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MISSISSIPPI DIVISION OF MEDICAID Eligibility Policy and Procedures Manual CHAPTER 200A – Income: ABD Categories Page |108 Effective Month: July 2025 SITUATION METHOD When an individual: • Has been conducting the same trade or business for several years. • Has had NESE which has been fairly constant from year-to-year. • Anticipates no changes or gives no satisfactory explanation of why current NESE would be substantially lower than past NESE. Current Year’s Estimate Based on Prior Year’s Profit • Use the NESE from the prior year as an estimate for the current taxable year. When an individual: • Is engaged in the same business he had only in the preceding taxable year. • Anticipates no change or gives no satisfactory explanation of why current NESE would be substantially different from what it has been in the past. Exception: Do not use this method for businesses which are seasonal or have unusual income peaks at certain times of the year, go to the next applicable procedure. Gross-Net Ratio: • Calculate from the individual’s tax return or business records the ratio between net profit and gross receipt for the last year. Example: Net profit of $1200 for $6000 gross income or 20% • Calculate from his records the actual gross receipts for the current taxable year and project it for the remainder of the year. Example: $4000 in current year’s receipts for the first 6 months gives an assumed gross of $8000 for the entire year. • Apply the previously calculated gross-net ratio to the current year’s assumed gross to arrive at the estimate NESE. Example: 20% of $8000 results in an estimated net profit of $1600 When an individual is engaged in a new business Projecting Partial Year’s Profit for Whole Year: • Obtain the profit and loss statement or other business records for the taxable year to date