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Am I interpreting this correctly.
That is NOT correct interpretation...
We are discussing the debt that is cancelled - correct?If we follow your logic and the question is related to the dent AFTER it cancellation - that question would be ALWAYS angered NO - and the question itself would be not relevant.We need to follow information on form 1099C box 5 - if that box is checked - that means - you personally is liable.
Then of course what do I put on the form 982?
We need to verify if you are eligible for ANY exclusion ? - that would be the purpose of form 982 - to claim an exclusion.
If you are not eligible - you would simply include the amount of cancelled debt on form 1040 line 21.
However - if you are insolvent - you may qualify for the exclusion - and in this case we need to prepare form 982.
Let me know if that answered your question.
Please be sure to ask for clarification if needed.