The Arizona LLC has gone out of business and I want to do a final tax return, however the LLC still has some debt. This debt can never be repaid as the LLC has no money or assets. This problem arose from real estate. The company who the debt is owed to hasn't sent a 1099C, COD, and I assume they will some time in the future. Normally I would enter a COD in the books and in this case there is an equivalent loss which would offset this income, thus there is no loss or income. The problem is I cannot do the COD as technically they haven't cancelled the debt. Do you have to leave the debt on the books until they send a 1099C, or is there some way that you can do a final tax return now and balance out this unpaid debt with the equivalent unused loss? Are you allowed to do a final tax return if you have unpaid debt?