Entering Cancelation of Debt and/or OID for Partnership S-Corporate or Corporate Returns in Lacerte

How to Enter Cancelation of Debt or OID in Lacerte

Enter as Other Income

• Go to the Income screen:
  • Screen 10 (Partnership)
  • Screen 13 (S Corporate)
  • Screen 13 (Corporate)
• Hold down Ctrl+E in, Other (Ctrl+E).
• Enter the Description and Amount.
• Click OK.

Form 982

Go to Discharge of Indebtedness Screen

• Screen 61 (Partnership)
• Screen 69 (S Corporate)
• Screen 75 (Corporate)

Note: If the Cancelation of Debt income should pass through to the partners/shareholders, use the Other Income field on Screen 20, Income and Deductions for S Corporations, or Screen 22, Other Schedule K Items for Partnerships.

Resources to view for Cancelation of Debt and OID

There are several ways to report Cancelation of Debt income for business returns. It's up to you to decide which method is correct based on the Form Instructions and Publications.

If you are having problems determining the appropriate line, a helpful resource for you is our Live Community. This is an open forum for our Lacerte to ask questions about tax law or tax advice that we cannot answer. Simply start typing your question and results will start to populate per the terms you search for.

Per IRS Publication 544:

Report income from cancelation of a nonbusiness debt as other income on Form 1040 as Other Income. Partnerships, corporations and other entities, report this income on the comparable line on your tax return.

Therefore the amount would be reported as "Other Income" on the Partnership, Corporate or other entity tax returns, however, income from cancelation of debt is not taxed if any of the following conditions apply:

• The Cancelation is intended as a gift
• The debt is qualified farm debt
• The debt is qualified real property business debt
• You are insolvent or bankrupt (see Publication 908)
• The debt is qualified principal residence indebtedness