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. 1-2016)

Page

Line 1c

Certain individuals may need to complete only a few

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

TIP

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

this form because of a discharge of indebtedness on

of qualified farm indebtedness. The exclusion relating to

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

qualified farm indebtedness doesn’t apply to a discharge that

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

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

follow the chart, earlier, to see which lines you need to

Qualified farm indebtedness is the amount of indebtedness

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

Repossessions, and Abandonments, for additional information.

incurred directly in connection with the trade or business of

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

Definitions

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

the discharge of such indebtedness occurs must be from the

Title 11 Case

trade or business of farming. For more information, see sections

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

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

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

The discharge must have been made by a qualified person.

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

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

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

who is actively and regularly engaged in the business of lending

money. This person can’t be related to you, be the person from

Discharge of Indebtedness

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

fee with respect to your investment in the property. A qualified

The term discharge of indebtedness conveys forgiveness of, or

person also includes any federal, state, or local government or

release from, an obligation to repay.

agency or instrumentality thereof.

When To File

If you checked line 1c and didn’t make the election on line 5,

the debt discharge amount will be applied to reduce the tax

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

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

discharge of indebtedness is excluded from your income under

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

section 108(a).

listed on lines 11a through 13.

The election to reduce the basis of depreciable property

You can’t exclude more than the total of your (a) tax attributes

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

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

I regarding the discharge of qualified real property business

used or held for use in a trade or business or for the production

indebtedness must be made on a timely filed return (including

of income. Any excess is included in income.

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

IRS.

Line 1d

If you timely filed your tax return without making either of

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

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

business indebtedness is applied to reduce the basis of

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

depreciable real property on line 4. The exclusion relating to

(excluding extensions). Write “Filed pursuant to section

qualified real property business indebtedness doesn’t apply to a

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

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

you filed the original return.

insolvent.

Specific Instructions

Qualified real property business indebtedness is indebtedness

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

Part I

assumed in connection with real property used in a trade or

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

The time for making a section 108(i) election has

▲

respect to which you have made an election under this

passed. If you made an election under section 108(i)

provision. This provision doesn’t apply to a corporation (other

to defer income from the discharge of business debt

than an S corporation).

CAUTION

arising from the reacquisition of a debt instrument

Indebtedness incurred or assumed after 1992 isn’t qualified

in 2009 or 2010, don’t report the amount deferred under the

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

election in lines 1a through 1d and line 2.

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 doesn’t exceed the amount of

The insolvency exclusion doesn’t apply to any discharge that

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

occurs in a title 11 case. It also doesn’t apply to a discharge of

Qualified acquisition indebtedness is (a) debt incurred or

qualified principal residence indebtedness (see the instructions

assumed to acquire, construct, reconstruct, or substantially

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

improve real property that is secured by such debt and (b) debt

exclusion apply instead of the exclusion for qualified principal

resulting from the refinancing of qualified acquisition

residence indebtedness.

indebtedness to the extent the amount of such debt doesn’t

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

exceed the amount of debt being refinanced.

occurred while you were insolvent. You were insolvent to the

You can’t exclude more than the excess of the

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

outstanding principal amount of the debt (immediately before

of your assets immediately before the discharge. For details and

the discharge) over the net FMV (as of that time) of the

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

property securing the debt reduced by the outstanding principal

Example. You were released from your obligation to pay your

amount of other qualified real property business indebtedness

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

secured by that property (as of that time). The amount excluded

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

is further limited to the aggregate adjusted basis (as of the first

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

day of the next tax year or, if earlier, the date of disposition) of

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

depreciable real property (determined after any reductions

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

under sections 108(b) and (g)) you held immediately before the

discharge (other than property acquired in contemplation of the

discharge). Any excess is included in income.

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