Once a trust has distribution the current income (interest and dividends in our case) and they wish to give an additional distribution of funds, how is done and where does it appear on the 1041?

Distributions of corpus (principal) generally do not appear on a 1041. 

You should note that income tax returns for trusts were due back in April unless you filed a 7004 for an extension. Otherwise, the return is very late as trusts typically file on a calendar year basis.

does the trust document permit such distributions? there are no adverse tax consequences of doing so if not allowed by the trust document. but there could be legal consequences for the trustee. 

Do you need to track the Corpus Principal reduction of money given out from the trust to calculate the trust basis for when you are shutting down the trust and calculating how much gain the trust made?

@jeffm 

I think you need to talk to a local tax pro about all things trust related and get all your questions answered.   Income earned is reported on a 1041  but it doesn't calculate increases in the corpus or keep any bookkeeping records.