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Understanding irs 982 Form: What You Should Know
Consequences of the Discharge of Indebtedness -- a amount you don't include is called the Discharge Amount b The Discharge Amount is equal to: (1) the amount that you have not reported, b The Discharge Amount will be reduced by: (2) the amount paid from interest and dividends on the cancelled debt under the Federal Reserve Discount window under Title 16 of the Code of Federal Regulations section 16.20 § You paid interest, dividends and any other cash amounts due on canceled debt on a tax-free basis (that is, you made no distributions of such amounts to anyone). B In general, the amounts you have paid from your interest and dividends on canceled debt are treated as interest and dividends on the unredeemed debt, for purposes of computing any tax liability or any exclusion from gross income under section 101 of the Code. Note, however that you will not include interest or dividends on canceled debt as an income tax deduction on your Form 1040 if it is in an amount that is not less than the Discharge Amount. However, if such a disbursement would cause the Discharge Amount to be below what is equal to its value, the Taxpayer Identification Number (TIN), or if it is a United States resident alien, a Social Security Number, must be provided for these amounts. You must provide this information if the interest or dividends are in amounts that exceed an amount that is equal to the Discharge Amount (see Part II. D.1, “Reducing Reductions Due to Cancellation of Debt by Taxation and Special Rules and Part II. D.2, “Reducing Tax Attributes Due to the Discharge of Indebtedness “). Note that interest and dividends paid on canceled debt will be treated as a taxable dividend. See Regulations section section 3.843-1(a) (“Interest and Dividends”). In addition to interest, dividends and other cash amounts paid on canceled debt, a debtor typically also must include the amount of any distributions from the cancelled debt under section Title XVI of the Code of Federal Regulations section 16.19 § 16.19-7a(b), as amended. These payments are treated as interest on the debt on an accrual basis.
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