Deferred Comp for Spouse who passed away

I'm admittedly very amateur when it comes to topic of Deferred Comp. Client of mine (very basic 1040 tax return, other than this) informs me that her spouse passed away. He was employed and had a deferred compensation plan in effect at DOD. The employer paid this out to my client, and she has informed me that they will be issuing her a 1099 at year-end for this amount. Not sure if 1099-MISC or 1099-NEC, or even what box would be filled in with these numbers. We have inquired of the employer for clarification several times, with no reply.

I told my client that there will be a large bill and likely nothing we can do to avoid. Am I correct? Anything she can do to mitigate tax impact? She used the pay-out to buy a $650,000 rental property, which is now here primary source of income.

Thanks!

1099 is the correct reporting. She should have saved some of the money for taxes.

Yes, and she has enough life insurance proceeds to cover the taxes, fortunately - but I think it’s one of those cases where the tax implications don’t dawn on the client until months later, and they are like “anything creative we can do???”

There's 691(b) and (c) but chances are they won't help. But you should look.

I would not waste my time looking for a solution. Once it is received, it's income.