If the credit cards that were written off on the 1099-C were expenses related to the rental property. You can enter the 1099-C and complete Form 982, "Reduction of Tax Attributes Due to Discharge of Indebtedness". The Form 982 is used to determine if you can exclude the canceled debt from income. However, if you file Form 982, you may need to reduce the basis in the the rental property by the amount that was excluded. It is recommended that you fill out Form 982, in TurboTax Desktop. To enter in Desktop, follow these steps:
- Open TurboTax Desktop
- Switch to Forms mode by clicking Forms in the upper right corner
- Complete Form 1099-C
- Complete Form 982 (a reason will be required for the discharge)
- Canceled Debt Worksheet
The IRS provides the following information on how to complete Form 982, "Use Part I of Form 982 to indicate why any amount received from the discharge of indebtedness should be excluded from gross income and the amount excluded.
Use Part II to report your reduction of tax attributes. The reduction must be made in the following order unless you check the box on line 1d for qualified real property business indebtedness or make the election on line 5 to reduce basis of depreciable property first.
- Any net operating loss (NOL) for the tax year of the discharge (and any NOL carryover to that year) (dollar for dollar);
- Any general business credit carryover to or from the tax year of the discharge (331/3 cents per dollar);
- Any minimum tax credit as of the beginning of the tax year immediately after the tax year of the discharge (331/3 cents per dollar);
- Any net capital loss for the tax year of the discharge (and any capital loss carryover to that tax year) (dollar for dollar);
- The basis of property (dollar for dollar);
- Any passive activity loss (dollar for dollar) and credit (331/3 cents per dollar) carryovers from the tax year of the discharge; and
- Any foreign tax credit carryover to or from the tax year of the discharge (331/3 cents per dollar).
Use Part III to exclude from gross income under section 1081(b) any amounts of income attributable to the transfer of property described in that section."
For more information on Form 982, see the instructions below:
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