I think the 1/2 of the trust attributable to husband is no longer a Grantor Trust after his death.

I think 1/2 the sale, with the 1/2 step up gets reported on a 1041, and to CO.

The wife's half of the trust is still a Grantor Trust. Her half of the sale gets reported on her 1040 and on a CO nonresident return.

I'll say it again-I hate joint trusts.