Form 982 2025

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Form 1099-C. Lenders or creditors are required to issue Form 1099-C, Cancellation of Debt, if they cancel a debt owed to them of $600 or more. Generally, an individual taxpayer must include all canceled amounts (even if less than $600) on the Other Income line of Form 1040.
There are two main tests for determining your companys solvency or insolvency: the balance sheet test and the cash flow test.
The discharge of indebtedness, in whole or in part, may result in the realization of income. If, for example, an individual performs services for a creditor, who in consideration thereof cancels the debt, the debtor realizes income in the amount of the debt as compensation for his services.
A taxpayer is insolvent when his or her total liabilities exceed his or her total assets. The forgiven debt may be excluded as income under the insolvency exclusion. Normally, a taxpayer is not required to include forgiven debts in income to the extent that the taxpayer is insolvent.
An individual is eligible to become an insolvency professional (IP) provided he/she: a. is a person resident in India, b. is not a minor, c. is solvent (i.e., he / she is not an undischarged insolvent or he / she has not applied to be adjudicated as an insolvent) d. is of sound mind, e. has the qualification and
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To do this, you must file Form 982. You can only claim balance-sheet insolvency to the IRS, not cash-flow insolvency.
Form 982 is used to determine, under certain circumstances described in section 108, the amount of discharged indebtedness that can be excluded from gross income.

irs form 982 pdf