Cancellation of Debt for Deceased Spouse

[tracie]

Taxpayer filed TY2019 MFJ, but the spouse was deceased.

ForTY2020, Taxpayer is filing Single, but has received a 1098-C in the name and social security number of deceased spouse.

Does the Taxpayer have to pay tax on the cancellation of debt if the 1098 is in the deceased spouse's name and ss#... and the debt was not joint to begin with?

[BobKamman]

No

[tracie]

Thank you Bob! My research revealed the same. It is always helpful to get consensus!

Tracie

[sjrcpa]

The deceased's estate might have to pay tax on it, though.

[tracie]

I see what you are saying, but because the spouse is still living everything has transferred over to her. Their assets are just their main home and retirement income. Nothing has rolled into an estate. Am I missing something?

[qbteachmt]

Is this a community property state? What was forgiven, such as debt on titled property? Was this some insurance closeout, such as Mortgage life insurance, or forgiven school debt due to death?

More details always help.

[BobKamman]

The creditor has already determined that it is uncollectible.  The auditors here are just trying to make sure they left no tombstone unturned.