This was posted on an Ohio Bar listserv. No one answered. Thought I'd run it up the flagpole here.
"Members: We have an estate wherein we have negotiated lesser amounts for several debts of the estate, two of which are judgments.
In times past, when we have negotiated lesser amounts in a nonprobate situation, the creditor has sent a form 1099 to the debtor for the difference between the amount claimed owed and the amount of the settlement. That supposedly represents forgiven indebtedness which may be taxable income to the debtor and includable on the debtor's federal income tax return.
Question 1: Has anyone had a situation where the debtor was an estate and the amount due was compromised and the creditor sent a 1099 for the difference between the amount owed and the amount of the compromise settlement?
Question 2: If so, was an estate federal income tax return filed which included the amount shown on the 1099?
Comments will be appreciated. TIA."