[WSBAPT] 1099-C Cancellation of Debt

Tue Jan 24 16:19:35 PST 2023

I believe that the debt is cancelled upon the earlier of an identifiable
event or the date the 1099-C is filed. One identifiable event listed in the
IRS 1099-C instructions is "[a] cancellation or extinguishment making the
debt unenforceable under a probate or similar proceeding."  If a creditor
claims is cut off in probate after notice, then I would venture that is the
moment the debt is cancelled. For most, this would occur prior to
distribution.

On Tue, Jan 24, 2023 at 4:02 PM Diane J. Kiepe <DJKiepe at depdslaw.com> wrote:

> So I think there a couple legal arguments that I would feel comfortable
> making.  The first was already discussed, that is there was no debt because
> WF had no legal right to the money claimed owed.  Second, I could, with a
> straight face, argue that one of the Section 108 exclusions apply – Code
> Section 108(a)(1)(B) states that there is no income if the taxpayer was
> insolvent when *the discharge occurred*.  Clearly taxpayer was insolvent
> if he/his estate had distributed and closed and owned nothing but the full
> $$$ of the WF 1099C.
>
>
>
> I can tell you that I personally experienced one in my own life for a
> significantly larger amount (long story) and I did not report it and never
> heard from the service – this was during 2009.
>
>
>
> *Diane J. Kiepe*
>
>
>
> Diane J. Kiepe
>
> Douglas Eden
>
> 717 W. Sprague Ave.
>
> Suite 1500
>
> Spokane, WA  99201
>
> djkiepe at depdslaw.com
>
> 509-455-5300
>
>
>
> *From:* wsbapt-bounces at lists.wsbarppt.com <
> wsbapt-bounces at lists.wsbarppt.com> *On Behalf Of *Brent Williams-Ruth
> *Sent:* Tuesday, January 24, 2023 3:48 PM
> *To:* WSBA Probate & Trust Listserv <wsbapt at lists.wsbarppt.com>
> *Subject:* Re: [WSBAPT] 1099-C Cancellation of Debt
>
>
>
> This was a low income estate, there was no earned income during the
> administration and the Executor did not file an income tax return on the
> advice and counsel of a tax professional. (I make it clear that I am NOT a
> tax attorney and do not give tax advice.....just enough knowledge to be
> dangerous). But even if they did, the tax year was 2021.
>
>
>
> I worry that by simply being ignored this could turn into a failure to
> file, and lead to interest and penalties and problems for the former PR -
> though it was sent to the Decedent's name (not his estate) care of me
> (personally) at my office address - not the Law Offices of Brent
> Williams-Ruth.  Bob Q. Smith, in care of Brent Williams-Ruth.
>
> *Brent Williams-Ruth* (pronouns: he/him)
> *Attorney-At-Law*
>
> *Law Offices of Brent Williams-Ruth, **a division of BWR Consulting, PLLC*
>
> *Physical Address: 500 S 336th Street, Suite 214; Federal Way, WA 98003*
>
> ***EFFECTIVE IMMEDIATELY**** All mail sent through the USPS should be
> sent to the following address: PO BOX 3319; Federal Way, WA 98063 *
>
> Office/Scheduling Phone: (253) 285-7751
>
> Direct: (253) 285-7453
>
> e-mail <Brent at Williams-RuthLaw.com> / website
> <http://www.williams-ruthlaw.com/> / facebook
> <http://www.facebook.com/bwrlaw> /
>
>
>
>
>
> On Tue, Jan 24, 2023 at 2:38 PM Claudia A Gowan <claudia at cagowanlaw.com>
> wrote:
>
> Brent, did the estate file a final form 1040 for the decedent?
>
>
>
> This is such a pain because technically, if Wells Fargo sent the 1099 to
> the IRS, the decedent had income in that amount – which is over the
> required amount for filing an income tax return amount. But the estate is
> long closed and the form 1040, if one was filed, has probably long since
> been processed. Plus of course, the debt was discharged in a year well
> after death, which raises another series of questions about any filing
> requirement, e.g. if you were to file a tax return for the 627.00, for whom
> would it be filed, the estate for the calendar year of the discharged debt
> or would it be for the decedent who incurred the debt (all when the PR has
> already been discharged)?
>
>
>
> And of course, the PR is not going to want to file anything…
>
>
>
> Excuse my ramblings but I would be scratching my head over what to do on
> this one.
>
>
>
> Best, Claudia
>
>
>
>
>
> *Claudia A. Gowan*
>
>
>
> *Claudia A. Gowan, PLLC*
>
> *2212 Queen Anne Avenue No., # 338 (Mailing only)*
>
> *Seattle, WA 98109*
>
> *(206) 443-2733 (T)*
>
> *claudia at cagowanlaw.com <claudia at cagowanlaw.com>  *
>
>
>
> *www.seattletrustsandestates.com <http://www.seattletrustsandestates.com/>*
>
>
>
> *From:* wsbapt-bounces at lists.wsbarppt.com <
> wsbapt-bounces at lists.wsbarppt.com> *On Behalf Of *Brent Williams-Ruth
> *Sent:* Tuesday, January 24, 2023 2:08 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)
> *Attorney-At-Law*
>
> *Law Offices of Brent Williams-Ruth, **a division of BWR Consulting, PLLC*
>
> *Physical Address: 500 S 336th Street, Suite 214; Federal Way, WA 98003*
>
> ***EFFECTIVE IMMEDIATELY**** All mail sent through the USPS should be
> sent to the following address: PO BOX 3319; Federal Way, WA 98063 *
>
> Office/Scheduling Phone: (253) 285-7751
>
> Direct: (253) 285-7453
>
> e-mail <Brent at Williams-RuthLaw.com> / website
> <http://www.williams-ruthlaw.com/> / facebook
> <http://www.facebook.com/bwrlaw> /
>
> ***Disclaimer: Please note that RPPT listserv participation is not
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-- 
Jerimy Kirschner
Managing Partner
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