When property is transferred from a living (revocable) trust to a beneficiary on the death of the grantor, the beneficiary receives a stepped-up basis. Any appreciation after the grantor’s death is taxable to the beneficiary when he/she sells the property.
The difference between face value of a bond and lower market price, attributable to rising interest rates. On a sale, gain on the bond is generally taxed as ordinary income to the extent of the discount.