Form 982 (Rev. 1-2016)
Certain individuals may need to complete only a few
lines on Form 982. For example, if you are completing
this form because of a discharge of indebtedness on
a personal loan (such as a car loan or credit card
debt) or a loan for the purchase of your principal residence,
follow the chart, earlier, to see which lines you need to
complete. Also, see Pub. 4681, Canceled Debts, Foreclosures,
Repossessions, and Abandonments, for additional information.
Title 11 Case
A title 11 case is a case under title 11 of the United States Code
(relating to bankruptcy), but only if you are under the jurisdiction
of the court in the case and the discharge of indebtedness is
granted by the court or is under a plan approved by the court.
Discharge of Indebtedness
The term discharge of indebtedness conveys forgiveness of, or
release from, an obligation to repay.
When To File
File Form 982 with your federal income tax return for a year a
discharge of indebtedness is excluded from your income under
The election to reduce the basis of depreciable property
under section 108(b)(5) and the election made on line 1d of Part
I regarding the discharge of qualified real property business
indebtedness must be made on a timely filed return (including
extensions) and can be revoked only with the consent of the
If you timely filed your tax return without making either of
these elections, you can still make either election by filing an
amended return within 6 months of the due date of the return
(excluding extensions). Write “Filed pursuant to section
301.9100-2” on the amended return and file it at the same place
you filed the original return.
The time for making a section 108(i) election has
passed. If you made an election under section 108(i)
to defer income from the discharge of business debt
arising from the reacquisition of a debt instrument
in 2009 or 2010, don’t report the amount deferred under the
election in lines 1a through 1d and line 2.
The insolvency exclusion doesn’t apply to any discharge that
occurs in a title 11 case. It also doesn’t apply to a discharge of
qualified principal residence indebtedness (see the instructions
for line 1e on page 4) unless you elect to have the insolvency
exclusion apply instead of the exclusion for qualified principal
Check the box on line 1b if the discharge of indebtedness
occurred while you were insolvent. You were insolvent to the
extent that your liabilities exceeded the fair market value (FMV)
of your assets immediately before the discharge. For details and
a worksheet to help calculate insolvency, see Pub. 4681.
Example. You were released from your obligation to payyour
credit card debt in the amount of $5,000. The FMV ofyour total
assets immediately before the discharge was$7,000 and your
liabilities were $10,000. You were insolventto the extent of
$3,000 ($10,000 of total liabilities minus$7,000 of total assets).
Check the box on line 1b and include$3,000 on line 2.
Check this box if the income you exclude is from the discharge
of qualified farm indebtedness. The exclusion relating to
qualified farm indebtedness doesn’t apply to a discharge that
occurs in a title 11 case or to the extent you were insolvent.
Qualified farm indebtedness is the amount of indebtedness
incurred directly in connection with the trade or business of
farming. In addition, 50% or more of your aggregate gross
receipts for the three tax years preceding the tax year in which
thedischarge of such indebtedness occurs must be from the
trade or business of farming. For more information, seesections
108(g) and 1017(b)(4).
The discharge must have been made by a qualified person.
Generally, a qualified person is an individual, organization, etc.,
who is actively and regularly engaged in the business of lending
money. This person can’t be related to you, be the person from
whom you acquired the property, or be a person who receives a
fee with respect to your investment in the property. A qualified
person also includes any federal, state, or local government or
agency or instrumentality thereof.
If you checked line 1c and didn’t make the election on line 5,
the debt discharge amount will be applied to reduce the tax
attributes in the order listed on lines 6 through 9. Any remaining
amount will be applied to reduce the tax attributes in the order
listed on lines 11a through 13.
You can’t exclude more than the total of your (a) tax attributes
(determined under section 108(g)(3)(B)) and (b) basis of property
used or held for use in a trade or business or for the production
of income. Any excess is included in income.
If you check this box, the discharge of qualified real property
business indebtedness is applied to reduce the basis of
depreciable real property on line 4. The exclusion relating to
qualified real property business indebtedness doesn’t apply to a
discharge that occurs in a title 11 case or to the extent you were
Qualified real property business indebtedness isindebtedness
(other than qualified farm indebtedness) that(a) is incurred or
assumed in connection with real propertyused in a trade or
business, (b) is secured by that realproperty, and (c) with
respect to which you have made anelection under this
provision. This provision doesn’t apply toa corporation (other
than an S corporation).
Indebtedness incurred or assumed after 1992 isn’t qualified
real property business indebtedness unless it is either (a) debt
incurred to refinance qualified real property business
indebtedness incurred or assumed before 1993 (but only to the
extent the amount of such debt doesn’t exceed the amount of
debt being refinanced) or (b) qualified acquisition indebtedness.
Qualified acquisition indebtedness is (a) debt incurred or
assumed to acquire, construct, reconstruct, or substantially
improve real property that is secured by such debt and (b)debt
resulting from the refinancing of qualified acquisition
indebtedness to the extent the amount of such debt doesn’t
exceed the amount of debt being refinanced.
You can’t exclude more than the excess of the
outstanding principal amount of the debt (immediately before
the discharge) over the net FMV (as of that time) of the
property securing the debt reduced by the outstanding principal
amount of other qualified real property business indebtedness
secured by that property (as of that time). The amount excluded
is further limited to the aggregate adjusted basis (as of the first
day of the next tax year or, if earlier, the date of disposition) of
depreciable real property (determined after any reductions
under sections 108(b) and (g)) you held immediately before the
discharge (other than property acquired in contemplation of the
discharge). Any excess is included in income.