We understand the issue, and this is a good question.
Generally speaking, in instances like this, where the K-1 issuer (in this particular case a hedge fund) either cannot or will not issue separate K-1s on behalf of the deceased (for the portion of the year that he or she was alive) and their taxable estate, then the normal procedure is to just report the income and other Schedule K-1 attributes on the tax return that belongs to the SSN or EIN printed on the Schedule K-1 itself. In other words, if the K-1 is printed with the deceased's SSN, then report it on their final Form 1040.
That is the least likely way to avoid any reporting issues with the IRS, and is also the most defensible (and explainable) action you can take as an estate administrator or personal representative of the deceased's estate.
Of course, if the Form 1041 estate continues to exist beyond the tax year in which the original hedge fund owner died, then you absolutely do need to have the next year's Schedule K-1 issued with the correct EIN of the estate on it. Even in the absence of that, if the original taxpayer is not alive for any portion of the tax year ascribable to the given Schedule K-1, then the K-1 information should still be reported on Form 1041 regardless.
Thank you again for asking about this.
