.
However, the Section 1411 adjustment (Box 14H) has no effect on your Form 1040 taxable income. You may wish to consult with the advisor who told you the Schedule D income was not taxable in case there is another way to report this credit.
Note that Schedule K-1 does not report any actual trust distribution you may have received. So that transaction is not reported as taxable income.
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