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Merlo, Accountant
Category: Tax
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Experience:  25+ years tax consulting. Specializing in returns for US citizens living abroad
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I need help with Form 982 line 10.

Resolved Question:

I need help with Form 982 line 10.
My total unsecured debt before the COD is $39,533.00 The COD AMT between two 1099c's is $6,999.00
I only own a vehicle and household goods FMV totaling $7,705.00 which includes my average checking acct balance of $500.00 I own no stocks, 401Ks, real estate, or any interest in any business. 
I know this should be simple, but every explanation I’ve  found has not made sense. Can you help with this?

Submitted: 6 years ago.
Category: Tax
Expert:  Merlo replied 6 years ago.


You said this was unsecured debt, so I assume that this is debt you had from credit card companies or a similar creditor, but please confirm the source of the debt.

Also, are you trying to claim an exclusion on the taxes owed due to being insolvent?

Customer: replied 6 years ago.

Yes, the total unsecured debt is credit card debt and I am trying to claim the exclusion due to insolvency.

Incidentally, this occurred in 2008 and I am attempting to respond to the cp2000 form I received showing that I under reported my income. I have never received the 1099C's or I would have dealt with it when I filed my 2008 1040.

Expert:  Merlo replied 6 years ago.

Thank you for the additional information.

To claim the insolvency exclusion, first check the box on line 1b of Form 982. On line 2, then enter the total amount of discharged debt which are excluding from your income, which in this case appears to be the $6,999 if that was the total of the two 1099-C forms.

On line 10a, also list the amount of $6,999.

Those are the only lines you need to fill out on this form.

You must also then attach a statement to the form to show how you determined that you were insolvent. This will basically be a listing of your assets and your liabilities as they were at the time this debt was discharged. Here is an example of what your statement should look like:


Car - $6,000 (fair market value)

Furniture - $1,000 (fair market value)

Cash in bank - $500

Total assets: $7,500


Credit card debt: $35,000

Balance owed on car loan: $2,500

Total liabilities: $37,500

Using the above example, you are insolvent by the amount of $30,000, because that is the amount by which your liabilities exceed your assets. So you may exclude up to $30,000 of your canceled debt from taxable income. Since your canceled debt was only $6,999, you will be able to exclude the entire amount.

Thank you.

Merlo and other Tax Specialists are ready to help you
Customer: replied 6 years ago.

Thanks very much!

I have been struggling with this for over a week and have only a couple days left to get this in.

Expert:  Merlo replied 6 years ago.

You’re welcome,

Glad this was of some help to you.

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