TN 22 (07-90)
SI 01130.501 Essential Property Excluded Regardless of Value or Rate of Return
A. Policy principles
1. The Exclusion
The properties described in 2, 3, and 4 below are excluded as essential to self-support regardless of value or rate of return. However, they must be in current use or, if not in use for reasons beyond the individual's control, there must be a reasonable expectation that the required use will resume.
2. Trade Or Business Property
Property essential to self-support used in a trade or business is excluded from resources regardless of value or rate of return effective May 1, 1990. See SI 01130.503 for periods of eligibility before that date.
3. Government Permits
Government permits represent authority granted by a government agency to engage in income producing activity. Examples are commercial fishing permits granted by a State Commerce Commission and tobacco crop allotments issued by the U.S. Department of Agriculture.
4. Personal Property Used By An Employee
Personal property used by an employee for work is excluded from resources beginning May 1, 1990. For periods before that date such items were excluded if they were required by the individual's employer. Excluded items include tools, safety equipment, uniforms, etc.
B. Development and documentation — general
The rules in C., D., and E. below apply unless development can be eliminated in accordance with SI 01130.500 C.
C. Development and documentation — property used in a trade or business
1. Trade Or Business Not Being Excluded
When an individual alleges owning trade or business property not already being excluded, consider if a valid trade or business exists, and if the property is in current use (see SI 01130.504). Obtain the individual’s statement either signed or recorded on a DROC giving the information below. Absent evidence to the contrary, accept the responses to items a.-d. Verify e. with the business tax returns.
a description of the trade or business;
a description of the assets of the trade or business;
the number of years it has been operating (see 4. below);
the identity of any co-owners;
the estimated gross and net earnings of the trade or business for the current tax year (see 3. below).
2. Redetermination Of Excluded Trade Or Business Property
Consider current use of the property in the trade or business. Obtain and verify the individual's allegations as to the estimated gross and net earnings of the trade or business for the current tax year for income purposes (see SI 00820.230).
3. Use Of Tax Returns
a. Use Most Recent Tax Return
Obtain a copy of the business tax return (i.e., Form 1040 and the appropriate schedules) for the tax year prior to the application or redetermination. Use the return to determine the net earnings from self-employment and validity of the trade or business. The following can be particularly helpful:
Schedule C, Profit or Loss from Business or Profession;
Schedule SE, Computation of Social Security Self-Employment;
Schedule F, Farm Income and Expenses;
Form 4562, Depreciation and Amortization; and
Form 1065, U.S. Partnership Return of Income.
b. Current Tax Return Not Available
If the current tax return is not available, obtain a copy of the latest tax return available.
4. Questionable Trade Or Business
If a trade or business has operated a year or less, or there is a question of bona fides, develop in accordance with RS 01802.002-.010 to determine whether a trade or business actually exists.
5. Liquid Resources Used In A Trade Or Business
Effective May 1, 1990, all liquid resources used in the operation of a trade or business are excluded as property essential to self-support. Obtain an individual's statement either signed or recorded on a DROC that liquid resources are used in the trade or business.
D. Development and documentation — government permits
1. Individual's Statement
If an individual alleges owning a government license, permit, or other property that represents government authority to engage in an income producing activity, and that has value as a resource, obtain his or her statement either signed or recorded on a DROC as to:
the type of license, permit or other property;
the name of the issuing agency, if appropriate;
whether the law requires such license, permit, or property for engaging in the income producing activity at issue; and
how the license, permit, or other property is being used; or
if it is not being used, why not.
If the property is not being used, see SI 01130.504 for development.
2. Supporting Evidence
Have the individual submit a copy of the license, permit and/or other pertinent documents. For example, an individual engaged in fishing in Alaska would have to have a permit. In North Carolina, a person growing flue-cured tobacco would have to have a “marketing sales card” to sell it. If the individual cannot submit the necessary evidence, verify his or her allegations with the issuing agency. Do this by telephone if possible.
3. Common Government Permits
a. Alaska Limited Entry Fishing Permit (ALEFP)
An ALEFP is one of the two most commonly encountered types of property representing required government authority to engage in an income producing activity.
Alaska's Commercial Fisheries Entry Commission first issued ALEFP's in 1973 to control commercial salmon fishing. These permits are required for individuals who engage in the fishing trade.
We are aware of such permits only in Alaska. Should one surface elsewhere, contact the Seattle RO through your own RO to obtain regional instructions concerning it.
b. Tobacco Crop Allotment (TCA)
The TCA is the other most commonly encountered type of property representing government authority to engage in an income
producing activity. It is issued by the U.S. Department of Agriculture's Agricultural Stabilization and Conservation Service. It is required for the growing and selling of flue-cured tobacco, which is grown mostly in the southeastern United States. Do not confuse a TCA with a price support or subsidy, or a soil bank program.
Exclude a TCA only when the grower who has it is restricted to growing a certain quantity of the crop.
FO's in the Atlanta region should refer to regional TCA instructions. Should a TCA surface outside the Atlanta region, contact the Atlanta RO through your own RO to obtain additional information.
NOTE: With passage of the American Jobs Creation Act of 2004, government permits, i.e., tobacco crop allotments (TCAs), are no longer required to engage in the income-producing activity of growing and selling certain kinds of tobacco. Previously, we excluded TCAs from resources if owners were restricted to growing a certain quantity of the crop. Since these restrictions have now been lifted, anyone can grow any amount of the crop. Thus, effective with the first crop of 2005, TCAs can no longer be excluded as property essential to self-support (PESS).
E. Development and documentation — personal property used by an employee
1. Individual's Statement
If an individual alleges owning items that are used in his or her work as an employee; or, for months of eligibility before May 1, 1990, that his or her employer required he or she provide as a condition of employment, obtain his or her statement either signed or recorded on a DROC which includes:
the name, address, and telephone number of the employer;
a general description of the items;
a general description of his or her duties; and
whether the items are currently being used.
If the individual is temporarily not working (e.g., job loss, seasonal employment), or the property is not otherwise in current use, see SI 01130.504.
2. Supporting Evidence
Absent evidence to the contrary, accept the individual's statement.