Forgiveness debt for a deceased with no estate

[m1tina]

I  received a cancellation debt from bank of America regarding a deceased person with no estate.  They said they are going to forgive his debt.  He passed-away two years ago.  Who will be responsible to pay the IRS with this tax if he is already a deceased with no estate and he is the only borrower of this debt.  They know this long time ago that there is no estate nor executor.  please advice.  Thanks

[DJS]

If the taxpayer died in 2014, and the debt was cancelled in 2014, then at least in theory, the cancelled debt would have to be reported on the final return of the decedent, i.e., the decedent's Form 1040 for 2014. If the decedent was insolvent at the time the debt was cancelled, then it is not taxable income. You would need to do a Form 982.

However, If the deceased received a 1099-c two years later, but there is no estate and no executor, then based on the individual facts and circumstances there may be no one responsible for filing a tax return with respect to the information returns addressed to the decedent..

[m1tina]

anymore suggestions.  because in the letter sent by BofA, they will report this cancelled debt to IRS.  So who will be the responsible person to file this to the IRS when the deceased was only the borrower?  Should I just not do anything since I am not the executor nor the representative of the deceased?  And since there is no Estate at all.

[m1tina]

I'm sorry he passed-away in 2012 not 2014

[DJS]

As I said in the post, based on the individual facts and circumstances there may be no one responsible for filing a tax return with respect to the information returns addressed to the decedent. As you say you are not the executor or representative to the decedent. I would never advise that one should not report income to the IRS if they're responsible for the reporting, but the circumstances seem to dictate otherwise. However, if you're uncomfortable about this you may wish to consult a lawyer.

[Kat]

Just curious:  Why did you receive the 1099-C in the first place, if you are neither a representative or executor?  Perhaps contacting BofA would be in order....asking why YOU were the addressee for this document?  What do you think of that, Djay43?

[DJS]

I agree, although perhaps m1tina was not the addressee. I have had some personal experience where I acquired the mail of a deceased family member who also had no estate. But if you you were the addressee then I would contact BoA to find out why.

[m1tina]

I think its because we both own the property together and he took a home equity in our property but only in his name.  I've been in contact with BofA and keep telling them, there is no executor nor estate for the decedent.  but they just keep sending him letter under his estate.  I also research that since our property is on joint tenancy with right of survivorship, I am now the sole owner of the property and that his debt that the lien attached to his share is extinguiguished upon his death and cannot be passed.

[m1tina]

no there was no addressee. It just says to the estate of the deceased.  My name is not mentioned

[DJS]

On that matter I can't comment. I am not a lawyer.

[Kat]

I agree with SuperUser Djay43.  You should consult a tax attorney.

[lourenshaw]

In your case, I would talk to at least a CPA if not a tax attorney simply because your name is attached to this property.  Since you are not related, you do not have to file taxes for the deceased, but should send this on to the executor if you know who it is.  If not, send a letter in writing to the company, and send it certified with return signature for your files, so they are on notice.  But just an FYI, if you feel like taking it on, the IRS allows a personal representative to file tax returns.  In the end, the IRS does not care who files the tax return, they just expect it filed. I filed for my ex-husband, even though I was not executor.   I put "personal representative" after my signature, and sent a Form 56 (Notice of Fiduciary Relationship) Cancellation of debt Form 982 should be filed with form 1041 (estate income) if it was cancelled after his death.  I was told by Turbo Tax CPA to put a description of income and insolvent under form 982, on line 8, where effectively the income is cancelled out by the insolvency, so the income is 0.  Then file a Form 982 with that, and include an Insolvency Worksheet, even though it says to keep for your records.  FYI, there is a date of cancellation listed on the 1099-C that the deceased received.  The insolvency worksheet and Form 982 are figured as of the day before the cancellation of debt date on the 1099-C.  Even if he got the 1099-C in the same year he died, that does not matter.  If it was cancelled after he died, you will report it on Form 1041 (estate income).  If it was cancelled before he died, you will report it on Form 1040.  If he died, you will need to apply for an EIN (for the estate) on the IRS website.  They will give the number to you immediately.