If the trust is maintaining a capital loss carryforward on it's investments from prior years, then apparently the investments are not considered its "business".
Capital losses are maintained at the trust level until the final year grantor trust return.
If a grantor trust is operating a business then it is generally operating the business left behind of the grantor at death to be operated and managed until liquidated.
Capital losses.
Capital losses are netted against gains at the entity level except for a gain used under item (3), Other exceptions, in determining the amount distributed or required to be distributed to a beneficiary.
Capital losses are allocated to the entity except in the year the estate or trust terminates.
If losses are more than gains, the smaller of the net loss, or $3,000, can be deducted on line 4, Form 1041.
Losses can be carried forward indefinitely. In the year an estate or trust terminates, any loss that would be carried over to the next year can be distributed to beneficiaries.
For additional information, please refer to the following link:
The Tax Book Deluxe
For additional information on preparation of the trust return, please refer to the following link:
IRS Instructions for form 1041
