Page 33

UPDATED: FEBRUARY 2005

131

INCOME UNEARNED

DIVIDENDS AND INTEREST

Series H/HH U.S. Savings Bonds - Series H/HH bonds pay interest semi-annually by check or electronic funds transfer. Count interest on these bonds as unearned income in the month available to the individual, either when the check is received or when the interest is electronically transferred to the individual’s account.

NOTE: Series E/EE U.S. Savings Bonds - Interest on series E/EE U.S. Savings Bonds is only available to the individual upon expiration of the minimum retention period. When series E/EE bonds are redeemed, the interest is to be counted as an increase in the value of the resource (it is not income).

Zero Coupon Bonds - Owners of zero coupon bonds do not receive interest payments, even though the accruing interest may be taxed by the Internal Revenue Service (IRS). Interest accrues on zero coupon bonds and is paid when the bond matures. The accrued interest is to be considered countable unearned income in the month the bond matures. It is not prorated. The equity value of the zero coupon bond is a countable resource.

Dividend Reinvestment - When an individual chooses to reinvest rather than receive interest or dividends on stocks, bonds or mutual funds, the reinvested interest or dividends is counted as unearned income in the month credited to the A/R’s account and available for use, and is an available resource the following month.

Capital Gains - Capital gains on property (e.g., stocks or real estate) are an increase in the value of the resource. A capital gain distribution outside of a trust is considered unearned income in the month received. A capital gain distribution within a trust is considered a part of the trust principal, unless specified otherwise in the trust. (See RESOURCES TRUST FUNDS) Capital gains distributions are generally made at the end of the year. Taxes or transaction fees are not deducted in determining the value of capital gains.

Life Insurance Policy - The dividends paid on a life insurance policy are not income. If the life insurance policy pays interest on dividends, the interest is income. (See RESOURCES LIFE INSURANCE)

(MRG)