reporting corp cancellation of debt

[Stearnsr]

Any guidance on reporting cancellation of debt on insolvent corporations, 1120 and 1120S

[veritas]

Sec 108

gives several cases where COD may be excluded from income.

[Stearnsr]

s-corp cancellation

I believe that an insolvent s-corp can exclude the cod income, questions is how to report on the return.

[veritas]

Use

Form 982.....

[BHoffman]

You have..

..saved the day. Exactly what I'm going to be looking for next year.

[Stearnsr]

cancellation of debt

Thanks for the help.

[JON]

Insolvency does

work, but in the corporation world I think it means you are going out of business. You can make elections to offset buildings if there is one the books with mortgages, but it you are staying in business I think you are not insolvent. It you have no election to offset it means you have already taken the loss that was generated by the loan, now you have the income and it should go against the NOL generated or offset the S Corp loss that could not be used because of the "at risk" rules. If the debt canceled is bigger then the NOLs or suspended loses then that is what has made you more then solvent and it would be taxable.

There are a couple of variations to this obviously.

[veritas]

Ultimately

work, but in the corporation world I think it means you are going out of business. You can make elections to offset buildings if there is one the books with mortgages, but it you are staying in business I think you are not insolvent. It you have no election to offset it means you have already taken the loss that was generated by the loan, now you have the income and it should go against the NOL generated or offset the S Corp loss that could not be used because of the "at risk" rules. If the debt canceled is bigger then the NOLs or suspended loses then that is what has made you more then solvent and it would be taxable.

There are a couple of variations to this obviously.

I think you are correct. This will just defer the inevitable.