Form 982 — Reduction of Tax Attributes Due to Discharge of Indebtedness

This skill produces an audit-grade Form 982 from a Form 1099-C and the user's facts. It identifies which §108 exclusion applies (bankruptcy, insolvency, qualified principal residence indebtedness, qualified farm indebtedness, qualified real property business indebtedness), computes the excluded amount, applies the §108(b) attribute-reduction ordering rules, and emits a deliverable the user can transcribe to a paper or e-file form.

The math is a rule-driven computation (insolvency worksheet from Pub 4681; basis reduction caps from §108(c)). The judgment is in which exclusion the user qualifies for — and that turns on facts the user may not realize matter: the precise fair market value of all assets vs. all liabilities immediately before the discharge; the use of the property securing the debt; whether bankruptcy was Chapter 7 vs. 11 vs. 13.

This skill optimizes for the latter — the agent should ask, not guess.

Companion skill: form-1099-c handles the receipt and reporting of Form 1099-C as ordinary income (the default case where no exclusion applies). Form 982 is the EXCLUSION path. Many users will have the 1099-C skill produce Schedule 1 Line 8c income; only those with a qualifying §108 exclusion need this skill.

When to invoke

Engage this skill when any of the following is true: