Contracts for Payment 415-25-10-20

(Revised 11/02 ML #2829)

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A contractual right to receive money payments such as a note, mortgage, or contract for deed is usually received in exchange for real property, a business, or the sale of some other form of asset. Payments may be monthly, quarterly, or annually, and extend over a specified period of time. These payments are only considered at the time they are received. The payments will include both interest and a portion of the sale price of the property that was sold (principal) and must be calculated separately. The face value of the Contract that is producing income commensurate with prevailing community rates is NOT counted because it is producing income much like the asset that was sold.

 

The interest portion of each payment is considered income and must be included in the household's gross annual income.

 

The remainder of each payment, the portion to be applied on the principal amount owed for the sale of the property, continues to be an asset. To decide if it is included in the household's total assets, you will need to know if these funds are held in an available asset or in some form of uncounted asset.