Q:

What is IRS Form 982?

A:

The title of Form 982 is "Reduction of Tax Attributes Due to Discharge of Indebtedness (and Section 1082 Basis Adjustment)." It is used to exclude income from the cancellation of debt under bankruptcy, insolvency or other sections of the U.S. Tax Code, according to Internal Revenue Service Publication 4681.

When a debt is cancelled or forgiven for less than its full amount, the debtor is treated as having income and may have to pay tax on it. Under some circumstances, this income can be excluded from taxation. If the taxpayer excludes income from cancelled debt, he may be required to adjust other tax attributes such as certain credits, losses or basis of assets. Form 982 is used to report this as well.

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