Form 982 - Reduction Of Tax Attributes Due To Discharge Of Indebtedness (And Section 1082 Basis Adjustment) Page 3

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Form 982 (Rev. 2-2011)

Page

Check the box on line 1b if the discharge of indebtedness

Certain individuals may need to complete only a few

occurred while you were insolvent. You were insolvent to the

lines on Form 982. For example, if you are completing

TIP

extent that your liabilities exceeded the fair market value (FMV)

this form because of a discharge of indebtedness on

of your assets immediately before the discharge. For details and

a personal loan (such as a car loan or credit card

a worksheet to help calculate insolvency, see Pub. 4681.

debt) or a loan for the purchase of your principal residence,

follow the chart on page 2 to see which lines you need to

Example. You were released from your obligation to pay your

complete. Also, see Pub. 4681, Canceled Debts, Foreclosures,

credit card debt in the amount of $5,000. The FMV of your total

Repossessions, and Abandonments, for additional information

assets immediately before the discharge was $7,000 and your

including many examples and sample forms.

liabilities were $10,000. You were insolvent to the extent of

$3,000 ($10,000 of total liabilities minus $7,000 of total assets).

Definitions

Check the box on line 1b and include $3,000 on line 2.

Title 11 Case

Line 1c

A title 11 case is a case under title 11 of the United States Code

Check this box if the income you exclude is from the discharge

(relating to bankruptcy), but only if you are under the jurisdiction

of qualified farm indebtedness. The exclusion relating to

of the court in the case and the discharge of indebtedness is

qualified farm indebtedness does not apply to a discharge that

granted by the court or is under a plan approved by the court.

occurs in a title 11 case or to the extent you were insolvent.

Discharge of Indebtedness

Qualified farm indebtedness is the amount of indebtedness

incurred directly in connection with the trade or business of

The term discharge of indebtedness conveys forgiveness of, or

farming. In addition, 50% or more of your aggregate gross

release from, an obligation to repay.

receipts for the 3 tax years preceding the tax year in which the

discharge of such indebtedness occurs must be from the trade

When To File

or business of farming. For more information, see sections

108(g) and 1017(b)(4).

File Form 982 with your federal income tax return for a year a

discharge of indebtedness is excluded from your income under

The discharge must have been made by a qualified person.

section 108(a).

Generally, a qualified person is an individual, organization, etc.,

who is actively and regularly engaged in the business of lending

The election to reduce the basis of depreciable property

money. This person cannot be related to you, be the person

under section 108(b)(5) and the election made on line 1d of Part

from whom you acquired the property, or be a person who

I regarding the discharge of qualified real property business

receives a fee with respect to your investment in the property. A

indebtedness must be made on a timely filed return (including

qualified person also includes any federal, state, or local

extensions) and can be revoked only with the consent of the

government or agency or instrumentality thereof.

IRS.

If you checked line 1c and did not make the election on line 5,

If you timely filed your tax return without making either of

the debt discharge amount will be applied to reduce the tax

these elections, you can still make either election by filing an

attributes in the order listed on lines 6 through 9. Any remaining

amended return within 6 months of the due date of the return

amount will be applied to reduce the tax attributes in the order

(excluding extensions). Write “Filed pursuant to section

listed on lines 11a through 13.

301.9100-2” on the amended return and file it at the same place

you filed the original return.

You cannot exclude more than the total of your (a) tax

attributes (determined under section 108(g)(3)(B)) and (b) basis

Specific Instructions

of property used or held for use in a trade or business or for the

production of income. Any excess is included in income.

Part I

Line 1d

The American Recovery and Reinvestment Act of 2009 allows

If you check this box, the discharge of qualified real property

certain businesses to elect under section 108(i) to defer and

business indebtedness is applied to reduce the basis of

include ratably over a 5-taxable-year period, beginning with the

depreciable real property on line 4. The exclusion relating to

taxpayer's fourth or fifth taxable year following the taxable year

qualified real property business indebtedness does not apply to

of the reacquisition, any income from the discharge of business

a discharge that occurs in a title 11 case or to the extent you

debt arising from the reacquisition of certain types of business

were insolvent.

debt repurchased in 2009 and 2010. For more details, including

Qualified real property business indebtedness is indebtedness

how to make this election, see section 108(i) and Rev. Proc.

(other than qualified farm indebtedness) that (a) is incurred or

2009-37, 2009-36 I.R.B. 309, available at

assumed in connection with real property used in a trade or

irb/2009-36_IRB/ar07.html.

business, (b) is secured by that real property, and (c) with

If you made an election under section 108(i) to defer

▲

respect to which you have made an election under this

income from the discharge of business debt arising

provision. This provision does not apply to a corporation (other

from the reacquisition of a debt instrument, you

than an S corporation).

CAUTION

cannot exclude on lines 1a through 1d the income

Indebtedness incurred or assumed after 1992 is not qualified

from the discharge of such indebtedness for the taxable year of

real property business indebtedness unless it is either (a) debt

the election or any subsequent taxable year.

incurred to refinance qualified real property business

Line 1b

indebtedness incurred or assumed before 1993 (but only to the

extent the amount of such debt does not exceed the amount of

The insolvency exclusion does not apply to any discharge that

debt being refinanced) or (b) qualified acquisition indebtedness.

occurs in a title 11 case. It also does not apply to a discharge of

qualified principal residence indebtedness (see the instructions

for line 1e on page 4) unless you elect to have the insolvency

exclusion apply instead of the exclusion for qualified principal

residence indebtedness.

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