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Department of the Treasury
Internal Revenue Service
Instructions for Form 982

(Rev. January 2020)
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 attributes either dollar for dollar or 33 /1 3 Discharge of Indebtedness. The term
Code unless otherwise noted. cents per dollar (as explained later). discharge of indebtedness conveys
General Instructions Certain individuals may need to forgiveness of, or release from, an
TIP complete only a few lines on Form obligation to repay.
Future Developments 982. For example, if you are When To File
For the latest information about completing this form because of a
developments related to Form 982 and its discharge of indebtedness on a personal File Form 982 with your federal income tax
instructions, such as legislation enacted loan (such as a car loan or credit card return for a year a discharge of
after they were published, go to IRS.gov/ debt) or a loan for the purchase of your indebtedness is excluded from your
Form982. principal residence, follow the chart, later, income under section 108(a).
to see which lines you need to complete. The election to reduce the basis of
What’s New Also, see Pub. 4681, Canceled Debts, depreciable property under section 108(b)
Foreclosures, Repossessions, and (5) and the election made on line 1d of
Discharge of qualified principal resi- Abandonments, for additional information. Part I regarding the discharge of qualified
dence indebtedness before 2021.
Qualified principal residence real property business indebtedness must
indebtedness can be excluded from Definitions be made on a timely filed return (including
income for discharges before January 1, Title 11 case. A title 11 case is a case extensions) and can be revoked only with
2021. under title 11 of the United States Code the consent of the IRS.
(relating to bankruptcy), but only if you are If you timely filed your tax return without
Purpose of Form under the jurisdiction of the court in the making either of these elections, you can
Generally, the amount by which you case and the discharge of indebtedness is still make either election by filing an
benefit from the discharge of granted by the court or is under a plan amended return within 6 months of the
indebtedness is included in your gross approved by the court. due date of the return (excluding
income. However, under certain extensions). Write “Filed pursuant to
circumstances described in section 108, You may know your title 11 case
you can exclude the amount of discharged TIP by the chapter (such as, for section 301.9100–2” on the amended
indebtedness from your gross income. example, chapter 7, 11, 12, or 13) return and file it at the same place you
under title 11 that you sought debt relief. filed the original return.
You must file Form 982 to report the
exclusion and the reduction of certain tax

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 in 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
after 2017.
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.

Jan 22, 2020 Cat. No. 69707U

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How To Complete the Form (cont.)

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 in 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 indebtednesss 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 three 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 after 2020 principal residence indebtedness. If your
and the discharge is subject to an main home is sold for $700,000 and
If you check this box, the discharge of arrangement that was entered into and $300,000 of debt is discharged, only
qualified real property business evidenced in writing before January 1, $100,000 of the debt discharged can be
indebtedness is applied to reduce the 2021. excluded (the $300,000 that was
basis of depreciable real property on Also, do not check box 1e if the discharge discharged minus the $200,000 of
line 4. The exclusion relating to qualified occurs in a title 11 case. You must check nonqualified debt). The remaining
real property business indebtedness the box on line 1a and not this box. If you $200,000 of nonqualified debt may qualify
doesn’t apply to a discharge that occurs in are insolvent (and not in a title 11 case), in whole or in part for one of the other
a title 11 case or to the extent you were you can elect to follow the insolvency rules exclusions, such as the insolvency
insolvent. by checking box 1b instead of checking exclusion.
box 1e. For more information, see Pub.
Qualified real property business 4681. Line 2
indebtedness is indebtedness (other than
qualified farm indebtedness) that (a) is If you do check box 1e, be sure Enter the total amount excluded from your
incurred or assumed in connection with TIP you complete line 2 (and line 10b gross income due to discharge of
real property used in a trade or business, if you continue to own the indebtedness under section 108. If you
(b) is secured by that real property, and (c) residence after discharge). checked any box on lines 1b through 1e,
with respect to which you have made an don’t enter more than the limit explained in
election under this provision. This Principal residence. Your principal the instructions for those lines. If you
provision doesn’t apply to a corporation residence is your main home, which is the checked line 1a, 1b, or 1c, this amount
(other than an S corporation). home where you ordinarily live most of the won’t necessarily equal the total
time. You can have only one main home at reductions on lines 5 through 13
Indebtedness incurred or assumed any one time. (excluding line 10b) because the debt
after 1992 isn’t qualified real property Qualified principal residence indebted- discharge amount may exceed the total
business indebtedness unless it is either ness. This indebtedness is a mortgage tax attributes. If you checked line 1e, this
(a) debt incurred to refinance qualified real you took out to buy, build, or substantially amount won’t necessarily equal the total
property business indebtedness incurred improve your main home. It also must be basis reduction on line 10b (which is
or assumed before 1993 (but only to the secured by your main home. If the amount required only if you continue to own the
extent the amount of such debt doesn’t of your original mortgage is more than the residence after the discharge).
exceed the amount of debt being cost of your main home plus the cost of
refinanced) or (b) qualified acquisition any substantial improvements, only the See section 382(l)(5) for a special rule
indebtedness. debt that is not more than the cost of your regarding a reduction of a corporation’s
main home plus improvements is qualified tax attributes after certain ownership
Qualified acquisition indebtedness is changes.
principal residence indebtedness. Any
(a) debt incurred or assumed to acquire,
debt secured by your main home that you
construct, reconstruct, or substantially
use to refinance qualified principal
improve real property that is secured by Line 3
residence indebtedness is treated as
such debt and (b) debt resulting from the You can elect under section 1017(b)(3)(E)
qualified principal residence
refinancing of qualified acquisition to treat all real property held primarily for
indebtedness, but only up to the amount of
indebtedness to the extent the amount of sale to customers in the ordinary course of
the old mortgage principal just before the
such debt doesn’t exceed the amount of a trade or business as if it were
refinancing. Any additional debt you
debt being refinanced. depreciable property. This election
incurred to substantially improve your doesn’t apply to the discharge of qualified
You can’t exclude more than the main home is also treated as qualified real property business indebtedness. To
excess of the outstanding principal principal residence indebtedness. make the election, check the “Yes” box.
amount of the debt (immediately before Amount eligible for the exclusion. The
the discharge) over the net FMV (as of exclusion applies only to debt discharged Part II
that time) of the property securing the debt after 2006 and in most cases before 2021. Basis Reduction
reduced by the outstanding principal The maximum amount you can treat as
amount of other qualified real property qualified principal residence indebtedness If you check any of the boxes on lines 1a
business indebtedness secured by that is $2 million ($1 million if married filing through 1c, you can elect, by completing
property (as of that time). The amount separately). You can’t exclude from gross line 5, to apply all or a part of the debt
excluded is further limited to the income discharge of qualified principal discharge amount to first reduce the basis
aggregate adjusted basis (as of the first residence indebtedness if the discharge of depreciable property (including property
day of the next tax year or, if earlier, the was for services performed for the lender you elected on line 3 to treat as
date of disposition) of depreciable real or on account of any other factor not depreciable property). Any balance of the
property (determined after any reductions directly related to a decline in the value of debt discharge amount will then be
under sections 108(b) and (g)) you held your residence or to your financial applied to reduce the tax attributes in the
immediately before the discharge (other condition. order listed on lines 6 through 13
than property acquired in contemplation of (excluding line 10b). You must attach a
the discharge). Any excess is included in Ordering rule. If only a part of a loan is statement describing the transactions that
income. qualified principal residence resulted in the reduction in basis under
indebtedness, the exclusion applies only section 1017 and identifying the property
to the extent the amount discharged for which you reduced the basis. If you
Line 1e exceeds the amount of the loan don’t make the election on line 5,
Only check the box on line 1e if the (immediately before the discharge) that is complete lines 6 through 13 (excluding
income you exclude is from discharge of not qualified principal residence line 10b) to reduce your attributes. See
qualified principal residence indebtedness indebtedness. For example, assume your section 1017(b)(2) and (c) for limitations of
and one of the following applies. main home is secured by a debt of $1 reductions in basis on line 10a.
• The debt was discharged before 2021. million, of which $800,000 is qualified

Instructions for Form 982 (Rev. 1-2020) -3-

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

-4- Instructions for Form 982 (Rev. 1-2020)

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