Instructions for Filling Out Form 982

This document offers comprehensive guidance on completing Form 982, used for reducing tax attributes due to discharge of indebtedness and section 1082 basis adjustment. It provides definitions, filing requirements, and step-by-step instructions for each section of the form, as outlined by the Internal Revenue Service (IRS).

In this article, we'll provide information on Form 982 and a step-by-step guide on how to fill it out, keeping it straight to the point.

What is Form 982?

Form 982 is a tax document used to report the exclusion of discharged indebtedness from gross income under specific circumstances outlined in section 108. Generally, the amount one benefits from the discharge of indebtedness is included in gross income, but in certain situations, it can be excluded. In addition to reporting the exclusion, Form 982 also details the reduction of specific tax attributes, either dollar for dollar or 33 1/3 cents per dollar. This form must be filed alongside the federal income tax return for the year in which a discharge of indebtedness is excluded from income under section 108(a).

Who Must File Form 982?

Form 982 should be filed by individuals who have had a discharge of indebtedness excluded from their gross income under specific circumstances outlined in section 108. This includes those who have had a discharge of indebtedness on a personal loan (e.g., car loan or credit card debt) or a loan for the purchase of their principal residence. Additionally, individuals with a discharge of qualified principal residence indebtedness before 2026 or discharges subject to an arrangement entered into and evidenced in writing before January 1, 2026, should file this form. Other filers include those with a discharge of qualified farm indebtedness or qualified real property business indebtedness. Corporations filing Form 982 agree to apply the general rule for adjusting the basis of property.

Form 982 Tax Filing Deadlines and Due Dates

• Form 982 should be filed with the federal income tax return for the year in which a discharge of indebtedness is excluded from income under section 108(a).
• The form should be filed on a timely basis, including extensions.
• If the form is not filed on time, an amended return can be filed within 6 months of the due date of the return (excluding extensions).

Form 982 Late Payment Penalty

There’s not a specific late payment penalty amount for Form 982. However, it is essential to file the form on time to avoid potential penalties or interest charges. If you are unsure about the late payment penalty or need further assistance, consider consulting a tax professional or contacting the IRS directly.

Step-by-Step Instructions for Form 982

The step-by-step instructions for filling out Form 982 are as follows:

1. Check the appropriate box on line 1a, 1b, 1c, 1d, or 1e depending on the nature of the discharge of indebtedness.
2. Enter the total amount excluded from your gross income due to discharge of indebtedness under section 108 on line 2.
3. If applicable, check the "Yes" box on line 3 to treat all real property held primarily for sale to customers in the ordinary course of a trade or business as if it were depreciable property.
4. If you check any of the boxes on lines 1a through 1c, you can elect, by completing line 5, to apply all or a part of the debt discharge amount to first reduce the basis of depreciable property.
5. Complete lines 6 through 13 to reduce your tax attributes.
6. If box 1e is checked and you continue to own the residence after discharge, enter the smaller of the part of line 2 that is attributable to the exclusion of qualified principal residence indebtedness, or the basis of your main home on line 10b.
7. If applicable, complete Part III to exclude from gross income under section 1081(b) any amounts of income attributable to the transfer of property described in that section.
8. Attach a statement describing the transactions that resulted in the reduction in basis under section 1017 and identifying the property for which you reduced the basis, if you made the election on line 5.
9. If you desire to have the basis of your property adjusted in a manner different from the general rule, attach a request for variation from the general rule. The request must show the precise method used and the allocation of amounts.
10. File Form 982 with your federal income tax return for a year a discharge of indebtedness is excluded from your income under section 108(a).

How to Submit Form 982

To submit Form 982, first complete Part I to indicate the reason for excluding any amount received from the discharge of indebtedness from your gross income and the amount excluded. Then, use Part II to report the reduction of tax attributes and Part III to exclude any income attributable to the transfer of property under section 1081(b). Finally, file Form 982 with your federal income tax return for the year in which a discharge of indebtedness is excluded from your income under section 108(a).

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