Deductions & credits

the executor/trustee probably had the discretion of either paying the taxes at the trust level and distributing the remaining proceeds or distributing the gain and letting the beneficiaries pay the taxes. you need to talk to the executor/trustee. it's not the proceeds that the trust or beneficiaries are taxed on but the gain. 

 

some of the beneficiaries may be in a lower tax bracket than the trust so overall they end up with more money