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Cancellation of Debt - Agriculture Tax Tips

Notice: Historical Content

This is an archival or historical document and may not reflect current law, policies or procedures.

If your debt is canceled or forgiven, other than as a gift or bequest to you, you must include the canceled amount in gross income for tax purposes. Report the canceled amount on line 10 of Schedule F if you incurred the debt in your farming business. If the debt is a non-business debt, report the canceled amount on line 21 of Form 1040.

Form 1099-C

If a federal agency, financial institution, or credit union cancels or forgives your debt of $600 or more, you will receive a Form 1099-C, Cancellation of Debt. The amount of debt canceled is shown in box 2.

Qualified Farm Debt

You can exclude from income a canceled debt that is qualified farm debt owed to a qualified person. This exclusion applies only if you were solvent when the debt was canceled or, if you were insolvent, only to the extent the canceled debt is more than the amount by which you were insolvent. Your debt is qualified farm debt if both of the following requirements are met.

  • You incurred it directly in operating a farming business
  • At least 50% of your total gross receipts for the 3 tax years preceding the year of debt cancellation were from your farming business

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