A capital gain is the profit earned when an asset is sold for more than its purchase price. A capital loss occurs when an asset is sold for less than its purchase price.

Capital gains and losses can result from the sale of business goods or equipment, or from the sale of real property.

Real Property

Gains from selling non-business real property are counted as unearned income. See 0017.12.03 (Unearned Income).

IRS Form 8949 is typically used to report taxable personal capital gains and losses, but other verifications may be provided.

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

Business Property

Gains from selling the capital assets of a business are counted as self-employment income.

Capital assets are all types of property that are held by a company for investment and useful business purposes, 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 the business.
• Real property (land and buildings) used in the business.

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 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 business 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.

MFIP, SNAP, GA:

Follow general provisions.

MSA, HSP:

For SSI recipients no action is required, SSA makes all income determinations.

For non-SSI recipients follow GA.