Treatment of Specific Types of Payments 430-05-30-55-30

(Revised 01/01/04 ML2893)

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IM 5192

1. A federal gasoline tax credit is excluded from income. (It is a credit against tax liability.)
2. A State gasoline tax refund is excluded from income on the basis that it is a non recurring lump-sum payment.

The federal gasoline tax credit and the State gasoline tax refund may be combined on the same line of the tax form.

3. Recaptured Depreciation and Recaptured Investment Credit: IRS allows self-employed persons to deduct depreciation on property, as a cost of doing business.

Recaptured depreciation and recaptured investment credit are considered in the capital gain computations in the same manner as they are for federal income tax purposes.

4. Patronage dividends are reported on tax forms. They are paid by cooperatives in cash or shares of stock. These dividends are similar to rebates paid based on the amount of goods bought or services used for the self-employment enterprise. Cash dividends are counted as unearned income. Dividends in the form of stock are counted as an asset.
5. Royalty payments are counted as unearned income.
6. Farm Service Agency (FSA) cash payments are counted as earned self-employment income except for loans and payments made as the result of a Presidentially declared disaster. Farm loans are excluded from income.
7. The Federal Crop Insurance Corporation (FCIC) insures producers against crop losses. An FCIC payment is a nonrecurring lump-sum payment. It is an asset in the month received and thereafter until spent. Unlike ASCS payments, the producer has to pay a premium for FCIC insurance. The federal government subsidizes the premiums.
8. A crop insurance payment from a private company is excluded from income if it is paid as a nonrecurring lump-sum payment. It is counted as an asset in the month received and thereafter until spent. If the insurance company pays the household in installments, the money is counted as unearned income.