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                Publication 4681
                Cat. No. 51508F                                                  Contents
                                                                                 What's New   . . . . . . . . . . . . . . . . . . 1
Department 
of the          Canceled Debts,                                                  Reminder . . . . . . . . . . . . . . . . . . . . 2
Treasury
Internal                                                                         Introduction . . . . . . . . . . . . . . . . . . 2
Revenue         Foreclosures, 
Service                                                                          Common Situations Covered in This 
                                                                                 Publication . . . . . . . . . . . . . . . . 2
                Repossessions, 
                                                                                 Chapter  1.  Canceled Debts        . . . . . . . . 3
                                                                                 Form 1099-C      . . . . . . . . . . . . . . . 3
                and                                                              Discounts and Loan 
                                                                                             Modifications . . . . . . . . . . . . . 4
                                                                                 Sales or Other Dispositions 
                Abandonments                                                                 (Such as Foreclosures and 
                                                                                             Repossessions)   . . . . . . . . . . . 4
                                                                                 Abandonments . . . . . . . . . . . . . . 4
                (for Individuals)                                                Stockholder Debt . . . . . . . . . . . . . 4
                                                                                 Exceptions . . . . . . . . . . . . . . . . . . . 4
                                                                                 Gifts, Bequests, Devises, and 
                For use in preparing                                                         Inheritances . . . . . . . . . . . . . . 4
                                                                                 Student Loans      . . . . . . . . . . . . . . 4
                                                                                 Deductible Debt           . . . . . . . . . . . . . 5
                2023 Returns                                                     Price Reduced After Purchase             . . . . . 6
                                                                                 Exclusions . . . . . . . . . . . . . . . . . . . 6
                                                                                 Bankruptcy     . . . . . . . . . . . . . . . . 6
                                                                                 Insolvency . . . . . . . . . . . . . . . . . 6
                                                                                 Insolvency Worksheet . . . . . . . . . . 7
                                                                                 Qualified Farm Indebtedness . . . . . . 8
                                                                                 Qualified Real Property 
                                                                                             Business Indebtedness    . . . . . . . 8
                                                                                 Qualified Principal Residence 
                                                                                             Indebtedness . . . . . . . . . . . . . 9
                                                                                 Reduction of Tax Attributes      . . . . . . . .   10
                                                                                 Qualified Principal Residence 
                                                                                             Indebtedness . . . . . . . . . . . .   10
                                                                                 Bankruptcy and Insolvency            . . . . . .   10
                                                                                 Qualified Farm Indebtedness . . . . .              11
                                                                                 Qualified Real Property 
                                                                                             Business Indebtedness    . . . . . .   12
                                                                                 Chapter  2.  Foreclosures and 
                                                                                 Repossessions             . . . . . . . . . . . .  12
                                                                                 Worksheet for Foreclosures and 
                                                                                             Reposessions   . . . . . . . . . . .   13
                                                                                 Chapter  3.  Abandonments          . . . . . . .   14
                                                                                 How To Get Tax Help . . . . . . . . . . . .        14

                                                                                 Future Developments
                                                                                 For  the  latest  information  about  developments 
                                                                                 related  to  Pub.  4681,  such  as  legislation 
                                                                                 enacted  after  it  was  published,  go  to  IRS.gov/
                                                                                 Pub4681.

                                                                                 What’s New
                Get forms and other information faster and easier at:            Discharge  of  qualified  principal  residence 
                • IRS.gov (English)         • IRS.gov/Korean (한국어)               indebtedness  before  2026.        Qualified  princi-
                • IRS.gov/Spanish (Español) • IRS.gov/Russian (Pусский)          pal  residence  indebtedness  can  be  excluded 
                • IRS.gov/Chinese (中文)      • IRS.gov/Vietnamese (Tiếng Việt)    from  income  for  discharges  before  January  1, 
                                                                                 2026.

January 03, 2024

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                                                       Comments  and  suggestions.            We  welcome 
                                                       your comments about this publication and sug-
Reminders                                              gestions for future editions.                                 Common Situations 
Discharge of student loan debt. If your stu-           You  can  send  us  comments  through                         Covered in This 
dent  loan  debt  was  discharged,  in  whole  or  in  IRS.gov/FormComments.  Or,  you  can  write  to 
part,  after  December  31,  2020,  the  amount  of    the  Internal  Revenue  Service,  Tax  Forms  and             Publication
debt  that  was  discharged  may  be  nontaxable.      Publications,  1111  Constitution  Ave.  NW, 
See Student Loans, later.                              IR-6526, Washington, DC 20224.                                The sections of this publication that apply to you 
Photographs of missing children. The Inter-            Although  we  can’t  respond  individually  to                depend on the type of debt canceled, the tax at-
nal Revenue Service is a proud partner with the        each comment received, we do appreciate your                  tributes you have, and whether or not you con-
National  Center  for  Missing  &  Exploited           feedback and will consider your comments and                  tinue to own the property that was subject to the 
Children®  (NCMEC).  Photographs  of  missing          suggestions as we revise our tax forms, instruc-              debt.  Some  examples  of  common  circumstan-
children selected by the Center may appear in          tions,  and  publications.       Don’t send  tax  ques-       ces are provided in the following paragraphs to 
this publication on pages that would otherwise         tions, tax returns, or payments to the above ad-              help guide you through this publication. These 
be  blank.  You  can  help  bring  these  children     dress.                                                        examples don't cover every situation but are in-
                                                                                                                     tended to provide general guidance for the most 
home by looking at the photographs and calling         Getting  answers  to  your  tax  questions.                   common situations.
800-THE-LOST  (800-843-5678)  if  you  recog-          If you have a tax question not answered by this 
nize a child.                                          publication or the               How To Get Tax Help section  Nonbusiness credit card debt cancellation. 
                                                       at the end of this publication, go to the IRS In-             If you had a nonbusiness credit card debt can-
Introduction                                           teractive  Tax  Assistant  page  at          IRS.gov/         celed, you may be able to exclude the canceled 
                                                       Help/ITA where you can find topics by using the               debt from income if the cancellation occurred in 
This  publication  explains  the  federal  tax  treat- search feature or viewing the categories listed.              a title 11 bankruptcy case or you were insolvent 
ment  of  canceled  debts,  foreclosures,  repos-
sessions, and abandonments.                            Getting tax forms, instructions, and pub-                     immediately before the cancellation. You should 
  Generally,  if  you  owe  a  debt  to  someone       lications.  Go  to  IRS.gov/Forms  to  download               also  read Bankruptcy  or Insolvency  under Ex-
else and they cancel or forgive that debt for less     current  and  prior-year  forms,  instructions,  and          clusions in chapter 1 to see if you can exclude 
than its full amount, you are treated for income       publications.                                                 the  canceled  debt  from  income  under  one  of 
                                                                                                                     those provisions. If you can exclude part or all of 
tax purposes as having income and may have             Ordering  tax  forms,  instructions,  and                     the canceled debt from income, you should also 
to pay tax on this income.                             publications.           Go to IRS.gov/OrderForms to or-       read Bankruptcy and Insolvency under    Reduc-
  Note. This  publication  generally  refers  to       der  current  forms,  instructions,  and  publica-            tion of Tax Attributes in chapter 1.
debt  that  is  canceled,  forgiven,  or  discharged   tions;  call  800-829-3676  to  order  prior-year 
for less than the full amount of the debt as “can-     forms  and  instructions.  The  IRS  will  process            Personal vehicle repossession.      If you had a 
celed debt.”                                           your  order  for  forms  and  publications  as  soon          personal vehicle repossessed and disposed of 
                                                       as possible. Don’t               resubmit requests you’ve al- by the lender during the year, you will need to 
  Sometimes a debt, or part of a debt, that you        ready sent us. You can get forms and publica-                 determine  your  gain  or  nondeductible  loss  on 
don't  have  to  pay  isn't  considered  canceled      tions faster online.                                          the disposition. This is explained in chapter 2. If 
debt. These exceptions are discussed later un-                                                                       the  lender  also  canceled  all  or  part  of  the  re-
der Exceptions.                                        Useful Items                                                  maining amount of the loan, you may be able to 
  Sometimes  a  canceled  debt  may  be  exclu-        You may want to see:                                          exclude  the  canceled  debt  from  income  if  the 
ded  from  your  income.  But  if  you  do  exclude                                                                  cancellation  occurred  in  a  title  11  bankruptcy 
                                                                                                                     case or you were insolvent immediately before 
canceled  debt  from  income,  you  may  be  re-       Publication                                                   the cancellation. You should read Bankruptcy or 
quired to reduce your “tax attributes.” These ex-
clusions and the reduction of tax attributes as-         225   225 Farmer's Tax Guide                                Insolvency under Exclusions in chapter 1 to see 
sociated  with  them  are  discussed  later  under                                                                   if  you  can  exclude  the  canceled  debt  from  in-
Exclusions.                                              334   334 Tax Guide for Small Business (For                 come under one of those provisions. If you can 
  Foreclosure and repossession are remedies                    Individuals Who Use Schedule C)                       exclude part or all of the canceled debt from in-
                                                                                                                     come, you should also read Bankruptcy and In-
that your lender may exercise if you fail to make        523   523 Selling Your Home                                 solvency  under Reduction  of  Tax  Attributes  in 
payments on your loan and you have previously 
                                                                                                                     chapter 1.
granted that lender a mortgage or other security         525   525 Taxable and Nontaxable Income
interest  in  some  of  your  property.  These  rem-                                                                 Main home foreclosure or abandonment.          If 
edies allow the lender to seize or sell the prop-        536   536 Net Operating Losses (NOLs) for                   a lender foreclosed on your main home during 
erty  securing  the  loan.  When  your  property  is           Individuals, Estates, and Trusts                      the year, you will need to determine your gain or 
foreclosed upon or repossessed and sold, you                                                                         loss  on  the  foreclosure.  Foreclosures  are  ex-
are treated as having sold the property and you          542   542 Corporations                                      plained in chapter 2 and abandonments are ex-
may recognize taxable gain. Whether you also                                                                         plained in chapter 3.
recognize income from canceled debt depends              544   544 Sales and Other Dispositions of 
in part on whether you are personally liable for               Assets                                                Main  home  loan  modification  (workout 
the debt and in part on whether the outstanding                                                                      agreement). If a lender agreed to a mortgage 
loan balance is more than the fair market value          551   551 Basis of Assets
                                                                                                                     loan modification (a “workout”) in 2022 that in-
(FMV) of the property. Figuring your gain or loss        908   908 Bankruptcy Tax Guide                              cluded  a  reduction  in  the  principal  balance  of 
and income from canceled debt arising from a                                                                         the  loan  in  2023,  you  should  read Qualified 
foreclosure  or  repossession  is  discussed  later                                                                  Principal Residence Indebtedness under  Exclu-
under Foreclosures and Repossessions.                  Form (and Instructions)
                                                                                                                     sions in chapter 1 to see if you can exclude part 
  Generally,  you  abandon  property  when  you          982   982 Reduction of Tax Attributes Due to                or all of the canceled debt from income. If you 
voluntarily and permanently give up possession                 Discharge of Indebtedness (and                        can  exclude  part  or  all  of  the  canceled  debt 
and use of property you own with the intention                 Section 1082 Basis Adjustment)                        from  income,  you  should  also  read  Qualified 
of ending your ownership but without passing it                                                                      Principal  Residence  Indebtedness  under   Re-
on  to  anyone  else.  Figuring  your  gain  or  loss    1099-C         1099-C Cancellation of Debt                  duction of Tax Attributes in chapter 1.
and income from canceled debt arising from an 
abandonment  is  discussed  later  under Aban-           1099-DIV              1099-DIV Dividends and Distributions
donments.
                                                         3800      3800 General Business Credit

2                                                                                                                                          Publication 4681 (2023)

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• Form 4835, line 6, if the debt is related to a Code B—Other judicial debt relief. Code
farm rental activity for which you use Form B is used to identify cancellation of debt as a re-
4835 to report farm rental income based sult of a receivership, foreclosure, or similar fed-
1. on crops or livestock produced by a tenant; eral or state court proceeding other than bank-
or ruptcy.
• Schedule F (Form 1040), line 8, if the debt
is farm debt and you are a farmer. Code C—Statute of limitations or expira-
Canceled Debts tion of deficiency period. Code C is used to
identify cancellation of debt either when the
This chapter discusses the tax treatment of Form 1099-C statute of limitations for collecting the debt ex-
canceled debts. pires or when the statutory period for filing a
If you receive a Form 1099-C, that means an claim or beginning a deficiency judgment pro-
applicable entity has reported an identifiable ceeding expires. In the case of the expiration of
General Rules event to the IRS regarding a debt you owe. For a statute of limitations, an identifiable event oc-
information on the reasons an applicable entity curs only if and when your affirmative defense
Generally, if a debt for which you are personally files Form 1099-C, see Identifiable event codes, of the statute of limitations is upheld in a final
liable is forgiven or discharged for less than the later. Unless you meet one of the exceptions or judgment or decision in a judicial proceeding,
full amount owed, the debt is considered can- exclusions discussed later, this canceled debt is and the period for appealing the judgment or
celed in whatever amount it remained unpaid. ordinary income and must be reported on the decision has expired.
There are exceptions to this rule, discussed un- appropriate form discussed above. Code D—Foreclosure election. Code D is
der Exceptions, later. Generally, you must in- If you had a student loan that was dis- used to identify cancellation of debt when the
clude the canceled debt in your income. How- TIP charged after December 31, 2020, and creditor elects foreclosure remedies that statu-
ever, you may be able to exclude the canceled the amount of the discharged loan is torily end or bar the creditor's right to pursue
debt. See Exclusions, later. nontaxable, you won’t receive a Form 1099-C collection of the debt. This event applies to a
from the lender or servicer of your student loan. mortgage lender or holder who is barred from
Example. You owed your friend $1,000. pursuing debt collection after a power of sale in
Your friend agreed to accept and you paid $400 the mortgage or deed of trust is exercised.
in satisfaction of the entire debt. You have can- An applicable entity includes the following.
celed debt of $600. 1. A financial institution. Code E—Debt relief from probate or sim-
ilar proceeding. Code E is used to identify
Example. You owed your friend.$1,000. 2. A credit union. cancellation of debt as a result of a probate
You both agreed that you would provide your 3. Any of the following, its successor, or sub- court or similar legal proceeding.
friend with services (instead of money) in full unit of one of the following. Code F—By agreement. Code F is used to
satisfaction of the debt. You don't have can- identify cancellation of debt as a result of an
celed debt. Instead, you have income from a. The Federal Deposit Insurance Cor-
services. poration (FDIC). agreement between the creditor and the debtor
to cancel the debt at less than full considera-
A debt includes any indebtedness: b. The Resolution Trust Corporation tion.
• For which you are liable, or (RTC).
Code G—Decision or policy to discon-
• Subject to which you hold property. c. The National Credit Union Administra- tinue collection. Code G is used to identify
Debt for which you are personally liable is re- tion (NCUA). cancellation of debt as a result of a decision or
course debt. All other debt is nonrecourse debt. d. Any other federal executive agency, a defined policy of the creditor to discontinue
If you aren't personally liable for the debt, including government corporations, collection activity and cancel the debt. For pur-
you don't have ordinary income from the cancel- any military department, the U.S. poses of this identifiable event, a defined policy
lation of debt unless you retain the collateral Postal Service, or the Postal Rate includes both a written policy and the creditor's
and either: Commission. established business practice.
• The lender offers a discount for the early Code H—Other actual discharge before
payment of the debt, or 4. A corporate subsidiary of a financial insti-
• The lender agrees to a loan modification tution or credit union (if the affiliation sub- identifiable event. Code H is used to identify
that results in the reduction of the principal jects the subsidiary to federal or state reg- an actual cancellation of debt that occurs before
balance of the debt. ulation). any of the identifiable events described in co-
des A through G.
See Discounts and Loan Modifications, later. 5. A federal government agency, including a
department, an agency, a court or court
However, upon the disposition of the prop- administrative office, or a judicial or legis- Form 1099-C Reference Guide for
erty securing a nonrecourse debt, the amount lative instrumentality. Box 6 Identifiable Event Codes
realized includes the entire unpaid amount of
the debt, not just the FMV of the property. As a 6. Any organization of which lending money A Bankruptcy
result, you may realize a gain or loss if the out- is a significant trade or business. B Other judicial debt relief
standing debt immediately before the disposi- For more information on the applicable entities C Statute of limitations or expiration of deficiency
tion is more or less than your adjusted basis in that must file a Form 1099-C, see the Instruc- period
the property. For more details on figuring your tions for Forms 1099-A and 1099-C, available at D Foreclosure election
gain or loss, see chapter 2 of this publication or irs.gov/instructions/i1099ac. E Debt relief from probate or similar proceeding
see Pub. 544. F By agreement
There are several exceptions and exclusions Identifiable event codes. Box 6 of Form G Decision or policy to discontinue collection
that may result in part or all of a canceled debt 1099-C should indicate the reason the creditor H Other actual discharge before identifiable event
being nontaxable. See Exceptions and Exclu- filed this form. The codes shown in box 6 are
sions, later. You must report any taxable can- explained next. Also, see the chart after the ex- Even if you didn't receive a Form
celed debt as ordinary income on: planation for a quick reference guide for the co- ! 1099-C, you must report canceled debt
• Schedule 1 (Form 1040), line 8c, if the debt des used in box 6. CAUTION as gross income on your tax return un-
is a nonbusiness debt; less one of the exceptions or exclusions descri-
• Schedule C (Form 1040), line 6, if the debt Code A—Bankruptcy. Code A is used to bed later applies.
is related to a nonfarm sole proprietorship; identify cancellation of debt as a result of a title
• Schedule E (Form 1040), line 3, if the debt 11 bankruptcy case. See Bankruptcy, later. Amount of canceled debt. The amount in
is related to nonfarm rental of real property; box 2 of Form 1099-C may represent some or
Publication 4681 (2023) Chapter 1 Canceled Debts 3

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all of the debt that has been canceled. The character of the property. If the lender forgives Gifts, Bequests, Devises,
amount in box 2 will include principal and may all or part of the amount of the debt in excess of
include interest and other nonprincipal amounts the FMV of the property, the cancellation of the and Inheritances
(such as fees or penalties). Unless you meet excess debt may result in ordinary income. The In most cases, you don't have income from can-
one of the exceptions or exclusions discussed ordinary income from the cancellation of debt celed debt if the debt is canceled as a gift, be-
later, the amount of the debt that has been can- (the excess of the canceled debt over the FMV quest, devise, or inheritance.
celed is ordinary income and must be reported of the property) must be included in your gross
on the appropriate form, as discussed earlier. income reported on your tax return unless one
of the exceptions or exclusions described later Student Loans
Interest included in canceled debt. If any in- applies. For more details, see Exceptions and
terest is included in the amount of canceled Exclusions, later. Generally, if you are responsible for making loan
debt in box 2, it will be shown in box 3. Whether payments, and the loan is canceled or repaid by
the interest portion of the canceled debt must Nonrecourse debt. If you owned property that someone else, you must include the amount
be included in your income depends on whether was subject to a nonrecourse debt in excess of that was canceled or paid on your behalf in your
the interest would be deductible if you paid it. the FMV of the property, the lender's foreclo- gross income for tax purposes. However, in cer-
See Deductible Debt under Exceptions, later. sure on the property doesn't result in ordinary tain circumstances, you may be able to exclude
income from the cancellation of debt. The entire amounts from gross income as a result of the
Persons who each receive a Form 1099-C amount of the nonrecourse debt is treated as an cancellation or repayment of certain student
showing the full amount of debt. If you and amount realized on the disposition of the prop- loans. These exclusions are for:
another person were jointly and severally liable erty. The gain or loss on the disposition of the • Student loan cancellation due to meeting
for a canceled debt, each of you may get a property is measured by the difference between certain work requirements;
Form 1099-C showing the entire amount of the the total amount realized (the entire amount of • Cancellation of certain loans after Decem-
canceled debt. However, you may not have to the nonrecourse debt plus the amount of cash ber 31, 2020, and before January 1, 2026;
report that entire amount as income. The and the FMV of any property received) and your or
amount, if any, you must report depends on all adjusted basis in the property. The character of • Student loan repayment assistance pro-
the facts and circumstances, including: the gain or loss is determined by the character grams.
• State law, of the property.
• The amount of debt proceeds each person Exclusion for student loan cancellation due
received, More information. See chapter 2 of this publi- to meeting certain work requirements. If
• How much of any interest deduction from cation and Pubs. 523, 544, and 551 for more your student loan is canceled in part or in whole
the debt was claimed by each person, details. in 2023 due to meeting certain work require-
• How much of the basis of any co-owned ments, you may not have to include the can-
property bought with the debt proceeds celed debt in your income. To qualify for this
was allocated to each co-owner, and Abandonments work-related exclusion, your loan must have
• Whether the canceled debt qualifies for Recourse debt. If you abandon property that been made by a qualified lender to assist you in
any of the exceptions or exclusions descri- secures a debt for which you are personally lia- attending an eligible educational organization
bed in this publication. ble (recourse debt) and the debt is canceled, described in section 170(b)(1)(A)(ii). In addition,
See Example 3 under Insolvency, later. you will realize ordinary income equal to the the cancellation must be pursuant to a provision
canceled debt. You must report this income on in the student loan that all or part of the debt will
your tax return unless one of the exceptions or be canceled if you work:
Discounts and Loan exclusions described later applies. For more de- • For a certain period of time,
Modifications tails, see Exceptions and Exclusions, later. This • In certain professions, and
income is separate from any amount realized • For any of a broad class of employers.
If a lender discounts (reduces) the principal bal- from the abandonment of the property. For more
ance of a loan because you pay it off early, or details, see chapter 3. The cancellation of your loan won’t
agrees to a loan modification (a “workout”) that ! qualify for tax-free treatment if it was
includes a reduction in the principal balance of Nonrecourse debt. If you abandon property CAUTION made by an educational organization or
a loan, the amount of the discount or the that secures a debt for which you aren't person- tax-exempt section 501(c)(3) organization and
amount of principal reduction is canceled debt. ally liable (nonrecourse debt), you may realize was canceled because of the services you per-
However, if the debt is nonrecourse and you gain or loss but won't have cancellation of in- formed for either organization. See Exception,
didn't retain the collateral, you don't have can- debtedness income. later.
cellation of debt income. The amount of the
canceled debt must be included in income un- Educational organization described in
less one of the exceptions or exclusions descri- Stockholder Debt section 170(b)(1)(A)(ii). This is an educa-
bed later applies. For more details, see Excep- If you are a stockholder in a corporation and the tional organization that maintains a regular fac-
tions and Exclusions, later. corporation cancels or forgives your debt to it, ulty and curriculum and normally has a regularly
the canceled debt is a constructive distribution. enrolled body of students in attendance at the
Sales or Other Dispositions For more information, see Pub. 542. place where it carries on its educational activi-
ties.
(Such as Foreclosures and
Qualified lenders. These include the fol-
Repossessions) lowing.
Exceptions
Recourse debt. If you owned property that 1. The United States, or an instrumentality or
was subject to a recourse debt in excess of the There are several exceptions to the requirement agency thereof.
FMV of the property, the lender's foreclosure or that you include canceled debt in income.
repossession of the property is treated as a sale These exceptions apply before the exclusions 2. A state or territory of the United States; or
or disposition of the property by you and may discussed later and don't require you to reduce the District of Columbia; or any political
result in your realization of gain or loss. The your tax attributes. subdivision thereof.
gain or loss on the disposition of the property is 3. A public benefit corporation that is tax-ex-
measured by the difference between the FMV empt under section 501(c)(3); and that
of the property at the time of the disposition and has assumed control of a state, county, or
your adjusted basis (usually your cost) in the municipal hospital; and whose employees
property. The character of the gain or loss (such are considered public employees under
as ordinary or capital) is determined by the state law.
4 Publication 4681 (2023)

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4. An educational organization described in              Private  education  loan. A  private  education        • Religious.
  section 170(b)(1)(A)(ii), if the loan is               loan is a loan provided by a private educational       • Educational.
  made:                                                  lender that:                                           • Scientific.
       a. As part of an agreement with an entity         • Is not made, insured, or guaranteed under            • Literary.
       described in (1), (2), or (3) under                 Title IV of the Higher Education Act of              • Testing for public safety.
       which the funds to make the loan were               1965; and                                            • Fostering national or international amateur 
       provided to the educational organiza-             • Is issued expressly for postsecondary edu-             sports competition (but only if none of its 
       tion; or                                            cational expenses to a borrower, regard-               activities involve providing athletic facilities 
                                                           less of whether the loan is provided                   or equipment).
       b. Under a program of the educational               through the educational organization that            • The prevention of cruelty to children or ani-
       organization that is designed to en-                the student attends or directly to the bor-            mals.
       courage its students to serve in occu-              rower from the private educational lender. 
       pations with unmet needs or in areas                A private education loan does not include            Exception.   In most cases, the cancellation 
       with unmet needs where services pro-                an extension of credit under an open end             of  a  student  loan  made  by  an  educational  or-
       vided by the students (or former stu-               consumer credit plan, a reverse mortgage             ganization  because  of  services  you  performed 
       dents) are for or under the direction of            transaction, a residential mortgage trans-           for  that  organizationn  or  another  organization 
       a governmental unit or a tax-exempt                 action, or any other loan that is secured by         that provided the funds for the loan must be in-
       section 501(c)(3) organization.                     real property or a dwelling.                         cluded in gross income on your tax return.
                                                                                                                Refinanced  loan. If  you  refinanced  a  stu-
Special rule for student loan discharges for             Private educational lender. A private educa-           dent loan with another loan from an eligible ed-
2021  through  2025. The  American  Rescue               tional lender is one of the following.                 ucational  organization  or  a  tax-exempt  organi-
Plan Act of 2021 modified the treatment of stu-          • A financial institution that solicits, makes,        zation,  that  loan  may  also  be  considered  as 
dent  loan  forgiveness  for  discharges  in  2021         or extends private education loans.                  made by a qualified lender. The refinanced loan 
through 2025. Generally, if you are responsible          • A federal credit union that solicits, makes,         is considered made by a qualified lender if it’s 
for making loan payments, and the loan is can-             or extends private education loans.                  made under a program of the refinancing organ-
celed or repaid by someone else, you must in-            • Any other person engaged in the business             ization  that  is  designed  to  encourage  students 
clude the amount that was canceled or paid on              of soliciting, making, or extending private          to serve in occupations with unmet needs or in 
your behalf in your gross income for tax purpo-            education loans.                                     areas with unmet needs where the services re-
ses.  However,  in  certain  circumstances,  you                 The  cancellation  of  your  loan  won’t       quired of the students are for or under the direc-
                                                                                                                tion of a governmental unit or a tax-exempt sec-
may be able to exclude this amount from gross            !       qualify for tax-free treatment if it is can-   tion 501(c)(3) organization.
income if the loan was one of the following.             CAUTION celed  because  of  services  you  per-
• A loan for postsecondary educational ex-               formed  for  the  private  educational  lender  that 
  penses.                                                made the loan or other organization that provi-        Student  loan  repayment  assistance.         Stu-
• A private education loan.                              ded the funds.                                         dent loan repayments made to you are tax free 
• A loan from an educational organization                                                                       if you received them for any of the following.
  described in section 170(b)(1)(A)(ii).                                                                        • The National Health Service Corps 
• A loan from an organization exempt from                Loan  from  an  educational  organization  de-           (NHSC) Loan Repayment Program.
  tax under section 501(a) to refinance a stu-           scribed  in  section  170(b)(1)(A)(ii). This  is       • A state education loan repayment program 
  dent loan.                                             any loan made by the organization if the loan is         eligible for funds under the Public Health 
                                                         made:                                                    Service Act.
Loan for postsecondary educational expen-                • As part of an agreement with an entity de-           • Any other state loan repayment or loan for-
ses.   This  is  any  loan  provided  expressly  for       scribed earlier under which the funds to               giveness program that is intended to pro-
postsecondary     education,  regardless     of            make the loan were provided to the educa-              vide for the increased availability of health 
whether  provided  through  the  educational  or-          tional organization; or                                services in underserved or health profes-
ganization  or  directly  to  the  borrower,  if  such   • Under a program of the educational organi-             sional shortage areas (as determined by 
loan was made, insured, or guaranteed by one               zation that is designed to encourage its               such state).
of the following.                                          students to serve in occupations with un-
• The United States, or an instrumentality or              met needs or in areas with unmet needs                       You can’t deduct the interest you paid 
  agency thereof.                                          where the services provided by the stu-              !       on  a  student  loan  to  the  extent  pay-
• A state or territory of the United States; or            dents (or former students) are for or under          CAUTION ments were made through your partici-
  the District of Columbia; or any political               the direction of a governmental unit or a            pation in any of the above programs.
  subdivision thereof.                                     tax-exempt section 501(c)(3) organization.
• An eligible educational organization.
                                                         Educational organization described in sec-             Deductible Debt
Eligible  educational  organization. An  eligi-          tion  170(b)(1)(A)(ii). This  is  an  educational 
ble  educational  organization  is  generally  any       organization that maintains a regular faculty and      If you use the cash method of accounting, you 
accredited public, nonprofit, or proprietary (pri-       curriculum and normally has a regularly enrolled       don't  realize  income  from  the  cancellation  of 
vately  owned  profit-making)  college,  university,     body  of  students  in  attendance  at  the  place     debt if the payment of the debt would have been 
vocational school, or other postsecondary edu-           where it carries on its educational activities.        a  deductible  expense.  This  exception  applies 
                                                                                                                before the price reduction exception discussed 
cational  organization.  Also,  the  organization                The  cancellation  of  your  loan  won’t       next.
must  be  eligible  to  participate  in  a  student  aid !       qualify  for  tax-free  treatment  if  it  was 
program  administered  by  the  U.S.  Department         CAUTION made by an educational organization, a         Example.   In  December  2022,  you  get  ac-
of Education.                                            tax-exempt section 501(c)(3) organization, or a        counting  services  for  your  farm  on  credit.  In 
An eligible educational organization also in-            private education lender (as defined in section        early  2023,  you  have  trouble  paying  your  farm 
cludes  certain  educational  organizations  loca-       140(a)(7) of the Truth in Lending Act) and was         debts and your accountant forgives part of the 
ted outside the United States that are eligible to       canceled  because  of  the  services  you  per-        amount  you  owe  for  the  accounting  services. 
participate  in  a  student  aid  program  adminis-      formed  for  either  such  organization  or  private   How  you  treat  the  canceled  debt  depends  on 
tered by the U.S. Department of Education.               education lender. See Exception, later.                your method of accounting.
       The  educational  organization  should                                                                   • Cash method. You don't include the can-
TIP    be able to tell you if it is an eligible edu-     Section  501(c)(3)  organization.       This  is         celed debt in income because payment of 
       cational organization.                            any  corporation,  community  chest,  fund,  or          the debt would have been deductible as a 
                                                         foundation  organized  and  operated  exclusively        business expense in 2023.
                                                         for one or more of the following purposes.
                                                         • Charitable.
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• Accrual method. Unless another exception insolvency exclusion by being an owner of, or a debt canceled, you can exclude the entire
or exclusion applies, you must include the partner in a partnership that owns, a grantor $5,000 canceled debt from income.
canceled debt in ordinary income because trust or disregarded entity that is insolvent. You When completing the tax return, you check
the expense was deductible in 2022 when must be insolvent to qualify for this exclusion. the box on line 1b of Form 982 and enter $5,000
you incurred the debt. You were insolvent immediately before the can- on line 2. You complete Part II to reduce the tax
cellation to the extent that the total of all of your attributes, as explained under Reduction of Tax
liabilities was more than the FMV of all of your Attributes, later. You don’t include any of the
Price Reduced After assets immediately before the cancellation. For $5,000 canceled debt on Schedule 1 (Form
Purchase purposes of determining insolvency, assets in- 1040), line 8c. None of the canceled debt is in-
clude the value of everything you own (including cluded in income.
If debt you owe the seller for the purchase of assets that serve as collateral for debt and ex-
property is reduced by the seller at a time when empt assets, which are beyond the reach of Example 2—amount of insolvency less
you aren't insolvent and the reduction doesn't your creditors under the law, such as your inter- than canceled debt. The facts are the same
occur in a title 11 bankruptcy case, the reduc- est in a pension plan and the value of your re- as in Example 1, except that your total liabilities
tion doesn't result in cancellation of debt in- tirement account). Liabilities include: immediately before the cancellation were
come. However, you must reduce your basis in • The entire amount of recourse debt; $10,000 and the FMV of the total assets imme-
the property by the amount of the reduction of • The amount of nonrecourse debt that isn't diately before the cancellation was $7,000. In
your debt to the seller. The rules that apply to in excess of the FMV of the property that is this case, you are insolvent to the extent of
bankruptcy and insolvency are explained in Ex- security for the debt; and $3,000 ($10,000 total liabilities minus $7,000
clusions next. • The amount of nonrecourse debt in excess FMV of the total assets) immediately before the
of the FMV of the property subject to the cancellation. Because the amount of the can-
nonrecourse debt, to the extent nonre- celed debt was more than the amount by which
Exclusions course debt in excess of the FMV of the you were insolvent immediately before the can-
property subject to the debt is forgiven. cellation, you can exclude only $3,000 of the
$5,000 canceled debt from income under the
After you have applied any exceptions to the You can use the Insolvency Worksheet insolvency exclusion.
general rule that a canceled debt is included in TIP to help calculate the extent that you You check the box on line 1b of Form 982
your income, there are several reasons why you were insolvent immediately before the and include $3,000 on line 2. Also, you com-
might still be able to exclude a canceled debt cancellation. plete Part II to reduce the tax attributes, as ex-
from your income. These exclusions are ex-
plained next. If a canceled debt is excluded plained under Reduction of Tax Attributes, later.
from your income, it is nontaxable. In most ca- Other exclusions must be applied before Additionally, you must include $2,000 of can-
ses, however, if you exclude canceled debt from the insolvency exclusion. This exclusion celed debt on Schedule 1 (Form 1040), line 8c
income under one of these provisions, you must doesn't apply to a cancellation of debt that oc- (unless another exclusion applies).
also reduce your tax attributes (certain credits, curs in a title 11 bankruptcy case. It also doesn't
losses, and basis of assets) as explained later apply if the debt is qualified principal residence Example 3—joint debt and separate re-
under Reduction of Tax Attributes. indebtedness (defined in this section under turns. In 2023, you and your spouse were re-
Qualified Principal Residence Indebtedness, leased from an obligation to pay a debt of
later) unless you elect to apply the insolvency $10,000 for which you were jointly and severally
Bankruptcy exclusion instead of the qualified principal resi- liable. None of the exceptions to the general
dence indebtedness exclusion. rule that canceled debt is included in income
Debt canceled in a title 11 bankruptcy case isn't apply. The debt (originally $12,000) was incur-
included in your income. A title 11 bankruptcy How to report the insolvency exclusion. To red to finance your purchase of a $9,000 motor-
case is a case under title 11 of the United show that you are excluding canceled debt from cycle and your spouse's purchase of a laptop
States Code (including all chapters in title 11 income under the insolvency exclusion, attach computer and software for personal use for
such as chapters 7, 11, and 13). You must be a Form 982 to your federal income tax return and $3,000. You each received a 2023 Form 1099-C
debtor under the jurisdiction of the court and the check the box on line 1b. On line 2, include the from the bank showing the entire canceled debt
cancellation of the debt must be granted by the smaller of the amount of the debt canceled or of $10,000 in box 2. Based on the use of the
court or occur as a result of a plan approved by the amount by which you were insolvent imme- loan proceeds, you both agreed that you were
the court. diately before the cancellation. You can use the responsible for 75% of the debt and your
Insolvency Worksheet to help calculate the ex- spouse was responsible for the remaining 25%.
You don’t qualify for the bankruptcy exclu- tent that you were insolvent immediately before Therefore, your share of the debt is $7,500
sion by being an owner of, or a partner in a part- the cancellation. You must also reduce your tax (75% of $10,000) and your spouse’s share is
nership that owns, a grantor trust or disregarded attributes in Part II of Form 982, as explained $2,500 (25% of $10,000). By completing the In-
entity that is a debtor in a title 11 bankruptcy under Reduction of Tax Attributes, later. solvency Worksheet, you determine that, imme-
case. You must be a debtor in a title 11 bank- diately before the cancellation of the debt, you
ruptcy case to qualify for this exclusion. Example 1—amount of insolvency more were insolvent to the extent of $5,000 ($15,000
than canceled debt. In 2023, you were re- total liabilities minus $10,000 FMV of the total
How to report the bankruptcy exclusion. To leased from an obligation to pay a personal assets). You can exclude $5,000 of the $7,500
show that your debt was canceled in a bank- credit card debt in the amount of $5,000. You canceled debt. Your spouse completes a sepa-
ruptcy case and is excluded from income, at- received a 2023 Form 1099-C from the credit rate Insolvency Worksheet and determines your
tach Form 982 to your federal income tax return card lender showing the entire amount of dis- spouse was insolvent to the extent of $4,000
and check the box on line 1a. Lines 1b through charged debt of $5,000 in box 2. None of the ($9,000 total liabilities minus $5,000 FMV of the
1e don't apply to a cancellation that occurs in a exceptions to the general rule that canceled total assets). Your spouse can exclude the en-
title 11 bankruptcy case. Enter the total amount debt is included in income apply. You use the In- tire canceled debt of $2,500.
of debt canceled in your title 11 bankruptcy solvency Worksheet to determine that the total When completing the separate tax return,
case on line 2. You must also reduce your tax liabilities immediately before the cancellation you check the box on line 1b of Form 982 and
attributes in Part II of Form 982, as explained were $15,000 and the FMV of the total assets enter $5,000 on line 2. You complete Part II to
under Reduction of Tax Attributes, later. immediately before the cancellation was reduce the tax attributes, as explained under
$7,000. This means that immediately before the Reduction of Tax Attributes, later. You must in-
Insolvency cancellation, you were insolvent to the extent of clude the remaining $2,500 (your $7,500 share
$8,000 ($15,000 total liabilities minus $7,000 of the canceled debt minus the $5,000 extent to
FMV of the total assets). Because the amount which you were insolvent) of canceled debt on
Don't include a canceled debt in income to the by which you were insolvent immediately before Schedule 1 (Form 1040), line 8c (unless an-
extent that you were insolvent immediately be- the cancellation was more than the amount of other exclusion applies).
fore the cancellation. You don’t qualify for the
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Insolvency Worksheet Keep for Your Records
Date debt was canceled (mm/dd/yy)
Part I. Total liabilities immediately before the cancellation (don't include the same liability in more than one category)
Amount Owed
Liabilities (debts) Immediately Before the
Cancellation
1. Credit card debt $
2. Mortgage(s) on real property (including first and second mortgages and home equity loans) (mortgage(s) can
be on main home, any additional home, or property held for investment or used in a trade or business) $
3. Car and other vehicle loans $
4. Medical bills owed $
5. Student loans $
6. Accrued or past-due mortgage interest $
7. Accrued or past-due real estate taxes $
8. Accrued or past-due utilities (water, gas, electric, etc.) $
9. Accrued or past-due childcare costs $
10. Federal or state income taxes remaining due (for prior tax years) $
11. Judgments $
12. Business debts (including those owed as a sole proprietor or partner) $
13. Margin debt on stocks and other debt to purchase or secured by investment assets other than real property $
14. Other liabilities (debts) not included above $
15. Total liabilities immediately before the cancellation. Add lines 1 through 14. $
Part II. Fair market value (FMV) of assets owned immediately before the cancellation (don't include the FMV of the same asset in more than one
category)
Assets FMV Immediately Before
the Cancellation
16. Cash and bank account balances $
17. Real property, including the value of land (can be main home, any additional home, or property held for
investment or used in a trade or business) $
18. Cars and other vehicles $
19. Computers $
20. Household goods and furnishings (for example, appliances, electronics, furniture, etc.) $
21. Tools $
22. Jewelry $
23. Clothing $
24. Books $
25. Stocks and bonds $
26. Investments in coins, stamps, paintings, or other collectibles $
27. Firearms, sports, photographic, and other hobby equipment $
28. Interest in retirement accounts (IRA accounts, 401(k) accounts, and other retirement accounts) $
29. Interest in a pension plan $
30. Interest in education accounts $
31. Cash value of life insurance $
32. Security deposits with landlords, utilities, and others $
33. Interests in partnerships $
34. Value of investment in a business $
35. Other investments (for example, annuity contracts, guaranteed investment contracts, mutual funds,
commodity accounts, interests in hedge funds, and options) $
36. Other assets not included above $
37. FMV of total assets immediately before the cancellation. Add lines 16 through 36. $
Part III. Insolvency
38. Amount of insolvency. Subtract line 37 from line 15. If zero or less, you aren't insolvent. $

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When completing the return, your spouse For more information about the basis of were from the trade or business of farming. You
checks the box on line 1b of Form 982 and en- property, see Pub. 551. received a 2023 Form 1099-C from the qualified
ters $2,500 on line 2. Your spouse completes lender showing discharged debt of $10,000 in
Part II to reduce the tax attributes, as explained Adjusted tax attributes. Adjusted tax at- box 2. The FMV of your total assets on March 2,
under Reduction of Tax Attributes, later. Your tributes means the sum of the following items. 2023 (immediately before the cancellation of
spouse doesn’t include any of the canceled 1. Any net operating loss (NOL) for 2023 and the credit card debt), was $7,000 and your total
debt on Schedule 1 (Form 1040), line 8c. None any NOL carryover to 2023. liabilities at that time were $11,000. Your adjus-
of the canceled debt has to be included in in- ted tax attributes (a 2023 NOL) are $7,000 and
come. 2. Any net capital loss for 2023 and any capi- you have $4,000 total adjusted basis in qualified
tal loss carryover to 2023. property at the beginning of 2024.
Qualified Farm Indebtedness 3. Any passive activity loss carryover from You qualify to exclude $4,000 of the can-
2023. celed debt under the insolvency exclusion be-
cause you are insolvent to the extent of $4,000
You can exclude canceled farm debt from in- 4. Three times the sum of any: immediately before the cancellation ($11,000
come on your 2023 return if all of the following
apply. a. General business credit carryover to total liabilities minus $7,000 FMV of total as-
• The debt was incurred directly in connec- or from 2023, sets). You must reduce the tax attributes under
the insolvency rules before applying the rules
tion with your operation of the trade or b. Minimum tax credit available as of the for qualified farm debt.
business of farming. beginning of 2024, You also qualify to exclude the remaining
• 50% or more of your total gross receipts for
2020, 2021, and 2022 were from the trade c. Foreign tax credit carryover to or from $6,000 of canceled qualified farm debt. The
or business of farming. 2023, and limit on your exclusion from income of canceled
qualified farm debt is $7,000, the sum of:
• The cancellation was made by a qualified d. Passive activity credit carryover from
person. A qualified person is an individual, 2023. 1. Your adjusted tax attributes of $3,000 (the
organization, partnership, association, cor- $7,000 NOL minus the $4,000 reduction of
poration, or other person who is actively Qualified property. This is any property tax attributes required because of the
and regularly engaged in the business of you use or hold for use in your trade or business $4,000 exclusion of canceled debt under
lending money. A qualified person also in- or for the production of income. the insolvency exclusion), and
cludes any federal, state, or local govern-
ment or agency or instrumentality of one of How to report the qualified farm indebted- 2. Your total adjusted basis of $4,000 in
those governments. For example, the U.S. ness exclusion. To show that all or part of your qualified property held at the beginning of
Department of Agriculture is a qualified canceled debt is excluded from income be- 2024.
person. A qualified person can't be related cause it is qualified farm debt, check the box on You check the boxes on lines 1b and 1c of
to you, can't be the person from whom you line 1c of Form 982 and attach it to your Form Form 982 and enter $10,000 on line 2. You
acquired the property (or a person related 1040 or 1040-SR. On line 2 of Form 982, in- complete Part II to reduce the tax attributes, as
to this person), and can't be a person who clude the amount of the qualified farm debt can- explained under Reduction of Tax Attributes,
receives a fee due to your investment in celed, but not more than the exclusion limit (ex- later. You don’t include any of the canceled debt
the property (or a person related to this plained earlier). You must also reduce your tax in income.
person). attributes in Part II of Form 982, as explained
under Reduction of Tax Attributes, later.
For the definition of the term “related person,” Example 3—no qualified farm indebted-
ness exclusion when insolvent to the extent
see Related persons under At-Risk Amounts in Example 1—only qualified farm indebt- of canceled debt. The facts are the same as
Pub. 925, Passive Activity and At-Risk Rules. edness exclusion applies. In 2023, you were in Example 2, except that immediately before
released from an obligation to pay a $10,000 the cancellation, you were insolvent to the ex-
Other exclusions must be applied before debt that was incurred directly in connection tent of the full $10,000 canceled debt. Because
the qualified farm indebtedness exclusion. with the trade or business of farming. You re- the exclusion for qualified farm debt doesn't ap-
This exclusion doesn't apply to a cancellation of ceived a Form 1099-C from the qualified lender ply to the extent that your insolvency (immedi-
debt in a title 11 bankruptcy case or to the ex- showing discharged debt of $10,000 in box 2. ately before the cancellation) was equal to the
tent you were insolvent immediately before the For 2020, 2021, and 2022 tax years, at least full amount of the canceled debt, you check
cancellation. If qualified farm debt is canceled in 50% of your total gross receipts were from the only the box on line 1b of Form 982 and enter
a title 11 case, you must apply the bankruptcy trade or business of farming. Your adjusted tax $10,000 on line 2. You complete Part II to re-
exclusion rather than the exclusion for canceled attributes are $5,000 and you have $3,000 total duce the tax attributes based on the insolvency
qualified farm debt. If you were insolvent imme- adjusted basis in qualified property at the begin- exclusion, as explained under Reduction of Tax
diately before the cancellation of qualified farm ning of 2024. You had no other debt canceled Attributes, later. You don’t include any of the
debt, you must apply the insolvency exclusion during 2023 and no other exception or exclusion canceled debt in income.
before applying the exclusion for canceled relating to canceled debt income applies.
qualified farm debt. You can exclude $8,000 ($5,000 of adjusted
tax attributes plus $3,000 total adjusted basis in Qualified Real Property
Exclusion limit. The amount of canceled qualified property at the beginning of 2024) of Business Indebtedness
qualified farm debt you can exclude from in- the $10,000 canceled debt from income. You
come under this exclusion is limited. It can't be check the box on line 1c of Form 982 and enter You can elect to exclude canceled qualified real
more than the sum of: $8,000 on line 2. Also, you complete Part II to property business indebtedness from income.
1. Your adjusted tax attributes, and reduce the tax attributes, as explained under Qualified real property business indebtedness
Reduction of Tax Attributes, later. The remain- is debt (other than qualified farm debt) that
2. The total adjusted basis of qualified prop- ing $2,000 of canceled qualified farm debt is in- meets all of the following conditions.
erty you held at the beginning of 2024. cluded in your income on Schedule F (Form
If you excluded canceled debt under the insol- 1040), line 8. 1. It was incurred or assumed in connection
vency exclusion, the adjusted basis of any with real property used in a trade or busi-
qualified property and adjusted tax attributes Example 2—both insolvency and quali- ness. Real property used in a trade or
are determined after any reduction of tax attrib- fied farm indebtedness exclusions apply. business doesn’t include real property de-
utes required under the insolvency exclusion. On March 2, 2023, you were released from an veloped and held primarily for sale to cus-
Any canceled qualified farm debt that is obligation to pay a $10,000 business credit card tomers in the ordinary course of business.
more than this limit must be included in your in- debt that was used directly in connection with a 2. It is secured by that real property. As long
come. farming business. For 2020, 2021, and 2022 tax as certain other requirements are met, in-
years, at least 50% of your total gross receipts debtedness that is secured by 100% of the
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ownership interest in a disregarded entity Note. When figuring the first limit in (1) You elect to apply the qualified real property
holding real property will be treated as in- above, reduce the FMV of the business real business debt exclusion to the canceled debt.
debtedness that is secured by real prop- property securing the debt (immediately before The amount of canceled qualified real property
erty. For more information, and for the re- the cancellation) by the outstanding principal business debt that you can exclude from in-
quirements that must be met, see amount of any other qualified real property busi- come is limited. The amount you can exclude
Revenue Procedure 2014-20, available at ness debt secured by that property (immedi- can’t be more than either:
IRS.gov/irb/2014-9_IRB#RP-2014-20. ately before the cancellation). When figuring the 1. $20,000 (the excess of the $185,000 out-
3. It was incurred or assumed: second (overall) limit in (2) above, use the ad- standing principal amount of your qualified
justed basis of the depreciable real property af-
a. Before 1993; or ter any reductions in basis required because of real property business debt immediately
b. After 1992, if the debt is either (i) the exclusion of debt canceled under the bank- before the cancellation over the $165,000
qualified acquisition indebtedness ruptcy, insolvency, or farm debt provisions de- FMV of the business real property secur-
(defined next), or (ii) debt incurred to scribed in this publication or because of other ing the debt), or
refinance qualified real property busi- basis adjustments that may apply to that depre- 2. $210,000 (the total adjusted basis of the
ness debt incurred or assumed before ciable property. depreciable real property you held imme-
1993 (but only to the extent the For more information about the basis of diately before the cancellation).
amount of such debt doesn't exceed property, see Pub. 551.
.
the amount of debt being refinanced). Thus, you can exclude the entire $20,000 of
How to elect the qualified real property
4. It is debt to which you elect to apply these business debt exclusion. You must make an canceled qualified real property business debt
rules. election to exclude canceled qualified real prop- from income. You check the box on line 1d of
erty business debt from gross income. The Form 982 and enter $20,000 on line 2. You must
Residential rental property generally election must be made on a timely filed federal also use line 4 of Form 982 to reduce the basis
TIP qualifies as real property used in a income tax return (including extensions) for in depreciable real property by the $20,000 of
trade or business unless you also use 2023 and can be revoked only with IRS con- canceled qualified real property business debt
the dwelling as a home. For more information, sent. The election is made by completing Form excluded from income, as explained under Re-
see Dwelling Unit Used as a Home in Pub. 527. 982 in accordance with its instructions. Attach duction of Tax Attributes, later.
Form 982 to your federal income tax return for
Definition of qualified acquisition indebted- 2023 and check the box on line 1d. Include the Qualified Principal
ness. Qualified acquisition indebtedness is: amount of canceled qualified real property busi- Residence Indebtedness
• Debt incurred or assumed to acquire, con- ness debt (but not more than the amount of the
struct, reconstruct, or substantially improve exclusion limit, explained earlier) on line 2 of
real property that is used in a trade or busi- Form 982. You must also reduce your tax attrib- Qualified principal residence indebtedness is
ness and secures the debt; or utes in Part II of Form 982, as explained under any mortgage you took out to buy, build, or sub-
• Debt resulting from the refinancing of quali- Reduction of Tax Attributes, later. stantially improve your main home. It must also
be secured by your main home. Qualified princi-
fied acquisition indebtedness, to the extent If you timely filed your tax return without pal residence indebtedness also includes any
the amount of the debt doesn't exceed the making this election, you can still make the debt secured by your main home that you used
amount of debt being refinanced. election by filing an amended return within 6 to refinance a mortgage you took out to buy,
months of the due date of the return (excluding build, or substantially improve your main home,
Other exclusions must be applied before extensions). Enter “Filed pursuant to section but only up to the amount of the old mortgage
the qualified real property business indebt- 301.9100-2” on the amended return and file it at principal just before the refinancing.
edness exclusion. This exclusion doesn't ap- the same place you filed the original return.
ply to a cancellation of debt in a title 11 bank-
ruptcy case or to the extent you were insolvent Example—full qualified real property
immediately before the cancellation. If qualified business indebtedness exclusion. In 2017, Example 1—qualified principal resi-
real property business debt is canceled in a title you bought a retail store for use in a business dence indebtedness amount after refi-
11 bankruptcy case, you must apply the bank- that you operated as a sole proprietorship. You nance. In 2022, you bought a main home for
ruptcy exclusion rather than the exclusion for made a $20,000 down payment and financed $315,000. You took out a $300,000 mortgage
canceled qualified real property business debt. the remaining $200,000 of the purchase price loan to buy the home and made a down pay-
If you were insolvent immediately before the with a bank loan. The bank loan was a recourse ment of $15,000. The loan was secured by the
cancellation of qualified real property business loan and was secured by the property. You used home. Later that year, you took out a second
debt, you must apply the insolvency exclusion the property in the business continuously since mortgage loan in the amount of $50,000 that
before applying the exclusion for canceled it was purchased. You had no other debt se- was used to add a garage to the home.
qualified real property business debt. cured by that depreciable real property. In addi- In 2023, when the outstanding principal of
tion to the retail store, you owned depreciable the first and second mortgage loans was
Exclusion limit. The amount of canceled equipment and furniture with an adjusted basis $325,000, you refinanced the two loans into one
qualified real property business debt you can of $50,000. loan in the amount of $400,000. The FMV of the
exclude from income under this exclusion has Your business encountered financial difficul- home at the time of the refinancing was
two limits. The amount you can exclude can't be ties in 2023. On September 21, 2023, the bank $430,000. You used the additional $75,000 debt
more than either: financing the retail store loan entered into a proceeds ($400,000 new mortgage loan minus
1. The excess (if any) of the outstanding prin- workout agreement with you under which it can- $325,000 outstanding principal balances of the
cipal amount of the qualified real property celed $20,000 of the debt. Immediately before first and second mortgage loans immediately
business debt (immediately before the the cancellation, the outstanding principal bal- before the refinancing) to pay off personal credit
cancellation) over the FMV (immediately ance on the retail store loan was $185,000, the cards and to pay college tuition for your daugh-
before the cancellation) of the business FMV of the store was $165,000, and the adjus- ter.
real property securing the debt, or ted basis was $210,000 ($220,000 cost minus After the refinancing, your qualified principal
$10,000 accumulated depreciation). residence indebtedness is $325,000 because
2. The total adjusted basis of depreciable The bank sent you a 2023 Form 1099-C the $400,000 debt resulting from the refinancing
real property you held immediately before showing discharged debt of $20,000 in box 2. is qualified principal residence indebtedness
the cancellation of the qualified real prop- You had no tax attributes other than the basis to only to the extent it isn't more than the old mort-
erty business debt (other than depreciable reduce and you didn’t qualify for any exception gage principal just before the refinancing (the
real property acquired in contemplation of or exclusion other than the qualified real prop- $325,000 of outstanding principal on your first
the cancellation). erty business debt exclusion. and second mortgages, which both qualified as
principal residence indebtedness).
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Example 2—refinancing home equity refinancing ($850,000 minus $740,000) to pay are excluding isn't excluded as qualified princi-
loan used for other purposes. In 2022, you off credit cards and to buy a new car. pal residence indebtedness and you have no
acquired a main home for $200,000, subject to About 2 years after the refinancing, you lost tax attributes other than the adjusted basis of
a mortgage of $175,000. Later that year, you your job and were unable to get another job personal-use property (see the list of seven tax
took out a home equity loan for $10,000, se- paying a comparable salary. Your home had de- attributes, later), you must reduce the basis of
cured by the main home, which you used to pay clined in value to between $600,000 and the personal-use property you held at the begin-
off personal credit cards. $650,000. Based on your circumstances, the ning of 2024 (in proportion to adjusted basis).
In 2023, when the outstanding principal on lender agreed to allow a short sale of the prop- Personal-use property is any property that isn't
the mortgage was $170,000, and the outstand- erty for $620,000 and to cancel the remaining used in your trade or business or held for invest-
ing principal on the home equity loan was $115,000 of the outstanding $735,000 debt. ment (such as your home, home furnishings,
$9,000, you refinanced the two loans into one Under the ordering rule, you can exclude only and car). Include on line 10a of Form 982 the
loan in the amount of $200,000. The FMV of the $5,000 of the canceled debt from income under smallest of:
home at the time of refinancing was $210,000. the exclusion for canceled qualified principal 1. The basis of your personal-use property
You used the additional $21,000 ($200,000 new residence indebtedness ($115,000 canceled held at the beginning of 2024,
mortgage loan minus $179,000 outstanding debt minus the $110,000 amount of the debt
principal balances on the mortgage and home that wasn't qualified principal residence indebt- 2. The amount of canceled nonbusiness debt
equity loan) to cover medical expenses. edness). You must include the remaining (other than qualified principal residence in-
After refinancing, your qualified principal $110,000 of canceled debt in income on debtedness) that you are excluding from
residence indebtedness is $170,000 because Schedule 1 (Form 1040), line 8c (unless an- income on line 2 of Form 982, or
the debt resulting from the refinancing is quali- other exclusion applies). 3. The excess of the total basis of the prop-
fied principal residence indebtedness only to erty and the amount of money you held im-
the extent it refinances debt that had been se- How to report the qualified principal resi-
cured by the main home and was used to buy, dence indebtedness exclusion. To show that mediately after the cancellation over your
build, or substantially improve the main home. all or part of your canceled debt is excluded total liabilities immediately after the can-
from income because it is qualified principal cellation.
Main home. Your main home is the one in residence indebtedness, attach Form 982 to For more information about the basis of
which you live most of the time. You can have your federal income tax return and check the property, see Pub. 551.
only one main home at any one time. box on line 1e. On line 2 of Form 982, include
the amount of canceled qualified principal resi- Example. In 2022, you bought a car for per-
Other exclusions must be applied before dence indebtedness, but not more than the sonal use. The cost of the car was $12,000. You
the qualified principal residence indebted- amount of the exclusion limit (explained earlier). put down $2,000 and took out a loan of $10,000
ness exclusion. This exclusion doesn't apply If you continue to own your home after a cancel- to buy the car. The loan was a recourse loan,
to a cancellation of debt in a title 11 bankruptcy lation of qualified principal residence indebted- meaning that you were personally liable for the
case. If qualified principal residence indebted- ness, you must reduce your basis in the home, full amount of the debt.
ness is canceled in a title 11 bankruptcy case, as explained under Reduction of Tax Attributes On December 7, 2023, when the balance of
you must apply the bankruptcy exclusion rather next. the loan was $8,500, the lender repossessed
than the exclusion for qualified principal resi- and sold the car because you stopped making
dence indebtedness. If you were insolvent im- payments on the loan. The FMV of the car was
mediately before the cancellation, you can elect Reduction of Tax $7,000 at the time the lender repossessed and
to apply the insolvency exclusion (as explained sold it. The lender applied the $7,000 it re-
under Insolvency, earlier) instead of applying Attributes ceived on the sale of the car against your loan
the qualified principal residence indebtedness and forgave the remaining loan balance of
exclusion. To do this, check the box on line 1b If you exclude canceled debt from income, you $1,500 ($8,500 outstanding balance immedi-
of Form 982 instead of the box on line 1e. must reduce certain tax attributes (but not be- ately before the repossession minus the $7,000
low zero) by the amount excluded. Use Part II of FMV of the car).
Exclusion limit. The maximum amount you Form 982 to reduce your tax attributes. The or- Your only other assets at the time of the can-
can treat as qualified principal residence indebt- der in which the tax attributes are reduced de- cellation are the furniture in your apartment,
edness is $750,000 ($375,000 if married filing pends on the reason the canceled debt was ex- which has a basis of $5,000 and an FMV of
separately). You can't exclude canceled quali- cluded from income. If the total amount of $3,000; jewelry with a basis of $500 and an
fied principal residence indebtedness from in- canceled debt excluded from income (line 2 of FMV of $1,000; and a $600 balance in a sav-
come if the cancellation was for services per- Form 982) was more than your total tax attrib- ings account. Thus, the FMV of your total as-
formed for the lender or on account of any other utes, the total reduction of tax attributes in Part sets immediately before the cancellation was
factor not directly related to a decline in the II of Form 982 will be less than the amount on $11,600 ($7,000 car plus $3,000 furniture plus
value of your home or to your financial condi- line 2. $1,000 jewelry plus $600 savings). You also
tion. had an outstanding student loan balance of
Ordering rule. If only a part of a loan is quali- Qualified Principal $6,000 immediately before the cancellation,
bringing the total liabilities at that time to
fied principal residence indebtedness, the ex- Residence Indebtedness $14,500 ($8,500 balance on car loan plus
clusion applies only to the extent the amount $6,000 student loan balance). Other than the
canceled is more than the amount of the loan If you exclude canceled qualified principal resi- car, which was repossessed, you held all of
(immediately before the cancellation) that isn’t dence indebtedness from income and you con- these assets at the beginning of 2024. The FMV
qualified principal residence indebtedness. The tinue to own the home after the cancellation, and basis of the assets remained the same at
remaining part of the loan may qualify for an- you must reduce the basis of the home (but not the beginning of 2024.
other exclusion. below zero) by the amount of the canceled You received a 2023 Form 1099-C showing
qualified principal residence indebtedness ex- $1,500 in box 2 (amount of debt that was can-
Example 3—ordering rule on cancella- cluded from income. Enter the amount of the celed) and $7,000 in box 7 (FMV of the prop-
tion of nonqualified principal residence basis reduction on line 10b of Form 982. erty). You can exclude all $1,500 of canceled
debt. You incurred recourse debt of $800,000 For more details on determining the basis of debt from income because at the time of the
when you bought a main home for $880,000. your main home, see Pub. 523. cancellation, you were insolvent to the extent of
When the FMV of the property was $1 million, $2,900 ($14,500 of total liabilities immediately
you refinanced the debt for $850,000. At the before the cancellation minus $11,600 FMV of
time of the refinancing, the principal balance of Bankruptcy and Insolvency
total assets at that time).
the original mortgage loan was $740,000. You
used the $110,000 obtained from the No tax attributes other than basis of per-
sonal-use property. If the canceled debt you
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You check box 1b on Form 982 and enter loss and then any capital loss carryover to part of the canceled debt. Basis of property is
$1,500 on line 2. You enter $100 on line 10a, 2023 (after taking into account any amount reduced in the following order.
the smallest of: used to reduce 2023 taxable income) in 1. Depreciable real property used in your
1. The $5,500 basis of your personal-use the order of the tax years from which the trade or business or held for investment
property held at the beginning of 2024 carryovers arose, starting with the earliest that secured the canceled debt.
($5,000 furniture plus $500 jewelry), year. Reduce the net capital loss or carry-
over by one dollar for each dollar of exclu- 2. Depreciable personal property used in
2. The $1,500 nonbusiness debt you are ex- ded canceled debt. your trade or business or held for invest-
cluding from income on line 2 of Form 982, 5. Basis. Reduce the basis of the property ment that secured the canceled debt.
or you hold at the beginning of 2024 in the 3. Other depreciable property used in your
3. The $100 excess of the total basis of the following order (and, within each category, trade or business or held for investment.
property and the amount of money you in proportion to adjusted basis). 4. Real property held primarily for sale to
held immediately after the cancellation a. Real property used in your trade or customers if you elect to treat it as if it
over the total liabilities at that time ($5,500 business or held for investment (other were depreciable property on Form 982.
basis of property held immediately after than real property held for sale to cus-
the cancellation plus $600 savings minus tomers in the ordinary course of busi- Basis reduction is limited to the total adjus-
$6,000 student loan). ness) if it secured the canceled debt. ted basis of all your depreciable property. De-
preciable property for this purpose means any
You must reduce (by one dollar for each dol- b. Personal property used in your trade property subject to depreciation or amortization,
lar of excluded canceled debt) the basis in each or business or held for investment but only if a reduction of basis will reduce the
item of property held at the beginning of 2024 in (other than inventory and accounts depreciation or amortization otherwise allowa-
proportion to the total adjusted basis in all the and notes receivable) if it secured the ble for the period immediately following the ba-
property. The total reduction, however, can't be canceled debt. sis reduction. If the amount of canceled debt ex-
more than (3) above—the $100 excess of the cluded from income is more than the total basis
total adjusted basis and the money held after c. Any other property used in your trade
the cancellation over the total liabilities after the or business or held for investment in depreciable property, you must use the ex-
cancellation. See the basis attribute under All (other than inventory, accounts receiv- cess to reduce the other tax attributes in the or-
other tax attributes next. able, notes receivable, and real prop- der described earlier under All other tax attrib-
Thus, you reduce the basis as follows. erty held for sale to customers in the utes. In figuring the limit on the basis reduction
ordinary course of business). in (5), Basis, use the remaining adjusted basis
1. The furniture's basis is 91% of the total ad- of your properties after making this election.
justed basis ($5,000 divided by $5,500), d. Inventory, accounts receivable, notes See Form 982 for information on how to make
so you reduce it by $91 (the $100 excess receivable, and real property held pri- this election. The election can be revoked only
in (3) multiplied by 0.91). marily for sale to customers in the or- with IRS consent.
dinary course of business.
2. The jewelry’s basis is 9% of the total ad- Recapture of basis reductions. If you reduce
justed basis ($500 divided by $5,500), so e. Personal-use property (property not
you reduce it by $9 (the $100 excess in (3) used in your trade or business nor the basis of property under these provisions
multiplied by 0.09). held for investment). and later sell or otherwise dispose of the prop-
erty at a gain, the part of the gain due to this ba-
All other tax attributes. If the canceled debt Reduce the basis by one dollar for sis reduction is taxable as ordinary income un-
is excluded by reason of the bankruptcy or in- each dollar of excluded canceled debt. der the depreciation recapture provisions. Treat
solvency exclusion, you must use the excluded However, the reduction can't be more than any property that isn't section 1245 or section
debt to reduce the following tax attributes (but the excess of the total basis of the prop- 1250 property as section 1245 property. For
not below zero) in the order listed unless you erty and the amount of money you held im- section 1250 property, determine the deprecia-
elect to reduce the basis of depreciable prop- mediately after the debt cancellation over tion adjustments that would have resulted under
erty first, as explained later. Reduce your tax at- your total liabilities immediately after the the straight line method as if there were no ba-
tributes after you figure your income tax liability cancellation. sis reduction for debt cancellation. See Pub.
for 2023. For allocation rules that apply to basis 544, or Pub. 225, for more details on sections
reductions for multiple canceled debts, 1245 and 1250 property and the recapture of
1. Net operating loss (NOL). First reduce see Regulations section 1.1017-1(b)(2). gain as ordinary income.
any 2023 NOL and then reduce any NOL Also see Election to reduce the basis of
carryover to 2023 (after taking into ac- depreciable property before reducing
count any amount used to reduce 2023 other tax attributes, later. Qualified Farm Indebtedness
taxable income) in the order of the tax If you exclude canceled debt from income under
years from which the carryovers arose, 6. Passive activity loss and credit carry-
starting with the earliest year. Reduce the overs. Reduce the passive activity loss both the insolvency exclusion and the exclusion
NOL or carryover by one dollar for each and credit carryovers from 2023. Reduce for qualified farm indebtedness, you must first
dollar of excluded canceled debt. the loss carryover by one dollar for each reduce your tax attributes by the amount exclu-
dollar of excluded canceled debt. Reduce ded under the insolvency exclusion. Then, re-
2. General business credit carryover. Re- the credit carryover by 33 / cents for each 1 3 duce your remaining tax attributes (but not be-
duce the credit carryover to or from 2023. dollar of excluded canceled debt. low zero) by the amount of canceled debt that
Reduce the credit carryovers to 2023 in qualifies for the farm debt exclusion.
the order in which they are taken into ac- 7. Foreign tax credit. Reduce the credit car-
count for 2023. For more information on ryover to or from 2023. Reduce the credit In most cases, when reducing your tax at-
the credit ordering rules for 2023, see the carryovers to 2023 in the order in which tributes for canceled qualified farm indebted-
Instructions for Form 3800. Reduce the they are taken into account for 2023. Re- ness excluded from income, reduce them in the
carryover by 33 / cents for each dollar of 1 3 duce the carryover by 33 / cents for each 1 3 same order explained under Bankruptcy and In-
excluded canceled debt. dollar of excluded canceled debt. solvency, earlier. However, don't follow the rules
in item (5), Basis. Instead, reduce only the basis
3. Minimum tax credit. Reduce the mini- Election to reduce the basis of depreciable of qualified property. Qualified property is any
mum tax credit available at the beginning property before reducing other tax attrib- property you use or hold for use in your trade or
of 2024. Reduce the credit by 33 / cents 1 3 utes. You can elect to reduce the basis of de- business or for the production of income. Re-
for each dollar of excluded canceled debt. preciable property you held at the beginning of duce the basis of qualified property in the fol-
4. Net capital loss and capital loss carry- 2024 before reducing other tax attributes. You lowing order.
overs. First reduce any 2023 net capital can reduce the basis of this property by all or

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1. Depreciable qualified property. You can You may be able to exclude the remaining complete Part II of Form 982 to reduce the basis
elect on Form 982 to treat real property $8,000 of canceled debt from income under the of depreciable real property and the 2023 NOL
held primarily for sale to customers as if it exclusion for qualified real property business in- by entering $4,000 on line 4 and $10,000 on
were depreciable property. debtedness, if you elect to apply it. The amount line 6. None of the canceled debt is included in
2. Land that is qualified property and is used you can exclude is limited. It can’t be more than: income.
or held for use in your farming business. 1. $20,000 (the excess of the $185,000 out-
3. Other qualified property. standing principal amount of your qualified
real property business debt (immediately
before the cancellation) over the $165,000
Qualified Real Property FMV (immediately before the cancellation)
Business Indebtedness of the qualified real property, which se-
cured the debt), or
If you make an election to exclude canceled 2. $198,000 (the total adjusted basis of de-
qualified real property business debt from in- preciable real property you held immedi-
come, you must reduce the basis of your depre- ately before the cancellation determined 2.
ciable real property (but not below zero) by the after reductions for accumulated deprecia-
amount of canceled qualified real property busi- tion and canceled debt excluded under the
ness debt excluded from income. The basis re- insolvency exclusion ($220,000 minus
duction is made at the beginning of 2024. How- $10,000 minus $12,000)). Foreclosures
ever, if you dispose of your depreciable real
property before the beginning of 2024, you must Since both limits are more than the $8,000
reduce its basis (but not below zero) immedi- of remaining canceled debt ($20,000 minus and
ately before the disposition. Enter the amount of $12,000), you can exclude $8,000 under the
the basis reduction on line 4 of Form 982. qualified real property business indebtedness
exclusion. Repossessions
Example 1—qualified real property busi- You check the boxes on lines 1b and 1d of
ness indebtedness and insolvency with re- Form 982. You complete Part II of Form 982 to If you don't make payments you owe on a loan
duction in basis. In 2018, you bought a retail reduce the basis in the depreciable real prop- secured by property, the lender may foreclose
store for use in a business operated as a sole erty by $20,000, the amount of the canceled on the loan or repossess the property. The fore-
proprietorship. You made a $20,000 down pay- debt excluded from income. You enter $8,000 closure or repossession is treated as a sale
ment and financed the remaining $200,000 of on line 4 and $12,000 on line 5. from which you may realize gain or loss. This is
the purchase price with a bank loan. The bank true even if you voluntarily return the property to
loan was a recourse loan and was secured by Example 2—qualified real property busi- the lender. If the outstanding loan balance was
the property. You used the property in the busi- ness indebtedness with insolvency and re- more than the FMV of the property and the
ness continuously since it was purchased and duction in NOL. You own depreciable real lender cancels all or part of the remaining loan
had no other debt secured by that depreciable property used in a retail business. Your adjusted balance, you may also realize ordinary income
real property. In addition to the retail store, you basis in the property is $145,000. The FMV of from the cancellation of debt. You must report
owned depreciable equipment and furniture the property is $120,000. The property is sub- this income on your return unless certain excep-
with an adjusted basis of $50,000. Your tax at- ject to $134,000 of recourse debt, which is se- tions or exclusions apply. See chapter 1 for
tributes included the basis of depreciable prop- cured by the property. You had no other debt more details.
erty, an NOL, and a capital loss carryover to secured by that depreciable real property. You
2023. also had a $15,000 NOL in 2023. Borrower's gain or loss. You figure and re-
Your business encountered financial difficul- During 2023, you entered into a workout port gain or loss from a foreclosure or reposses-
ties in 2023. On September 21, 2023, the bank agreement with the lender under which the sion in the same way as gain or loss from a
financing the retail store loan entered into a lender canceled $14,000 of the debt on the real sale. The gain is the difference between the
workout agreement with you under which it can- property used in the business. Immediately be- amount realized and your adjusted basis in the
celed $20,000 of the principal amount of the fore the cancellation, you were insolvent to the transferred property (amount realized minus ad-
debt. Immediately before the bank entered into extent of $10,000. You exclude $10,000 of the justed basis). The loss is the difference be-
the workout agreement, you were insolvent to canceled debt from income under the insol- tween your adjusted basis in the transferred
the extent of $12,000. At that time, the out- vency exclusion. As a result of that exclusion, property and the amount realized (adjusted ba-
standing principal balance on the retail store you reduce the NOL by $10,000. sis minus amount realized). For more informa-
loan was $185,000, the FMV of the store was You may be able to exclude the remaining tion on figuring gain or loss from the sale of
$165,000, and the adjusted basis was $4,000 of canceled debt from income under the property, see Gain or Loss From Sales and Ex-
$210,000 ($220,000 cost minus $10,000 accu- qualified real property business indebtedness changes in Pub. 544.
mulated depreciation). The bank sent you a exclusion, if you elect to apply it. The amount You can use Table 1-1 to figure your or-
2023 Form 1099-C showing canceled debt of you can exclude is limited. It can't be more than: TIP dinary income from the cancellation of
$20,000 in box 2. 1. $14,000 (the excess of the $134,000 out- debt and your gain or loss from a fore-
You must apply the insolvency exclusion be- standing principal amount of your qualified closure or repossession.
fore applying the exclusion for canceled quali- real property business debt (immediately
fied real property business indebtedness. Un- before the cancellation) over the $120,000 Amount realized and ordinary income on
der the insolvency exclusion rules, you can FMV (immediately before the cancellation) a recourse debt. If you are personally liable
exclude $12,000 of the canceled debt from in- of that qualified real property, which se- for the debt, the amount realized on the foreclo-
come. You elect to reduce the basis of depreci- cured the debt), or sure or repossession includes the smaller of:
able property before reducing other tax attrib-
utes. Under that election, you must first reduce 2. $145,000 (the total adjusted basis of de- 1. The outstanding debt immediately before
the basis in the depreciable real property used preciable real property held immediately the transfer reduced by any amount for
in the trade or business that secured the can- before the cancellation of debt). which you remain personally liable imme-
diately after the transfer, or
celed debt. After the basis reduction, the adjus- Since both limits ($14,000 and $145,000)
ted basis in that property is $198,000 ($210,000 are more than the remaining $4,000 of canceled 2. The FMV of the transferred property.
adjusted basis before entering into the workout debt, you can also exclude the remaining The amount realized also includes any pro-
agreement minus $12,000 of canceled debt ex- $4,000 of canceled debt. ceeds you received from the foreclosure sale. If
cluded from income under the insolvency exclu- You check the boxes on lines 1b and 1d of the FMV of the transferred property is less than
sion). Form 982 and enter $14,000 on line 2. You

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Table 1-1. Worksheet for Foreclosures and the outstanding debt immediately before the
Repossessions Keep for Your Records transfer. This is true even if the FMV of the prop-
erty is less than the outstanding debt immedi-
Part 1. Complete Part 1 only if you were personally liable for the debt (even if none of the debt was ately before the transfer.
canceled). Otherwise, go to Part 2.
Example 1. You paid $200,000 for a home.
1. Enter the amount of outstanding debt immediately before the transfer of property You made a $15,000 down payment and bor-
reduced by any amount for which you remain personally liable immediately after rowed the remaining $185,000 from a bank. You
the transfer of property . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . aren’t personally liable for the loan, but the loan
2. Enter the fair market value of the transferred property . . . . . . . . . . . . . . . . . . was secured by a mortgage on the house.
3. Ordinary income from the cancellation of debt upon foreclosure or The bank foreclosed on the mortgage be-
repossession.* Subtract line 2 from line 1. If less than zero, enter zero. Next, go cause you stopped making payments. When
to Part 2 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . the bank foreclosed on the mortgage, the bal-
ance due was $180,000, the FMV of the house
Part 2. Gain or loss from foreclosure or repossession. was $170,000, and your adjusted basis was
4. Enter the smaller of line 1 or line 2. If you didn't complete Part 1 (because you $175,000 due to a casualty loss that was de-
weren't personally liable for the debt), enter the amount of outstanding debt ducted.
immediately before the transfer of property . . . . . . . . . . . . . . . . . . . . . . . . . The amount you realized on the foreclosure
5. Enter any proceeds you received from the foreclosure sale . . . . . . . . . . . . . . is $180,000, the outstanding debt immediately
before the foreclosure. You figure the gain or
6. Add line 4 and line 5 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . loss by comparing the $180,000 amount real-
7. Enter the adjusted basis of the transferred property . . . . . . . . . . . . . . . . . . . ized with the $175,000 adjusted basis. You have
8. Gain or loss from foreclosure or repossession. Subtract line 7 a $5,000 realized gain. See Pub. 523, to figure
from line 6 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . and report any taxable amount.
* The income may not be taxable. See chapter 1 for more details. Example 2. You bought a new car for
$15,000. You made a $2,000 down payment
the total outstanding debt immediately before You figure the gain or loss on the foreclosure and borrowed the remaining $13,000 from the
the transfer reduced by any amount for which by comparing the $170,000 amount realized dealer's credit company. You aren’t personally
you remain personally liable immediately after with the $175,000 adjusted basis. You have a liable for the loan (nonrecourse), but pledged
the transfer, the difference is ordinary income $5,000 nondeductible loss. the new car as security for the loan.
from the cancellation of debt. You must report On August 3, 2023, the credit company re-
this income on your return unless certain excep- Example 2. You bought a new car for possessed the car because you stopped mak-
tions or exclusions apply. See chapter 1 for $15,000. You made a $2,000 down payment ing loan payments. The balance due after tak-
more details. and borrowed the remaining $13,000 from the ing into account the payments you made was
dealer's credit company. You are personally lia- $10,000. The FMV of the car when it was repos-
Example 1. In 2022, you paid $200,000 for ble for the loan (recourse debt) and the car is sessed was $9,000.
a home. You made a $15,000 down payment pledged as security for the loan. On August 3, The amount you realized on the reposses-
and borrowed the remaining $185,000 from a 2023, the credit company repossessed the car sion is $10,000. That is the outstanding amount
bank. You are personally liable for the mortgage because you stopped making loan payments. of debt immediately before the repossession,
loan and the house secures the loan. In 2023, The balance due after taking into account the even though the FMV of the car is less than
the bank foreclosed on the mortgage because payments you made was $10,000. The FMV of $10,000. You figure the gain or loss on the re-
you stopped making payments. When the bank the car when it was repossessed was $9,000. possession by comparing the $10,000 amount
foreclosed the mortgage, the balance due was On November 16, 2023, the credit company for- realized with the $15,000 adjusted basis. You
$180,000, the FMV of the house was $170,000, gave the remaining $1,000 balance on the loan have a $5,000 nondeductible loss.
and your adjusted basis was $175,000 due to a due to insufficient assets.
casualty loss that was deducted. At the time of In this case, the amount you realize is Forms 1099-A and 1099-C. A lender who ac-
the foreclosure, the bank forgave $2,000 of the $9,000. This is the smaller of: quires an interest in your property in a foreclo-
sure or repossession should send you Form
$10,000 debt in excess of the FMV ($180,000 1. $9,000 (the $10,000 outstanding debt im- 1099-A, Acquisition or Abandonment of Se-
minus $170,000). You remained personally lia- mediately before the repossession minus cured Property, showing information you need
ble for the $8,000 balance. the $1,000 for which you remain person- to figure your gain or loss. However, if the lender
In this case, you have ordinary income from ally liable immediately after the reposses- also cancels part of your debt and must file
the cancellation of debt in the amount of sion), or Form 1099-C, the lender can include the infor-
$2,000. The $2,000 income from the cancella-
tion of debt is figured by subtracting the 2. $9,000 (the FMV of the car). mation about the foreclosure or repossession
$170,000 FMV of the house from the $172,000 on that form instead of on Form 1099-A. The
difference between the total outstanding debt You figure the gain or loss on the reposses- lender must file Form 1099-C and send you a
immediately before the transfer of property and sion by comparing the $9,000 amount realized copy if the amount of debt canceled is $600 or
the amount for which you remain personally lia- with the $15,000 adjusted basis. You have a more and the lender is a financial institution,
ble immediately after the transfer ($180,000 mi- $6,000 nondeductible loss. After the cancella- credit union, federal government agency, or
nus $8,000). You are able to exclude the $2,000 tion of the remaining balance on the loan in No- other applicable entity, as discussed earlier in
of canceled debt from income under the quali- vember, you also have ordinary income from chapter 1. For foreclosures or repossessions
fied principal residence indebtedness rules, dis- cancellation of debt in the amount of $1,000 occurring in 2023, these forms should be sent
cussed earlier. (the remaining balance on the $10,000 loan af- to you by January 31, 2024.
You must also determine the gain or loss ter the $9,000 amount satisfied by the FMV of
from the foreclosure. In this case, the amount the repossessed car). You must report the
realized is $170,000. This is the smaller of: $1,000 on the return unless one of the excep-
tions or exclusions described in chapter 1 ap-
1. $172,000 (the $180,000 of outstanding plies.
debt immediately before the transfer minus
$8,000 for which you remain personally li-
able immediately after the transfer), or Amount realized on a nonrecourse debt.
If you aren't personally liable for repaying the
2. $170,000 (the FMV of the house). debt secured by the transferred property, the
amount you realize includes the full amount of

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were personally liable for the debt and the amount realized is $185,000 and the adjusted
lender didn't complete a foreclosure of the prop- basis in the property is $180,000 (as a result of
erty in 2023, you have neither gain nor loss in $20,000 of depreciation deductions on the
3. tax year 2023 from abandoning the property. If property). You have a $5,000 gain in tax year
the lender sells the property at a foreclosure 2023. (Had your adjusted basis been greater
sale in 2024, you will have to figure the gain or than the amount realized, you would have had a
deductible loss for tax year 2024, as discussed deductible loss.) The lender sells the property
Abandonments earlier in chapter 2. at a foreclosure sale in 2024. You have neither
gain nor loss from the foreclosure sale. Be-
You abandon property when you voluntarily and Abandonment of property securing nonre- cause you weren’t personally liable for the debt,
permanently give up possession and use of the course debt. If you abandon property that se- you also have no cancellation of debt income.
property with the intention of ending your own- cures debt for which you aren't personally liable
ership but without passing it on to anyone else. (nonrecourse debt), the abandonment is treated Canceled debt. If the abandoned property se-
Whether an abandonment has occurred is de- as a sale or exchange. cures a debt for which you are personally liable
termined in light of all the facts and circumstan- The amount you realize on the abandon- and the debt is canceled, you will realize ordi-
ces. You must both show an intention to aban- ment of property that secured nonrecourse debt nary income equal to the canceled debt. This
don the property and affirmatively act to is the amount of the nonrecourse debt. If the income is separate from any amount realized
abandon the property. amount you realize is more than your adjusted from abandonment of the property. You must re-
A voluntary conveyance of the property in lieu of basis, then you have a gain. If your adjusted ba- port this income on your return unless one of
foreclosure isn’t an abandonment and is treated sis is more than the amount you realize, then the exceptions or exclusions described in chap-
as the exchange of property to satisfy a debt. you have a loss. For more information on how to ter 1 applies.
For more information, see Sales and Ex- figure gain and loss, see Gain or Loss From
changes in Pub. 544. Sales and Exchanges in Pub. 544. Forms 1099-A and 1099-C. In most cases, if
The tax consequences of abandonment of Loss from abandonment of business or in- you abandon:
property that secures a debt depend on vestment property is deductible as a loss. The • Real property (such as a home),
whether you were personally liable for the debt character of the loss depends on the character • Intangible property, or
(recourse debt) or weren’t personally liable for of the property. The amount of deductible capi- • Tangible personal property held (wholly or
the debt (nonrecourse debt). tal loss may be limited. For more information, partly) for use in a trade or business or for
see Treatment of Capital Losses in Pub. 544. investment
See Pub. 544 if you abandoned prop- You can't deduct any loss from abandonment of that secures a loan and the lender knows the
TIP erty that didn't secure debt. This publi- your home or other property held for personal property has been abandoned, the lender
cation only discusses the tax conse- use. should send you Form 1099-A showing informa-
quences of abandoning property that secured a tion you need to figure your gain or loss from the
debt. Example 1—abandonment of per- abandonment. Also, if your debt is canceled
sonal-use property securing nonrecourse and the lender must file Form 1099-C, the
Abandonment of property securing re- debt. In 2019, you purchased a home for lender can include the information about the
course debt. In most cases, if you abandon $200,000. You borrowed the entire purchase abandonment on that form instead of on Form
property that secures debt for which you are price, for which you weren’t personally liable, 1099-A. The lender must file Form 1099-C and
personally liable (recourse debt), you don't have and gave the bank a mortgage on the home. In send you a copy if the amount of debt canceled
gain or loss until the later foreclosure is comple- 2023, you lost your job and was unable to con- is $600 or more and the lender is a financial in-
ted. For details on figuring gain or loss on the tinue making the mortgage loan payments. Be- stitution, credit union, federal government
foreclosure, see chapter 2. cause the mortgage loan balance was agency, or other applicable entity, as discussed
$185,000 and the FMV of the home was only earlier in chapter 1.
Example 1—abandonment of per- $150,000, you decided to abandon the home by For abandonments of property and debt
sonal-use property securing recourse debt. permanently moving out on August 1, 2023. Be- cancellations occurring in 2023, these forms
In 2019, you purchased a home for $200,000. cause you weren’t personally liable for the debt, should be sent to you by January 31, 2024.
You borrowed the entire purchase price, for the abandonment is treated as a sale or ex-
which you were personally liable, and gave the change of the home in tax year 2023. Your
bank a mortgage on the home. In 2023, you lost amount realized is $185,000 and the adjusted
your job and was unable to continue making the basis in the home is $200,000. You have a How To Get Tax Help
mortgage loan payments. Because your mort- $15,000 nondeductible loss in tax year 2023.
gage loan balance was $185,000 and the FMV (Had your adjusted basis been less than the If you have questions about a tax issue; need
of the home was only $150,000, you decided to amount realized, you would have had a gain help preparing your tax return; or want to down-
abandon the home by permanently moving out that would have to be included in gross in- load free publications, forms, or instructions, go
on August 1, 2023. Because you were person- come.) The bank sells the house at a foreclo- to IRS.gov to find resources that can help you
ally liable for the debt and the bank didn't com- sure sale in 2024. You have neither gain nor right away.
plete a foreclosure of the property in 2023, you loss from the foreclosure sale. Because you
have neither gain nor loss in tax year 2023 from weren’t personally liable for the debt, you also Preparing and filing your tax return. After
abandoning the home. If the bank sells the have no cancellation of debt income. receiving all your wage and earnings state-
ments (Forms W-2, W-2G, 1099-R, 1099-MISC,
house at a foreclosure sale in 2024, you will 1099-NEC, etc.); unemployment compensation
have to figure the gain or nondeductible loss for Example 2—abandonment of business
tax year 2024, as discussed earlier in chapter 2. or investment property securing nonre- statements (by mail or in a digital format) or
course debt. In 2019, you purchased business other government payment statements (Form
Example 2—abandonment of business property for $200,000. You borrowed the entire 1099-G); and interest, dividend, and retirement
or investment property securing recourse purchase price, for which you weren’t person- statements from banks and investment firms
debt. In 2019, you purchased business prop- ally liable, and gave the lender a security inter- (Forms 1099), you have several options to
erty for $200,000. You borrowed the entire pur- est in the property. In 2023, you were unable to choose from to prepare and file your tax return.
chase price, for which you were personally lia- continue making the loan payments. Because You can prepare the tax return yourself, see if
ble, and gave the lender a security interest in the loan balance was $185,000 and the FMV of you qualify for free tax preparation, or hire a tax
the property. In 2023, you were unable to con- the property was only $150,000, you decided to professional to prepare your return.
tinue making the loan payments. Because the abandon the property on August 3, 2023. Be-
loan balance was $185,000 and the FMV of the cause you weren’t personally liable for the debt, Free options for tax preparation. Your op-
property was only $150,000, you abandoned the abandonment is treated as a sale or ex- tions for preparing and filing your return online
the property on August 1, 2023. Because you change of the property in tax year 2023. Your

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or in your local community, if you qualify, include based on your input, provide answers on a Free Over-the-Phone Interpreter (OPI) Serv-
the following. number of tax topics. ice. The IRS is committed to serving taxpayers
• Free File. This program lets you prepare • IRS.gov/Forms: Find forms, instructions, with limited-English proficiency (LEP) by offer-
and file your federal individual income tax and publications. You will find details on ing OPI services. The OPI Service is a federally
return for free using software or Free File the most recent tax changes and interac- funded program and is available at Taxpayer
Fillable Forms. However, state tax prepara- tive links to help you find answers to your Assistance Centers (TACs), most IRS offices,
tion may not be available through Free File. questions. and every VITA/TCE tax return site. The OPI
Go to IRS.gov/FreeFile to see if you qualify • You may also be able to access tax infor- Service is accessible in more than 350 lan-
for free online federal tax preparation, e-fil- mation in your e-filing software. guages.
ing, and direct deposit or payment options.
• VITA. The Volunteer Income Tax Assis- Accessibility Helpline available for taxpay-
tance (VITA) program offers free tax help to Need someone to prepare your tax return? ers with disabilities. Taxpayers who need in-
people with low-to-moderate incomes, per- There are various types of tax return preparers, formation about accessibility services can call
sons with disabilities, and limited-Eng- including enrolled agents, certified public ac- 833-690-0598. The Accessibility Helpline can
lish-speaking taxpayers who need help countants (CPAs), accountants, and many oth- answer questions related to current and future
preparing their own tax returns. Go to ers who don’t have professional credentials. If accessibility products and services available in
IRS.gov/VITA, download the free IRS2Go you choose to have someone prepare your tax alternative media formats (for example, braille,
app, or call 800-906-9887 for information return, choose that preparer wisely. A paid tax large print, audio, etc.). The Accessibility Help-
on free tax return preparation. preparer is: line does not have access to your IRS account.
• TCE. The Tax Counseling for the Elderly • Primarily responsible for the overall sub- For help with tax law, refunds, or account-rela-
(TCE) program offers free tax help for all stantive accuracy of your return, ted issues, go to IRS.gov/LetUsHelp.
taxpayers, particularly those who are 60 • Required to sign the return, and
years of age and older. TCE volunteers • Required to include their preparer tax iden- Note. Form 9000, Alternative Media Prefer-
specialize in answering questions about tification number (PTIN). ence, or Form 9000(SP) allows you to elect to
pensions and retirement-related issues Although the tax preparer always signs receive certain types of written correspondence
in the following formats.
unique to seniors. Go to IRS.gov/TCE or ! the return, you're ultimately responsible • Standard Print.
download the free IRS2Go app for informa- CAUTION for providing all the information re-
tion on free tax return preparation. quired for the preparer to accurately prepare • Large Print.
• MilTax. Members of the U.S. Armed your return and for the accuracy of every item • Braille.
Forces and qualified veterans may use Mil- reported on the return. Anyone paid to prepare
Tax, a free tax service offered by the De- tax returns for others should have a thorough • Audio (MP3).
partment of Defense through Military One- understanding of tax matters. For more informa- • Plain Text File (TXT).
Source. For more information, go to tion on how to choose a tax preparer, go to Tips
MilitaryOneSource MilitaryOneSource.mil/ ( for Choosing a Tax Preparer on IRS.gov. • Braille Ready File (BRF).
MilTax).
Also, the IRS offers Free Fillable Forms, Disasters. Go to IRS.gov/DisasterRelief to re-
which can be completed online and then Employers can register to use Business view the available disaster tax relief.
e-filed regardless of income. Services Online. The Social Security Adminis-
tration (SSA) offers online service at SSA.gov/ Getting tax forms and publications. Go to
Using online tools to help prepare your re- employer for fast, free, and secure W-2 filing op- IRS.gov/Forms to view, download, or print all
turn. Go to IRS.gov/Tools for the following. tions to CPAs, accountants, enrolled agents, the forms, instructions, and publications you
• The Earned Income Tax Credit Assistant and individuals who process Form W-2, Wage may need. Or, you can go to IRS.gov/
(IRS.gov/EITCAssistant) determines if and Tax Statement, and Form W-2c, Corrected OrderForms to place an order.
you’re eligible for the earned income credit Wage and Tax Statement.
(EIC). Getting tax publications and instructions in
• The Online EIN Application IRS.gov/EIN ( ) IRS social media. Go to IRS.gov/SocialMedia eBook format. Download and view most tax
helps you get an employer identification to see the various social media tools the IRS publications and instructions (including the In-
number (EIN) at no cost. uses to share the latest information on tax structions for Form 1040) on mobile devices as
• The Tax Withholding Estimator IRS.gov/ ( changes, scam alerts, initiatives, products, and eBooks at IRS.gov/eBooks.
W4App) makes it easier for you to estimate services. At the IRS, privacy and security are IRS eBooks have been tested using Apple's
the federal income tax you want your em- our highest priority. We use these tools to share iBooks for iPad. Our eBooks haven’t been tes-
ployer to withhold from your paycheck. public information with you. Don’t post your so- ted on other dedicated eBook readers, and
This is tax withholding. See how your with- cial security number (SSN) or other confidential eBook functionality may not operate as inten-
holding affects your refund, take-home pay, information on social media sites. Always pro- ded.
or tax due. tect your identity when using any social net-
• The First-Time Homebuyer Credit Account working site. Access your online account. Go to IRS.gov/
Look-up IRS.gov/HomeBuyer ( ) tool pro- The following IRS YouTube channels provide Account to securely access information about
vides information on your repayments and short, informative videos on various tax-related your federal tax account.
account balance. topics in English, Spanish, and ASL. • View the amount you owe and a break-
• The Sales Tax Deduction Calculator • Youtube.com/irsvideos. down by tax year.
(IRS.gov/SalesTax) figures the amount you • Youtube.com/irsvideosmultilingua. • See payment plan details or apply for a
can claim if you itemize deductions on • Youtube.com/irsvideosASL. new payment plan.
Schedule A (Form 1040). • Make a payment or view 5 years of pay-
Watching IRS videos. The IRS Video portal ment history and any pending or sched-
Getting answers to your tax ques- (IRSVideos.gov) contains video and audio pre- uled payments.
tions. On IRS.gov, you can get sentations for individuals, small businesses, • Access your tax records, including key
up-to-date information on current and tax professionals. data from your most recent tax return, and
events and changes in tax law. transcripts.
• IRS.gov/Help: A variety of tools to help you Online tax information in other languages. • View digital copies of select notices from
get answers to some of the most common You can find information on IRS.gov/ the IRS.
tax questions. MyLanguage if English isn’t your native lan- • Approve or reject authorization requests
• IRS.gov/ITA: The Interactive Tax Assistant, guage. from tax professionals.
• View your address on file or manage your
a tool that will ask you questions and, communication preferences.

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Get a transcript of your return. With an on- Making a tax payment. Payments of U.S. tax will be redirected appropriately on IRS.gov to
line account, you can access a variety of infor- must be remitted to the IRS in U.S. dollars. take further action. To learn more about the tool
mation to help you during the filing season. You Digital assets are not accepted. Go to IRS.gov/ go to IRS.gov/Upload.
can get a transcript, review your most recently Payments for information on how to make a pay-
filed tax return, and get your adjusted gross in- ment using any of the following options. Note. You can use Schedule LEP (Form
come. Create or access your online account at • IRS Direct Pay: Pay your individual tax bill 1040), Request for Change in Language Prefer-
IRS.gov/Account. or estimated tax payment directly from your ence, to state a preference to receive notices,
checking or savings account at no cost to letters, or other written communications from
Tax Pro Account. This tool lets your tax pro- you. the IRS in an alternative language. You may not
fessional submit an authorization request to ac- • Debit Card, Credit Card, or Digital Wallet: immediately receive written communications in
cess your individual taxpayer IRS online ac- Choose an approved payment processor the requested language. The IRS’s commitment
count. For more information, go to IRS.gov/ to pay online or by phone. to LEP taxpayers is part of a multi-year timeline
TaxProAccount. • Electronic Funds Withdrawal: Schedule a that began providing translations in 2023. You
payment when filing your federal taxes us- will continue to receive communications, includ-
Using direct deposit. The safest and easiest ing tax return preparation software or ing notices and letters, in English until they are
way to receive a tax refund is to e-file and through a tax professional. translated to your preferred language.
choose direct deposit, which securely and elec- • Electronic Federal Tax Payment System:
tronically transfers your refund directly into your Best option for businesses. Enrollment is Contacting your local TAC. Keep in mind,
financial account. Direct deposit also avoids the required. many questions can be answered on IRS.gov
possibility that your check could be lost, stolen, • Check or Money Order: Mail your payment without visiting a TAC. Go to IRS.gov/LetUsHelp
destroyed, or returned undeliverable to the IRS. to the address listed on the notice or in- for the topics people ask about most. If you still
Eight in 10 taxpayers use direct deposit to re- structions. need help, TACs provide tax help when a tax is-
ceive their refunds. If you don’t have a bank ac- • Cash: You may be able to pay your taxes sue can’t be handled online or by phone. All
count, go to IRS.gov/DirectDeposit for more in- with cash at a participating retail store. TACs now provide service by appointment, so
formation on where to find a bank or credit • Same-Day Wire: You may be able to do you’ll know in advance that you can get the
union that can open an account online. same-day wire from your financial institu- service you need without long wait times. Be-
tion. Contact your financial institution for fore you visit, go to IRS.gov/TACLocator to find
Reporting and resolving your tax-related availability, cost, and time frames. the nearest TAC and to check hours, available
identity theft issues. services, and appointment options. Or, on the
• Tax-related identity theft happens when Note. The IRS uses the latest encryption IRS2Go app, under the Stay Connected tab,
someone steals your personal information technology to ensure that the electronic pay- choose the Contact Us option and click on “Lo-
to commit tax fraud. Your taxes can be af- ments you make online, by phone, or from a cal Offices.”
fected if your SSN is used to file a fraudu- mobile device using the IRS2Go app are safe
lent return or to claim a refund or credit. and secure. Paying electronically is quick, easy,
• The IRS doesn’t initiate contact with tax- and faster than mailing in a check or money or- The Taxpayer Advocate
payers by email, text messages (including der. Service (TAS) Is Here To
shortened links), telephone calls, or social Help You
media channels to request or verify per- What if I can’t pay now? Go to IRS.gov/
sonal or financial information. This includes Payments for more information about your op- What Is TAS?
requests for personal identification num- tions.
bers (PINs), passwords, or similar informa- • Apply for an online payment agreement TAS is an independent organization within the
tion for credit cards, banks, or other finan- (IRS.gov/OPA) to meet your tax obligation IRS that helps taxpayers and protects taxpayer
cial accounts. in monthly installments if you can’t pay rights. TAS strives to ensure that every taxpayer
• Go to IRS.gov/IdentityTheft, the IRS Iden- your taxes in full today. Once you complete is treated fairly and that you know and under-
tity Theft Central webpage, for information the online process, you will receive imme- stand your rights under the Taxpayer Bill of
on identity theft and data security protec- diate notification of whether your agree- Rights.
tion for taxpayers, tax professionals, and ment has been approved.
businesses. If your SSN has been lost or • Use the Offer in Compromise Pre-Qualifier How Can You Learn About Your
stolen or you suspect you’re a victim of to see if you can settle your tax debt for Taxpayer Rights?
tax-related identity theft, you can learn less than the full amount you owe. For
what steps you should take. more information on the Offer in Compro- The Taxpayer Bill of Rights describes 10 basic
• Get an Identity Protection PIN (IP PIN). IP mise program, go to IRS.gov/OIC. rights that all taxpayers have when dealing with
PINs are six-digit numbers assigned to tax- the IRS. Go to TaxpayerAdvocate.IRS.gov to
payers to help prevent the misuse of their Filing an amended return. Go to IRS.gov/ help you understand what these rights mean to
SSNs on fraudulent federal income tax re- Form1040X for information and updates. you and how they apply. These are your rights.
turns. When you have an IP PIN, it pre- Know them. Use them.
vents someone else from filing a tax return Checking the status of your amended re-
with your SSN. To learn more, go to turn. Go to IRS.gov/WMAR to track the status
IRS.gov/IPPIN. of Form 1040-X amended returns. What Can TAS Do for You?
It can take up to 3 weeks from the date
TAS can help you resolve problems that you
Ways to check on the status of your refund. ! you filed your amended return for it to can’t resolve with the IRS. And their service is
• Go to IRS.gov/Refunds. CAUTION show up in our system, and processing
• Download the official IRS2Go app to your it can take up to 16 weeks. free. If you qualify for their assistance, you will
mobile device to check your refund status. be assigned to one advocate who will work with
you throughout the process and will do every-
• Call the automated refund hotline at Understanding an IRS notice or letter thing possible to resolve your issue. TAS can
800-829-1954. you’ve received. Go to IRS.gov/Notices to find help you if:
The IRS can’t issue refunds before additional information about responding to an • Your problem is causing financial difficulty
! mid-February for returns that claimed IRS notice or letter. for you, your family, or your business;
CAUTION the EIC or the additional child tax credit • You face (or your business is facing) an im-
(ACTC). This applies to the entire refund, not Responding to an IRS notice or letter. You mediate threat of adverse action; or
just the portion associated with these credits. can now upload responses to all notices and • You’ve tried repeatedly to contact the IRS
letters using the Document Upload Tool. For no- but no one has responded, or the IRS
tices that require additional action, taxpayers hasn’t responded by the date promised.

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How Can You Reach TAS? How Else Does TAS Help below a certain level and who need to resolve
Taxpayers? tax problems with the IRS. LITCs can represent
TAS has offices in every state, the District of taxpayers in audits, appeals, and tax collection
Columbia, and Puerto Rico. To find your advo- TAS works to resolve large-scale problems that disputes before the IRS and in court. In addi-
cate’s number: affect many taxpayers. If you know of one of tion, LITCs can provide information about tax-
• Go to TaxpayerAdvocate.IRS.gov/Contact- these broad issues, report it to TAS at IRS.gov/ payer rights and responsibilities in different lan-
Us; SAMS. Be sure to not include any personal tax- guages for individuals who speak English as a
• Download Pub. 1546, The Taxpayer Advo- payer information. second language. Services are offered for free
cate Service Is Your Voice at the IRS, avail- or a small fee. For more information or to find an
able at IRS.gov/pub/irs-pdf/p1546.pdf; LITC near you, go to the LITC page at
• Call the IRS toll free at 800-TAX-FORM Low Income Taxpayer Clinics TaxpayerAdvocate.IRS.gov/LITC or see IRS
(800-829-3676) to order a copy of Pub. (LITCs) Pub. 4134, Low Income Taxpayer Clinic List, at
1546; IRS.gov/pub/irs-pdf/4134.pdf.
• Check your local directory; or LITCs are independent from the IRS and TAS.
• Call TAS toll free at 877-777-4778. LITCs represent individuals whose income is

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                    To help us develop a more useful index, please let us know if you have ideas for index entries.
Index               See “Comments and Suggestions” in the “Introduction” for the ways you can reach us.
 
                                    Income from 3                                                       Qualified principal residence 
1099-C 4                          Co-owners  4                       I                                   indebtedness   9
                                                                                                         Examples  9
                                                                     Income from canceled debt     3    Qualified real property business 
A                                 D                                  Insolvency 6                        indebtedness   8
Abandonments  14                  Debts:                               Reduction of tax attributes 10    Reduction of tax attributes 12
  Canceled debt 14                  Stockholder's   4
Assistance (See Tax help)         Definitions:                       L                                  R
                                    Adjusted tax attributes 8        Limits:                            Real property business 
B                                   Qualified acquisition              Excluded farm debt 8              indebtedness   8
Bankruptcy  6                           indebtedness 9
  Reduction of tax attributes 10    Qualified farm indebtedness   8    Qualified real property business Recapture:
                                                                          indebtedness 9                 Basis reductions 11
Business:                           Qualified principal residence    Loans:                             Repossessions  12
                                        indebtedness 9
  Real property indebtedness  8     Qualified real property business   Student 4
                                        indebtedness 8                                                  S
C                                                                    M
                                                                                                        Stockholder debts 4
Canceled debt 4                   E                                  Missing children, photographs      Student loans 4
  Exceptions:                     Educational loans  4                 of  2
   Deductible debt 5                                                 Mortgage Debt Relief Act           T
                                                                       (See Qualified Principal 
   Gifts  4                       F                                    Residence Indebtedness)          Tax attributes, reduction of:
   Price reduced after 
       purchase 6                 Farm indebtedness  8                                                   Bankruptcy   10
   Student loans  4                 Reduction of tax attributes 11   P                                   Insolvency 10
  Exclusions:                     Foreclosures 12                    Principal residence                 Qualified farm indebtedness  11
   Bankruptcy   6                 Form:                                indebtedness 9                    Qualified Principal Residence 
   Insolvency   6                   1099-A   13 14,                  Publications (See Tax help)         Indebtedness     10
   Qualified farm                   1099-C   13 14,                                                      Qualified real property business 
                                                                                                         indebtedness     12
       indebtedness 8                                                Q                                  Tax help 14
   Qualified principal residence  G                                  Qualified farm indebtedness   8
       indebtedness 9
   Qualified real property        Gifts 4                              Reduction of tax attributes 11
       business indebtedness     8

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