If that house was not business property of some type (such as rental property) then losses on the sale of personal property are not deductible. I assume the house remained in the trust until sold and title was transferred to the buyer. If that assumption is correct, then that's why I say "we" did not sell anything. The trust sold the house and the sale would be reported on the 1041 trust return with any gain or loss based on the stepped-up cost basis of the property.
