With respect to your last question (which I missed entirely), the daughter takes the trust's basis for the house that was distributed in kind; it is actually corpus of the trust and does not need to be reported on the K-1 (some would report the value on Line 10, Schedule B).
Also, the income that is reported on federal K-1s typically transfers to the beneficiaries' states of residence and they will usually have tax liability on that basis.
