@Love2Cruise "Technically there is no estate as the spouse was the beneficiary of the TSP and all other assets were co-owned thus negating any kind of estate."

For 1041 purposes, there can be and often is an estate.  I would compare this to a situation I recently had, involving a decedent with about $10,000 in 1099-C cancellation of debt income.  You wouldn't tax that to a beneficiary.  I suspect your 1099-R was issued because the surviving spouse provided her SSN when a withdrawal was made from the TSP, either to her directly or to a rollover account.  If you fought long and hard enough, a corrected 1099-R might be issued.  But it's easier to report it on her 1040 as received, but not taxable.  

If the 1041 is the right place to report the "income," it shouldn't be a question of who pays less tax.  The tax would probably be less if the income were taxed to his 10-year-old granddaughter, but you can't do that either.  But who is liable for paying the 1041 tax?  Maybe IRS Collections could reach the joint assets in the widow's name, but that's a separate question involving federal and state law.  And maybe the tax is less because there are deductions available on the 1041.