@Phatparents
It is critical to understand that there is no living trust at this point; that trust was extinguished with the passing of the grantor. The trust is now an irrevocable trust, a separate entity, which needs its own EIN and reports on its own return (Form 1041).
Therefore, the 1041 would show the gross proceeds from the sale and the basis of the house, which most likely, would result in no gain. If that is the case, then there is really no need to issue K-1s since a K-1 only reports items of income, gain, deductions, and credits, not distributions of principal (corpus) of the trust.
