Discussion:2006 Cancelation of Debt - Still able to send letter to IRS?

Facts: clients had c.card debt canceled in 2006 for $15,000. They filed the 06 return without including the income from form 1099-C. For various reasons they didn't address the issue until now. I think that they might have been insolvent at the time. I think now it's too late to file form 982, since the instructions say: "If you timely filed your tax return without making the election, you can still make the election by filing an amended return within 6 months of the due date of the return."

After reading the posts here I think that they could send a letter to the IRS with the insolvency information, but they received a Notice of Deficiency in late February, and it shows the last date to petition tax court (May 18, 2009). Is it too late to send that letter to the IRS? Is Tax Court the only option now? They owe $2,800 in back taxes, so hiring an attorney, CPA or EA to represent them in court doesn't make much sense at this point.

Thank you so much in advance, your guidance is greatly appreciated!