5632 Capital Gains

The term "capital gains^" as used by the IRS describes the handling of profits from the sale or transfer of capital assets used in a self-employment enterprise. For IRS purposes, such proceeds less depreciation are considered taxable income.

The proceeds from the sale of goods or equipment used in a self-employment enterprise will be calculated for food stamp purposes in the same manner as a capital gain for Federal income tax purposes except that depreciation is not allowed.

Therefore, for food stamp purposes, the capital gain is the net proceeds of capital goods and equipment - the sale price less encumbrances, interest penalties, etc.

Net capital gains are counted as part of the household's total self-employment income before the costs of producing the income are excluded.

Example -A farmer purchased a used combine for $6,000.00 in 1973. He depreciated the combine over a period of ten years in the amount of $6,000.00. In 1985, he sold the combine for $2,000.00. He owed nothing on the combine. For food stamp purposes, the entire proceeds, $2,000.00, is counted as part of the income before exclusions for 1985. This is true even though no income from the sale was used for Federal Income Tax purposes.

NOTE::Lump-sum payments from the sale of property not connected with a self-employment enterprise will be handled according to