Tax Law (Questions About Taxes)/IRS form 982


Hi John,
   I am in need of some assistance with form 982.   I received a 1099C from Bank of America for forgiveness of the balance of my 2nd mortage on my primary residence. After falling way behind on payments, BOA offered fulll forgiveness of the remaining balance.   It was the 20% of an 80/20 mortgage opened in 2007.  The total forgiveness is $44,700.  I still own the house and now paying the main mortgage only.   I am using turbotax and unfortunately they dont include the form in their online software, only in the desktop version, so I have to mail my return this year.

Anyway, im a little unclear on the form.   I definetly qualify as Insolvent since my home was worth about $70k less than the total of both mortgages combined. I will also attach a separate worksheet detailing this.  On form 982,  I plan on selecting box 'b'under part 1 of the form - (Discharge of indebtedness to the extent insolvent), which would be entered as $44,700 on line 2.   
Would i also check off box e ("Discharge of qualified principal residence indebtedness") in addition to box b??

Also, reading thru some of the IRS worksheet, they state that Part II, Reduction of Tax Attributes, also needs to be completed.   Would I enter $44,700 on line 10b ("Applied to reduce the basis of your principal residence") "Enter amount here only if line 1e is checked."  

Thanks for the help


Thanks for your question.

First, I want to be certain you understand insolvency as it relates to your situation.  Insolvency involves more than the house.  If you are insolvent, the fair market value of everything you own - houses, vehicles, jewelry, clothing, furnishings, investments, retirement accounts, etc., must be less that the total of everything you owe.

You only need to check one of the boxes, either b or e.  It appears that you do have qualified principal residence indebtedness, but I want to be certain that you do understand the definition.  It is defined as "Any debt incurred in acquiring, constructing, or substantially improving a principal residence and which is secured by the principal residence
Any debt secured by the principal residence resulting from the refinancing of debt incurred to acquire, construct, or substantially improve a principal residence, but only to the extent the amount of the debt does not exceed the amount of the refinanced debt."

Thus, if the proceeds were not used to buy or improve you home, it does not qualify.

Yes, on the reduction of tax attributes.

Hope this helps.

John Stancil, CPA

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John Stancil, CPA


I can answer questions on personal income taxes, partnerships, and some corporate income taxes. I can deal with some state tax questions. Limited gift and estate tax questions. I am also familiar with ministerial and church tax reporting issues. I am Professor Emeritus at Florida Southern College. Sales taxes and property taxes are state and local issues so I am not likely be be able to give you an in depth answer on those types of taxes. I have maintained a CPA practice, specializing in tax, for over 35 years. I am a member of the National Association of Tax Professionals, The Florida Insititute of CPA's, The NCPE Fellowship. In addition I am a Certified Mentor for SCORE. Visit my website at I also offer seminars and consultations to churches and clergy on their tax issues at Also visit my blog, I am listed on Tax Connections at Prepare and file your own taxes at


I hold a doctorate in Accounting, and am a CPA. My certifications of CIA, CFM, and CMA are inactive. I passed all certification examinations on the first attempt, and received honorable mention for my scores on the CIA exam. I have operated a CPA firm for over 37 years and have taught accounting and tax at the college level for over 35 years.

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DBA University of Memphis MBA University of Georgia BS in Accounting Mars Hill University

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