Yes, if the estate is closed and the unclaimed funds check is the only transaction in question, the heirs may report the allocated income on their individual tax returns. If the final estate return has been filed, there is no need to file another Form 1041.
Note that the income should be reported according to the source transactions that generated the income. Inheritances are generally non-taxable. But in this case, no taxes have been paid on the income by the estate. So, the tax liability flows to the heirs.
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