1) Is a 1041 and K1 required? (i.e. the estate had > $600 in income)
Yes to the 1041 because the estate had more than $600 in gross income. A K-1 won't be necessary since the estate is technically insolvent and there's nothing to pass through to the benes.
2) Is the shortfall (unpaid loan for the judgement deductible?
No.
3) If deductible, is it considered a NOL?
Not deductible and wouldn't be an NOL anyway.
4) If not, where on the 1041 and K1 report the AP?
The AP is not reported anywhere on the 1041. It's not a deduction for the estate....which is unable to pay its debts.
The executor/heir may be able to claim a nonbusiness bad debt since he loaned funds to the estate and was never repaid by the estate
