Form 982: Reduction of Tax Attributes

[Chowdahead]

Good afternoon.  I need a clarification.  When filing Form 982 based on a taxpayer receiving a 1099-C due to a short sale of their principal residence, does any of the amount from the 1099-C need to be included on the 1040, or does entering the excluded income from the 1099-C on the 982 and filing it with the return appropriate?  I know that ATX doesn't carry any amounts from the 982 to the 1040.

The reason I as is because including the excluded income it on the 1040 creates quite a tax liability.  I just want to make sure it doesn't have to be included and the IRS will calculate the reduced liability after processing the Form 982.

Thanks!

[Yardley CPA]

Chowdahead...I just completed that form on a return.  I included the 1099-C amount on the 982.  I did not reflect it anywhere else on the return.  It was my understanding that they will review the 982 and determine the next step.  In my clients case, I had them complete the Insolvency Worksheet in anticipation of the IRS requesting that. 

[Pacun]

Primary Residence doesn't need insolvency to be "not taxable" but you have to reduce the basis by that amount.  When you get a 1099-C you have two choices: Taxable or not taxable. Then you have to report it on line 21 (1040) if taxable or on 982 if not taxable.

[Lee B]

Pub 4681 is my go to resource for this stuff, fairly well written with lots of detailed examples.

[Chowdahead]

Thanks you.  Forgot to mention, this is a single-family home and they lived in it for about 10 years consecutively.  I will go through the 982.