M21-1 Manual / Part IX, Subpart iii, Chapter 1, Section I
Counting Specific Types of Income
M21-1, Part IX, Subpart iii, Chapter 1, Section I
Overview
In This Section | This section contains the following topics:
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1. Income Inclusions
Introduction | This topic contains information on income inclusions, including
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Change Date | April 18, 2023 |
IX.iii.1.I.1.a. General Guidelines on Income Inclusions | The general rule set out at 38 CFR 3.271 is that all income is countable for pension purposes unless specifically excluded by 38 CFR 3.272. The following types of income are all countable income for pension purposes:
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IX.iii.1.I.1.b. Income Subject to Garnishment | If a claimant’s benefits, such as Social Security, are subject to involuntary withholding due to legal action initiated by a third party, count the entire amount even though the claimant does not receive it all. Exception: If benefits are withheld to recoup an overpayment of the benefit, count only the actual amount received.Note: See VAOPGCPREC 25-97 for situations where a portion of a Veteran’s military retirement is being paid to a divorced spouse. |
IX.iii.1.l.1.c. Counting IRA Distributions | When an individual retirement account (IRA) or similar instrument starts paying benefits, count the entire amount even though it represents a partial return of principal. |
IX.iii.1.l.1.d. Counting Non-Retirement Annuities | Count, on an annual basis, only the amount of interest received from a non-retirement annuity or similar instrument if the beneficiary purchased the annuity using funds VA already considered as a
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IX.iii.1.l.1.e. Withdrawal of Contributions From a Retirement Fund | If a claimant receives a distribution of retirement benefits, count the entire amount received. This is the case, even though all or part of the distribution might represent a return of withheld wages which were previously counted as IVAP as part of the claimant’s gross wages. |
IX.iii.1.l.1.f. Value of Room and Board | Count the fair value of room and board furnished to a claimant if the room and board are furnished in lieu of money or services provided by the beneficiary. Exception: The value of room and board is not countable if it is furnished gratuitously. |
IX.iii.1.l.1.g. Gifts and Inheritances of Property or Cash | Count gifts and inheritances of property or cash as received. The value of a
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IX.iii.1.l.1.h. Waived Income | If a beneficiary is entitled to receive income, such as a retirement benefit, but waives the income, the amount that would be received if not for the waiver still counts as income as described in 38 CFR 3.271(i). The intent of this provision is to prevent a person from creating a need for pension. Exception: If a claimant withdraws a Social Security application after a finding of entitlement to Social Security so as to maintain eligibility for an unreduced Social Security benefit on attainment of a certain age, such as age 65, do not regard the withdrawal as a waiver under 38 CFR 3.271(i). |
IX.iii.1.l.1.i. Gains From Gambling | For gambling income received on or after January 1, 2020, count the gross winnings from gambling as income. Gambling losses cannot be deducted from gambling winnings. For gambling income received prior to January 1, 2020, count the net winnings from gambling as income. Gambling losses prior to January 1, 2020, may be deducted from gross winnings during the corresponding income reporting period to arrive at net gambling income. |
IX.iii.1.l.1.j. USGLI, NSLI, and TDIP | Count the following types of income:
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IX.iii.1.l.1.k. Income From Joint Accounts | Count income from joint bank accounts or from other jointly owned property in proportion to the claimant’s ownership share, per 38 CFR 3.271(d). Example: A surviving spouse has a joint bank account with a nephew. One half of the interest earned by the joint account is countable income for the surviving spouse. |
IX.iii.1.l.1.l. Cooperative Dividends | Count cash dividends from rural cooperatives and similar entities. Exception: Do not count cooperative dividends in the form of discounts on the purchase of merchandise or services. |
IX.iii.1.l.1.m. Campaign Contributions | Count campaign contributions only if the beneficiary has access to the money and could use it for purposes other than their political campaign. If the laws restrict the use of contributions to campaign purposes, then the contributions would not be considered as income to the beneficiary. |
IX.iii.1.l.1.n. Child Support Payments | Count child support payments as income of the custodial parent if they are payable to the custodial parent. Do not count the child support payments as income of the child as the income is not eligible to be subject to a hardship deduction under 38 CFR 3.23(d)(6) and 38 CFR 3.272(m). Reference: For more information on hardship deductions from a child’s income, see M21-1, Part IX, Subpart iii, 1.K.5. |
2. Income Inclusions From Government Programs
Introduction | This topic contains information on income inclusions from government programs, including
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Change Date | July 11, 2022 |
IX.iii.1.l.2.a. Social Security Lump-Sum Death Benefit | Count the Social Security lump-sum death benefit for one year beginning the first day of the month after the month in which it was received. |
IX.iii.1.l.2.b. DoL Employment Programs | Count the income received by participants in programs operated by the Department of Labor (DoL), such as the
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IX.iii.1.l.2.c. VA Education or Compensation Benefits | Count VA
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IX.iii.1.l.2.d. VA Pension Benefits | Generally, do not count VA pension benefits. However, under 38 CFR 3.700(a)(4), a Veteran receiving pension is barred from receiving any other pension benefit, such as Section 306 Pension as a surviving spouse.Important: Medal of Honor Pension (MOHP) is a unique benefit type awarded when the name of a Veteran or service member has been entered on a military branch's Medal of Honor Roll per 38 U.S.C. 1562. MOHP shall not be considered as countable income in the determination of Veterans or Survivors Pension benefits. |
IX.iii.1.l.2.e. Multiple VA Benefits | If one of two Veterans married to each other receives pension and the other Veteran receives disability compensation, count the compensation as income for pension purposes. If a beneficiary’s VA benefits are countable income on another account and the payee receives less than the full benefit, count the gross VA benefit before the withholding. Example: Two Veterans are married. Veteran A is entitled to pension and Veteran B is entitled to compensation at the 10 percent rate. Veteran B’s compensation is being withheld to recoup a VA Medical Center overpayment. Veteran B’s entire 10 percent compensation still counts as income on Veteran A’s pension award. |
IX.iii.1.l.2.f. Accrued VA Benefits | Count accrued VA benefits. Exceptions: Do not count
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IX.iii.1.l.2.g. VA PCAFC Stipend | VA Program of Comprehensive Assistance for Family Caregivers (PCAFC) pays a stipend to eligible Veterans’ family members that serve as the Veteran’s caregiver. The stipend is countable income.Example: A Veteran is married and in receipt of VA pension. The Veteran’s spouse receives a stipend from PCAFC. Count the stipend as income for the spouse.Note: Since one of the eligibility requirements for PCAFC requires a specified evaluation for service-connected disability, the inclusion of the PCAFC stipend as countable income may result in disability compensation being the greater benefit.Reference: For more information on elections between VA benefits, see M21-1, Part VI, Subpart ii, 1.A.2. |
IX.iii.1.l.2.h. CRP Payments | Count payments to a landowner under the
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IX.iii.1.l.2.i. Vietnam Era Bonus Payments | Count Vietnam Era bonus payments. Exception: Do not count the payment if eligibility for the bonus is based on the need of the beneficiary. |
3. Income Exclusions
Introduction | This topic contains information on income exclusions, including
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Change Date | April 15, 2020 |
IX.iii.1.l.3.a. General Guidelines on Income Exclusions | Certain items are not countable for pension purposes, either because they are
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IX.iii.1.l.3.b. Welfare, SSI, SSI Windfall, and Drug Discounts Received Under the MMA | In general, do not count any type of benefit for which eligibility is based on the claimant’s financial need, such as Welfare, Supplemental Security Income (SSI), and savings from prescription drug discounts received under the Medicare Prescription Drug, Improvement, and Modernization Act (MMA). Note: This also applies to any SSI Windfall income that is received. SSI Windfall occurs when an individual receives SSI payments, and the Social Security Administration (SSA) subsequently determines that the individual was actually entitled to regular Social Security benefits. SSA converts the SSI payments to regular Social Security payments, and lists the income as SSI Windfall. Exception: SSI payments and SSI Windfall payments are considered countable income for Old Law Pension. Reference: For more information on this exclusion, see 38 CFR 3.272(a). |
IX.iii.1.l.3.c. Income From VHA Work Restoration Programs | Do not count income received from Work Restoration programs administered by the Veterans Health Administration (VHA), including
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IX.iii.1.l.3.d. Income Tax Refunds | Do not count income tax refunds, including the Federal Earned Income Credit. |
IX.iii.1.l.3.e. Withheld Social Security | Do not count Social Security or similar benefits withheld to recoup a prior overpayment from SSA or other non-VA organization. Count the check amount received, if any, plus any Medicare deduction. Exception: If the withholding is due to legal action by a third party, such as a garnishment order, count the gross benefit. |
IX.iii.1.l.3.f. Chore Services Payments | Do not count amounts paid by a governmental entity to an individual to care for a disabled VA claimant in the claimant’s home, provided eligibility for the payments is based on the disabled VA claimant’s financial need. Payments are not countable if they are paid to a dependent of the disabled VA claimant where
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IX.iii.1.l.3.g. Examples: Chore Services Payments | Example 1: A spouse of a Veteran beneficiary is paid by the State to take care of the Veteran in their home under a chore services program. The income is not countable. It makes no difference whether the State pays the spouse directly or pays the Veteran. Example 2: A surviving spouse beneficiary is paid by the State to take care of a neighbor in the neighbor’s home under a chore services program. The chore services payments are countable earned income since eligibility for the payments derives from the neighbor’s financial need and not the financial need of the VA beneficiary. |
IX.iii.1.l.3.h. Payments to Foster Parents | Do not count as income payments made by a State or subdivision of a State to foster parents for care of foster children. |
IX.iii.1.l.3.i. Survivor Benefit Annuity | Do not count Survivor Benefit Annuity amounts paid by the Department of War (DOW) under Public Law (PL) 100-456 to the surviving spouse of a Veteran who died prior to November 1, 1953, per 38 CFR 3.272(n). Exception: The following DOW annuity payments are countable as income:
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IX.iii.1.l.3.j. Timber Sales | Do not count income received from the occasional sales of timber, as they are considered a conversion of assets. Exception: If the claimant is in the business of selling timber, the proceeds from the sale of timber constitute business income. |
IX.iii.1.l.3.k. Mineral Royalties | Do not count royalties received for extracting minerals. Royalties are considered to be a conversion of assets. The claimant is deemed to be exchanging mineral assets for cash assets. Exception: Bonus payments and delay rentals that do not involve depletion of mineral assets are countable. |
IX.iii.1.l.3.l. IRA Interest | In general, do not count interest on IRAs if it cannot be withdrawn without incurring a substantial penalty. Exception: When the claimant starts drawing down their IRA, all payments, including interest and principal, are countable income. |
IX.iii.1.l.3.m. Loans, Including Reverse Mortgages | Do not count loans to a claimant as long as the claimant incurs a legally binding obligation to repay the loan. Do not count funds received from a reverse mortgage. A reverse mortgage is considered a home equity loan that must be repaid when the homeowner no longer lives in the home. Note: Loans must be distinguished from gifts. A gift disguised as a loan is countable. |
IX.iii.1.l.3.n. VA Pension as an Accrued Benefit | Do not count VA pension that is paid as an accrued benefit. In Martin v. Brown, 7 Vet.App. 196 (1994), the Court of Appeals for Veterans Claims held that when pension benefits are paid as an accrued benefit, that payment meets the pension-income-exclusion provision of 38 U.S.C. 1503(a)(2), and, therefore, is not IVAP. |
IX.iii.1.l.3.o. MOD Payment to Surviving Spouse | Do not count the Veteran’s month of death (MOD) payment as income on a surviving spouse’s Survivors Pension award. |
IX.iii.1.l.3.p. Insurance Dividends | Do not count insurance dividends, as they are considered to be a return of excess premium payments. Exceptions:
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IX.iii.1.l.3.q. Joint Accounts | If a joint owner of property, such as a bank account, acquires the other joint owner’s share because of the death of that person, do not count the amount acquired, per 38 CFR 3.272(f). Exception: If one joint owner transfers their share of property to another joint owner (pension claimant) during the transferor’s lifetime, the amount acquired is countable as a gift of property. |
IX.iii.1.l.3.r. Withdrawals From Bank Accounts and CDs | Do not count withdrawals from regular bank accounts and certificates of deposit (CDs), as they do not constitute income events because the
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IX.iii.1.l.3.s. AmeriCorps Program Payments | Do not count as income any of the following types of payments received by participants in an AmeriCorps program under the National and Community Service State grant program:
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IX.iii.1.l.3.t. Scholarships and Grants for School Attendance | Do not count scholarships and grants earmarked for specific educational purposes, provided that the payments are actually used for school purposes, such as tuition or fees. Exception: Any amounts in excess of amounts actually paid for school expenses are countable income. Reference: For more information on educational expenses that may be deducted from income, see M21-1, Part IX, Subpart iii, 1.K.3. |
IX.iii.1.l.3.u. Proceeds of Cashed-In Life Insurance Policies | Do not count the proceeds of cashed-in life insurance policies as income. Rationale: Such proceeds are considered profit realized from the disposition of real or personal property, which is excluded under 38 CFR 3.272(e). Reference: For more information on this exclusion, see
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IX.iii.1.l.3.v. Proceeds of Life Insurance Policies Received After December 9, 2004 | Under PL 108-454, do not count the lump sum proceeds of a life insurance policy on a Veteran who dies after December 9, 2004. Reference: For more information on this exclusion, see 38 CFR 3.272(q). |
IX.iii.1.l.3.w. Proceeds of Cashed-In Savings Bonds | Do not count the proceeds of cashed-in savings bonds as income. Rationale: Such proceeds are considered profit realized from the disposition of real or personal property, which is excluded under 38 CFR 3.272(e). Important: Some savings bonds, such as Series HH U.S. Savings Bonds and some State or municipal bonds, pay interest to the holder without requiring the holder to redeem the bond. If interest is paid without redemption of the bond, the interest is countable income. Reference: For more information on this exclusion, see
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IX.iii.1.l.3.x. Payments to Veterans From a State or Municipality Due to Injury or Disease | Exclude up to $5,000.00 per year of income from a State or municipality that is paid to the Veteran as a Veterans’ benefit due to injury or disease when determining annual income for Veterans Pension benefits. Note: This applies to determinations of annual income for calendar years beginning January 1, 2012. Reference: For more information on this exclusion, see 38 U.S.C. 1503(a)(11). |
IX.iii.1.l.3.y. Payments Under the CARES Act of 2020 | Do not count any payments received from the Coronavirus Aid, Relief, and Economic Security (CARES) Act of 2020. |
4. Living/Home Income Exclusions
Introduction | This topic contains information on living/home income exclusions, including
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Change Date | May 20, 2011 |
IX.iii.1.l.4.a. Profit From Sale of Property | If a claimant enters into an occasional sale of property, do not count the income unless it is an installment sale, even if the amount received exceeds the value of the property. Exception: Profit from sale of property is countable if the claimant sells the property as part of a regular business. Note: An installment sale, for pension purposes, is any sale in which the seller receives more than the sales price over the course of the transaction. The actual number of installments is irrelevant. |
IX.iii.1.l.4.b. Maintenance | Do not count the value of maintenance. For example, if someone furnishes a claimant free room and board, or pays the claimant’s bills, the value of room and board or the amount of the extinguished debt is not countable. Regular cash contributions can be considered maintenance, and not be counted as income, if the evidence establishes that
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IX.iii.1.l.4.c. California State Renter’s Credit | Do not count California State Renter’s Credit, as it is considered to be a welfare payment, per 38 CFR 3.272(a). |
IX.iii.1.l.4.d. Farmers Home Administration Construction Grants | Do not count grants made by the Farmers Home Administration to needy families in rural areas for repairs or improvements to structures. |
5. Disaster Income Exclusions
Introduction | This topic contains information on disaster income exclusions, including
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Change Date | June 30, 2015 |
IX.iii.1.l.5.a. Proceeds of Casualty Insurance Received Prior to February 2, 2013 | Do not count the amount received from an insurance policy when a claimant loses property due to fire, flood, theft, or other casualty loss as long as it does not exceed the value of the lost property, per 38 CFR 3.272(d). |
IX.iii.1.l.5.b. Proceeds of Casualty Insurance Received on or After February 2, 2013 | In general, do not count any reimbursement income received from an insurance company, other than for personal injury. This exclusion applies only to loss or damage to property and does not apply to personal injury. Important: Exclude proceeds of casualty insurance from net worth unless evidence of record shows that the beneficiary has no intention of using the money received as reimbursement for property loss to repair or replace that property. Request documentation showing the beneficiary’s commitment to replace or repair the property if needed. Notes:
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IX.iii.1.l.5.c. Disaster Relief Payments | Do not count voluntary payments in the nature of relief after widespread national disaster, such as floods and hurricanes, as they are considered to be welfare under 38 CFR 3.272(a). Exception: This exclusion does not apply to disaster relief payments made in a commercial context, such as drought relief to farmers. If the operator of a business receives disaster relief, it must be treated as any other business income. |
6. Death and Disability Income Exclusions
Introduction | This topic contains information on death and disability income exclusions, including
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Change Date | May 20, 2011 |
IX.iii.1.l.6.a. RECA Payments | Do not count payments received under the Radiation Exposure Compensation Act (RECA). Reference: For more information on this exclusion, see PL 101-426. |
IX.iii.1.l.6.b. Payments for Participation in a Program of Rehabilitative Services | Do not count payments made as a result of a claimant’s participation in a therapeutic or rehabilitation activity under 38 U.S.C. 1718, per 38 CFR 3.272(l). Prior to November 4, 1992, this exclusion applied only to therapeutic and rehabilitation activities under the auspices of a VA medical center. PL 102-585, which was effective November 4, 1992, extends the exclusion to rehabilitative services programs furnished in State homes recognized by VA to provide care to Veterans in order to receive per diem payments. Reference: For a list of State homes recognized by VA, see the following websites: |
IX.iii.1.l.6.c. Agent Orange Settlement Payments | Do not count payments received in settlement of the case In Re Agent Orange ProductLiability Litigation in the U.S. District Court for the Eastern District of New York. |
IX.iii.1.l.6.d. Provisional Income | Do not count any awarded benefits, such as Black Lung benefits, if
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IX.iii.1.l.6.e. VA Burial Benefits | Do not count VA burial benefits.Note: If a beneficiary claims a final expense deduction and subsequently receives VA burial benefits as reimbursement for paying those same expenses, adjust the award.Reference: For more information on VA burial expenses, see M21-1, Part IX, Subpart iii, 1.K.1.c. |
IX.iii.1.l.6.f. Interest on Irrevocable Burial Trusts | Certain prepaid burial plans, often characterized as irrevocable burial trusts, earn interest that is added to the value of the policy to offset the effects of inflation. Typically, the interest earned is not available to the holder of the policy. Do not count the interest on such a burial plan if it is not available to the VA claimant. |
7. Income From a Mortgage or Contract for Deed
Introduction | This topic contains information on income from a mortgage or contract for deed, including
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Change Date | May 20, 2011 |
IX.iii.1.l.7.a. General Principles of Income From a Mortgage or Contract for Deed | Instruments such as mortgages or contracts for deed typically entitle a seller of property to receive payments for the property and retain a security interest in the property. The payments the seller receives under the instrument represent a combination of interest and return of principal. A mortgage or contract for deed is similar to other property, such as stocks or bonds, in that it is assignable and produces income. However, the value of a contract for deed or mortgage, unlike that of a stock or bond, usually decreases as the buyer or mortgagor makes payments under the instrument. |
IX.iii.1.l.7.b. Applying the General Principles of Income From a Mortgage or Contract for Deed | The general principles of income from a mortgage or contract for deed apply when the VA claimant
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IX.iii.1.l.7.c. Countable Income in a Contract for Deed or Mortgage | If a claimant receives a contract for deed or mortgage as a gift or by inheritance after the date of entitlement to pension, the value of the contract for deed or mortgage is countable income for pension purposes for 12 months from the first of the month after the month of receipt. |
IX.iii.1.l.7.d. Countable Interest Versus Non-Countable Principal | If the claimant received the contract for deed or mortgage as a gift or by inheritance before the date of entitlement to pension, any interest received under the instrument is countable income, but principal payments are considered a conversion of assets. The same applies where the instrument is received after the date of entitlement to pension and the value of the instrument has been counted for 12 months. The VSC or PMC must secure a copy of the amortization schedule or similar document showing a monthly breakdown of interest and principal payments. |
8. Indian Income
Introduction | This topic contains information on Indian income, including
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Change Date | June 30, 2015 |
IX.iii.1.l.8.a. General Information on Indian Income | American Indians may receive a variety of unique types of income. Often the Federal government is the direct or indirect source of this income and complex treaties and Federal statutes govern payments. This topic attempts to summarize VA’s approach to counting various types of income received by Indian beneficiaries. However, it is recognized that other types of Indian income not covered here will be encountered. When this happens, contact the P&F Policy and Procedures mailbox at VAVBAWAS/CO/P&F POL & PROC for guidance. Reference: For more information on payments excluded by Federal statutes, see M21-1, Part IX, Subpart iii, 1.I.11. |
IX.iii.1.l.8.b. Determining if Indian Income Is Countable | Use the table below as a suggested analytical approach to determining if Indian income is countable for pension purposes.
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IX.iii.1.l.8.c. Income From Gaming on Indian Trust Lands | In VAOPGCPREC 21-1997, the General Counsel held that amounts received by an individual pursuant to a per capita distribution of proceeds from gaming on Indian trust lands are considered IVAP. The General Counsel noted that gaming proceeds are not
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IX.iii.1.l.8.e. Business or Investment Income of Indian Tribes | In some instances, distributions to Indian tribes that are intended to compensate the tribe for lost land are invested to produce income or are used to establish tribal businesses or Native Corporations. Individual Indians will in turn receive dividends or distributions from the business operations of these entities. These types of distributions are IVAP, even though the funds for establishment of the business were intended to compensate the tribe for lost land or other property. The conversion of assets exclusion applies only to compensatory transfers. It does not apply to secondary income generated from the amount transferred as compensation. Note: The Alaska Native Claims Settlement Act, PL 103-446, Section 506 provides that profits of native businesses (cash dividends on stock received from a Native Corporation) are excluded up to $2,000 per year, per individual. Reference: For more information on payments excluded by Federal statutes, see M21-1, Part IX, Subpart iii, 1.I.11. |
IX.iii.1.l.8.f. Exclusionary Language in Specific Legislation – Payments to Indian Tribes | Legislation providing for payments to Indian tribes may include provisions such as the following: Distributions under this Act shall not be considered income for purposes of any Federal benefit program. If a beneficiary claims exclusion of income on this basis, first determine if the income is otherwise excludable. If it is not, e-mail the P&F Policy and Procedures mailbox at VAVBAWAS/CO/P&F POL & PROC for guidance. |
9. Income From the Sale of Property
Introduction | This topic contains information on the impact of the sale of property for pension purposes, including
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Change Date | May 20, 2011 |
IX.iii.1.l.9.a. Impact of the Sale of Property for Pension Purposes | Income received from the sale of property is viewed as a conversion of assets and is not countable income for pension purposes, unless the
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IX.iii.1.l.9.b. Definition: Installment Sale | An installment sale, for pension purposes, is any sale in which the seller receives more than the sales price over the course of the transaction. The actual number of installments is irrelevant. |
IX.iii.1.l.9.c. Sale of Property in the Course of Business | If a beneficiary who operates a business sells property or merchandise in connection with the business, add any profit received from the sale of the property to the other income of the business. Reference: For information on deductions from gross business income, see M21-1, Part IX, Subpart iii, 1.K.6.a. |
IX.iii.1.l.9.d. Counting Income From Installment Sales | If a claimant or dependent sells property and receives payment in installments, count as income any amounts received over and above the sales price, but not until an amount equal to the sales price has been received by the seller. Note: This principle applies regardless of whether the sale occurred before or after the date of entitlement to pension. Reference: For information on the impact of installment sales on Section 306 or Old Law Pension, see M21-1, Part IX, Subpart iii, 1.C.7. |
IX.iii.1.l.9.e. Example: Installment Sale | Situation: A Veteran sells their house for $80,000. The Veteran receives a cash payment of $40,000 and a cash payment of $45,000. Result: This is an installment sale for VA pension purposes and $5,000 is countable as interest income when the Veteran receives the $45,000. |
IX.iii.1.l.9.f. Ensuring Proper Documentation Prior to Computation of Income | Ensure that the following information is of record before attempting to compute countable income from the sale of property:
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IX.iii.1.l.9.g. Not Distinguishing Between Principal and Interest in Installment Sales | It is not necessary to distinguish between payment of principal and interest in the installment sale context. As soon as the down payment and installment payments received by the beneficiary equal the sales price, all subsequent installment payments count as income. Example:Situation: A Veteran reports the sale of a house for $60,000 on December 1, 1997. The Veteran received $20,000 down and will receive installment payments of $400 per month for the next 10 years. The first payment was received January 1, 1998. Result: The Veteran’s return from the sale of property will exceed $60,000 during May 2006. Charge recurring income of $400 per month effective June 1, 2006. |
IX.iii.1.l.9.h. Establishing Controls for Installment Sales | Once the date from which to count installment payments has been determined, establish a diary for the month prior to that during which installment income will be countable. When the control matures, process an amended award to charge the installment payments as “other” income. |
IX.iii.1.l.9.i. Counting Income for Sales Occurring Before Entitlement to Pension | Previously, if a beneficiary received income from a sale of property that occurred before the date that the beneficiary became entitled to pension, only interest from the sale of property was countable income. If a case is encountered in which income from the sale of property is being counted under the old rule, continue to count interest only. Do not attempt to apply the current rule on the sale of property, unless to do so would clearly be to the payee’s advantage. |
10. Asset Transfers and Life Estates: Effect on Net Worth and Income
Introduction | This topic contains information on the effect of asset transfers, and the income associated with asset transfers, on pension benefits, including
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Change Date | May 20, 2011 |
IX.iii.1.l.10.a. Effect of Asset Transfers on Countable Income | A claimant may attempt to reduce net worth or countable income by transferring property to another person without actually giving up all rights in the property. However, no sale or gift of property to a
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IX.iii.1.l.10.b. When a Claimant Transfers Property but Takes Income From the Property | If a transferee takes legal title to the property and receives income from the property, a true transfer is deemed to have occurred. However, if the transferee turns income from the property back to the claimant, the income is countable under 38 CFR 3.271 as a gift of money. Reference: For more information, see 38 CFR 3.276(b). |
IX.iii.1.l.10.c. Transferring a Partial Interest in Property | If a claimant transfers a partial interest in property to a person who is outside the claimant’s household, the claimant’s net worth and income are reduced in proportion to the percentage of the asset transferred. |
IX.iii.1.l.10.d. Example 1: Transferring a Partial Interest in Property to a Person Outside of the Household | Situation:
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IX.iii.1.l.10.e. Example 2: Transferring a Partial Interest in Property to a Person in the Household | Situation:
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IX.iii.1.l.10.f. Example 3: Partial Interest in Property – No Transfer Involved | Situation:A Veteran and an adult (non-helpless) child who lives in the same household are joint owners of a $10,000 CD and were joint owners before the date that the Veteran became entitled to pension. Result: Each owner has an undivided one-half interest in the CD. The value of the CD is $5,000 for net worth purposes and only one-half of the interest earned is counted as income in determining the Veteran’s IVAP. |
IX.iii.1.l.10.g. Definition: Life Estate | A life estate is an estate which is limited in duration to the life or lives of a particular individual or individuals, and is non-inheritable. The life tenant is the owner of the property during their life and is entitled to exclusive possession and control of the property. |
IX.iii.1.l.10.h. Life Estate and a Claimant’s Net Worth | When a claimant transfers an interest in property to someone other than a relative residing in the claimant’s household, retaining a life estate in the property, 38 CFR 3.276(b) requires that the transfer be disregarded in determining the claimant’s net worth for pension purposes, unless the right to ownership (control) is relinquished. This requirement is due to the fact that the life tenant retains ownership interest in the property during their lifetime. Note: If necessary, request a copy of the life estate to determine whether the right to ownership of the property has been relinquished. Reference: For more information on the effect of property held as a life estate on pension eligibility, see VAOPGCPREC 15-1992. |
IX.iii.1.l.10.i. Computing Property Value When a Life Estate Is Involved | Calculate the value of the property for pension purposes based on the market value of the property, less mortgages and encumbrances, without regard to the purported transfer. |
11. Exhibits: Payments Excluded by Federal Statutes in Calculating Income and/or Net Worth
Introduction | This topic contains information on payments excluded by Federal statutes in calculating income and/or net worth, including
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Change Date | April 15, 2020 |
IX.iii.1.l.11.a. Exhibit 1: Payments Excluded for All Income-Based Benefits | The table below shows whether certain payments are included or excluded by Federal statutes in calculating income or net worth for
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IX.iii.1.l.11.b. Exhibit 2: Payments Excluded for Current-Law Pension and Parents’ DIC Only | The table below shows the payments that are excluded by Federal statutes in calculating income and/or net worth for current-law pension and Parents’ DIC only.
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Source: VA M21-1 Adjudication Procedures Manual, M21-1, Part IX, Subpart iii, Chapter 1, Section I (U.S. government work, reproduced for reference). Browse all sections →