IF THIS STUFF WAS INTERESTING, THEY'D MAKE YOU PAY TO GO TO LAW SCHOOL....by Steve Duhl 
Monday, June 28, 2010, 01:16 PM
Posted by Administrator
Last week, I received in the mail a "COMBINED TAX STATEMENT FOR YEAR 2009" for a client of mine who died a couple of years ago at the age of 93. It came from my good friends at the Bank of America. Here, stripped of verbiage that I didn't understand, is what it said:

ESTATE UNCOLLECTED DEBT DEBT CANCELLED 1,880.02

What happened was that George died without paying an $1,800 credit card bill. He had no estate opened with the court because he died with nothing. And, after a while, the credit card company realized they weren't going to get paid; believed they had tried hard enough to collect; wrote the bad debt off as an expense on their books; and told the IRS that George had an addition $1,880.02 income in '09. The "income" was from having his credit card debt "forgiven" Had George died with money or if the same thing happened to someone who was living, they could have to pay the IRS income tax on the $1,880.02.

WHY SHOULD ANYONE CARE?

If you have your debt forgiven in a bankruptcy, you WON'T (WILL NOT) get "1099'd"** for "forgiven" debt...there are, generally, no tax consequences attached to debt discharged in a bankruptcy. On the other hand, if you make a deal with a creditor to reduce your balance; if you do a short sale on a house you don't live in; if you don't pay your debts.......you likely will get yourself one of these COMBINED TAX STATEMENT FOR YEAR ___whatever year it happens in__________. ...and you likely will have to pay.

This is not tax advice. I don't know enough about taxes to give advice. I am just reporting on the Statement George got...and why he got it.

I will now rejoin the living.


**pronounced: ten ninety-nined...an action verb...the act of telling the IRS (with a copy to you) that you have more income that you need to pay taxes on than you thought you did. example: "After I settled out my credit card debt with Bank of American, they ten ninety nined me." or "Oh, you got ten ninety nined, also? Me too."
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