[WSBAPT] 1099-C Cancellation of Debt

Tue Jan 24 15:27:51 PST 2023

I believe the answer depends on whether the debtor (Estate) is solvent or
insolvent.  Generally speaking, a debtor who is solvent *after *the debt is
forgiven will have income to the lesser of their  level of the assets or
forgiven debt, unless the debt is forgiven through a bankruptcy discharge.
An Estate is expressly identified as a qualifying debtor for 1099-C.

Example:  If the estate is insolvent to the tune of ($100,000), but has
$250,000 in debt forgiven or uncollectible because the creditor claim
period expired, then the creditor may issue a 1099-C to the debtor (Estate)
for the $250,000.  If the Estate only has $50,000 in total assets, then
they would have $50,000 in income. I would look to amended any tax files if
that were the case.

On Tue, Jan 24, 2023 at 2:58 PM Jade Coppieters <jade at scarfflaw.com> wrote:

> If the creditor’s claim was not properly presented/filed, I would argue
> there is no debt from which income can result when it was “cancelled”. It’s
> hard to say it was even “cancelled”, since Wells Fargo simply failed to
> preserve their claim by not following the probate claims procedure. If the
> Estate was not obligated to pay the debt, how can it owe income when the
> debt is cancelled?
>
>
>
> I would ignore the 1099. Wells Fargo likely filed it with the IRS, which
> is frustrating as I suppose it could lead to questions from the IRS when no
> 1041 is filed.
>
>
>
> *J. M. Coppieters, Esq.*
>
> Phone: 206-236-1500
>
> Fax: 206-905-5912
>
>
>
> <http://www.scarfflaw.com/>
>
>
>
> *From:* wsbapt-bounces at lists.wsbarppt.com <
> wsbapt-bounces at lists.wsbarppt.com> *On Behalf Of *Inge Fordham
> *Sent:* Tuesday, January 24, 2023 2:12 PM
> *To:* WSBA Probate & Trust Listserv <WSBAPT at lists.wsbarppt.com>
> *Subject:* Re: [WSBAPT] 1099-C Cancellation of Debt
>
>
>
> I have a similar situation.  Please reply to the list.
>
>
>
> Thank you!
>
>
>
> [image:
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>
> *Inge A. Fordham | Attorney*
>
> Fordham Law, PLLC
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> 3218 Sixth Avenue | Tacoma, WA 98406
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> *From: *<wsbapt-bounces at lists.wsbarppt.com> on behalf of Brent
> Williams-Ruth <brent at williams-ruthlaw.com>
> *Reply-To: *WSBA Probate & Trust Listserv <WSBAPT at lists.wsbarppt.com>
> *Date: *Tuesday, January 24, 2023 at 2:11 PM
> *To: *WSBA Probate & Trust Listserv <WSBAPT at lists.wsbarppt.com>
> *Subject: *[WSBAPT] 1099-C Cancellation of Debt
>
>
>
> Mighty Brain Trust -
>
>
>
> Today I received a 1099-C for the cancellation of debt from a Wells Fargo
> credit card.
>
>
>
> This debt was never presented as a creditor claim. The amount is $627.47.
>
>
>
> The estate closed under regular process - Decl of Completion - on January
> 20, 2022. The creditor period expired on August 14, 2021.
>
>
>
> Other than providing this information to the former Executor - I am open
> to guidance as to how to respond. It was reported as discharged on July 2,
> 2022. More than a year and a half after death.
>
>
>
> Thank you.
>
> *Brent Williams-Ruth* (pronouns: he/him)
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