Normally, the trust instrument does not provide for a reserve. The basis of the property that passes to the principal beneficiary will be reduced without compensation. Passive loss activity rules apply to fiduciary. They do not pass through to beneficiary like S corporations and partnerships, except in termination year. No double loss deduction.
Deduction depends on distribution to beneficiary.
Beneficiary basis then becomes FMV at date of distribution. Any trust not meeting simple trust rules above is a complex trust. Beneficiary receives 1041 - K1, which informs them what is to be reported on their tax return. A special 65-day rule applies to complex trusts. Any distribution within 65 days of the next trust year is considered to be a distribution within the current year.