sale of trust asset to beneficiary

Simple trust has 3 beneficiaries - all siblings. The trust will be selling it's final asset (a piece of real estate) to one of the beneficiaries for a loss. None of the beneficiaries contributed the property to the trust.

The beneficiary who is buying the asset is also the trustee.

Question - is a loss in this situation disallowed (eg, under the rules of Section 267)?

Yes it's disallowed, unless the parties are tax indifferent. See sec 267(d)(3).