What is real property business indebtedness?
Qualified real property business indebtedness is indebtedness:
- that is assumed or incurred in connection with real property used in a business or trade.
- that is secured by the real property.
- that was assumed or incurred:
- Before 1993 OR
- After 1992, if the debt is either
- qualified acquisition indebtedness OR
- debt incurred to refinance qualified real property business debt incurred or assumed before 1993 (but only to the extent the amount of such debt does not exceed the amount of debt being refinanced).
- that is a debt to which you elect to apply these rules.
Qualified acquisition indebtedness is:
- debt assumed or incurred to obtain, build, rebuild, or significantly improve real property that is used in a trade or business and secures the debt, OR
- debt from refinance of qualified acquisition indebtedness, where the amount of debt doesn’t exceed the amount of debt being refinanced.
What amount of cancelled debt can be excluded from income?
The amount that may actually be excluded from income is subject to a few limitations to discharge of real property business indebtedness. Please click here to review the exclusion limit from Publication 4681.
To locate Form 982, go to:
- Federal Section
- Select My Forms
- Less Common Income
- Cancellation of Debt Form 1099-C, Form 982
- Exclusions (Form 982)
If you had debt cancelled and are no longer obligated to repay the debt, you generally must include the amount of cancelled debt in your income. However, if it was a discharge of real property business indebtedness, the debt generally does not have to be added to your return as income.
For more information, please review instructions for Form 982.