IRS Form 982 Reduction of Tax Attributes Due to Discharge of Indebtedness (And Section 1082 Basis Adjustment)

What Is IRS Form 982?

IRS Form 982, Reduction of Tax Attributes Due to Discharge of Indebtedness (and Section 1082 Basis Adjustment) is a document you fill out to figure and request the exclusion of the amount of discharged debts from your gross income. It was created and issued by the Internal Revenue Service (IRS). The last revision of the form took place in March 2018. Download and complete the IRS Form 982 fillable version using the link provided below.

Who Can Use IRS Form 982?

The situations when you would need to apply for a reduction of the taxes you have to pay on the forgiven debt and IRS Section 1082 basis adjustment include the following:

  • You were released of your debt under Title 11 (in case of bankruptcy). The discharge, in this case, must either be granted by the court or be under a plan approved by the court;
  • The debt was discharged due to your insolvency excluding Title 11 and qualified principal residence cases;
  • You were released of qualified farm debt, i.e., the debt that occurred due to the farming trade or business;
  • The discharged debt was qualified real property business debt. This includes debts incurred in connection with a real property you used in trade or business, as well as debts secured by the real property. Corporations do not apply in this case except for S corporations;
  • You were released from the debt connected with your qualified principal residence, like the mortgage you took to purchase, improve, or build your main home.

If any of the above-mentioned applies, fill out your form.

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IRS Form 982 Instructions

The IRS Form 982 is a simple one-page document. Fill it out using the following instructions:

  1. Provide your name and identifying number as indicated on your income tax return;
  2. Line 1. Determine whether you claim the reduction of tax attributes due to insolvency, release from qualified farm indebtedness, principal residence debt, or other. Read the detailed description of each case provided in the IRS-issued Form 982 Instructions carefully before checking the applicable box;
  3. Line 2. Provide the total amount you want to exclude from your gross income because of release from paying off debt. The debt discharge amount may exceed the total tax attributes in some cases, so if you have checked Line 1a, 1b, or 1c above, the amount in this line may differ from the total reductions on lines 5 through 3;
  4. Line 3. Choose if you want to treat the real property held for sale to customers as the depreciable property. Note that the election is not applicable to the release from real property business debts;
  5. Part II. Reduction of Tax Attributes. If you have checked box on Lines 1a - 1c, you can request to reduce the basis of depreciable property, including the property you have elected on Line 3, by filling out Line 5. If you do not complete Line 5, fill out Lines 6 - 13 (except for Line 10b) for tax attributes reduction;
  6. Line 7. Fill out this line to reduce general business credit carryover. The carryover is reduced by 331/3 cents per each dollar you exclude from gross income. Find the details on the general business credit and rules for the calculation of carryforward or carryback on IRS Form 3800, General Business Credit;
  7. Line 10a. Complete this line to reduce the basis of non-depreciable and depreciable property for cases that do not apply to be reported on Line 5. Do not fill out this line if you have checked Line 1c;
  8. Line 10b. Complete it to reduce the basis of your principal residence. If you were discharged from your principal resident debt but still remain the owner of the home, enter either the basis of your primary residence or the part of Line 2 that refers to the exclusion of the principal residence debt. Enter the smaller amount of the two;
  9. Part III. Consent of Corporation to Adjustment of Basis of its Property under Section 1082(a)(2). By completing this form, you agree that the basis of your corporation property is adjusted according to the general rule. If you want to amend it, attach a request for variation to this form.

Check the information provided on the form attentively to avoid issues with the IRS. Do not forget to attach a description of all transactions that result in basis reduction under Section 1017.

Where to Send IRS Form 982?

File IRS 982 when claiming your tax deductions and submitting your federal income tax return. Attach this form to your tax return documents and send them to the same address. Send it to the same address you sent the initial return even if you are filing this form later. The exact address depends on the state you live in. Find the full list of addresses on the IRS website.

Download IRS Form 982 Reduction of Tax Attributes Due to Discharge of Indebtedness (And Section 1082 Basis Adjustment)

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