Situation: Dottle, an SSI applicant, sold a parcel of land to a neighbor for $3,000 plus interest.
Dottle received a $1,500 cash down payment. The real estate contract specifies that
the remaining $1,500 will be repaid at 5% interest over the next 2 years.
Analysis: The farmland is no longer Dottle's resource even though it is still their property.
Because they are bound by an agreement to sell that land, they cannot transfer title
to anyone else. Dottle has converted their ownership interest in the land into a real
estate contract. The CR determines that there is no legal restriction against converting
the contract into cash, so it is Dottle’s resource. The initial value of the contract
is the $1,500 outstanding principal balance. Counting the $1,500 principal balance
as a resource, Dottle is still under the $2,000 resource limit. Because this contract
is a resource, the principal portion of the monthly payment they receive is not income,
but the interest portion is unearned income. To determine the amount of the principal
and interest portions, the CR obtains an amortization schedule with $1,500 as the
amount of the contract, 5% interest rate, and a 24 month payment period.