cancelled debt

[Ken]

I have a client who's spouse passed away last year. She had some credit card debt forgiven and the taxpayer seems to think that since it was only in her name he shouldn't have to pay tax's on the forgiven debt. I told him that I was pretty sure he would but that I would check it out.
Any opinions?

[BOB W]

If he is filing a joint return it needs to be included..... Were they illiquid at the time? If not it is taxable. He can always file MFS.

[Burke]

Depends on when the debt was cancelled. Before her death, it goes on her tax return (theirs if MFJ). After her death, it goes into the estate and is reported on Form 1041. Even if he files her MFS, the fiduciary would have to pay any resulting tax from the estate assets, unless she did not have any in her name or joint names (insolvent).