sorry for your loss. for her, it's depreciation as usual for the portion of the year she owned it. in Turbotax you enter the date of death as the date sold but do not enter any proceeds so depreciation is prorated. She recognizes neither gain nor loss and the depreciation she took over her period of ownership disappears. Upon her death, the property value is stepped up to fair market value(FMV). That is divided between the land and the depreciable portion. So the trust from the date she died to the end of its tax year gets depreciation based on the FMV of the depreciable portion over 39 years. A 1041 needs to be filed which is done with Turbotax business. Whether the trust pays tax on any of this and any other income or it's distributed to the trust beneficiaries is a matter of the Trust instrument and what state law allows.
