1099-c

[kones]

What is the name of your state (only U.S. law)? New york

I received 3 1099-c forms for cancellation of student loans. I was the cosignor. The student passed away. Total is about $40,000.
I think I'm stuck with this and will have to pay taxes. Any advice?

 

[xylene]

Any advice?

You should see a lawyer about what your obligations were in the event of the student's death.

 

[Some Random Guy]

I received 3 1099-c forms for cancellation of student loans. I was the cosignor. The student passed away. Total is about $40,000.
I think I'm stuck with this and will have to pay taxes. Any advice?

Sorry for your loss.

In looking at the 1099-C forms, does it list your SSN or that of the student? See this thread for more discussion on who is responsible for the 1099-C income

https://forum.freeadvice.com/tax-law-12/cancelation-debt-cosigner-509906.html

 

[kones]

The 1099-c has my SS#.

 

[davew128]

Please find a local tax professional who can research this. My gut is a 1099 should not have been sent to you but without spending time researching it I cannot defend that view. My feeling is that a student loan is discharged in the event of the primary signer's death, and it should be forgiven debt in the name of the co-signer since a co-signer would NEVER benefit from the proceeds of a student loan. But hire someone to review the law.

 

[LdiJ]

Please find a local tax professional who can research this. My gut is a 1099 should not have been sent to you but without spending time researching it I cannot defend that view. My feeling is that a student loan is discharged in the event of the primary signer's death, and it should NOT be forgiven debt in the name of the co-signer since a co-signer would NEVER benefit from the proceeds of a student loan. But hire someone to review the law.

I have edited Dave's post to include a word I think he accidentally omitted based on his context, and my gut agrees with his gut, but I am not at all certain that we are correct.

I don't know what your marginal tax rate is, but as well as getting a tax professional to research the issue you should examine whether or not including that 40k in your debt to asset ratio immediately before it was cancelled puts you at any amount of insolvency. If by any chance you would be insolvent in that amount that would also eliminate the problem for you.

 

[davew128]

you should examine whether or not including that 40k in your debt to asset ratio immediately before it was cancelled puts you at any amount of insolvency. If by any chance you would be insolvent in that amount that would also eliminate the problem for you.

Yes, I accidentally omitted that word.

However excluding the income due to insolvency would not be ideal as it required reducing any tax attributes, so that would be a secondary position. Primary position would be making sure it is incorrect reporting on the 1099 in the first place.

 

[LdiJ]

Yes, I accidentally omitted that word.

However excluding the income due to insolvency would not be ideal as it required reducing any tax attributes, so that would be a secondary position. Primary position would be making sure it is incorrect reporting on the 1099 in the first place.

I agree...and my gut agrees with your gut...but I am not certain that our "guts" are accurate and I am offering other options to the OP.

The potential tax bite on that 40k of cancelled debt is high. Between federal and state it could be as much as 30% (or even more) for a middle income taxpayer. Getting a tax attorney involved could also be beyond the budget of a middle income taxpayer, and to be honest, without involving a tax attorney once a 1099C has been issued, makes me uncertain that it is resolveable at that level.

I am also not certain that the "student" was the primary borrower if the 1099C was issued under the SSN of the OP. There are many student loans where the parent of the student is the primary borrower.

Yes, reducing tax attributes is not ideal, but it is possible that its the better solution.