Reducing Tax Attributes Form 982

[taxjungle]

Hello,

My client has major Insolvency immediately before he received 3 Forms 1099-C (COD) for Credit Cards all 3 used for both business and personal expenses.
I am going to use the Insolvency Exclusion for the total amounts of the 3 credit cards.

My question is: Since the reduction of Tax Attributes doesn't apply until Jan. 1, 2012 (the year following the year of discharge), when is Part 11 of F. 982 get reported? Is it in the year of discharge 2011 or the following year after discharge 2012?

How do you keep tract of Basis Reduction?

This client also is insolvent as of Jan. 1st, even with the 3 canceled debts. So, IS THERE ANY BASIS REDUCTION TO REPORT AT ALL??? The Instructions
are so confusing!

Your help would be greatly appreciated. Thank you.

[Gary2]

The 982 is filed for the year of discharge.

You keep track of the basis adjustment the same way you keep track of any other basis, by good records. Or if you mean how is it recorded in the books, I believe it's taken the same way as adjustments due to depreciation.

[taxjungle]

Basis Reduction

The 982 is filed for the year of discharge.

You keep track of the basis adjustment the same way you keep track of any other basis, by good records. Or if you mean how is it recorded in the books, I believe it's taken the same way as adjustments due to depreciation.

Sorry, I should have added that the clients have always claimed Sec 179 on business assets, so there are no depreciable assets to reduce the basis.
All client has is their residence, jewelry, electronics, household goods & furnishings, clothing, 2 cars (sold one car this past July).

WHAT TO REDUCE? ....... (iNSTRUCTIONS SAY NOT TO REDUCE BELOW ZERO).

[mactoolsix]

Ordering Rules

Sorry, I should have added that the clients have always claimed Sec 179 on business assets, so there are no depreciable assets to reduce the basis.
All client has is their residence, jewelry, electronics, household goods & furnishings, clothing, 2 cars (sold one car this past July).

WHAT TO REDUCE? ....... (iNSTRUCTIONS SAY NOT TO REDUCE BELOW ZERO).

1. Real property used in a trade or business or held for investment (other than the property that secured the debt)
2. Real property used in a trade or business or held for business or held for investment (other than that which secured the debt)
3. Remaining property used in a trade or business or held for investment, other than inventory, A/R, N/R,
4. Inventory, accounts receivable, notes receivable,
5. Property not used in a trade or business nor held for investment

Google IRS Regs section 1.1017-1
Mike

[Gary2]

If he was still insolvent after the cancellation, then there may not be any basis to reduce, because of the rule limiting the basis reduction to the excess of bases over remaining liabilities. Be careful, since this calculation uses the bases, not the FMV.

I suggest reading http://www.fogelcpa.com/Documents/CS...gTaxAttrib.pdf, particularly Example 1.