Who Needs Form 982?
Under certain circumstances described in section 108 of the Internal Revenue Code, a taxpayer is allowed to exclude the amount of discharged indebtedness from their gross income. Such a taxpayer must file Form 982.
What is the Purpose of Form 982?
The purpose of Form 982 is to report the exclusion and the reduction of certain tax attributes either dollar for dollar or thirty-three and a third cent per dollar.
Which Documents do Form 982 Support?
A taxpayer should attach the form to his income tax return.
When is Form 982 Due?
A taxpayer should file Form 982 with their federal income tax return for a year a discharge of indebtedness is excluded from their income under section 108(a) of the Internal Revenue Code. The taxpayer must elect on a timely filed return to reduce the basis of depreciable property under section 108(b)(5) and the election made on line 1d of Part I regarding the discharge of qualified real property business indebtedness.
If the taxpayer filed their tax return without making either of the above-mentioned elections, they can still make either election by filing an amended return within six months of the due date of the return. The taxpayer must write “Filed pursuant to section 301.9100-2” on the amended return and file it at the same place the original return was filed.
How do I Fill out Form 982?
If the discharged debt is:
- Qualified principal residence indebtedness:
1.1. Check the box on line 1e.
1.2. Include on line 2 the amount of discharged qualified principal residence indebtedness that is excluded from gross income. Any amount in excess of the excluded amount may result in taxable income. If you disposed of your residence, you may also be required to recognize a gain on its disposition.
1.3. If you continue to own your residence after the discharge, enter on line 10b the smallest of (a) the amount of qualified principal residence indebtedness included on line 2 or (b) the basis (generally, your cost plus improvements) of your principal residence. - A nonbusiness debt (other than qualified principal residence indebtedness, such as a car loan or credit card debt):
2.1. Check the box on line 1a if the discharge was made in a title 11 case (see Definitions, later) or the box on line 1b if the discharge occurred when you were insolvent (see Line 1b, later).
2.2. Include on line 2 the amount of discharged nonbusiness debt that is excluded from gross income. If you were insolvent, don’t include more than the excess of your liabilities over the fair market value of your assets.
2.3. Include on line 10a the smallest of (a) the basis of your depreciable property, (b) the amount of the nonbusiness debt included on line 2, or (c) the excess of the aggregate bases of the property and the amount of money you held immediately after the discharge over your aggregate liabilities immediately after the discharge. - Any other debt:
Use Part I of Form 982 to indicate why any amount received from the discharge of indebtedness should be excluded from gross income and the amount excluded.
Use Part II to report your reduction of tax attributes. The reduction must be made in the following order unless you check the box on line 1d for qualified real property business indebtedness or make the election on line 5 to reduce basis of depreciable property first.
3.1. Any net operating loss (NOT) for the tax year of the discharge (and any NOT carryover to that year) (dollar for dollar);
3.2. Any general business credit carryover to or from the tax year of the discharge (33 1/3 cents per dollar);
3.3. Any minimum tax credit as of the beginning of the tax year immediately after the tax year of the discharge (33 1/3 cents per dollar);
3.4. Any net capital loss for the tax year of the discharge (and any capital loss carryover to that tax year) (dollar for dollar);
3.5. The basis of property (dollar for dollar);
3.6. Any passive activity loss (dollar for dollar) and credit (33 1/3 cents per dollar) carryovers from the tax year of the discharge; and
3.7. Any foreign tax credit carryover to or from the tax year of the discharge (33 1/3 cents per dollar).
Use Part III to exclude from gross income under section 1081(b) of the Internal Revenue Code any amounts of income attributable to the transfer of property described in that section.
