Whether capital gains taxes are owed when property held in a trust is sold and who pays them depends primarily on the type of trust in question: revocable or irrevocable. For revocable trust, if grantor is alive, trust is not count as a separate entity that means you will report any income, gains and loses on personal return. So if this is revocable trust and property that you will sale is/was your primary resident for 2 out of last 5 year, you will be able to exclude part of the gain (up to $250,000 of that gain from your income, or up to $500,000 of that gain if you file a joint return with your spouse.).
If the trust is irrevocable trust, then there are couple of issue to think about. One issue is whether there is a step up in basis. and step up in basis will depend when the property was transferred to trust. From your question, I am assuming it was transferred while granter was alive then you do not get step up basis. Other issue is if irrevocable trusts are required to distribute income to beneficiaries every year, then that makes the trust a pass-through entity. Beneficiaries pay taxes on the income they receive from the trust. So in irrevocable trust, total tax liability will depend on who pays the tax. Remember, irrevocable trust cannot claim exclusion above 205k and 500k exclusion.
In order to reduce the total gain, make sure include any improvements (Not repairs and maintenance) made thru out the years to increase your purchase price and remember to deduct any selling expenses.
Please note above info. is just general information for each trust, please consult an Attorney or a Tax Attorney about the specifics of your circumstances
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