How JustAnswer Works:
  • Ask an Expert
    Experts are full of valuable knowledge and are ready to help with any question. Credentials confirmed by a Fortune 500 verification firm.
  • Get a Professional Answer
    Via email, text message, or notification as you wait on our site.
    Ask follow up questions if you need to.
  • 100% Satisfaction Guarantee
    Rate the answer you receive.
Ask Lane Your Own Question
Lane
Lane, JD, CFP, MBA, CRPS
Category: Tax
Satisfied Customers: 10103
Experience:  Law Degree, specialization in Tax Law and Corporate Law, CFP and MBA, Providing Financial & Tax advice since 1986
1929974
Type Your Tax Question Here...
Lane is online now
A new question is answered every 9 seconds

My question is regarding a 1099-C deceased person whose

Customer Question

My name is ***** ***** my question is regarding a 1099-C for a deceased person whose estate has been closed for 6 years
JA: Thanks. Can you give me any more details about your issue?
Customer: Father in law died in 2009
JA: OK got it. Last thing — Tax Professionals generally expect a deposit of about $32 to help with your type of question (you only pay if satisfied). Now I'm going to take you to a page to place a secure deposit with JustAnswer. Don't worry, this chat is saved. After that, we will finish helping you.
Submitted: 9 months ago.
Category: Tax
Expert:  Lane replied 9 months ago.

Hi - I can help here ... If the estate has been closed, and the final return prepared, this is essentially a non- issue.

...

Can you tell me more about the situation?

...

Is this for non-secured debt such as credit card debt

Was is potentially for a secured debt such as a home where the home was retitled

Was anyone else on the debt as a co-borrower?

...

Again, very likely something that can be ignored, based on what you've said ... but give me a little more detail if you would and we can go from there.

...

Lane

...

...

I hold a JD (Juris Doctorate, a doctoral degree in the law), with concentration in Tax Law, Estate law & Corporate law, an MBA, with specialization in finance & tax, as well as CFP® and CRPS designations. - I’ve been providing financial, retirement plan, Social Security & Medicare, estate, corporate & tax advice since 1986

Customer: replied 9 months ago.
This was a non-secured loan (SBA Disaster Loan in 2005). He was the only one on the loan.
Customer: replied 9 months ago.
After his death in 2009 we setup his estate. All his assets were joint ownership and POD. There was no assets that were probated. We closed the estate on 10/9/2009. We filed his final 1040 on 3/10/2015. Never filed a 1041 since there was no income to report. Then this year (2016) we received a 1099-C for cancellation of this loan.
Expert:  Lane replied 9 months ago.

It's non-secured debt. Non-secured debt "goes away" at death. ... meaning that there are no assets (transferred to anyone else) that they could potentially lay claim to.

...

Although it is true that you don't have the protection that comes from closed probate (where creditors no longer have a claim, regardless of asset re-titling), here, there were no assets securing the debt, so the creditors have no claim after death of the debtor.

...

As you say, no need to to file an estate return, last 1040 was filed; so (1) there's no one here that could possibly report this income, and (2) they have no claim to any assets, as this is unsecured debt.

...

You can disregard this.

...

Let me know if you have questions

Customer: replied 9 months ago.
I'm not concerned about paying back the debt. That was cancelled in 2015. We received a 1099-C this year. I'm concerned about how to handle the filing of the income that the 1099-C created. What I read when ever you receive a 1099-C the irs considers the cancelled loan as income for the year you receive the 1099. What is the best way to handle the income reporting.
Expert:  Lane replied 9 months ago.

Yes, but you said that the 1099-C was for (hence to) your father in law.

...

One cannot report income for a decedent where the last return has been filed and there's no estate.

...

I suppose you could do a 1041, but because the decedent is insolvent, no income tax could be collected.

Expert:  Lane replied 9 months ago.

Further, this is past the 6 year period where IRS would keep a return open anyway.

...

Given that the last return has been filed and there has been no estate income for six years, they will be expecting nothing.

...

Now, if the estate were still open and contained assets that could be levied to pay the taxes that might be a different story.

Customer: replied 9 months ago.
Correct me if I am wrong but doesn't a pers rep have to fill out a 1041 whenever income is reported in a tax year. The way I understand the 1099-C created an income item for 2015. I thought I would have to file a 1041 with a 982 to support the insolvency along with the insolvency worksheet. The other confusing part is the 1099-C was issued in his SSN not in the estate's EIN. How does the IRS know the 1099 they received is supposed to match up to our 1041.
Expert:  Lane replied 9 months ago.

...

Theoretically, you're right. Because there was no probate estate here, income has been received for a taxable estate.

...

To answer your question the SS# ***** the EIN of the estate are associated because it's provided when you apply for the EIN for the estate.

...

Just to provide context, the lender's objective in sending this is to take their own tax deduction, and comply with their own requirements to send 1099-C

...

Real-world? This is what IRS will call a Di Minimis amount, more costly to pursue than collect.

...

You can certainly set up the estate's EIN do a final 1041 and send in the 982 - Given the time elapsed, in my experience, IRS will kick back and say the issue is closed, or you'll never hear from them.

...

If you do this, the worksheet is not filed, just kept for your records.

Expert:  Lane replied 9 months ago.

I hope this has helped.

...

Please let me know if you have any questions at all.

...

If this HAS helped, I'd really appreciate a positive rating (using the rating request, faces, or stars on your screen)

...

That's the only way I'll be credited for the work here.

...

Thank you!

Lane

Expert:  Lane replied 9 months ago.

If this HAS helped, I'd really appreciate a positive rating (using the rating request, faces, or stars on your screen)

...

That's the only way I'll be credited for the work here.

...

Thank you!

Lane