Form 982 is used to report the exclusion of discharged indebtedness (cancellation of debt) from gross income under Internal Revenue Code (IRC) §108. You must file Form 982 with your federal income tax return for the year in which the discharge of indebtedness is excluded from income.
Whether you need to attach additional statements depends on the specific circumstances of your situation and any elections you make on the form.
When You Must Attach Additional Documentation
Basis Reduction under IRC §1017:
If you are required or elect to reduce the basis of your property (for example, by checking boxes on lines 1a–1d and making elections on the form), you should attach a statement describing:
- The transactions that resulted in the basis reduction
- The property affected and how the reduction is applied.
Corporations Requesting Variation from General Rule:
If you are a corporation and wish to apply a method of basis reduction different from the general rules (under applicable Treasury Regulations), you must attach a detailed statement describing:
- The proposed method
- The allocation of amounts
- Approval generally requires a formal agreement with the IRS.
Complex or Unusual Situations:
In more complex cases (such as multiple assets, pass-through entities, or detailed allocations), attaching a clear explanation may be necessary to properly disclose how the exclusion and any reductions are applied.
When You Do Not Need to Attach Additional Documentation
- If your situation is straightforward (for example, a simple exclusion of discharged debt with standard attribute reduction), you may only need to complete the applicable lines on Form 982 without attaching additional statements.
- If you are excluding qualified principal residence indebtedness (if applicable under current law for the tax year), you may only need to complete the relevant lines (such as basis reduction of your residence) unless additional detail is required.
Important Notes
- Form 982 is commonly used in situations involving:
- Bankruptcy
- Insolvency
- Qualified principal residence indebtedness (if applicable)
- Even if no additional statement is required, you must still properly complete Form 982 and apply any required tax attribute reductions.
Source:
Form 982
Disclaimer: Always verify details with the current year’s Federal or State Department of Revenue Forms and Instructions. Tax rules may vary based on individual circumstances, and professional advice from a CPA or tax attorney is recommended for complex situations.