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- Re: Debt Cancellation
Debt Cancellation
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Elif Turkseven
Level 1
10-07-2023
04:44 AM
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Hi everyone, this is the first time i am preparing form 1120 for an insolvent c corp. Since the client is insolvent I understand that he should not pay any taxes due to debt cancellation. I have generated form 982 as well. I just did not understand whether i should include the discharged debt on form 1120 as ''other income'' ? If i do it then a tax is calculated on it even though i generated the form 982. Thank you for help.
Elif,
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sjrcpa
Level 15
10-07-2023
09:48 AM
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You can exclude from taxable income COD to the extent the taxpayer is insolvent. The 982 is informational and does not link to/automatically exclude from the tax return.
If the COD is not taxable, don't enter it as other income.
The more I know, the more I don't know.
