I guest what I will do is to use 2019 Form 8606 to calculate the taxable amount, and new basis (for eventually filing the 2020 estate return), and enter the calculated taxable amount on Line 8 of Form 1041. Then, use the 3.5-inch long blank dotted-line on Line 8 to enter as much of a tiny explanation as will fit. I won't file the Form 8606 (since that is apparently not permitted with a Form 1041 return), but will simply keep it for reference. This way, the Schedules K-1 will go to the beneficiaries with only taxable amounts included on them, thereby avoiding double-taxation of the nondeductible amounts.
