I agree that DNI is not impacted by state income taxes paid wheter chargeable to income or corpus, but the distribution deduction is being impacted.  If I leave the state income tax deductionat line 11, it looks like there is a double benefit ituitively to me -- the deduction at the trust level and an offset against income to be reported by the beneficiary.

I think the way to do it is as I suggested before -- eliminate the state deduction at the trust level which will have no impact on the trust's federal liability because there will be a corresponding increase in the trust's distribution deduction and you get to the right place at the beneficiary level.  Effectively, the trust is getting the benefit of the state tax deduction although it is not denominated as such on page 1 of the return and the beneficiary is picking up the correct amount of income because it is not being reduced by the state tax deduction.