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Chapter: 1600 Assets Program: MSSI, SFP 25

3. Nonliquid assets against which a lien has been placed as a result of a business loan. The security or lien agreement must prohibit the applicant/recipient from selling the asset(s). This exclusion is limited to nonliquid assets such as land, crops, buildings, timber, farm equipment or machinery.

4. Real or personal property, directly related to the maintenance or use of an income producing vehicle. Only that portion of real property determined necessary for maintenance or use is excludable.

Example: An applicant/recipient who owns a produce truck to earn a livelihood may be prohibited from parking the truck in a residential area. The applicant/recipient may own a 100 acre field and use a quarter acre of the field to park and/or service the truck. Only the value of the quarter acre would be excludable, not the entire 100 acre field.

5. Nonliquid notes and mortgages owned by the applicant/recipient and signed on or before March 1, 2005 shall be excluded if the contract or agreement is producing income consistent with its fair market value. Nonliquid notes and mortgages are considered to be producing income consistent with their fair market value if the conditions of the contract are being met. The exclusion shall also apply to the value of the property sold under the contract, or held as security in exchange for a purchase price consistent with the fair market value of that property. Notes and mortgages signed on or after March 1, 2005 cannot be considered for exclusion under this policy.

6. Ownership of timber rights, mineral, or oil exploration rights shall be excluded if the income produced is consistent with the value of the property. 1640.0549 Rate of Return Less Than Reasonable (MSSI, SFP) Income producing property that does not generate income consistent with its fair market value is counted as an asset in full. However, consideration must be given as to why certain properties generate less income than others in the same geographic area (e.g., run-down properties). The income received may be the fair market value for that particular property. In addition, a less than reasonable rate of return is considered acceptable when the following conditions are met:

1. The property is used in a business or non-business income producing operation; and 2. Unusual or untoward circumstances (e.g., a fire, street repairing in front of a store) cause a temporary reduction in the net return; and 3. The usual net rate of return is reasonable; and 4. The individual expects the property to again produce a reasonable return within 18 months of the end of the taxable year in which the unusual incident that caused the reduction in rate of return occurred.

Obtain the individual's explanation for the decline in earnings and documentation of prior earnings (e.g., tax returns). If a convincing explanation is furnished and there is a reasonable expectation that the property will again produce a reasonable rate of return, notify the individual that he has 18 months from the end of the taxable year in which the unusual incident that caused the reduction in net return occurred to again have a reasonable net rate of return.

If, at the end of the prescribed time period, the property is not producing a reasonable net return, the value of the property is considered an includable asset. If property does not generate income consistent with its fair market value, the property will count in full as an asset. 1640.0550 Indian Land (MSSI, SFP) Land that is held by an enrolled member of an Indian tribe is excluded from assets if it cannot be sold or transferred without the permission of other individuals, the tribe, or a federal agency.