The grantor trust I do the returns for owns a portion of the rental property, and the grantor owns the remainder.  I divide up all income and expense (including depreciation) based on the partnership share %'s for each and generate a Schedule E for each to reflect their portion.  The trust's Sch E gets filed with the 1041, and the grantor's Sch E and Grantor Letter get filed with the grantor's 1040.  The depreciation should always be included.