1040-US: Calculation of canceled debt to be included in income

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Question

How does the amount of canceled debt to be included in income calculate, and where is that income reported?

Answer

The tax application reduces the amount of canceled debt in box 2 (on Screen 1099C) by the following:

The tax application produces a Cancellation of Debt Worksheet to show how the net amount of canceled debt included in income was calculated. The worksheet also reports the exception or exclusion to the canceled debt to be excluded from income.

Canceled debt income is reported on the form or schedule selected in the Form/Schedule field in Screen 1099C. The following table lists where the amount is reported on the applicable form or schedule.

Form/Schedule Line
1040/Blank line 21, Other income
Schedule C line 6, Other income
Schedule E, Page 1 line 3, Rents received or line 4, Royalties received
Schedule F line 8, Other income
Form 4835 line 6, Other income

Note: If there are multiple units of Screen 1099C, the total amount is reported on the applicable form or schedule. The Cancellation of Debt Worksheet details each 1099-C on a per-activity basis and how the total amount is calculated.

Related topic: Form 1099-C - Cancellation of debt FAQs (1040)

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