I don't understand your wording:

<<Have a 1041 inheritance line 5 of 1041>> Line 5 is rental income. An estate can own and rent out a property. Use Sch E.

<<there is an adjustment in box 14 "H" to zero out inheritance>> What does this mean, box 14 "H"? Is this an adjustment for net investment income? Why do you think this is correct? Is the rental a profit or a loss?

<<It still wants to tax it as rental income, on schedule E. >> The Sec 1411 adjustment is for the NII tax, not the net rental income as income. There is still income to be taxed.