1082 Tax Form: Form 982, Attribute Reduction, and Basis Adjustments

There is no IRS form numbered 1082. If someone pointed you to “the 1082 tax form” after a debt was forgiven, what you actually need is Form 982, titled “Reduction of Tax Attributes Due to Discharge of Indebtedness (and Section 1082 Basis Adjustment).” Section 1082 is a piece of the Internal Revenue Code referenced in the form’s name, not a form of its own. Form 982 is how you tell the IRS that cancelled debt reported to you on a Form 1099-C qualifies for one of the legal exclusions and should not be taxed as income.

What Form 982 Does

When a creditor forgives a debt, the IRS’s default rule is that the forgiven amount is income to you. The creditor may send a Form 1099-C showing the cancelled balance.¹ Without Form 982, that full amount lands on your return as taxable income for the year.

Form 982 is where you claim an exclusion under Section 108 of the Code and report the corresponding reduction in your tax attributes. The price of not paying tax on the cancelled debt now is that you shrink certain future tax benefits, such as loss carryovers or the basis of property you own. You attach the form to your federal income tax return for the year the cancellation happened.²

Who Can Use Form 982

Individuals use Form 982 all the time, not just businesses. You qualify if your cancelled debt fits one of the Section 108(a) exclusions:

Bankruptcy. The debt was discharged in a Title 11 case while you were under the court’s jurisdiction.³
Insolvency. Your total liabilities exceeded the fair market value of your total assets immediately before the cancellation. The exclusion is capped at the amount by which you were insolvent.³
Qualified farm indebtedness. The debt was directly connected to your farming business, and at least 50 percent of your gross receipts over the prior three years came from farming.
Qualified real property business indebtedness. Debt incurred in connection with real property used in a trade or business and secured by that property. C corporations cannot use this one.
Qualified principal residence indebtedness. A mortgage taken out to buy, build, or substantially improve your main home, if the discharge happened before January 1, 2026, or was subject to a written arrangement entered into before that date.²

Bankruptcy takes priority. If the cancellation happened inside a bankruptcy case, that is the box you use even if you were also insolvent or had qualifying farm debt.³

How the Attribute Reduction Works

Excluding cancelled debt from income comes with a required offset. Unless you elect otherwise, you reduce your tax attributes in this order:⁴

Net operating losses for the year and any NOL carryovers, dollar for dollar.
General business credit carryovers, at 33⅓ cents per dollar.
Minimum tax credit, at 33⅓ cents per dollar.
Net capital losses and carryovers, dollar for dollar.
Basis of property, dollar for dollar.
Passive activity loss and credit carryovers.
Foreign tax credit carryovers, at 33⅓ cents per dollar.

If you check the bankruptcy, insolvency, or qualified farm debt box, the form lets you elect to reduce the basis of depreciable property first, before touching anything else. That election can protect NOL carryovers you want to keep. Whatever excluded amount is left after the basis reduction then flows through the standard order.

When and How to File

Form 982 goes with your federal income tax return for the year the debt was cancelled. It has no separate deadline and no separate mailing address. Attach it to your Form 1040 and file the return normally.²

Two elections must be made on a timely filed return, including extensions: the election to reduce depreciable property basis first, and the election for qualified real property business indebtedness. If you filed on time but forgot one of them, you get a six-month window from the original due date (without extensions) to file an amended return with “Filed pursuant to section 301.9100-2” written on it.⁴

Mistakes That Cost People Money

The most damaging mistake is not filing Form 982 at all. If a 1099-C shows up in your records and you qualify for an exclusion but never attach the form, the IRS treats the whole cancelled balance as taxable income and sends a notice proposing the additional tax. An amended return can fix it, but the six-month deadline on those two elections is not flexible.

The second common error is overstating insolvency. The exclusion is capped at the exact dollar amount by which your liabilities exceeded your assets immediately before the cancellation. If you were $30,000 insolvent and $50,000 was cancelled, only $30,000 is excludable; the other $20,000 is taxable.³ The asset-and-liability worksheet is where most audit adjustments happen.

Third: a Form 1099-C does not automatically mean you owe tax. The creditor is required to report the cancellation. Whether it is taxable turns on your situation, and the Section 108 exclusions exist for exactly this reason.¹

About the Actual Section 1082 Part of the Form

Part III of Form 982 is the section that literally involves Section 1082, a corporate basis-adjustment rule tied to old SEC-ordered exchanges under the Public Utility Holding Company Act of 1935. Congress repealed Sections 1081 through 1083 in December 2005.⁵ Part III now only matters to corporations reporting a basis adjustment tied to a pre-2006 transaction. If you are filing Form 982 because a personal debt was cancelled, skip Part III entirely.

1
Internal Revenue Service. Topic No. 431, Canceled Debt – Is It Taxable or Not?
2
Internal Revenue Service. Instructions for Form 982 (12/2021)
3
Office of the Law Revision Counsel. 26 USC 108 – Income From Discharge of Indebtedness
4
Internal Revenue Service. Instructions for Form 982
5
Office of the Law Revision Counsel. 26 U.S. Code 1081 to 1083 – Repealed