loan default - 1099

[k man]

the participant had an outstanding loan for 10k and he dies. he has 100K in his account. who do you issue the the 1099 to? due to the default, i think you issue a 1099 to the deceased participant for 10K and the beneficiaries (if they take a distribution) for 90K... anyone know whether this is correct.

[Jim Chad]

I'm surprised no one took a swing at this. So I will tell you that I agree with you. FWIW

[Appleby]

We were waiting for you to respond Jim

I agree too

Cite Treas Reg §1.401(a)-20, Q&A-24(d)

[wsp]

assuming his estate has no assets or income during the year who's on the hook for the tax bill? Is there anything that allows the IRS to go back at the beneficiaries?

Granted, the tax liability is small but seems like reasonable tax planning for those who are diagnosed as terminal and whose assets can be gifted prior to passing away.

[Kimberly S]

assuming his estate has no assets or income during the year who's on the hook for the tax bill? Is there anything that allows the IRS to go back at the beneficiaries?

Granted, the tax liability is small but seems like reasonable tax planning for those who are diagnosed as terminal and whose assets can be gifted prior to passing away.

If the deceased participant was married, it is probably the spouse who will get hit with the income tax.