Input, on line 2 of 982, the total amount of forgiven debt you wish to exclude from income. Generally, this will be the amount reported to you on Form 1099-C.Insolvency is calculated with FMV of assets.Tax attribute reduction (if there are no NOLs, capital losses, etc) is based on book value.For example a 10 year old car worth $3K, may have cost $25K. You use the $25K value in the attribute reductions. If you still come up negative after using cost bases, then you put $0 on 10a and explain in the attached statement that you have reached the reduction limit.
SO, If your total debts AFTER the cancelled debt EXCEED your total assets at their adjusted bases, then you have reached the debt reduction limit and the value for 10a would be $0