Wayne Rivers <wayne[at]wayneriverscpa.com> wrote:

- quote -

If that money had been included in the estate, would it have
pushed the total over the tax-free limit?

I think it counts as "income in respect of a decedent" and
is therefore taxable (but any estate taxes are deducted from
the amount on which taxes are owed). (I think that's what
would have happened if the customer had just not paid the
bill for a while, and paid it later; which is very similar
to what's happening now.)

- quote -

I don't think so.

Seth

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Interesting situation:

A husband and wife had a business and had a customer not
follow through with paying an amount due on a contract. The
customer filed bankruptcy and included the amount in
bankruptcy.

Subsequently the husband and wife both died (she last) and
the estate was closed (assets under $600,000 limit at the
time). Their daughter was personal representative for the
estate.

Now, the old customer is selling their house and the
bankruptcy court has notified the daughter that she and her
two siblings will be receiving money from the sale for the
old contract that went through bankruptcy.

Question: Any tax liability on this receipt? Would it make
a difference if the original taxpayer was accrual basis and
recorded the income and a subsequent loss on bankruptcy?

Thanks

Wayne Rivers

<< ================================================== ===== > << The foregoing was not intended or written to be used, > << nor can it used, for the purpose of avoiding penalties > << that may be imposed upon the taxpayer. > << > << The Charter and the Guidelines for submitting posts > << to this newsgroup as well as our anti-spamming policy > << are at www.asktax.org. > << Copyright (2006) - All rights reserved. > << ================================================== ===== >