An income tax return must be filed for a decedent if his/her gross income for the year of death was over the filing threshold based on the person’s filing status at the time of death. A surviving spouse may be able to file a joint tax return with the decedent.
When debts are cancelled in bankruptcy cases, the cancelled amount is excluded from gross income. Tax attributes are certain losses, credits, and property basis that must be reduced to the extent of the exclusion.