What it is:
A tax attribute is a reduction that the tax credit or tax loss when a lender cancels debt that the taxpayer owes. There are typically seven types of tax attributes: net operating losses, business credit carryovers, minimum tax credits, capital losses, property bases, passive activity loss and credit carryover, and foreign tax credit.requires a to make in a
How it works/Example:
John Doe qualifies for a $2,000 minimum tax credit. A tax credit is dollar-for-dollar reduction in John Doe’s tax bill.
However, John Doe also declared bankruptcy, which resulted in his company discharging $1,500 of his credit card debt. Although this means that John Doe no longer owes the $1,500, his tax credit is reduced by that amount.
Other scenarios include reducing the basis (that is, the purchase price for tax purposes) by the amount of the forgiven debt, which would a larger taxable gain occurs when the property is sold.
The must use Form 982 to reduce his or her tax attributes in a specific order.