You posted the same (very lengthy and involved) question previously and a Champ suggested consulting with legal counsel or a local tax professional (legal counsel would be better at this point).
Regardless, you have an unusual scenario where an individual is "granted special permission" to access and use trust assets? Is that the case? If so, that individual was a beneficiary as well as a co-trustee.
From the facts you stated the son was granted a life estate by the terms of the trust and, generally, the basis would be predicated upon the last to die of the life tenants. However, in this instance the preceding estate was held in fee simple and then placed in trust by one grantor (Lucy). As a result, it is likely that the basis would be the fair market value on the date of her death.
You REALLY DO need to consult with a local tax professional and/or legal counsel for this scenario as no one here has access to the exact terms of the trust.
