Assuming this trust came into existence because of the passing of someone, then the trust owned the property that was sold, and the trust is legally liable for all taxes. The trust must settle all debts first, including taxes, before any distributions can be made to the named beneficiaries of the trust. Then the trust is dissolved when all distributions are made and K-1s are issued. Generally, the K-1s are only to show the IRS the disposition of the assets. The recipients will not report the K-1s on their tax return at all, because an inheritance of less than $5.2M is not taxable or reportable for the beneficiary recipient.
