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04 040113 HA ADMINPLAN EX 2
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04 040113 HA ADMINPLAN EX 2
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3/28/2013 10:01:24 AM
Creation date
3/28/2013 9:36:46 AM
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City Clerk
Doc Type
Agenda Packet
Agency
Community Development
Date
4/1/2013
Destruction Year
2018
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or profession will be included in income, except to the extent the withdrawal is reimbursement of <br />cash or assets invested in the operation by the family" [24 CFR 5.609(b)(2)] . <br />Business Expenses <br />Net income is "gross income less business expense" [HCV GB, p. 5-19]. <br />To determine business expenses that maybe deducted from gross income, SARA will use <br />current applicable Internal Revenue Service (IRS) rules for determining allowable business <br />expenses [see IRS Publication 535], unless a topic is addressed by HUD regulations or guidance <br />as described below. <br />Business Expansion <br />HUD regulations do not permit SARA to deduct from gross income expenses for business <br />expansion. <br />Business expansion is defined as any capital expenditures made to add new business activities, to <br />expand current facilities, or to operate the business in additional locations. For example, <br />purchase of a street sweeper by a construction business for the purpose of adding street cleaning <br />to the services offered by the business would be considered a business expansion. Similarly, the <br />purchase of a property by a hair care business to open at a second location would be considered a <br />business expansion. <br />Capital Indebtedness <br />HUD regulations do not permit SARA to deduct from gross income the amortization of capital <br />indebtedness. <br />Capital indebtedness is defined as the principal portion of the payment on a capital asset such as <br />land, buildings, and machinery. This means SARA will allow as a business expense interest, but <br />not principal, paid on capital indebtedness. <br />Negative Business Income <br />If the net income from a business is negative, no business income will be included in annual <br />income; a negative amount will not be used to offset other family income. <br />Withdrawal of Cash or Assets from a Business <br />HUD regulations require SARA to include in annual income the withdrawal of cash or assets <br />from the operation of a business or profession unless the withdrawal reimburses a family <br />member for cash or assets invested in the business by the family. <br />Acceptable investments in a business include cash loans and contributions of assets or <br />equipment. For example, if a member of an assisted family provided an up-front loan of $2,000 <br />to help a business get started, SARA will not count as income any withdrawals from the business <br />up to the amount of this loan until the loan has been repaid. Investments do not include the value <br />of labor contributed to the business without compensation. <br />Co-owned Businesses <br />If a business is co-owned with someone outside the family, the family must document the share <br />of the business it owns. If the family's share of the income is lower than its share of ownership, <br />the family must document the reasons for the difference. <br />2/25/13 Page 6-10 <br />
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