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MS 5310

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Volume 2 - Supplemental Nutrition Assistance Program (SNAP) MS 5310 – R. 8/1/10 – OMTL – 368 Special Considerations

Give special consideration to the following types of income:

A. Income from Rental Property: Consider income derived from rental property as earned for the earned income deduction only if a member of the household is actively engaged in the management of the property at least an average of 20 hours per week. If the 20 hours per week are not met, the net income is considered unearned. Whether the income is considered earned or unearned, exclude the cost of doing business.

B. Capital Gains: Calculate the proceeds from the sale of capital goods or equipment as a capital gain. Even if only 50 percent of the proceeds from the sale of capital goods or equipment is taxed for Federal income tax purposes, count the full amount of the capital gain as income. For those households whose self-employment income is not averaged but is instead calculated on an anticipated basis, any capital gains the household anticipates receiving in the next 12 months are added starting with the date the application is filed, and this amount is divided by 12. This amount is used in successive certification periods during the next 12 months; however, if the anticipated amount of capital gains changes, re-average the monthly amount over this 12-month period. Add the anticipated monthly amount of capital gains to the anticipated monthly self-employment income and subtract the cost of producing the self- employment income. The cost of producing the self-employment income is calculated by anticipating the monthly allowable costs of producing the self- employment income. Depreciation is not allowed as a cost of doing business.

Include tobacco pounds which are bought (not rented or leased) and can be resold without selling the land as a capital asset.

C. S Corporation: Any “distributions” that the household receives from the corporation must be entered as self-employment earned income to allow the 2 percent earned income deduction only. Although entered as self-employment, this is not considered self-employment. No other expenses should be entered. Distributions are most often reflected on the individual income tax return line, which includes Rental real estate, royalties, partnerships, S corporations, trusts, etc.

Any “dividends” that the household receives from the corporation are considered unearned income. Dividends are most often reflected on the individual income tax return line, which includes Ordinary/qualified dividends.

Any “wages” (in which taxes are withheld) that the household receives from the corporation are entered as earned income. Wages are most often reflected on the individual income tax return, which includes Wages, salaries, tips, etc.

D. For farmers receiving recurring annual Tobacco Settlement Agreement payments, prorate the income over a 12-month period. See MS 5300, D.