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. Administrative Plan 4/1/16 <br />. <br />Page 6-11 <br />affects or is affected by the EID (e.g., when the family member’s income falls to a level <br />at or below his/her prequalifying income, when one of the exclusion periods ends, and at <br />the end of the lifetime maximum eligibility period). Acceptable proof will be required. <br /> <br />6-I.F. BUSINESS INCOME [24 CFR 5.609(b)(2)] <br />Annual income includes “the net income from the operation of a business or profession. <br />Expenditures for business expansion or amortization of capital indebtedness shall not be used as <br />deductions in determining net income. An allowance for depreciation of assets used in a business <br />or profession may be deducted, based on straight line depreciation, as provided in Internal <br />Revenue Service regulations. Any withdrawal of cash or assets from the operation of a business <br />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 />SAHA Policy <br />To determine business expenses that may be deducted from gross income, SAHA will use <br />current applicable Internal Revenue Service (IRS) rules for determining allowable <br />business expenses [see IRS Publication 535], unless a topic is addressed by HUD <br />regulations or guidance as described below. <br />Business Expansion <br />HUD regulations do not permit SAHA to deduct from gross income expenses for business <br />expansion. <br />SAHA Policy <br />Business expansion is defined as any capital expenditures made to add new business <br />activities, to expand current facilities, or to operate the business in additional locations. <br />For example, purchase of a street sweeper by a construction business for the purpose of <br />adding street cleaning to the services offered by the business would be considered a <br />business expansion. Similarly, the purchase of a property by a hair care business to open <br />at a second location would be considered a business expansion. <br />Capital Indebtedness <br />HUD regulations do not permit SAHA to deduct from gross income the amortization of capital <br />indebtedness. <br />SAHA Policy <br />Capital indebtedness is defined as the principal portion of the payment on a capital asset <br />such as land, buildings, and machinery. This means SAHA will allow as a business <br />expense interest, but not principal, paid on capital indebtedness. <br /> <br />3-139