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

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. 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!


  2. 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 information you receive as either a binding legal opinion in your case, nor presume that I am your counsel because I've answered a question you had. Any legal representation is accomplished by written contract ONLY, signed by each of us.


  3. 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 Specialization PATENTAX.COM This communication is general information and not legal advice, and does not create an attorney-client relationship. This communication should not be relied upon as any type of legal advice. Please note that no attorney-client relationship exists between the sender and the recipient of this message in the absence of either (1) a signed fee contract and (2) remission of an agreed-upon retainer. Absent such an agreement and retainer, I am not engaged by you as an attorney, nor is any other member of my law firm.