IRS form 1099-C

[dwk]

Today, I received a 1099-C Cancellation of Debt for the my son's estate. He was killed in a auto accident 3/04. According to the form, Chase Bank cancelled the balance on his credit card.

The statement shows the following; box #:
1. Date debt cancelled 8/11/2006
2. Amount of debt cancelled $4,654.42
3. Interest if included in the debt $0.00
4. There is no box 4
5. Debt description credit card account
6. Bankruptcy no, debt cancelled as a result of a bnakruptcy hearing
7. Fair market value of property $0.00

at the top is printed for Tax Year 2006.

I closed out my son's estate well over 2 years ago. Does this form mean that I have for file an addmented return for 2006. My son had been deceased for over two years -- therefore there was no income. If this amount was reported in 2006, is it low enough that I can forgo filing a return?

Or do I need to admend my 2006 return because I was executor of his estate.

Thanks for the advice.

dwk

[Red-y]

This is not professional advice but here goes:

1. Cancellation of debt is considered income
2. The amount was reported on a 2006 form because the debt was considered canceled in August 2006
3. The amount of income reported is below the 2006 threshold for filing (single) of $8450, which represents a $3300 personal exemption plus the $5150 standard deduction.
4. Your taxes are not affected at all since your status as executor just makes you a personal representative for your son and his estate
5. Therefore, no further action is required on your part

I am truly sorry for your loss.

[Texas Proud]

Sorry for your loss also...

I would like to correct Red's above... and you might know this also.. His advice is for the 1040, not the 1041 you must file as an estate... I don't know the filing requirments, but it should be easy to look up...

The questions that might make it clearer...

You asked should you amend my 2006 return... Did the 1099 have your SS# on it If it did, call up and get a new one that has your son's number. It was HIS debt and this is his estates obligation, not yours. PS.. have you already filed your 2006 If so... WOW!!!

Did you file any 1041s? Did you say 'Final' on the last one two years ago?? If not, then they would be expecting more to come...

This is a leagal question on this... you already distributed the estate and now have no money to pay taxes if due... where does the money come from??

[Brat]

After verifying the info others suggested you examine post your question on this board:

http://groups.google.com/group/misc....n&lr=&ie=UTF-8

It is a moderated group with many tax practitioners responding.

[Red-y]

TP,

Good point about the 1040 vs. the 1041. The last 1040 filed for the decedent in 2004 would have the std income exemptions for a person, which would not be the same for the estate on the 1041, as you said.

The forgiven debt is income to the estate. I looked on www.irs.gov for the Instructions for 1041 to see what the current exemption amount is for the estate for years after the death. Not sure why, but I only saw forms for the year 2005. Anyway, the exemption for estates for that year was $600. So the amount over that might be taxable to the estate.

Brat--thanks for the link!

[Martha]

I wonder if the the solvency exception would apply so there is no resulting taxable income. . . .