IRS vs the decedant

[Y2KEA]

A situation has arisen for a prior client and I am not sure of the ramifications.

Taxpayer filed joint returns with spouse through 2004.
Taxpayer died in 2005. TP has not filed 2005 return.
Spouse filed 2005 as MFS.
This a community property state. SP MFS return was not split 50/50.

IRS is requesting tax return for TP.
TP had approximatety $27,000 in income, mostly from 1099C. The 1099C's were from credit cards held soley in TP's name.
TP was insolvent with exception of about $10,500 in IRA accounts.
Spouse was beneficiary of TP IRA's.


If a 2005 return is submitted, who would sign it?
If one is not submitted & the IRS does one itself, would the SP have any liability?

[solomon]

File

joint for 2005. Surviving spouse signs decedent's name and where she would normally sign, she signs "Filing as Surviving Spouse." You will need to amend from MFS to MFJ. I assume the decedent is primary TP on the return.

[Y2KEA]

The purpose of filing MFS is so the SP is not liable for the taxes on TP's income. Amending to a joint return is not an option at this time.

[solomon]

It seems to me

part of the 27k of the TP should have been allocated (up to TP death) to the wife's separate return she filed if it is community property state. In addition, I would think decedent's IRA the IRS would want some of that toward any tax due on decedent's return. May be his IRA was sacred and IRS could not touch it - don't know. I would assume she would be liable for the taxes on the 27k on the portion that was community income. On the other hand, if insolvency could be shown that would have a bearing on the 27k.

[Y2KEA]

I would think that the cancellation of debt income to TP should not be allocated to the spouse since she had noe personal liability to the card issuers.

[solomon]

If

you are correct on the COD then let the IRS worry about it. However, although the credit card was in his name only might not exclude her. I think you would have to check your state's community property laws to be sure. If she had no knowledge of his charges and she did not benefit from any of the purchases, then you might be correct.

[solomon]

By the way

if you file MFS for the deceased, surviving spouse would sign the return on her own signature line with her own name followed by "Personal Representative". This is assuming no one was appointed as such or did not go into an estate - which it sounds like neither of those apply.