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Richard
Richard, Tax Attorney
Category: Tax
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Experience:  29 years of experience as a tax, real estate, and business attorney.
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how to fill out form 982 to offset the effect of 1099-C cancellation

Customer Question

how to fill out form 982 to offset the effect of 1099-C cancellation of debt. I have not gotten an answer to my question!

How long do I have to wait for an answer?
Submitted: 4 years ago.
Category: Tax
Expert:  Richard replied 4 years ago.

Good morning. Was your cancellation due to the forgiveness of debt on your principal residence? How much was the amount of the forgiveness on your 1099-C? Thank you!

Customer: replied 4 years ago.
No, they're all investment proprties.
Expert:  Richard replied 4 years ago.
Unfortunately, if they are investment properties, you are not eligible to exclude the 1099 income from being taxable. The Tax Act is only applicable to debt forgiven with respect to your principal residence. As a result, Form 982 has no applicability. I'm sorry!
Customer: replied 4 years ago.

This is an insolvency case. The for 982 clearly staes the amount excludible from taxable income due to insolvency. In other words, if the assets are less than the indebtness reported, then you can exlucde them from income. However, when I fill out the form 982, it does not reflect on page 1 of 1040 to offset the effect of 1099-C

which is in the Mis. income section. If this was a resdential property, it would not be a problem because there is exclusion for principal residence right after the 1099-C box.

thanks,

Expert:  Richard replied 4 years ago.
Ahhh....Thanks for the additional information. I am late for a meeting, but will answer this for you as soon as I return.
Customer: replied 4 years ago.
I will wait for an answer from you. Thanks,
Expert:  Richard replied 4 years ago.

Sorry for the delay. When you fill out the Form 982, you simply fill complete Line 1b and Line 2. Then that is the amount excluded from income. You simply exclude that amount from being reported in income on your 1040 income line so you do not have to deduct it somewhere else. Form 982 simply justifies why you did not include the 1099 amount in the income line.

 

 

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The information given here is not legal advice. As all states have different intricacies in their laws, the information given is general only. This communication does not establish an attorney-client relationship with you. I hope this answer has been helpful to you.

Customer: replied 4 years ago.

If 1099-C has been issued to a name and SS#, how would you not show that that has not been reported. The amount of 1099-C is $687,745. Wouldn't IRS send you a letter that you have not included this amount in your income. I think there must be a mechanism in 982 that would offset the 1099-C income in page 1 of 1040.!

Expert:  Richard replied 4 years ago.

You can include a note if you want, but that is what Form 982 is for...to specifically put the IRS on notice as to why it is excluded. Form 982 was designed specifically for this purpose.

 

 

 

Customer: replied 4 years ago.

This is what I came up with by calling the Le Ceret Software comany. The amount of indebtness has to be zeroed out by the the following action:

 

  • Go to Screen 14.1, Miscellaneous Income
  • Select Alimony and Other Income in the Section box on the left side of the screen
  • Enter the appropriate amount in the Cancellation of debt (1099-C) field, code 64
  • Enter the amount as a negative with a description in "Other income" (Ctrl+E), code 11
  • A statement will be generated for Form 1040 Line 21 that shows amounts offsetting each other
  • Let me know if this makes sense to you. Thanks,

    Expert:  Richard replied 4 years ago.
    That will work...I've not seen it done that way.. But, the botXXXXX XXXXXne on this is that as long as it is validly shown on your return, it is going to be acceptable to the IRS.

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