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  • Form 982 – Reduction of Tax Attributes Due to Discharge of Indebtedness (and Section 1082 Basis Adjustment) 2018
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Form 982 – Reduction of Tax Attributes Due to Discharge of Indebtedness (and Section 1082 Basis Adjustment) 2018

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Form 982: What Is It and Its Importance to Your Business

Save thousands of dollars in taxes and find relief from financial distress with Form 982. Don’t overlook this essential document for debt cancellation, foreclosure, or short sale situations. Take action now.

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form 982 reduction of tax attributes due to discharge of indebtedness and section 1082 basis adjustment template

Get relief from canceled or discharged debt with IRS Form 982. When lenders forgive a debt, it’s usually taxable. But there are IRC Section 108 exclusions to reduce your tax bill. 

Form 982 provides a tool for taxpayers to claim exclusions for specific types of debt, such as qualified principal residence indebtedness, business debt, or certain types of farm indebtedness. 

Where to Get and Complete Form 982

Taxpayers must complete Form 982 and attach it to their tax return for the tax year in which the debt cancellation occurred. The form requires detailed information on the type of debt, the fair market value of any property received in exchange for the cancellation of debt, and the total amount of debt discharged. Failure to complete the form correctly could result in the IRS treating the canceled debt as taxable income, leading to unexpected tax bills and penalties.

You can obtain IRS Form 982, also known as the Reduction of Tax Attributes Due to Discharge of Indebtedness (and Section 1082 Basis Adjustment), on the IRS website or on this page. The form is available for download as a PDF file, which you can print and complete manually or fill out electronically using tax software or online tax tools.

How do I know if I qualify for insolvency?

The insolvency exclusion allows you to exclude canceled debt from your taxable income up to the amount of your insolvency.

To determine if you qualify for the exclusion, you need to calculate your insolvency at the time your debt was forgiven or canceled. This means adding up the total fair market value of all your assets and liabilities and subtracting your liabilities from your assets. If the resulting number is negative, you were likely insolvent at the time of the debt cancellation.

The insolvency exclusion is available to taxpayers who meet specific circumstances such as being insolvent at the time of the debt cancellation or having the debt canceled in a Title 11 bankruptcy case. Other criteria include certain types of farm indebtedness, qualified principal residence indebtedness, and business debt.

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Consult an Expert

To ensure you meet the qualifications and accurately complete IRS Form 982, it is essential to consult with a tax professional or an attorney. They can provide tax advice and support tax tools that help you determine the extent of the cancellation of debt income, reduce your taxable income, and claim any available deductions or exclusions.

Using tax software

If you’re using certain tax tools to file your tax return, the software will guide you through the process of completing Form 982 and help you determine if you qualify for any of the available exclusions or deductions.

FAQ About Form 982: Reduction of Tax Attributes Due to Discharge of Indebtedness (and Section 1082 Basis Adjustment)

Form 982 is used to report the exclusion of canceled debt from taxable income. It is typically filed by taxpayers who have had some or all of their debt canceled, forgiven, or discharged.
You generally need to file Form 982 if you had canceled debt in the previous tax year, and you qualify for one of the exclusions listed on the form. You may also need to file Form 982 if you received a 1099-C form from a lender indicating that canceled debt was reported to the IRS.
The most common exclusions on Form 982 include the insolvency exclusion, which allows taxpayers to exclude canceled debt to the extent that they were insolvent immediately before the cancellation, and the qualified principal residence exclusion, which allows taxpayers to exclude canceled debt related to their primary residence. There are also exclusions for certain types of business debt, and debt canceled in bankruptcy proceedings.

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