[BACKGROUND]
The decedent died in 2021.
All assets passed outside of probate other than an unpaid Annuity, discovered after decedents death.
The insurance company refused to pay the Annuity.
The Executor (heir) loaned the estate the funds (to pay all filing and other costs to bring the case to court).
The Estate booked an Accounts Payable (AP) to the Heir.
No legal fees were incurred by the Estate, because the case was handled pro-se by the Executor (Heir).
The Judgement awarded the Estate the Annuity (won on the merits). This is 1041 Income.
The Judgement required also, the Estate pay the Defendant's legal fees + interest if not paid.
The Executor/Heir loaned the Estate the funds to pay the legal fees.
The Estate paid off the AP, in full. for the loan related to costs only.
The balance of the Annuity proceeds will be used to pay the AP related to the loan for judgement interest.
The Estate balance is NOT enough to pay the AP (judgement loan) in Full.
The 1041 will be both an initial and final.
[QUESTIONS]
1) Is a 1041 and K1 required? (i.e. the estate had > $600 in income)
2) Is the shortfall (unpaid loan for the judgement deductible?
3) If deductible, is it considered a NOL?
4) If not, where on the 1041 and K1 report the AP?
Thanks
