Discussion:1099-C issued to decedent

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Discussion Forum Index --> Tax Questions --> 1099-C issued to decedent


Michaelstar (talk|edits) said:

6 March 2007
When a 1099-C has been issued to a decedent in the year after their death, is the living spouse obligated to report this (credit card)cancelled debt as income on their 1040 even though the 1099-C has been issued to the decedent's SS# ?

Riley2 (talk|edits) said:

6 March 2007
If the surviving spouse had personal liability for the debt, the answer is yes, she should report the amount for which she was personally liable. The portion for which she had no liability would be treated as COD income for the estate.

Michaelstar (talk|edits) said:

6 March 2007
I would then think that in a community property state, the surviving spouse would have been liable for at least 50% of the debt even when the credit cards were in the decedents name only. But if that were the case, it makes no sense that the debt would have been fully forgiven. Other than the COD income, this is a no asset estate.

Kevinh5 (talk|edits) said:

6 March 2007
This would be income to the estate of the decedent.

Dennis (talk|edits) said:

6 March 2007
You have to bear in mind that while the estate is the responsible party it is not necessarily the debtor. All states have a set time frame for creditors' claims during probate. When a 1099C is issued in the name of the decedent after date of death the suggestion is that no claim against the estate has been filed. Dead people are insolvent so there is no income in respect issue. Facts and circumstances and particular state laws all have bearing so there is no clear cut answer, but I wouldn't be recognizing income without a clear understanding.

Michaelstar (talk|edits) said:

6 March 2007
It seems that in both cases I have this year, (one a CA resident, one a NV resident) the decedent's ran up cc debt (CA-$8k, NV-$12k) and the living spouses decided to not pay the debt and request that it be written off which apparently it was. This is also the first time I have come across this as an issue and it happens twice in the same tax season. All other times, the estate just paid off the debt with estate assets which these both estates claim to have none. Certainly these were unsecured debts without recourse.

Dennis (talk|edits) said:

6 March 2007
In a case where the living spouse decides not to pay the debt you have to ask why. For the estate to be the debtor the debt has to be acknowledged. Has survivng spouse tecnically done this? I want the money myself is not a very good excuse for non recognition of income. And again, state law is important.

Michaelstar (talk|edits) said:

6 March 2007
In both cases the surviving spouses acknowledge that this was valid cc debt of the decedent. In the case of the CA resident, the spouse was told by a couple of the children to not pay the debt "we will get the cc company to write it off". In the case of the NV spouse, there was plenty of money but just believed they could go this route and keep the cash from life insurances proceeds for other personal uses. In both cases, they have been able to walk away from the debt even though there were assets owned by the living spouse to fully pay for the debt.

Dennis (talk|edits) said:

6 March 2007
State law issues that I can't comment on. Perhaps Riley knows.

In a case where all there is are life insurance proceeds payable to a named beneficiary I have never seen a creditor claim proceed (although I know that the IRS has the power). If there are probate assets or jointly held assets you have to look to exactly what each party did. Again, issuing a 1099C in decedent's name after death is more evidence for non-recognition than inclusion. There are generally rules that the credit card company has to follow to establish the estate or successor interest as debtor.

Riley2 (talk|edits) said:

7 March 2007
Presumably, the credit card debts were used to benefit the community; consequently, the estate and the surviving spouse would appear to be jointly and severally liable for the debt under California law. However, I believe that the estate would only report 50% of the COD income. On the other hand, if the debts were incurred to finance a gambling habit, I believe that only the gambling spouse would be liable.

In California, life insurance proceeds generally enjoy significant protection form creditor claims; consequently, a totally solvent debtor may be able to convince a credit card company that he is judgment proof even though he is financially able to pay the debt.

Michaelstar (talk|edits) said:

7 March 2007
Thank you Dennis and Riley2 - this has been very helpful. Should also be a good link/information source for others should they run a search for it. Michael

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