Question : IRS form 982 line 10a “basis” Reduction & Attributes Due to Discharge of Indebtedness?
Example: 4 personal credit card loans settled within weeks of each other with a total forgiveness of approx $ 45K. Insolvent (total assets less total liabilities) by $ 82K (negative) 1 day before and still insolvent by no less than $ 52K (negative) after any of the forgiven debts. Checked box 1b and entered $ 45K on line 2. What do you need to calculate for line 10a in Part 2 since the degree of insolvency is still greater than the forgiven debt before and after? What is done with the value for line 10a? Is it advantageous to have a larger value or smaller value on line 10a in relation to the amount of forgiven debt?
debt reduction irs

Best answer:

Answer by v b
Insolvency is calculated with FMV of assets.
Tax attribute reduction (if there are no NOLs, capital losses, etc) is based on book value.

For example a 10 year old car worth $ 3000, may have cost $ 25000. You use the $ 25000 value in the attribute reductions. If you still come up negative after using cost bases, then you put $ 0 on 10a and explain in the attached statement that you have reached the reduction limit.