An official State of Texas website.
Revision 16-4; Effective December 1, 2016
- An individual who resides in a nursing facility owns a 160-acre farm where the individual's spouse continues to live. One hundred acres of land are set aside in a Conservation Reserve Program (CRP). The other 60 acres are farmed by the couple's son, who pays all expenses. In return for use of the land, the son pays the individual one-quarter of the net profit he produces. For several years, the individual has received $6,000 from the CRP during the month of September. The son's most recent IRS Schedule C form shows net farming income of $7,000 for the year.
Action:
The income from the land set aside for CRP is considered lease or rental income. As neither the individual nor the individual's spouse participates in the production of farm income, this is also considered rental income and no deductions are given for expenses. If expenses are incurred by either the individual or the individual's spouse, consider these expenses as deductions in netting the income. Other common examples of lease income include hunting or fishing leases, subsidy payments, surface exploration, or bonuses. An individual supplements their Social Security income by making quilts. The quilts are sold through a consignment shop, which keeps 10 percent of the sales price. Each month the individual produces and sells two quilts, which retail for $450 each. The material for each quilt costs $75; additionally, the individual pays her niece $150 per quilt to do the actual quilting stitch. The individual's business is run out of a rented apartment, which includes a living area, kitchen, bathroom, and two bedrooms. One of the bedrooms is used as the workshop. The individual pays $400 per month in rent; utilities for the apartment run $150 per month. The individual is also repaying their son at the rate of $50 per month for money he loaned the individual for the purchase of a new sewing machine, which is used to produce the quilts.
- An individual supplements their Social Security income by making quilts. The quilts are sold through a consignment shop, which keeps 10 percent of the sales price. Each month the individual produces and sells two quilts, which retail for $450 each. The material for each quilt costs $75; additionally, the individual pays her niece $150 per quilt to do the actual quilting stitch. The individual's business is run out of a rented apartment, which includes a living area, kitchen, bathroom, and two bedrooms. One of the bedrooms is used as the workshop. The individual pays $400 per month in rent; utilities for the apartment run $150 per month. The individual is also repaying their son at the rate of $50 per month for money he loaned the individual for the purchase of a new sewing machine, which is used to produce the quilts.
Action:
Amount Action $900.00 gross monthly income (two quilts @ $450 each) – 90.00 consignment fee (10 percent of $900) –150.00 cost of materials ($75 X 2) –300.00 payment to niece ($150 X 2) –100.00 rental expense for work space ($400/four rooms) – 37.50 utility expense for work space ($150/four rooms) $222.50 net monthly income from sale of two quilts
Note: The $50 payment on the principal of the loan to the son is not an allowable expense. Similarly, if the individual bought the sewing machine outright (purchase of a capital asset), the purchase would also not be an allowable deduction. However, the rental of a sewing machine would be allowable. See the chart in the previous section.
-
An eligible couple produces a yearly cotton crop. The couple belongs to a co-op that stores the cotton to await a better price. The co-op members receive coupons, which are actually a loan against the eventual sale price of the crop.
Action:Proceeds from the sale of the crop become income in the month the individual actually receives the profit. Any coupons cashed against the eventual sale price of the crop are considered income at the time they are cashed.