My mother died in 1999. I just got a 1099-C for 2010 Cancellation of Debt. She has been dead 11 years. There is no estate or money left. Nothing. Who has to claim this as income? I (Her Daughter) was the Trustee and executor but that was 11 years ago. This is for $7600!
Just out of curiousity... whose SSN is listed ? and what was the debt - after 11 years ?
I would think that ANY credit/lender would have issued some overdue notice back then.
For $7,600 of gross income, as a non-dependent, she wouldn't have a tax liability nor a filing requirement for 2010 (true for federal, hopefully no requirement for the state either), so I think you can safely ignore it. Should an IRS letter ever come (it probably won't), you can reply with an explanation.
Another option, if you are tax-wise conservative, is to file a no-tax-due return this year, just to match the 1099-C computer record, but I don't recommend this step. Just the signature requirement alone will give you headaches. Your state tax situation may vary.
-Mark B.
Contact the issuer of the 1099-C and ask questions. It may have been issued in error.
Katie in San Diego
The 1041 instructions, Who Must File, state that a 1041 must be filed is the estate has gross income of $600 or more (even though no tax may be due). This presumes that the 1099-C is correct. I agree that pragmatically, it may be better to wait for the IRS to ask.
The filing requirement raises a couple of other questions. Are there any gotchas for filing a 1041 after the "final" 1041 has been filed? And would the heirs need to formally decline to take the phantom income to keep it in the estate (since this is a "post final" filing, where presumably all assets and income are distributed)?
Not too big a deal, since OP is executor. Presumably already on file with IRS (if not, see Form 56), so can just sign.
Mark Freeland
At the very least if she died in 1999 there likely is a statute of limitations issue indicating that the 1099 should have been issued a number of years ago.
Your answer does not make sense. The mother (if that's who you mean by "she") died in 1999 so she can't file a form 1040 claiming the $7,600 of income, and wiping it out with her standard deduction and income. In theory the income should go to the heirs in the proportions mentioned in the will, and we don't know their income -- maybe the $7,600 will be taxable for them.
But 1099-C income is not always taxable.
Good point regarding 1041 filing requirement.
What theory? The heirs have no COD income unless they were obligated to pay the debt. Unless the property they received was pledged as collateral for this specific debt, I see no COD flowing to the heirs.
The income (assuming the 1099-C is valid) belongs to the estate. The estate has no assets and therefore is insolvent. I would wait to see if the IRS does anything with this. If there is an IRS letter forthcoming, I would file a Form 1041 with zero income and attach Form 982, claiming insolvency for the exclusion of the $7600. The heirs are untouchable as long as the estate was settled legitimately.
Why is she (deceased) a non-dependent? If she were a dependent before death, wouldn't that continue in her estate? Does the dependent status change the gross income amount for filing?
Chip 1
Tying into another thread on m.t.m., it would seem that if the estate went through the probate process, any debts would have had to have been already paid or else they were discharged and are now uncollectable. So would there even be cancelation of debt income if the underlying debt is uncollectable. But I wasn't clear what the consensus was from that other discussion.
One cannot file a individual return for a decedent for a period AFTER death. It will be flagged (when the SSN is input) and may even start a criminal investigation.
Actually, yes - if the IRS has issued the estate closing letter, that's it.
11 years for the alleged creditor to give notice of the debt. Sounds as if there's a period of limitations somewhere that's been violated.
Agreed.
the thought that comes to mind: did someone use Mom's SSN to take out a credit card or other debt? That would be fraud on the issuer, who would have to try to find the true debtor (good luck!).
GREAT CATCH, Tom!
This is one of the BIG reasons that I ALWAYS recommend that the heirs open a probate estate on behalf of the decedent even if one isn't required. It starts the clock ticking on the statute of limitations for creditors. Here in Maryland, the opening of a probate estate gets published in the paper and creditors have six (6) months to file a claim. Once the court closes the probate estate creditors who failed to file a claim are out of luck.
Failing to open and close a probate can extend, or perhaps permanently toll, the statute of limitations such that creditors could go after the heirs in an attempt to collect on an old debt. This is especially true of anything of value passed to the heirs without creditors being given proper notice and an opportunity to file a claim.
Its also worth noting that frequently creditors will sell blocks of old uncollected debts to various collectors, sometimes for as little as 2 cents on the dollar. Sometimes those selling the debts fail to inform the buyers that the debtor is deceased. And all too frequently a debt collector will attempt to guilt an heir into "doing the right thing" and paying off mom's old debts. BALONEY - unless you were a co-signor on the debt OR got an inheritance that could have been used to satisfy the debt without giving the creditor proper notice heirs are generally under no obligation to pay someone else's debt.
I would send the issuer of the 1099-C a copy of mom's death certificate and a copy of the order from the court closing probate. That should be sufficient.
I am reminded of what happened to ME when my mother passed back in August of
1995. We opened a probate estate in Maryland Orphan's Court, printed the notice in the papers, sold what she had, disbursed what we could and closed the estate.TO THIS DAY - I still get occasional pieces of mail from collectors trying to collect on her debts for which I KNOW the original creditor was properly notified. I know because I sent copies of the death certificate to them via certified mail, return receipt and kept copies of the mailings. What I find most interesting is that mom died in Maryland in 1995 and in 2003 I moved to Delaware - and the creditors have managed to find ME?!
Good luck, Gene E. Utterback, EA, RFC, ABA
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