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1239 (07/2026) Chapter 8: Examples • Chapter 8: Examples Example 1: Bob and Tom are brothers and trained mechanics. Bob wants to go into business for himself and open an auto shop but doesn’t have enough money, so Bob asks Tom to be his partner. Tom is an excellent mechanic but has no business sense whatsoever. Tom agrees to invest in the business but wants nothing to do with the daily operations and makes no business decisions; Tom just works there as the shop’s lead diesel mechanic. Tom doesn’t have to be Bob’s partner in order to work there, Bob would always have a place for his brother in the shop. They agree that Tom will be paid a salary of $25 per hour and also have a 50% share of the profits. The $25 per hour is counted as earned income and the profits are unearned income. Tom’s interest in the business is a countable resource because Bob could buy him out and Tom could still work there. Note: Bob is considered self-employed, so his income and resources have to be evaluated under the rules governing self-employment. Example 2: Let’s say that Tom decides he wants to be bought out, but Bob can’t quite raise the money to do it (he has expensive tastes and his debt-to-income ratio is a bit too high). Bob hits up his younger brother, Stuart, who is an aspiring golf pro. Stuart can get a loan and help Bob buy out Tom, but rather than giving him the money outright, he wants to be Bob’s new business partner because he knows how profitable it is (plus the bank needs collateral). Stuart is trying to work his way into the pro tour and has neither the time nor the desire to be involved in the business; therefore, they decide that he will be a silent partner. The equity value of Stuart’s ownership interest in the business would be a countable resource, and any profits he receives from the business would be countable as unearned income. The business also pays Stuart’s golf match entry fees, so those are counted as unearned income as well. Income-producing property OSIPM Example 1: Harry’s godfather passes away in November and leaves his family home to Harry in his will. Harry is away at school and decides to rent out the house for $500 per month. The $500 is unearned income because Harry is not managing the property at least 20 hours per week. Property taxes and insurance average $80 per month and Harry sends a check for $20 to a local kid to mow the weeds every month, so the countable unearned income is $400 ($500 rent - $20 yard maintenance fees - $80 taxes/ insurance). Example 2: Harry’s home from school for the next 3 months and can now do some work on the home and yard. Harry spends about 40 hours per week in June, July, and August painting, making repairs, and cleaning up the yard. Harry’s still only asking $500 per month, but it will be counted as earned income in June – August because he’s spending more than 20 hours a week managing the property. When Harry returns to school in September, it will be once again counted as unearned income.