PS 01815.039 Ohio
A. PS 10-122 SSI-Ohio- Review of Ownership Interest of Traci S~ in a Home in Ohio- REPLY Your Reference: S2D5G6, SI 2-1-5 OH Our Reference: 10-0101
DATE: July 13, 2010
This opinion addresses whether a quit claim deed must be signed for ownership interest to end on real property when a divorce decree has already ordered said property ownership be terminated. In this case, the claimant married in 1995 and co-owned a house with her spouse. The claimant separated from her spouse and applied for SSI in November 2007. In May 2008, a divorce decree was issued stating that her spouse owned the house free and clear of any claim from the claimant and stipulated that she must sign a quit claim deed to the real property. Although the claimant did not sign a quit claim deed, the opinion finds that the real property is not a resource to the claimant because the divorce decree served to terminate her ownership interest.
You asked us whether a house is a resource to Traci S~ for purposes of the Supplemental Security Income program, where the deed to the house currently includes Ms. S~’s name, but a May 27, 2008 divorce decree required Ms. S~ to sign a quit claim deed of the house. We believe for the reasons stated below that the house was not a resource to Ms. S~ as of the date of the divorce decree.
Traci S~ married Bert S~ in January 1995. During their marriage, Mr. and Ms. S~ owned the house in question. You explained that Ms. S~ applied for Supplemental Security Income in November 2007. The two were divorced pursuant to a Decree of Divorce (“Decree”) issued by the Butler County Court of Common Pleas, Division of Domestic Relations (the “Court”) on May 27, 2008. The Court ordered that Bert S~ would retain the property free and clear of any claim of Traci S~. The Court further ordered Traci S~ to sign a quit claim deed at the time of the final hearing. You stated that despite the passage of more than two years, Traci S~ has not signed a quit claim deed. You explained that Traci S~ is not living in the house and that Bert S~ is renting the house to a third party.
To be entitled to SSI, an individual must have limited income and resources. See 42 U.S.C. § 1382(a). The term “resource” includes real property that an individual owns and could convert to cash to be used for her support. 20 C.F.R. § 416.1201(a). The issue here is whether Traci S~ has an ownership interest in the house in question, given that she did not sign a quit claim deed, despite an order in the Decree requiring her to do so. We conclude that the property has not been a resource of Traci S~ since May 27, 2008, the date of the Decree. The decision in Goodrich v. VanVliet, No. 446, 1982 WL 3404 (Ohio App. 4 Dist. March 24, 1982) is instructive in this case. In Goodrich, Burneda Goodrich and Alfred VanVliet divorced, and in the divorce decree, Ms. Goodrich was ordered to convey real property to Mr. VanVliet. Ms. Goodrich instituted a partition action (action to separate ownership in real estate, see Ohio Rev. Code ch. 5307), but the trial court dismissed the case, in part, because it found that the divorce decree deprived Ms. Goodrich of an possessory right in the real estate. Id. at *1. The appeals court affirmed, finding that the divorce decree ordering Ms. Goodrich to convey her interest in the property terminated her interest. Id. Therefore, despite Traci S~’s failure to sign a quit claim deed, the Decree served to terminate her interest in the house. Therefore, it was not a resource for purposes of the SSI program as of the date of the Decree. Likewise, any rents collected from the property should not be considered as income to Ms. S~.
The house should not be considered a resource to Ms. S~ as of May 27, 2008, because her interest was terminated by a divorce decree on that date.
Donna L. C~
Regional Chief Counsel Region V
Assistant Regional Counsel
B. PS 02-135 Review of a Resource Needed for SSI Claimant's Physical Condition Alicia W~, SSN ~
DATE: September 16, 2002
This opinion addresses whether a personal effect (in this case, a piano) owned by an SSI recipient, should be considered a countable resource for SSI purposes, or whether it can be excluded as a resource required by her physical condition under the household goods and personal effects exclusion. This is essentially an evidentiary issue; i.e., the key is whether the fact finder in the FO has sufficient evidence to determine that the piano is required by the individual's physical condition. Under 20 CFR 416.1216(c), certain household goods and personal effects are excluded from SSI resource counting if they are "required because of a person's physical condition." As long as there is sufficient evidence for the fact finder to determine that the piano (or similar item) is required as treatment or therapy for the individual's physical condition, then the item could be excluded as a resource. If the fact finder cannot determine that the piano (or similar item) is required, then the current market value of the piano (or similar item) is subject to the $2,000 maximum exclusion for household goods and personal effects [20 CFR 416.1216(a)-(b)]. It should be noted that the exclusions discussed above do not appear in the Social Security Act.
You asked whether a piano, owned by SSI claimant Alicia W~, should be considered a countable resource for SSI purposes, or whether it can be excluded as a resource required because of her physical condition. We conclude that, although there is no caselaw or other legal authority interpreting the applicable regulation, 20 C.F.R. § 416.1216(c), the Agency may consider the piano as an excludable resource, under 20 C.F.R. § 416.1216(c), provided Ms. W~ can show that playing the piano is required as treatment or therapy for her physical condition. If the Agency finds that the piano is not so required, further development and consideration may be warranted to determine the actual current market value of the piano.
Alicia W~ owns a baby grand piano that the Wausau Field Office reported is worth $7000. It is not clear how the valuation of $7000 was reached. For purposes of this memorandum, we assume that $7000 is likely the amount Ms. W~ paid for the piano. Ruth J~, a benefit specialist with the Aging and Disability Resource Center of Marathon County, has advised SSA that Ms. W~ tried to sell her piano by advertising it in a local newspaper and with the Wausau Conservatory of Music and by contacting several local churches. Two individuals expressed interest, but Ms. W~ received no offers to buy the piano. We do not know what price Ms. W~ asked or whether anyone would be willing to purchase the piano for less than her asking price. Ms. J~ stated, in April 2002, that a local music store sold only one comparable piano in the preceding year. The price that the music store charged was not reported. Although Ms. J~ indicated that she was providing the field office with a statement from the music store, no such statement was included in the materials forwarded to us. Ms. J~ also reported that Ms. W~ uses the piano daily and that she is the only member of her household.
Ms. W~ has a congestive heart condition and hypertension. On December 12, 2001, her physician, Arthur W~, M.D., wrote a letter stating that playing piano provided Ms. W~ with positive health benefits in terms of stress relief, which resulted in positive benefits for her hypertension. Dr. W~ further stated that being forced to sell her piano in order to receive SSI "would have a deleterious effect on her overall health."
The Social Security Act (the Act) provides that certain resources are excludable resources for SSI purposes. 42 U.S.C. § 1382b. Among the resources that may be excluded are household goods and personal effects, but only to the extent that their total value does not exceed the $2000 limit set by the Commissioner. 42 U.S.C. § 1382b(2)(A); 20 C.F.R. § 416.1216(b). The regulations define "personal effects" to include musical instruments. Thus, a portion of the value of Ms. W~'s piano could be excluded as a personal effect, provided the total value of her other personal effects and household goods is less than $2000. However, it appears that Ms. W~'s piano may be worth considerably more than that. We must determine, therefore, whether her piano may be excludable for some other reason, or whether the value of her piano can be considered less than previously assumed.
Exclusion for Items Required for Person's Physical Condition
The exclusion for household goods and personal effects that are required because of a person's physical condition does not appear in the Act. See 42 U.S.C. §1382b. The exclusion became a part of SSI regulations effective October 20, 1975. 40 Fed. Reg. 48911, 48916 (October 20, 1975). Neither the preamble to the final regulation published on that date nor the preamble to the proposed regulation states the rationale for the exclusion or gives any further clarification as to its application. See 39 Fed. Reg. 2487 (January 22, 1974); 40 Fed. Reg. at 48911. Thus, we cannot ascertain from those publications whether the Agency intended for the exclusion to apply to items such as a piano that provide "positive health benefits" in terms of an individual's physical condition. The POMS, likewise, provides no guidance in this situation. See POMS SI 01130.430. We were unable to find any caselaw interpreting the regulatory provision or any OGC precedential opinion on the subject. Similarly, we found no caselaw regarding other needs-based federal entitlement programs that might be helpful in interpreting 20 C.F.R. § 416.1216(c).
The Internal Revenue Code (IRC), however, includes a personal income tax deduction for medical care expenses. 26 U.S.C. § 213(a). The definition of "medical care" includes amounts paid "for the diagnosis, cure, mitigation, treatment, or prevention of disease, or for the purpose of affecting any structure or function of the body. . .." 26 U.S.C. § 213(d)(1)(A). The Internal Revenue Service (IRS) addressed the issue of whether the cost of a piano could be deducted under the IRC medical care provision in two private letter opinions. In the first, parents bought a piano so that their child, who had polio, could strengthen her finger muscles and improve her posture. Priv. Ltr. Rul. 59-03205410A (March 20, 1959), 1959 WL 59702. The IRS determined that, if the use of the piano was prescribed by a physician to mitigate the effects of the child's illness, and if the child was the only one to use the piano, a portion of the cost could be deducted as a medical care expense. Id. The portion of the piano's cost that could be deducted was "the minimum cost of a piano of a quality sufficient for the therapeutic purposes" subject to the ceiling of 7.5% of adjusted gross income, as provided in 26 U.S.C. § 213(a). Priv. Ltr. Rul. 59-03205410A. Another private letter ruling states that, after suffering a nervous breakdown, a taxpayer's daughter "was induced by her doctors to resume piano lessons, in view of her particular aptitude in this area, as it was hoped that this would be good therapeutic treatment and would create a motivation toward recovery." Priv. Ltr. Rul. 63-02264710A (February 26, 1963), 1963 WL 14192. The taxpayer could not find a suitable used piano, so he bought a new piano for $800. The IRS held that the taxpayer could take a medical care deduction for "an amount which does not exceed the minimum cost of a piano of a quality sufficient to effect the prescribed therapy," subject to the limitations in 26 U.S.C. § 213. Priv. Ltr. Rul. 63-02264710A (February 26, 1963), 1963 WL 14192. To the extent, however, that the expenditure was "elaborate," i.e., beyond the need for the prescribed medical therapy, it was not deductible because it was not directly related to medical care. Id.
The IRC provision relied upon in these two private letter rulings is not identical to the resource exclusion provision in the Social Security Regulations. The IRC section would apply to expenditures for treatment of a mental condition as well as a physical condition, but the Social Security regulation would allow exclusion of an item only if it is required because of the SSI claimant's physical condition. Compare 26 U.S.C. § 213(d)(1)(A), 20 C.F.R. § 416.1216(c). While the Social Security regulation allows for exclusion of a resource "required because of a person's physical condition," 20 C.F.R. § 416.1216(c) (emphasis added), the IRC provision, 26 U.S.C. § 213(d)(1), allows a tax deduction for "amounts paid" for treatment (emphasis added). Although the IRC section does not address whether an expenditure is medically required, the private letter rulings provide some support for the conclusion that, in some cases, piano playing may be prescribed as part of an individual's medical treatment.
There is nothing in the Social Security Act or Social Security Regulations to direct a conclusion on this issue. We think it reasonable, however, to conclude, based on the private letter rulings, that there are situations in which a doctor may reasonably require a patient to play a piano as a necessary part of treatment or therapy for the patient's physical condition. Unlike the medical care deduction provision in the IRC, the SSI exclusion for items required for a person's physical condition does not place any limitation on the value of items which can be excluded, even though some of the items listed, such as an engagement ring or a dialysis machine, could have considerable monetary value. 20 C.F.R. § 416.1216(c); see also POMS SI 01130.430 ("Items Excluded Regardless of Value") (emphasis added).
The letter from Ms. W~'s physician states that it is important that she enjoy the benefits of her piano because it relieves her stress and, consequently, has a positive effect on her hypertension. The doctor further states that selling the piano to receive SSI benefits would be "deleterious" to her health. In the absence of evidence casting doubt on the doctor's credibility, we think this statement may be sufficient for a fact-finder to conclude that the piano is required for Ms. W~'s physical condition. You may want to obtain clarification from the doctor, however, that he considers playing the piano a required part of Ms. W~'s treatment or therapy for her hypertension or her congestive heart condition. You may also want to verify that the "deleterious" effect of selling the piano refers to her inability to receive the therapeutic benefit of playing the piano, rather than to other factors, such as a contemplated elevation of her blood pressure because selling the piano would upset her.
If you find that playing a piano is required for Ms. W~'s physical condition and she is the only person who will use the piano, the entire value of the piano should be considered an excludable resource. If, however, you find that playing piano is not required for Ms. W~'s physical condition, it will be necessary to determine the piano's value.
Determining the Current Market Value
If you determine that the piano is not an excludable resource under 20 C.F.R. § 416.1216(c), the current market value of the piano will be subject to the $2000 maximum exclusion for household goods and personal effects. 20 C.F.R. § 416.1216(a)-(b). Contrary to Ms. J~'s contention, the fact that Ms. W~ was unable to sell her piano does not necessarily mean that the value of the piano is zero. The piano likely has some value, even if it is not the $7000 purchase price. It is possible that the value of the piano is zero, however, if, for example, a buyer's expense to move the piano from Ms.W~'s home to a new location exceeds the price that a buyer would ordinarily pay for the piano.
The information provided to us did not indicate what price Ms. W~ was asking for the piano when she advertised it. It may be that she was simply asking a higher price than the current market value and, therefore, did not get an offer. We suggest further development to ascertain the current market value of the piano. For example, did Ms. W~ get any offers to buy the piano and, if so, what amount was offered? Ms. J~ indicated that the local music store sold one comparable piano over the past year. What was the sale price? Are there other music stores in the area that carry comparable pianos? If so, what price do they charge? Has Ms. W~'s piano been appraised? How much would a pawn shop pay for the piano, given that it could be difficult to sell quickly?
We note that POMS SI 01150.200 contains a provision that, under certain circumstances, allows for conditional SSI benefits for a limited period while an individual attempts to sell a non-liquid resource. The individual must agree to sell the resource at the current market value within a specified period and use the proceeds to refund the overpayment of conditional benefits. POMS SI 01150.200B.1. The period of conditional benefits where personal property is concerned would generally end after three months, except that there could be one three-month extension granted for good cause. SI 01150.201A. The individual must make reasonable efforts to sell the resource, taking all necessary steps to sell the resource through the local media. SI 01150.201B.1. The information provided to us does not indicate whether Ms. W~ was eligible for, or received, conditional benefits under these POMS provisions.
We also note that, even if Ms. W~ purchased the piano for $7000, and if the Agency determines that the current market value of her piano is less than $7000, it does not necessarily mean that her purchase was a transfer for less than fair market value. See POMS SI 01150.005A. (transfers of resources for less than fair market value after December 14, 1999 may result in a period of SSI ineligibility). Nor does the fact that Ms. W~ may not be able to sell her piano for the same price she paid mean that she paid more than the fair market value. Fair market value is the current market value of a resource at the time the resource is transferred, i.e., the going price for which it could reasonably be expected to sell at the time, on the open market in the geographic area involved. POMS SI 01150.005. If Ms. W~ bought her piano on the open market, e.g., from a merchant, the $7000 purchase price is assumed to be the fair market value at the time of the transfer. POMS SI 01140.005C.4.a. It may be that the value of the piano has depreciated since its purchase, or simply that the going price for a comparable piano was $7000 at the time of the purchase but is less now due to economic conditions. A prospective buyer might be willing to pay more for a piano bought from a merchant whose reputation is known than he would pay in a private sale by a stranger. A merchant might also be in a position to charge more because he could offer a factory guarantee or a store guarantee that a private seller like Ms. W~ cannot offer. Finally, a merchant might be in a position to wait until a buyer came along who was willing to pay a higher price. Thus, the current market value of the piano, in Ms. W~'s hands, may be less than the amount she paid for the piano, even though the original purchase was not a transfer for less than fair market value.
In summary, we conclude that, if the Agency fact-finder concludes that Ms. W~ has shown that playing piano is required as part of her treatment or therapy for her physical condition, the piano's entire value may be excluded under 20 C.F.R. § 416.1216(c). If the fact-finder concludes that playing piano is not required for Ms. W~'s physical condition, the current market value of the piano should be considered a household good or personal effect subject to the $2000 maximum exclusion for all household goods and personal effects. However, the Agency may want to give further consideration to the current market value of the piano in Ms. W~'s hands.
Thomas W. C~
Regional Chief Counsel
Nancy L. B~
Assistant Regional Counsel
C. PS 00-160 Revised Opinion - Non-Home Real Property for Mary A. B~
DATE: September 30, 1996
This opinion concerns whether or not a non-principal residence is considered an excludable resource for SSI purposes.
Generally, property that is not the principal place of residence is not considered an excludable resource. However, if the sale of the property would cause undue hardship due to the loss of housing to a co-owner of the property, an exception would be made and the property would remain an excluded resource.
Thus, the residential property is not considered a resource for SSI purposes.
The claimant, Mary A. B~, resides in Cambridge, Massachusetts but holds title to property located in Ohio. The claimant's daughter, Tonya B~, lives on the property in Ohio and pays all expenses connected with the residence. The claimant and her daughter have an informal agreement that when the property is paid for, the claimant will quit claim the property to her daughter as repayment "over several years" of past loans and for the care and maintenance of the property.
Generally, property such as in this case, that is not the principal place of residence, is not considered an excluded resource. POMS SI 01130.100A.6(a). However, if the sale of the property would cause undue hardship due to the loss of housing to a co-owner of the property, an exception would be made and the property would remain an excluded resource. POMS SI 01130.100A.6(b).
Therefore, if Mary B~'s daughter, Tonya B~, can show she is a co-owner of the property and the sale of the property would cause her undue hardship, the property remains an excluded resource. Since Tonya B~ does not hold legal title to the property (as discussed in our previous opinion letter), in order to show co-ownership she must show an equitable ownership interest. According to POMS SI 01130.100B.1(e), evidence of an "equitable" ownership interest in property can result from personal considerations or from making mortgage payments, making or paying for additions to a shelter, or making improvements to a shelter. It appears Tonya B~ is making the mortgage payments on the property.
Furthermore, Ohio case law also recognizes that there are two kinds of ownerships, equitable and legal:
An 'equitable owner' is one who is recognized in equity as the owner of the property, because the real and beneficial use and title belong to him, although the bare legal title is invested in another.
A 'legal owner' is one in whom the legal title to real estate is vested, but subject to the rights of any equitable owner.
Levin v. Carney et al., 120 N.E. 2d 92, 96 (1954).
Mary and Tonya B~ have entered into an agreement, or executory contract, entitling Tonya B~ to an equitable ownership interest in the property due to her care and maintenance of the property and past loans made by her to Mary B~. When full payment of the property is completed, Tonya B~ acquires a completed equity which may entitle her to a conveyance of the legal title. Possession by Tonya B~ is notice to everyone of her equitable rights. Butcher v. Kagey Lumber Co., 128 N.E. 2d 54, 56 (1955).
Since Tonya B~ has shown an equitable ownership interest in the property, due to her care and maintenance of the property as well as a result of personal considerations, and it would appear she would suffer undue hardship from the sale of the property since it would deprive her of her home, the property should be considered to be an excluded resource.