Welcome to Just Answer. I am here to help you resolve your tax and finance concerns. Please feel free to ask anytime you need extra help.
The house sales price less certain costs are the basis for any gain or loss calculation not the assessed value. The costs to be added up are: the amount recorded as "cost" within the trust, the expenses of selling the house, and any expenses incurred to render the house saleable.If the property was rented out for any time while it was in the trust you will need to deduct any depreciation that may have been claimed from the basis of the property.This number, along with the sales price, is then divided by the number of individuals who received the net proceeds of the sale. Since the house was inside a trust this gets reported as a capital gain in the Schedule K-1 from the trust to each individual.
This is not considered an inheritance since the house was in the trust at the time of sale. That is why the reporting is different. Since the house was also not the main residence of any of the beneficiaries of the trust, you will also not be entitles to the exclusion from the gain of your principal residence and all the gain, offset by any capital losses you may have, will be taxable.
If there are other factors you need to question or other facts that were not brought up in your initial question, please provide this.
The IRS rules specifically state that basis is what is to be used in this calculation, not assessed value. Assessed value is only used for real estate taxation purposes. Sadly the cost is that from 70 years ago which will make almost everything taxable as a long term capital gain.
The funds from the sale will only be taxable to the two of you who were included in the trust. The remaining siblings who were not included in the trust can treat their share as an inheritance but the two of you who were in the trust will need to absorb all the taxes on the gain unless the other two chip in towards that.
If this is not a satisfactory answer to your mind I will opt out so another person here can tell you the same thing.