Hi and welcome to our site! to determine your insolvency using the worksheet - the difference between the two (liabilities minus assets) - $47,800 minus $1,905.Then - you will compare these amounts - and if your insolvency is more than the amount of debt forgiven $25,550 - you will be eligible to exclude it from taxable income."My insolvency is more than the amount of debt forgiven" - that is a key for determination - so you report the full amount on form 982 and nothing on form 1040.
Thank you! So what numbers go on what lines on the form?
On form 982 - because you are insolvent - check the box 1(b)Line 2 - list the amount $25,550 which is excluded from taxable income because of insolvency.Part II is for reduction of tax attributes - most likely - you do not need to reduce any attributes - but still please verify.
Let me know if you need any help.