Reduce Form 982 tax attributes
You'll need to reduce tax attributes in a particular order. The order is dependent upon why the canceled debt is being excluded from income. Use the
982
or 982S
screen to report the reduced attributes on Form 982. See the Form 982 instructions regarding the ordering rules that will need to be followed.The following information provides details regarding the reduction of tax attributes for C Corporations.
If the canceled debt is excluded due to bankruptcy or insolvency, the excluded debt will need to be used to reduce the tax attributes in the following order unless electing to reduce the basis of depreciable property first. Tax attributes are reduced after determining the income tax liability for the tax year. See IRS Publication 4681, Canceled Debts, Foreclosures, Repossessions and Abandonments, for additional information.
- Net operating loss- To report NOL reduction on Form 982, line 6, enter one or more excluded amounts in theNet operating loss and carryoverfield in the982screen in theOtherfolder. The reduction also reports on the Adjusted Net Operating Loss Carryover Worksheet.
- General business credit carryover- To report the general business credit carryover reduction on Form 982, line 7, enter the total amount excluded from income in theGeneral business credit carryoverfield in the982screen, which you can find in theOtherfolder. UltraTax CS reports 33 1/3 percent of the amount entered on Form 982. The reduction also reports on the Adjusted General business Credit Carryover Worksheet.
- Minimum tax credit- To report the minimum tax credit reduction on Form 982, line 8, enter the total amount excluded from income in theMinimum tax creditfield in the982screen, which you can find in theOtherfolder. UltraTax CS reports 33 1/3 percent of the amount entered on the982screen. The reduction also reports at the bottom of Form 8827.
- Capital loss- To report the excluded income as applied to reduce net capital loss on Form 982, line 9, use the capital loss carryover fields in the982screen, which you can find in theOtherfolder. The reduction also reports on the Adjusted Capital Loss Carryover Worksheet.
- Basis- IRS Publication 4681, Canceled Debts, Foreclosures, Repossessions and Abandonments, describes that basis reduction will need to occur in the following order.noteBasis needs to be adjusted as of the 1st day of the following tax year in which the tax attribute was reduced. This requires a manual adjustment to assets entered in the asset module, any beginning inventory proforma'd to theAscreen orFscreen. You can create and proforma a client note to the following year as a reminder to adjust basis in the following tax year.
- Real property used in trade or business (except inventory) or held for investment that secured the canceled debt: To report the excluded income on Form 982, line 4 as applied to reduce the basis of depreciable real property, use theQualified real property business indebtedness applied to reduce basis of depreciable real propertyfield in the982screen, which you can find in theOtherfolder.
- Personal property used in trade or business (except inventory and accounts and notes payable) or held for investment that secured the canceled debt: To report the excluded income on Form 982, line 10a as applied to reduce the basis of nondepreciable and depreciable property, use theBasis of nondepreciable and depreciable property if not reduced for Section 108(b)(5) electionfield in the982screen, which you can find in theOtherfolder.
- Other property (except inventory, accounts and notes payable, and real property held primarily for sale to customers) used in the taxpayer's trade or business or held for investment: To report the excluded income on Form 982, line 10a as applied to reduce the basis of nondepreciable and depreciable property, use theBasis of nondepreciable and depreciable property if not reduced for Section 108(b)(5) electionfield in the982screen, which you can find in theOtherfolder.
- Inventory, accounts and notes receivable, and real property held primarily for sale to customers: To report the excluded income on Form 982, line 10a as applied to reduce the basis of nondepreciable and depreciable property, use theBasis of nondepreciable and depreciable propertyfield in the982screen, which you can find in theOtherfolder.
- Personal use property.
- Passive activity loss and credit carryovers- To report the reduction of tax attributes as applied to reduce passive activity loss and credit carryovers on Form 982, line 12, enter the total amount excluded from income in the passive activity fields in the982screen, which you can find in theOtherfolder. UltraTax CS reports 33 1/3 percent of the amount entered in the982screen.notePassive activity loss and credit carryovers need manual adjustment for the reduction in tax attribute by overriding the Suspended Losses to Next Year column on the Passive Activity Deduction Worksheet. The reduced carryover amount proformas to the following tax year.
- Foreign tax credit- To report the reduction of tax attributes as applied to reduce foreign tax credit carryover on Form 982, line 13, enter the total amount excluded from income on the foreign tax credit carryover fields in the982screen, which you can find in theOtherfolder. UltraTax CS reports 33 1/3 percent of the amount entered on the982screen. The reduction also reports on the Adjusted Foreign Tax Credit Carryover Worksheet.
