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Bankruptcy discharged debt, NOL carry forward and taxes.

Cle Elum, WA |

If have a large NOL carry forward being applied each year on my 1040. Unfortunately I soon will need to apply for Chapter 7 bankruptcy to discharge my debts. For Federal Tax Return purposes does this discharged debt get taken against my NOL on my future 1040 returns?

Attorney Answers 2


  1. Discharged debt is not reportable as income even though the general rule makes forgiven debt taxable as income. Find Form 982 at www.irs,gov and read the instructions for that form.

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    This answer is offered as a public service for general information only and may not be relied upon as legal advice.


  2. This is a question for a tax professional. The discharge may not directly affect the NOL. However, it may affect whether it will offset any losses and provide any tax benefit.