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COMBINED MANUAL

ISSUE DATE 08/2019

CAPITAL GAINS AND LOSSES AS INCOME

0017.15.54

MFIP, DWP, GA, GRH: Capital gain is an Internal Revenue Service (IRS) term for proceeds from the sale of real property. The gain is the difference between the purchase and selling price of the real property minus allowable expenses. Count capital gains from the sale of real property as unearned income.

The IRS Capital Gains and Losses form (1040 - Schedule D) includes real property capital gains. The client must report Schedule D capital gains from the sale of real property. Use the tax form figures to verify the countable capital gain.

SNAP: Capital Gains and Capital Losses result from the sale of business goods or equipment. A capital gain or loss is the difference between the amount the business paid for an asset and the amount received when that asset is sold.

Capital Assets are all types of property that are held by a company for investment and useful business purposes. Capital assets are those assets used by the business to make a profit. Most types of business property are considered capital assets, including:

● Property for sale to customers, like inventory or merchandise.

● Intellectual property, like patents, trademarks, or copyrights.

● Accounts receivable or notes receivable; accounts receivable have value and can be sold, so they are considered assets.

● Depreciable property (equipment and vehicles, for example) used in your business.

● Real property (land and buildings) used in your business.

Capital gains from self-employment businesses count as income. Unless the client is in the business of selling assets, exclude capital gains from the sale of the client's assets, regardless of whether the asset was excluded. If the client is in the business of selling assets, such as a farmer who holds grain until the prices change, the capital gain is self-employment and counts as income.

Capital losses are deducted on the tax return as a loss from self-employment businesses, which reduces the net profit. Capital losses from one self-employment business can be used to reduce total countable self-employment income from other businesses within the SNAP unit, within the same tax year.

Capital gains and losses recorded on self-employment tax forms, such as Schedules C and F, include items such as the sale of livestock or grain. You may not be able to distinguish capital gains on self-employment forms from other self-employment income.

The IRS Capital Gains and Losses form (Schedule D) includes excluded and counted capital gains. The client must clarify whether Schedule D capital gains are from the sale of an asset or from self-employment.

In addition to capital gains and losses from the sale of assets, Schedule D includes capital gain distributions. Capital gain distributions are dividends from stock or mutual funds. See 0017.15.42 (Interest and Dividend Income).

Use the tax form figures to verify the countable capital gain or allowable loss. If the client did not file tax forms, determine the capital gain using self-employment income procedures. See 0017.15.33 (Self-Employment Income).

Count the amount of capital gains or losses the household anticipates receiving during the months over which the income is being averaged.

When capital gains or losses are not accounted for in a specific business’ records it must be tracked separately on STAT/BUSI.

NOTE: For personal gains and losses not related to a business, see 0002.09 (Glossary: Calendar Month...), 0017.12.03 (Unearned Income).