It depends on the amount and some other considerations as to whether it must be reported.
Since your mother passed away in 2023, there are considerations for you as follows.
It definitely does not go on an individual income tax return for her, and you shouldn't have to include this as income since it does not represent your debt cancellation.
Considerations:
- Open an estate and file Form 982 which could be used since she would have no assets, and potentially only liabilities.
- Form 982: Reduction of Tax Attributes Due to Discharge of Indebtedness) reports the amount of cancelled debt to excluded from taxable income. TurboTax will automatically generate Form 982 if your canceled debt is for a qualified principal residence indebtedness, etc.
- Since there is not a return to add the income to unless an estate is opened, here is the next option.
- With no estate or probate opened or the estate was closed, there's nothing you can add it to. If you want to be cautious you can put 'deceased' on it and send to the IRS with a letter of explanation or you can address it later if they ever contact you over it.
- Form 1099-C - Debt Cancellation
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