How do I document my reduction of tax attributes on Form 982 (Cancellation of Debt)?

Asked almost 3 years ago - Fairfax, VA

I have a 1099-C for 100k of student loans. I am insolvent based on the IRS pub. 4681 insolvency worksheet. I have indicated as much on Form 982, Part I.

I earned a negligible amount of money, on which I owe no taxes, nor am owed a refund. I do not own a business, or property. The basis of my personal-use property (no more than 10k) is far below my liabilities AFTER my cancellation of debt (still owe another 60k in student loans). Based on this (as I understand it), no reduction of tax attributes is required in Part II of Form 982 according to IRC 1017(b)(2). How do I indicate this on my taxes??? What exactly does a "statement" to the IRS documenting this information look like?

Attorney answers (3)

  1. Susan Leslie Fraser

    Pro

    Contributor Level 14

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    Answered . You really need to hire either a CPA or a tax attorney for help on this. If it is later deemed that you were incomplete in your statement of assets, this can come back to hurt you significantly.
    If you cannot afford a C.P.A. then go ahead and check out your local library for volunteer tax help- those are usually run by retired accountants who have a strong public service sense. You can call the I.R.S. itself for tax help but if you do this, you MUST document it.

    Legal issues often depend on the specific facts in any given case or situation. Please do NOT utilize the... more
  2. Shannon E Wynn

    Pro

    Contributor Level 14

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    Answered . You should seek the advice of a CPA or tax attorney. I have changed your question heading to Tax, as you will likely receive more insightful answers. Good Luck!

  3. Curtis Lamar Harrington Jr

    Contributor Level 20

    2

    Lawyers agree

    Answered . Reduction of bases yields more tax when an asset is eventually sold. Personal use assets economically are considered as being consumed. I would list all of my few assets on the form to make it part of the record because no one knows what you might be earning in 5 years. Putting them on the record makes it a statement.

    Also file your $0 income owing tax return complete. If you need to rely on it far after your records are gone it will stand and it will get the statute of limitations application. (otherwise you will have to show that you earned nothing, perhaps continually for years to come AND it will preferably not give you statute of limitations closure.

    Curt Harrington Patent & Tax Law Attorney Certified Tax Specialist by the California Board of Legal... more

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