OK, first of all, what you are attempting to do, ie. prepare a fiduciary income tax return, is a very difficult exercise if you do not have any experience with fiduciary accounting and tax issues. The best advice I can give you, is to engage a CPA or EA to prepare the fiduciary return for the Trust. There are a number of issues and areas that become complex very quickly and unless you know what you are doing, the chances of running into problems, that ultimately will cost additional tax, penalties & interest are more likely than not.
That said, I can assist you here, but this site is designed to answer specific questions, not to walk someone through the complete tax preparation process. So, if you want to continue with that in mind, let me respond to your first couple of questions & you can decide for yourself how you wish to proceed.
Here are a few of the things we need to know:
Was this a joint revocable trust, or did the trust originate with the decedent's spouse and was it split into two trusts when the decedent's spouse died?
The decedent's date of death & state of residence.
The number of beneficiaries of the trust and states of residence.
Is the succeeding Trustee(s) resident in the same state as the decedent?
Prior to the decedent's death, was the trust's income reported directly on the decedent's personal income tax return and was the tax reporting of the trust's assets under the decedent's social security number?
Now, first with respect to the rental property:
Note that no matter what was distributed, income or principal, for purposes of the "Income Distribution Deduction" on Schedule B, it doesn't matter whether it was income or principal, if either income or principal was distributed, all of the income is passed through to the beneficiaries; in the example you gave, that's all 40K. That goes to your question of differentiating between income & principal on the 1041 - Schedule B and the K-1; the point is you don't differentiate; not good news if you were thinking that the beneficiaries would only be taxed on 10K not 40K.
Another question; I presume the assets generating the rental income was or is in the Trust? If so, did you adjust the tax basis to the fair market value (fmv) at the date of death, allocate the fmv between land & building & recompute the depreciation for the tax year you are preparing the return for? If so, that must be done as depreciation is "allowed or allowable" & if the depreciation isn't taken, then the tax basis is reduced anyway & if the property is sold, the gain is increased with no current benefit of the depreciation not claimed.
I'm not sure what you mean by "How do I list the principal assets in 1040?". Do you mean the 1041 or the 1040?
What specific assets are you referring to?
I'm sure you will have some additional questions or require clarification of something I've "said", so please let me know. Again, I'll do what I can to assist you, but I can't do the return for you; that's not permitted under IRS regulations, unless I am the actual Preparer and sign the return, a service that I am not providing here.