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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.
  1. Net operating loss
     - To report NOL reduction on Form 982, line 6, enter one or more excluded amounts in the
    Net operating loss and carryover
     field in the
    982
     screen in the
    Other
     folder. The reduction also reports on the Adjusted Net Operating Loss Carryover Worksheet.
  2. 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 the
    General business credit carryover
     field in the
    982
     screen, which you can find in the
    Other
     folder. 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.
  3. Minimum tax credit
     - To report the minimum tax credit reduction on Form 982, line 8, enter the total amount excluded from income in the
    Minimum tax credit
     field in the
    982
     screen, which you can find in the
    Other
     folder. UltraTax CS reports 33 1/3 percent of the amount entered on the
    982
     screen. The reduction also reports at the bottom of Form 8827.
  4. 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 the
    982
     screen, which you can find in the
    Other
     folder. The reduction also reports on the Adjusted Capital Loss Carryover Worksheet.
  5. Basis
     - IRS Publication 4681, Canceled Debts, Foreclosures, Repossessions and Abandonments, describes that basis reduction will need to occur in the following order.
    note
    Basis 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 the
    A
     screen or
    F
     screen. You can create and proforma a client note to the following year as a reminder to adjust basis in the following tax year.
    1. 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 the
      Qualified real property business indebtedness applied to reduce basis of depreciable real property
       field in the
      982
       screen, which you can find in the
      Other
       folder.
    2. 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 the
      Basis of nondepreciable and depreciable property if not reduced for Section 108(b)(5) election
       field in the
      982
       screen, which you can find in the
      Other
       folder.
    3. 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 the
      Basis of nondepreciable and depreciable property if not reduced for Section 108(b)(5) election
       field in the
      982
       screen, which you can find in the
      Other
       folder.
    4. 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 the
      Basis of nondepreciable and depreciable property
       field in the
      982
       screen, which you can find in the
      Other
       folder.
    5. Personal use property.
  6. 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 the
    982
     screen, which you can find in the
    Other
     folder. UltraTax CS reports 33 1/3 percent of the amount entered in the
    982
     screen.
    note
    Passive 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.
  7. 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 the
    982
     screen, which you can find in the
    Other
     folder. UltraTax CS reports 33 1/3 percent of the amount entered on the
    982
     screen. The reduction also reports on the Adjusted Foreign Tax Credit Carryover Worksheet.

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