" Does this carry out the losses to the beneficiary on the K-1?"

No. Since your AGI here is negative, there is no income to distribute to the beneficiaries. Thus, any distribution you made would have been from corpus (principal) and would be reported as a second tier distribution.

" I thought that trust losses can't be transferred out of the trust and the used by the beneficiary...."

That is generally correct; losses cannot be passed through to the beneficiary until the trust terminates and then files an income tax return for the trust's final year.