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Generally - as you are personally liable - the amount of forgiven dent is included into your income.As that is related to rental property - report that income on line 3 schedule E.
You have an option to exclude that income by filing form 982.If you do so - on form 982
check box d - Discharge of qualified real property business indebtedness
put the amount discharged on line 2 - and on line 4.
If interest from box 3 was previously deducted - you will need to use the full amount from box 2 form 1099C as your debt discharged.If the interest was NOT deducted - your debt discharges is (box 2) MINUS (box 3)
You will need to reduce the basis of your property by the amount forgiven which you excluded from your income - that is the meaning of line 4 reporting on form 982.
That would be another possibility...To exclude COD - cancellation of debt income using Insolvency exemption.But as long as you may use an exemption for "qualified real property business indebtedness" - that woudl not make any difference.But - formally speaking - you may use any exemption for which you qualify.
So if for some reason you like an insolvency exemption better - you would do the same - but on line 1 you will select a different option.
If you choose to do so - you woudl need top prepare an insolvency worksheet - but woudl not need to send it with your tax return - just keep for your own records.