Dear Customer -
Normally, capital gains are taxed at the trust level, except in the final year of the trust. The trust tax rate on capital gains is similar to individuals with a maximum tax rate of 15%.
Hope this helps.
In the final year of the trust, all income, gains/losses, etc for that year is taxed to the beneficiaries. It will be reported to them on a Form 1065 Schedule K-1.
Any tax paid by the trust in prior years, is just that. The beneficiaries won't pick up the prior years income on their returns, nor will they get a credit for those taxes paid. The income is only taxed once, either at the trust level or the beneficiary level.
The trust will distribute its remaining assets which have already been reduced by the taxes paid.
Glad I could help.