HUD Handbook 4350.3 § 5-7

Calculating Income from Assets (HUD Occupancy Handbook 4350.3 REV-1 CHG-4)

HUD guidance — not codified law
In Force
Verified 9/24/2026 · Next check 10/1/2026
effective 9/24/2026FederalSection 8 HCV

Operative Text

HUD Handbook 4350.3 § 5-7
Annual income includes amounts derived from assets to which family members have
        access.

        A.      What is Considered an Asset?

                1.       Assets are items of value that may be turned into cash. A savings
                         account is a cash asset. The bank pays interest on the asset. The
                         interest is the income from that asset.

                2.       Some tenants have assets that are not earning interest. A quantity of
                         money under a mattress is an asset: it is a thing of value that could be
                         used to the benefit of the tenant, but under the mattress it is not
                         producing income.

                3.       Some belongings of value are not considered assets. Necessary
                         personal property is not counted as an asset. Exhibit 5-2 summarizes the
                         items that are considered assets and those that are not.

        B.      Determining Income from Assets

                Note: For families receiving only BMIR assistance, it is not necessary to
                determine whether family assets exceed $5,000. The rule for imputing income
                from assets does not apply to the BMIR program.

1.       The calculation to determine the amount of income from assets to include
                         in annual income considers both of the following:

                         a.      The total cash value of the family’s assets; and

                         b.      The amount of income those assets are earning or could earn.

                2.       The rule for calculating income from assets differs depending on whether
                         the total cash value of family assets is $5,000 or less, or is more than
                         $5,000.

        C.      Determining the Total Cash Value of Family Assets

                1.       To comply with the rule for determining the amount of income from
                         assets, it is necessary to first determine whether the total “cash value” of
                         family assets exceeds $5,000.

                         a.      The “cash value” of an asset is the market value less reasonable
                                 expenses that would be incurred in selling or converting the asset
                                 to cash, such as the following:

                                 (1)      Penalties for premature withdrawal;

                                 (2)      Broker and legal fees; and

                                 (3)      Settlement costs for real estate transactions.

                                  The cash value is the amount the family could actually receive in
                                  cash, if the family converted an asset to cash.

                        Example – Calculating the Cash Value of an Asset
                        A family has a certificate of deposit (CD) in the amount of
                        $5,000 paying interest at 4%. The penalty for early
                        withdrawal is three months of interest.
                                       $5,000 x 0.04 = $200 in annual income
                                       $200/12 months = $16.67 interest per month
                                       $16.67 x 3 months = $50.01
                                       $5,000 - $50 = $4,950 cash value of CD

b.      It is essential to note that a family is not required to convert an
                                 asset to cash. Determining the cash value of the asset is done
                                 simply as a calculation by the owner because it is a required step
                                 when determining income from assets under program
                                 requirements.

D.      Assets Owned Jointly

                1.       If assets are owned by more than one person, prorate the assets
                         according to the percentage of ownership. If no percentage is specified
                         or provided by a state or local law, prorate the assets evenly among all
                         owners.

                2.       If an asset is not effectively owned by an individual, do not count it as an
                         asset. An asset is not effectively owned when the asset is held in an
                         individual’s name, but (a) the asset and any income it earns accrue to the
                         benefit of someone else who is not a member of the family, and (b) that
                         other person is responsible for income taxes incurred on income
                         generated by the assets.

                3.       Determining which individuals have ownership of an asset requires
                         collecting as much information as is available and making the best
                         judgment possible based on that information.

Example – Determining the Cash Value of an Asset
                     The “cash value” of an asset is the amount a family would
                     receive if the family turned a noncash asset into cash.
                     The cash value is the market value—or the amount another
                     person would pay to acquire the asset—less the cost to turn the
                     asset into cash.
                     If a family owns real estate, it may be necessary to consider the
                     family’s equity in the property as well as the expense to sell the
                     property.
                     To determine the family’s equity, subtract amounts owed on the
                     property from its market value:
                                       Market value
                                   -   Mortgage amount owed
                                       Equity in the property

                     Calculate the cash value by subtracting the expense of selling
                     the property:
                                       Equity
                                   -   Expense of selling
                                       Cash Value
                     Juanita Player owns a rental house. The market value is
                     $100,000. She owes $60,000. The cost to dispose of this
                     house would be $8,000. The owner would determine the cash
                     value as follows:
                     Market Value                      $100,000
                     Mortgage amount                   - $60,000
                                                          40,000
                     Cost of disposing of the asset
                     (real estate commission, and
                     other costs of sale)               - $8,000
                     Cash Value                          $32,000

a.      In some instances, but not all, knowing whose social security
                                 number is connected with the asset may help in identifying
                                 ownership. Owners should be aware that there are many
                                 situations in which a social security number connected with an
                                 asset does not indicate ownership and other situations where
                                 there is ownership without connection to a social security number.

                         b.      Determining who has contributed to an asset or who is paying
                                 taxes on the asset may assist in identifying ownership.

Examples – Jointly Owned Assets
                                 Helen Wright is an assisted-housing tenant. She
                                  and her daughter, Elsie Duncan, have a joint
                                  savings account. Mother and daughter both
                                  contribute to the account. They have used the
                                  account for trips together and to cover emergency
                                  needs for either of them. Assume in this example
                                  that state law does not specify ownership. Even
                                  though either Helen Wright or Elsie Duncan could
                                  withdraw the entire asset for her own use, count
                                  Helen's ownership as 50% of the account.
                                 Jean Boucher’s name is on her mother’s savings
                                  account to ensure that she can access the funds for
                                  her mother’s care. The account is not effectively
                                  owned by Jean and should not be counted as her
                                  asset.

E.      Calculating Income from Assets When Assets Total $5,000 or Less

                If the total cash value of all the family’s assets is $5,000 or less, the actual
                income the family receives from assets is the amount that is included in annual
                income as income from assets.

        F.      Calculating Income from Assets When Assets Exceed $5,000

                1.       When net family assets are more than $5,000, annual income includes
                         the greater of the following:

                         a.       Actual income from assets; or

                         b.       A percentage of the value of family assets based upon the current
                                  passbook savings rate as established by HUD. This is called
                                  imputed income from assets. The passbook rate is currently set
                                  at 2%.

                2.       To begin this calculation, first add the cash value of all assets. Multiply
                         the total cash value of all assets by .02. The product is the “imputed
                         income” from assets. Then, add the actual income from all assets. The
                         greater of the imputed income from assets or the actual income from
                         assets is included in the calculation of annual income.

Example – Use Actual Income from Assets When
                          Total Net Family Assets are $5,000 or Less
                  Type of Asset                Cash Value           Actual Yearly Income

Certificate of Deposit                $950                         $40
              $1,000
              withdrawal fee $50
              interest @ 4%

              Savings Account                       $500                         $13
              $500
              interest @ 2.5%

              Stock                                 $300                          $0
              $300
              Not paying dividends
                                                   $1,750                        $53
              Total

             The total cash value of the family’s assets is $1,750. Therefore, the amount
             that is added to annual income as income from assets is the actual income
             earned or $53.

Example – Imputed Income from Assets
    “Imputed” means “attributed” or “assigned.” Imputing income from assets is “assigning” an
    amount of income solely for the sake of the annual income calculation. The imputed income is
    not real income.

    For example, money under a mattress is not earning income. If the money were put in a
    savings account it would earn interest. Imputed income from such an asset is the interest the
    money would earn if it were put in a savings account.

    A family with cash under a mattress is not required to put the cash in a savings account; but
    when the owner is calculating income for a family with more than $5,000 in assets, the owner
    must assign an amount that cash would earn if it were in a savings account.

Example – Determining Income from Assets
                                When Net Family Assets Exceed $5,000

                Type of Asset                   Cash Value             Actual Yearly Income

             Checking Account (non-                 $455                          $0
             interest bearing)
             Savings Account                       $6,000                        $150
             (interest at 2.5%)
             Stocks (not paying                    $3,000                         $0
             dividends this year)
             Total                                 $9,455                        $150

             Total cash value of assets is greater than $5,000. Therefore, it is necessary to
             compare the actual income from assets to the imputed income from assets.
             The total cash value of assets ($9,455) is multiplied by 2% to determine the
             imputed income from assets.
             .02 x $9,455 = $189
             $189 is greater than the actual income from assets ($150).
             In this case, therefore, the owner will add $189 to the annual income calculation
             as income from assets.

G.       Calculating Income from Assets - Specific Types of Assets

                 1.      Trusts.

                         a.         Explanation of trusts.

                                    (1)    A trust is a legal arrangement generally regulated by state
                                           law in which one party (the creator or grantor) transfers
                                           property to a second party (the trustee) who holds the
                                           property for the benefit of one or more third parties (the
                                           beneficiaries). A trust can contain cash or other liquid
                                           assets or real or personal property that could be turned
                                           into cash. Generally, the assets are invested for the
                                           benefit of the beneficiaries.

                                    (2)    Trusts may be revocable or nonrevocable. A revocable
                                           trust is a trust that the creator of the trust may amend or
                                           end (revoke). When there is a revocable trust, the creator
                                           has access to the funds in the trust account. When the
                                           creator sets up a nonrevocable trust, the creator has no
                                           access to the funds in the account.

                                    (3)    The beneficiary frequently will be unable to touch any of
                                           the trust funds until a specified date or event (e.g., the

beneficiary’s 21st birthday or the grantor’s death). In some
                                          instances, the beneficiary may receive the regular
                                          investment income from the trust but not be able to
                                          withdraw any of the principal.

                                 (4)      The beneficiary and the grantor may be members of the
                                          same family. A parent or grandparent may have placed
                                          funds in trust to a child. If the trust is revocable, the funds
                                          may be accessible to the parent or grandparent but not to
                                          the child.

                         b.      How to treat trusts.

                                 (1)      The basis for determining how to treat trusts relies on
                                          information about who has access to either the principal in
                                          the account or the income from the account.

                                 (2)      Revocable trusts. If any member of the tenant family has
                                          the right to withdraw the funds in the account, the trust is
                                          considered to be an asset and is treated as any other
                                          asset. The cash value of the trust (the amount the family
                                          member would receive if he or she withdrew all that could
                                          be withdrawn) is added to total net assets. The actual
                                          income received is added to actual income from assets.

Example – A Trust Accessible to Family Members
                        Assez Charaf lives alone. He has placed $20,000 in trust
                        to his grandson to be available to the grandson upon the
                        death of Assez. The trust is revocable, that is, Assez has
                        control of the principal and interest in the account and can
                        amend the trust or remove the funds at any time. In
                        calculating Assez’s income, the owner will add the
                        $20,000 to Assez’s net family assets and the actual
                        income received on the trust to actual income from assets.

(3)      Nonrevocable trusts. If no family member has access to
                                          either the principal or income of the trust at the current
                                          time, the trust is not included in the calculation of income
                                          from assets or in annual income.

                                          If only the income (and none of the principal) from the trust
                                          is currently available to a family member, the income is
                                          counted in annual income, but the trust is not included in
                                          the calculation of income from assets.

                                 (4)      Nonrevocable trust as an asset disposed of for less than
                                          fair market value. If a tenant sets up a nonrevocable trust
                                          for the benefit of another person while residing in assisted

housing, the trust is considered an asset disposed of for
                                          less than fair market value (see subparagraph G.6 below).

                                                  If the trust has been set up so income from the trust
                                                   is regularly reinvested in the trust and is not paid
                                                   back to the creator, the trust is calculated as any
                                                   other asset disposed of for less than fair market
                                                   value for two years and not taken into consideration
                                                   thereafter.

                             Example – Nonrevocable Trust As an
                       Asset Disposed of for Less Than Fair Market Value
                        Sarah Gordy placed $100,000 in a nonrevocable trust for
                        her grandson. Last year, the trust produced $8,000, which
                        was reinvested into the trust.

                        The trust is treated as an asset disposed of for less than
                        fair market value for two years. (See paragraph 5.7 G.6.)
                        No actual income from the trust is included in Sarah’s
                        annual income, but the value of the asset when it was
                        given away, $100,000, is included in net family assets for
                        two years from the date the trust was established.

        Nonrevocable trust distributing income. When a
                                                   tenant places an asset in a nonrevocable trust but
                                                   continues to receive income from the trust, the
                                                   income is added to annual income and the trust is
                                                   counted as an asset disposed of for less than
                                                   market value for two years. Following the two-year
                                                   period, the owner will count only the actual income
                                                   distributed from the trust to the tenant.

                   Example – Nonrevocable Trust Distributing Income to the
                                     Creator/Tenant
                   Reggie Bouchard has established a nonrevocable trust in the
                   amount of $35,000 that no one in the tenant family controls.
                   Income from the trust is paid to Reggie. Last year, he received
                   $3,500.

                   The owner will count Reggie’s actual anticipated income from the
                   trust in next year’s annual income.

                   Because the asset was disposed of for less than fair market value
                   (see paragraph 5.7 G.6), the value of the asset given away,
                   $35,000, is counted as an asset disposed of for less than fair
                   market value for two years.

(5)      Payment of principal from a trust. The beneficiary of a
                                          trust may receive funds from the trust in different ways. A
                                          beneficiary may receive the full value of a trust at one time.
                                          In that instance the funds would be considered a lump sum
                                          receipt and would be treated as an asset. A trust set up to
                                          provide support for a person with disabilities may pay only
                                          income from the trust on a periodic basis. Occasionally,
                                          however, a beneficiary may be given a portion of the trust
                                          principal on a periodic basis. When the principal is paid
                                          out on a periodic basis, those payments are considered
                                          regular income or gifts and are counted in annual income.

                     Example – Payment of Principal Amounts from a Trust
                   Jared Leland receives funds from a nonrevocable trust established
                   by his parents for his support. Last year he received $18,000 from
                   the trust. The attorney managing the trust reported that $3,500 of
                   the funds distributed was interest income and $14,500 was from
                   principal. Jared receives a payment of $1,500 each month (an
                   amount that includes both principal and interest from the trust).

                   The owner will count the entire $18,000 Jared received as annual
                   income.

c.      Special needs trusts.

                                 A special needs trust is a trust that may be created under some
                                 state laws, often by family members for disabled persons who are
                                 not able to make financial decisions for themselves. Generally,
                                 the assets within the trust are not accessible to the beneficiary.

                                 (1)      If the beneficiary does not have access to income from the
                                          trust, then it is not counted as part of income.

                                 (2)      If income from the trust is paid to the beneficiary regularly,
                                          those payments are counted as income.

                                   Example – Special Needs Trust
                       Daryl Rockland is a 55-year-old person with disabilities,
                       living with his elderly parents. The parents have established
                       a special-needs trust to provide income for their son after
                       they are gone. The trust is not revocable; neither the parents
                       nor the son currently have access to the principal or interest.
                       In calculating the income of the Rocklands, the owner will
                       disregard the trust.

2.       Annuities.

                         a.      Annuity facts and terms.

                                 (1)      An annuity is a contract sold by an insurance company
                                          designed to provide payments, usually to a retired person,
                                          at specified intervals. Fixed annuities guarantee a certain
                                          payment amount, while variable annuities do not, but have
                                          the potential for greater returns.

                                                  A hybrid annuity (also called a combination annuity)
                                                   combines the features of a fixed annuity and a
                                                   variable annuity.

                                                  A deferred annuity is an annuity that delays income
                                                   payments until the holder chooses to receive them.
                                                   An immediate annuity is one that begins payments
                                                   immediately upon purchase.

                                                  A life annuity continues to pay out as long as the
                                                   owner is alive. A single-life annuity provides
                                                   income benefits for only one person. A joint life
                                                   annuity is issued on two individuals, and payments
                                                   continue in whole or in part as long as either
                                                   individual is alive.

                                 (2)      Generally, a person who holds an annuity from which he or
                                          she is not yet receiving payments will also be earning
                                          income. In most instances, a fixed annuity will be earning
                                          interest at a specified fixed rate similar to interest earned
                                          by a CD. A variable annuity will earn (or lose) based on
                                          market fluctuations, as in a mutual fund.

                                 (3)      Most annuities charge surrender or withdrawal fees. In
                                          addition, early withdrawal usually results in tax penalties.

                                 (4)      Depending on the type of annuity and the current status of
                                          the annuity, the owner will need to ask different questions
                                          of the verification source, which will normally be the
                                          applicant or tenant’s insurance broker.

                         b.      Income after the holder begins receiving payments.

                                 (1)      When verifying an annuity, owners should ask the
                                          verification source whether the holder of the annuity has
                                          the right to withdraw the balance of the annuity. For
                                          annuities without this right, the annuity is not treated as an
                                          asset.

(2)      Generally, when the holder has begun receiving annuity
                                          payments, the holder can no longer convert it to a lump
                                          sum of cash. In this situation, the holder will receive regular
                                          payments from the annuity that will be treated as regular
                                          income, and no calculations of income from assets will be
                                          made.

                         c.      Calculations when an annuity is considered an asset.

                                 (1)      When an applicant or tenant has the option of withdrawing
                                          the balance in an annuity, the annuity will be treated like
                                          any other asset. It will be necessary to determine the cash
                                          value of the annuity in addition to determining the actual
                                          income earned.

                                 (2)      In most instances, an annuity from which payments have
                                          not yet been made is earning income on the balance in the
                                          annuity. A fixed annuity will earn income at a fixed rate in
                                          the same manner that a CD earns income. A variable
                                          annuity will earn (or lose) based on current market
                                          conditions, as with a mutual fund.

                                 (3)      The owner will need to verify with the insurance agent or
                                          other appropriate source:

                                                  The right of the holder to withdraw the balance
                                                   (even if penalties are involved).

                                                  The basis on which the annuity may be expected to
                                                   grow during the coming year.

                                                  The surrender or early withdrawal penalty fee.

                                                  The tax rate and the tax penalty that would apply if
                                                   the family withdrew the annuity.

                                 (4)      The cash value will be the full value of the annuity, less the
                                          surrender (or withdrawal) penalty, and less any taxes and
                                          tax penalties that would be due.

                                 (5)      The actual income is the balance in the annuity times the
                                          percentage (either fixed or variable) at which the annuity is
                                          expected to grow over the coming year. (This money will
                                          be reinvested into the annuity, but it is still considered
                                          actual income.)

                                 (6)      The imputed income from the asset is calculated only after
                                          the cash value of all family assets has been determined.

Imputed income from assets is calculated on the total cash
                                          value of all family assets.

                3.       Lump sum receipts counted as assets.

                         a.      Commonly, when a family receives a large amount of money, a
                                 lump sum payment, the family will put the money in a checking or
                                 savings account, or will purchase stocks or bonds or a CD.
                                 Owners must count lump sum payments received by a tenant as
                                 assets. Examples of lump sum payments include the following:

                                 (1)      Inheritances;

                                 (2)      Capital gains;

                                 (3)      Lottery winnings paid in one payment;

                                 (4)      Cash from the sale of assets;

                                 (5)      Insurance settlements (including health and accident
                                          insurance, workers compensation, and personal and
                                          property losses); and

                                 (6)      Any other amounts that are received in one-time lump sum
                                          payments.

                      Example – Calculating the Cash Value of an Annuity
       Rodrigo Ramirez, site manager at Fernwood Forrest, has interviewed Barbara Barstow, an
       applicant who reports holding an annuity from which she will not receive payments for
       another 15 years when she turns 65. The applicant could not provide any more detail on
       the annuity but did report the name, address, and phone number of her insurance agent.

       Rodrigo called the insurance agent and faxed a copy of the applicant’s approval for release
       of information. As a result, Rodrigo learned that the annuity is a fixed annuity, with a
       current value of $20,400 earning interest at an annual rate of 4.5%. The applicant could
       withdraw the current balance in the account but would pay a surrender penalty of $3,000.
       If the annuity is withdrawn, then the applicant will owe $1,200 in tax penalties.

       In this example, the important information for calculating cash value is the current value,
       $20,400; the surrender fee, $3,000; and the tax penalties, $1,200. If the applicant
       withdrew the cash from the annuity, after paying the surrender fee and tax penalty, then
       the amount of cash received would be $16,200.

       The cash value, $16,200, is recorded as an asset.

       Rodrigo will also calculate the actual anticipated income on this asset: $20,400 x .045 =
       $918.

b.      A lump sum payment is counted as an asset only as long as the
                                 family continues to possess it. If the family uses the money for
                                 something that is not an asset—a car or a vacation or education—
                                 the lump sum must not be counted.

                         c.      It is possible that a lump sum or an asset purchased with a lump
                                 sum payment may result in enough income to require the family to
                                 report the increased income before the next regularly scheduled
                                 annual recertification. But this requirement to report an increase
                                 in income before the next annual recertification would not apply if
                                 the income from the asset was not measurable by the tenant (e.g.,
                                 gems, stamp collection).

Examples – Lump Sum Additions to
                                Family Assets (One-Time Payment)
                     JoAnne Wettig won $500 in the lottery and received it in one payment.
                      Do not count the $500 as income. At JoAnne’s next annual
                      recertification, she will report all of her assets.

                     Mia LaRue, a tenant in a Section 8 property, won $75,000 in one
                      payment in the lottery. She buys a car with some of the money, and
                      puts the remaining amount of $24,000 in the bank. Mia receives her
                      first bank statement and notices that the income on this asset is $205
                      per month. She must report this increase in income because the
                      family has experienced a cumulative increase in income of more than
                      $200 per month. (See paragraph 7-10 A.4 on rules for reporting
                      interim increases in income.) The owner must perform an interim
                      recertification and count the greater of the actual or imputed income on
                      this asset (since the net family assets are greater than $5,000).

4.       Balances held in retirement accounts.

                         a.      Balances held in retirement accounts are counted as assets if the
                                 money is accessible to the family member. For individuals still
                                 employed, accessible amounts are counted even if withdrawal
                                 would result in a penalty. However, amounts that would be
                                 accessible only if the person retired are not counted.

                         b.      IRA, Keogh, and similar retirement savings accounts are counted
                                 as assets, even though withdrawal would result in a penalty,
                                 *unless benefits are being received through periodic payments.*

                         c.      Include contributions to company retirement/pension funds:

                                 (1)      While an individual is employed, count only amounts the
                                          family can withdraw without retiring or terminating
                                          employment.

(2)     After retiring or terminating employment, count as an asset
                                           any amount the employee elects to receive as a lump sum.

                          d.       Include in annual income any retirement benefits received through
                                   periodic payments. *Do not count any remaining amounts in the
                                   account as an asset.*

                               Examples – Balances Held in an IRA or 401K
                                          Retirement Account
                           Jed Dozier’s 401K account balance is $35,000. He is able
                            to terminate his participation in the retirement plan without
                            quitting his job, but if he did so he would lose a part of his
                            employer’s contribution and would pay a penalty fee. The
                            total cash he could withdraw, $18,000, is the amount that is
                            counted as an asset.

5.        Federal Government/Uniformed Services Pensions

                          In instances where the applicant/tenant is a retired Federal
                          Government/Uniformed Services employee receiving a pension that is
                          determined by a state court in a divorce, annulment of marriage, or legal
                          separation proceeding to be a marital asset and the court provides OPM
                          with the appropriate instructions to authorize OPM to provide payment of
                          a portion of the retiree’s pension to a former spouse, that portion to be
                          paid directly to the former spouse is not counted as income for the
                          applicant/tenant. However, where the tenant/applicant is the former
                          spouse of a retired Federal Government/Uniformed Services employee,
                          any amounts received pursuant to a court ordered settlement in
                          connection with a divorce, annulment of marriage, or legal separation are
                          reflected on a Form-1099 and is counted as income for the
                          applicant/tenant. (See Paragraph 5-6.K.4 for more information on
                          Federal Government/Uniformed Services pension funds paid to a former
                          spouse.)

                6.        Other state, local government, social security or private pensions.

                          Other state, local government, social security or private pensions where
                          pensions are reduced due to a court ordered settlement in connection
                          with a divorce, annulment of marriage, or legal separation and paid
                          directly to the former spouse are not counted as income for the
                          applicant/tenant and should be handled in the same manner as 5, above.

                7.        Mortgage or deed of trust.

                          a.       Occasionally, when an individual sells a piece of real estate, the
                                   seller may loan money to the purchaser through a mortgage or
                                   deed of trust. This may be referred to as a “contract sale.”

b.     A mortgage or deed of trust held by a family member is included
                                  as an asset. Payments on this type of asset are often received as
                                  one combined payment that includes interest and principal. The
                                  value of the asset is the unpaid principal as of the effective date of
                                  the certification. Each year this balance will decline as more
                                  principal is paid off. The interest portion of the payment is
                                  counted as actual income from an asset.

                8.         Assets disposed of for less than fair market value. Applicants and
                           tenants must declare whether an asset has been disposed of for less than
                           fair market value at each certification and recertification. Owners must
                           count assets disposed of for less than fair market value during the two
                           years preceding certification or recertification. The amount counted as an
                           asset is the difference between the cash value and the amount actually
                           received. (This provision does not apply to families receiving only BMIR
                           assistance.)

                           a.     Any asset that is disposed of for less than its full value is counted,
                                  including cash gifts as well as property. To determine the amount
                                  that has been given away, owners must compare the cash value
                                  of the asset to any amount received in compensation.

                           b.     However, the rule applies only when the fair market value of all
                                  assets given away during the past two years exceeds the gross
                                  amount received by more than $1,000.

                     Examples – Assets of More or Less Than $1,000 Disposed
                               of for Less Than Fair Market Value
                           During the past two years, Alexis Turner donated $300 to
                            the local food bank, $150 to a camp program, and $200 to
                            her church. The total amount she disposed of for less than
                            fair market value is $650. Since the total is less than
                            $1,000, the donations are not treated as assets disposed of
                            for less than fair market value.
                           Jackson Jones gave each of his three children $500.
                            Because the total exceeds $1,000, the gifts are treated as
                            assets disposed of for less than fair market value.

c.     When the two-year period expires, the income assigned to the
                                  disposed asset also expires. If the two-year period ends in the
                                  middle of a recertification year, the tenant may request an interim
                                  recertification to remove the disposed asset(s). However, if the
                                  owner elects to only include the income for a partial remaining
                                  year as shown in the example below, an interim recertification
                                  should not be conducted.

Example – Asset Disposed of
                                   for Less Than Fair Market Value
                    Margot Lundberg’s recertification will be effective January 1. On
                    that date, it will be 18 months since she sold her house to her
                    daughter for $60,000 less than its value. The owner will count
                    income on the $60,000 for only six months. (After six months, the
                    two-year limit on assets disposed of for less than fair market value
                    will have expired.)

d.      Assets disposed of for less than fair market value as a result of
                                 foreclosure, bankruptcy, divorces, or separation, are not counted.

                         e.      Assets placed in nonrevocable trusts are considered as assets
                                 disposed of for less than fair market value except when the assets
                                 placed in trust were received through settlements or judgments.

                         f.      Applicants and tenants must sign a self-verification form at their
                                 initial certification and each annual recertification identifying all
                                 assets that have been disposed of for less than fair market value
                                 or certifying that no assets have been disposed of for less than fair
                                 market value.

                         g.      Owners need to verify the tenant self certification only if the
                                 information does not appear to agree with other information
                                 reported by the tenant/applicant.

Examples – Asset Disposed of for Less Than Market Value
          (1)       An applicant “sold” her home to her daughter for $10,000. The home was
                    valued at $89,000 and had no loans secured against it. Broker fees and
                    settlement costs are estimated at $1,800.

                    $89,000         Market value

                    - 1,800         Fees

                    $87,200         Cash value

                    - 10,000        Sales price to daughter

                    $77,200         Asset disposed of for less than fair market value

                    In this example, the asset disposed of for less than fair market value is
                    $77,200. That amount is counted as the resident’s asset for two years from
                    the date the sale took place.

                    (The $10,000 received from the daughter may currently be in a savings
                    account or other asset or may have been spent. The $10,000 will be
                    counted as an asset if the applicant has not spent the money.)

          (2)       A resident contributed $10,000 to her grandson’s college tuition and gave her
                    two granddaughters $4,000 each to save for college.

                    $10,000         College tuition gift

                    + 8,000         Gift to granddaughters

                    $18,000         Asset disposed of for less than fair market value

                    The $18,000 disposed of for less than fair market value is counted as the
                    tenant’s asset for two years from the date each asset was given away.

Section 2 does not apply to families applying for or occupying 221(d)(3) BMIR units without
additional subsidy.
Source: Legislative text reproduced verbatim

Effective Timeline

Current
Sep 24, 2026
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Related Rules

§ 888.113
§ 888.113 Fair market rents for existing housing: Methodology.
§ 888.115
§ 888.115 Fair market rents for existing housing: Manner of publication.
§ 5.512
§ 5.512 Verification of eligible immigration status.

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