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Debt Relief – Insolvency – Bankruptcy Information » Insolvency » IRS form 982 line 10a “basis” Reduction & Attributes Due to Discharge of Indebtedness?

IRS form 982 line 10a “basis” Reduction & Attributes Due to Discharge of Indebtedness?

Example: 4 personal credit card loans settled within weeks of each other with a total forgiveness of approx $45K. Insolvent (total assets less total liabilities) by $ 82K (negative) 1 day before and still insolvent by no less than $52K (negative) after any of the forgiven debts. Checked box 1b and entered $45K on line 2. What do you need to calculate for line 10a in Part 2 since the degree of insolvency is still greater than the forgiven debt before and after? What is done with the value for line 10a? Is it advantageous to have a larger value or smaller value on line 10a in relation to the amount of forgiven debt?

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One Response to "IRS form 982 line 10a “basis” Reduction & Attributes Due to Discharge of Indebtedness?"

  1. v b says:
    Insolvency is calculated with FMV of assets.
    Tax attribute reduction (if there are no NOLs, capital losses, etc) is based on book value.

    For example a 10 year old car worth $3000, may have cost $25000. You use the $25000 value in the attribute reductions. If you still come up negative after using cost bases, then you put $0 on 10a and explain in the attached statement that you have reached the reduction limit.

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