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1099C Received for Deceased Wife

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    1099C Received for Deceased Wife

    Client called and said he received a 1099C from credit card company who was cancelling the debt for his wife. The 1099C was made out to the estate. She has been deceased since 2011. The amount is $3500. Can he just ignore this or is some action required? Taxable on his return? Anybody knowledgeable on this subject?

    #2
    I believe in community property states each spouse owns 50% of the debt regardless of whose name the loan or debt was. For other states if the estate did not have any assets and estate is now closed then it is worthless piece of paper. This assumes the credit card was only in the deceased wife's name and not a joint account. If it was a joint account the spouse would have to claim it.
    Taxes after all are the dues that we pay for the privileges of membership in an organized society. - FDR

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      #3
      1099-C to Spouse who died in 2011

      1. Need to check the date on the 1099C the lender claims the debt was forgiven. Also, for what was the original Debt? If payment of the debt including interest would have been deductible by the estate, the COD is excluded from income. Thre are many situations where COD income is not taxable under The Code.
      2. If there is an estate, whomever is in charge of that has to deal with it. If the estate was insolvent on the date the debt was forgiven, form 982 needs to be prepared and filed with the estate's tax return.
      3. It may be a situation where the cancellation of debt date on the 1099C is not accurate: the debt may have been actually foregiven earlier.
      4. Since it was to her estate, question would be did the estate (if a probate estate was set up) file or publish a notice to creditors or provide notice to the creditor directly. If there was an former (court) estate, and if the spouse or others received benefits (i.e. property or money or income) from the estate they may have some cod income to deal with; again, their individual solvency situation would be a factor.
      5. TTB 14-11 through 14-14 has summary of the factors.
      6. Your scenario seems to suggest there was no formal probate estate for the spouse. One option for your taxpayer might be open an estate, report the cod income and do form 982 and wash it out.
      7. I do not treat COD income as income in respect of a decedent.
      Friends double; family triple. Don't buy an audit for yourself. If someone has to go to jail make sure it is the client. Remember it is only taxes, nothing important.

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