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Department of the Treasury
Internal Revenue Service
Instructions for Form 982

(Rev. December 2021)
Reduction of Tax Attributes Due to Discharge of Indebtedness (and Section 1082
Basis Adjustment)
(For use with Form 982 (Rev. March 2018))

Section references are to the Internal Revenue income. However, under certain Discharge of indebtedness. The term
Code unless otherwise noted. circumstances described in section 108, “discharge of indebtedness” conveys
you can exclude the amount of discharged forgiveness of, or release from, an
General Instructions indebtedness from your gross income. obligation to repay.
Future Developments You must file Form 982 to report the
exclusion and the reduction of certain tax When To File
For the latest information about attributes either dollar for dollar or 33 /1 3 File Form 982 with your federal income tax
developments related to Form 982 and its cents per dollar (as explained later). return for a year a discharge of
instructions, such as legislation enacted indebtedness is excluded from your
after they were published, go to IRS.gov/ Certain individuals may need to income under section 108(a).
Form982. TIP complete only a few lines on Form
982. For example, if you are The election to reduce the basis of
What’s New completing this form because of a depreciable property under section 108(b)
Discharge of qualified principal resi- discharge of indebtedness on a personal (5) and the election made on line 1d of
dence indebtedness before 2026. loan (such as a car loan or credit card Part I regarding the discharge of qualified
Qualified principal residence debt) or a loan for the purchase of your real property business indebtedness must
indebtedness can be excluded from principal residence, follow the chart, later, be made on a timely filed return (including
income for discharges before January 1, to see which lines you need to complete. extensions) and can be revoked only with
2026, or discharges subject to an Also, see Pub. 4681, Canceled Debts, the consent of the IRS.
arrangement that was entered into and Foreclosures, Repossessions, and
evidenced in writing before January 1, Abandonments, for additional information. If you timely filed your tax return without
making either of these elections, you can
2026. still make either election by filing an
Amount eligible for the exclusion. Definitions amended return within 6 months of the
The maximum amount you can treat as Title 11 case. A “title 11 case” is a case due date of the return (excluding
qualified principal residence indebtedness under title 11 of the United States Code extensions). Write “Filed pursuant to
is $750,000 ($375,000 if married filing (relating to bankruptcy), but only if you are section 301.9100-2” on the amended
separately). under the jurisdiction of the court in the return and file it at the same place you
Purpose of Form case and the discharge of indebtedness is filed the original return.
granted by the court or is under a plan
Generally, the amount by which you approved by the court.
benefit from the discharge of
indebtedness is included in your gross You may know your title 11 case
TIP by the chapter (such as, for
example, chapter 7, 11, 12, or 13)
under title 11 that you sought debt relief.

How To Complete the Form

IF the discharged debt you are THEN follow these steps . . .
excluding is . . .
Qualified principal residence 1. Be sure to read the definition of qualified principal residence indebtedness on Line 1e, later. Part or
indebtedness all of your debt may not qualify for the exclusion on line 1e but may qualify for one of the other exclusions.
2. Check the box on line 1e. See Line 1e, later, before checking the box if the debt was discharged
before 2026.
3. 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.
See Pub. 4681 for more information. If you disposed of your residence, you may also be required to
recognize gain on its disposition. For details, see Pub. 523, Selling Your Home.
4. If you continue to own your residence after the discharge, enter on line 10b the smaller 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.
If the discharge is in a title 11 case, you can’t check box 1e. You must check box 1a
! and complete the form as discussed later under A nonbusiness debt. If you are
CAUTION insolvent (and not in a title 11 case), you can elect to follow the insolvency rules by
checking box 1b instead of box 1e and completing the form as discussed later under A
nonbusiness debt.

Dec 16, 2021 Cat. No. 69707U

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How To Complete the Form (continued)

IF the discharged debt you are THEN follow these steps . . .
excluding is . . .
A nonbusiness debt (other than Follow these instructions if you don’t have any of the tax attributes listed in Part II (other than a basis in
qualified principal residence nondepreciable property). Otherwise, follow the instructions for Any other debt, later.
indebtedness, such as a car loan or 1. Check the box on line 1a if the discharge was made in a title 11 case (see Definitions, earlier) or
credit card debt) the box on line 1b if the discharge occurred when you were insolvent (see Line 1b, later).
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.
3. Include on line 10a the smallest of (a) the basis of your nondepreciable 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.
1. Any net operating loss (NOL) for the tax year of the discharge (and any NOL carryover to that year)
(dollar for dollar);
2. Any general business credit carryover to or from the tax year of the discharge (33 / cents per 1 3
dollar);
3. Any minimum tax credit as of the beginning of the tax year immediately after the tax year of the
discharge (33 / cents per dollar);1 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);
5. The basis of property (dollar for dollar);
6. Any passive activity loss (dollar for dollar) and credit (33 / cents per dollar) carryovers from the tax 1 3
year of the discharge; and
7. Any foreign tax credit carryover to or from the tax year of the discharge (33 / cents per dollar).1 3
Use Part III to exclude from gross income under section 1081(b) any amounts of income attributable to the
transfer of property described in that section.

Specific Instructions details and a worksheet to help calculate The discharge must have been made
insolvency, see Pub. 4681. by a qualified person. Generally, a
Part I Example. You were released from “qualified person” is an individual,
The time for making a section your obligation to pay your credit card organization, etc., who is actively and
debt in the amount of $5,000. The FMV of regularly engaged in the business of
! 108(i) election has passed. If you your total assets immediately before the lending money. This person can’t be
CAUTION made an election under section
108(i) to defer income from the discharge discharge was $7,000 and your liabilities related to you, be the person from whom
of business debt arising from the were $10,000. You were insolvent to the you acquired the property, or be a person
reacquisition of a debt instrument in 2009 extent of $3,000 ($10,000 of total liabilities who receives a fee with respect to your
or 2010, don’t report the amount deferred minus $7,000 of total assets). Check the investment in the property. A qualified
under the election on lines 1a through 1d box on line 1b and include $3,000 on person also includes any federal, state, or
and line 2. line 2. local government or agency or
instrumentality thereof.
Line 1c If you checked line 1c and didn’t make
Line 1b
Check this box if the income you exclude the election on line 5, the debt discharge
The insolvency exclusion doesn’t apply to is from the discharge of qualified farm amount will be applied to reduce the tax
any discharge that occurs in a title 11 indebtedness. The exclusion relating to attributes in the order listed on lines 6
case. It also doesn’t apply to a discharge qualified farm indebtedness doesn’t apply through 9. Any remaining amount will be
of qualified principal residence to a discharge that occurs in a title 11 case applied to reduce the tax attributes in the
indebtedness (see Line 1e, later) unless or to the extent you were insolvent. order listed on lines 11a through 13.
you elect to have the insolvency exclusion
apply instead of the exclusion for qualified You can’t exclude more than the total
principal residence indebtedness. “Qualified farm indebtedness” is the of your (a) tax attributes (determined
amount of indebtedness incurred directly under section 108(g)(3)(B)), and (b) basis
Check the box on line 1b if the in connection with the trade or business of of property used or held for use in a trade
discharge of indebtedness occurred while farming. In addition, 50% or more of your or business or for the production of
you were insolvent. You were insolvent to aggregate gross receipts for the 3 tax income. Any excess is included in income.
the extent that your liabilities exceeded the years preceding the tax year in which the
fair market value (FMV) of your assets discharge of such indebtedness occurs
immediately before the discharge. For must be from the trade or business of
farming. For more information, see
sections 108(g) and 1017(b)(4).

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Line 1d • The debt was discharged subject to an main home is secured by a debt of $1
arrangement that was entered into and million, of which $800,000 is qualified
If you check this box, the discharge of evidenced in writing before January 1, principal residence indebtedness. If your
qualified real property business 2026. main home is sold for $700,000 and
indebtedness is applied to reduce the Also, do not check box 1e if the discharge $300,000 of debt is discharged, only
basis of depreciable real property on occurs in a title 11 case. You must check $100,000 of the debt discharged can be
line 4. The exclusion relating to qualified the box on line 1a and not this box. If you excluded (the $300,000 that was
real property business indebtedness are insolvent (and not in a title 11 case), discharged minus the $200,000 of
doesn’t apply to a discharge that occurs in you can elect to follow the insolvency rules nonqualified debt). The remaining
a title 11 case or to the extent you were by checking box 1b instead of checking $200,000 of nonqualified debt may qualify
insolvent. box 1e. For more information, see Pub. in whole or in part for one of the other
4681. exclusions, such as the insolvency
“Qualified real property business exclusion.
indebtedness” is indebtedness (other than If you do check box 1e, be sure
qualified farm indebtedness) that (a) is TIP you complete line 2 (and line 10b
incurred or assumed in connection with if you continue to own the Line 2
real property used in a trade or business, residence after discharge). Enter the total amount excluded from your
(b) is secured by that real property, and (c) gross income due to discharge of
with respect to which you have made an Principal residence. Your principal indebtedness under section 108. If you
election under this provision. This residence is your “main home,” which is checked any box on lines 1b through 1e,
provision doesn’t apply to a corporation the home where you ordinarily live most of don’t enter more than the limit explained in
(other than an S corporation). the time. You can have only one main the instructions for those lines. If you
home at any one time. checked line 1a, 1b, or 1c, this amount
Indebtedness incurred or assumed Qualified principal residence indebted- won’t necessarily equal the total
after 1992 isn’t qualified real property ness. This indebtedness is a mortgage reductions on lines 5 through 13
business indebtedness unless it is either you took out to buy, build, or substantially (excluding line 10b) because the debt
(a) debt incurred to refinance qualified real improve your main home. It must also be discharge amount may exceed the total
property business indebtedness incurred secured by your main home. If the amount tax attributes. If you checked line 1e, this
or assumed before 1993 (but only to the of your original mortgage is more than the amount won’t necessarily equal the total
extent the amount of such debt doesn’t cost of your main home plus the cost of basis reduction on line 10b (which is
exceed the amount of debt being any substantial improvements, only the required only if you continue to own the
refinanced), or (b) qualified acquisition debt that is not more than the cost of your residence after the discharge).
indebtedness. main home plus improvements is qualified
principal residence indebtedness. Any See section 382(l)(5) for a special rule
“Qualified acquisition indebtedness” is regarding a reduction of a corporation’s
debt secured by your main home that you
(a) debt incurred or assumed to acquire, tax attributes after certain ownership
use to refinance qualified principal
construct, reconstruct, or substantially changes.
residence indebtedness is treated as
improve real property that is secured by
qualified principal residence
such debt; and (b) debt resulting from the
indebtedness, but only up to the amount of
refinancing of qualified acquisition Line 3
the old mortgage principal just before the
indebtedness to the extent the amount of You can elect under section 1017(b)(3)(E)
refinancing. Any additional debt you
such debt doesn’t exceed the amount of to treat all real property held primarily for
incurred to substantially improve your
debt being refinanced. sale to customers in the ordinary course of
main home is also treated as qualified a trade or business as if it were
You can’t exclude more than the principal residence indebtedness. depreciable property. This election
excess of the outstanding principal Amount eligible for the exclusion. The doesn’t apply to the discharge of qualified
amount of the debt (immediately before exclusion applies only to debt discharged real property business indebtedness. To
the discharge) over the net FMV (as of before 2026 or discharged subject to an make the election, check the “Yes” box.
that time) of the property securing the debt arrangement that was entered into and
reduced by the outstanding principal evidenced in writing before January 1, Part II
amount of other qualified real property 2026. The maximum amount you can treat Basis Reduction
business indebtedness secured by that as qualified principal residence
property (as of that time). The amount indebtedness is $750,000 ($375,000 if If you check any of the boxes on lines 1a
excluded is further limited to the married filing separately) after 2020 and through 1c, you can elect, by completing
aggregate adjusted basis (as of the first before 2026. You can’t exclude from gross line 5, to apply all or a part of the debt
day of the next tax year or, if earlier, the income discharge of qualified principal discharge amount to first reduce the basis
date of disposition) of depreciable real residence indebtedness if the discharge of depreciable property (including property
property (determined after any reductions was for services performed for the lender you elected on line 3 to treat as
under sections 108(b) and (g)) you held or on account of any other factor not depreciable property). Any balance of the
immediately before the discharge (other directly related to a decline in the value of debt discharge amount will then be
than property acquired in contemplation of your residence or to your financial applied to reduce the tax attributes in the
the discharge). Any excess is included in condition. order listed on lines 6 through 13
income. (excluding line 10b). You must attach a
Ordering rule. If only a part of a loan is statement describing the transactions that
qualified principal residence resulted in the reduction in basis under
Line 1e indebtedness, the exclusion applies only section 1017 and identifying the property
Only check the box on line 1e if the to the extent the amount discharged for which you reduced the basis. If you
income you exclude is from discharge of exceeds the amount of the loan don’t make the election on line 5,
qualified principal residence indebtedness (immediately before the discharge) that is complete lines 6 through 13 (excluding
and one of the following applies. not qualified principal residence line 10b) to reduce your attributes. See
• The debt was discharged before 2026. indebtedness. For example, assume your

Instructions for Form 982 (Rev. 12-2021) -3-

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section 1017(b)(2) and (c) for limitations of Part III You aren’t required to provide the
reductions in basis on line 10a. information requested on a form that is
Adjustment to Basis subject to the Paperwork Reduction Act
Line 7 Unless it specifically states otherwise, the unless the form displays a valid OMB
corporation, by filing this form, agrees to control number. Books or records relating
If you have a general business credit apply the general rule for adjusting the to a form or its instructions must be
carryover to or from the tax year of the basis of property (as described in retained as long as their contents may
discharge, you must reduce that carryover Regulations section 1.1082-3(b)). become material in the administration of
by 33 / cents for each dollar excluded 1 3 any Internal Revenue law. Generally, tax
from gross income. See Form 3800, returns and return information are
General Business Credit, for more details If the corporation desires to have the
on the general business credit, including basis of its property adjusted in a manner confidential, as required by section 6103.
rules for figuring any carryforward or different from the general rule, it must
carryback. attach a request for variation from the The time needed to complete and file
general rule. The request must show the this form will vary depending on individual
precise method used and the allocation of circumstances. The estimated burden for
Line 10a amounts. individual and business taxpayers filing
this form is approved under OMB control
In the case of a title 11 case or insolvency, number 1545-0074 and 1545–0123 and is
the reduction in basis is limited to the Consent to the request for variation included in the estimates shown in the
aggregate of the basis of your property from the general rule will be effective only instructions for their individual and
immediately after the discharge over the if it is incorporated in a closing agreement business income tax return. The estimated
aggregate of your liabilities immediately entered into by the corporation and the burden for all other taxpayers who file this
after the discharge. However, this limit Commissioner of Internal Revenue under form is shown as follows:
doesn’t apply to a reduction in basis the rules of section 7121. If no agreement Recordkeeping, 5 hr., 58 min.; Learning
reported on line 5 pursuant to section is entered into, then the general rule will about the law or the form, 2 hr., 34 min.;
108(b)(5). apply in determining the basis of the Preparing and sending the form to the
corporation’s property. IRS, 2 hr., 48 min.
Line 10b
Paperwork Reduction Act Notice. We If you have comments concerning the
If box 1e is checked and you continue to ask for the information on this form to carry accuracy of these time estimates or
own the residence after discharge, enter out the Internal Revenue laws of the suggestions for making this form simpler,
the smaller of: United States. You are required to give us we would be happy to hear from you. See
• That part of line 2 that is attributable to the information. We need it to ensure that the instructions for the tax return with
the exclusion of qualified principal you are complying with these laws and to which this form is filed.
residence indebtedness, or allow us to figure and collect the right
• The basis of your main home. amount of tax.

-4- Instructions for Form 982 (Rev. 12-2021)

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