Cancellation of Debt for Deceased

[Terry O]

Taxpayer passed away in 2006 - - -did the FINAL 1041 in 2007 - -NOW - -her daughter shows up with a 1099 misc in Estate ID number - -for unknown income - - -

AND - - - a 1099C for cancellation of debt in the deceased taxpayer's SS#.

I am not sure about the 1099 C - - -

I realize that I have to prepare the 1041 for the Misc income of $1750 - - but what about the Debt of $3800 ??

Any suggestions?

Thanks!

[RitaB]

Income from debt cancellation after DOD also belongs on the Form 1041. Believe you can deduct attorney fees (for handling estate business) and funeral expenses. (I assume estate paid them.) Maybe other deductible expenses, see Instructions to 1041 and Pub 559.

I would also prepare 2008 1040 for Mom with that line 21 statement reporting the debt cancellation, and subtracting it with a statement explaining that the attorney who "handled" everything gave the wrong ID number to the issuer of the 1099-C. You'll have to write in the "Deceased, blah, blah, blah" cause ATX won't do it again and if you unprotect the 1040, you don't have room in the cell. Don't ask me how I know. Haha!

[michaelmars]

I'd never file a 2008 return for someone who died in 2006. report 2008 as it should be and if the IRS ever questions the lack of a return for the 2008 soc number you explain it then.

[kcjenkins]

I agree. No 2008 return. The IRS, if it does kick out, should match to SSA, and discover that the t/p died two years before, so they will not be looking for a 1040, they will be looking for the 1041.