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The "mistake" is that the assets themselves are the source of income. Sell them off, and the income goes away too. It's the equivalent of expecting the parents

The "mistake" is that the assets themselves are the source of income. Sell them off, and the income goes away too. It's the equivalent of expecting the parents to use 100% of their income to put their kids into college, which is impossible.

Dylan16807 2y ago
A bunch of stock is a source of income too, but it wouldn't be wrong to use some of it. If the business is worth enough then selling it can replace all the income you would have ever gotten from it. It's not as simple as "income goes away". The specific numbers make all the difference.
- bb88 2y ago
  > A bunch of stock is a source of income too, but it wouldn't be wrong to use some of it. Normal US tax law that most people fall under says no, stock itself is not income. It's only taxed at the time of sale. If you ask for mark to market taxing then any increase in market value during the calendar year will count as income -- even if you didn't sell anything throughout the year. But usually those people are drawing a direct income from trading.
  - s1artibartfast 2y ago
    Yes, but I think these tests look at both income and assets (like stock). That is why people get dinged for owning assets, even if they are a source of income.
s1artibartfast 2y ago
IF I have stock and make $XX,XXX in dividends, how is that different? IF I have own apartments and make $XX,XXX in rent, how is that different? I think the idea is that Yes, the expectation is for people to make actual sacrifice before they qualify.
- adastra22 2y ago
  If this was inventory they were counting, sure. But you can’t sell part of a small business. Let’s say the parents own a restaurant, and the value of the land, building, and kitchen equipment is a few million. Do they sell an oven from the kitchen to put you through school? Sell the parking lot? It’s an all or nothing thing. The business needs all its assets to function, and shouldn’t be considered any more than for its income potential.
  - throwaway2037 2y ago
    Lease back for land and building is definitely possible. Most capital efficient corps do not own their own land and buildings for precisely this reason.
    - adastra22 2y ago
      It is sometimes an option, not always. Depends on the cash flow of the business and current market risks. Not every business is automatically eligible. Small mom and pop restaurants often can’t get a loan on demand, at least not on predatory terms.
  - jorvi 2y ago
    Situation: You have parents A, B and C. - Parents A own a small business. - Parents B sold their small business two years ago, and put the money in the stock market. - Parents C just scrimped and scraped and over the years saved up money equal to parents A and B. I’m not sure why you’re so hellbent on giving specifically parents A a free pass. Why the unequal treatment?
    - s1artibartfast 2y ago
      Thanks for explaining this much more clearly than I did.
- ehnto 2y ago
  That's economic suicide not sacrifice, for many small businesses the asset produces the revenue. Sell the asset you may as well close the business. It is not a fair assessment of a family's means at all. It's not equivalent to making all your income off one rental and having to sell it, but it is closer to that. If you sell it, you have no income now. But a small business also creates jobs and provides novel value to the community, so even more is lost than just a single income.

Dylan16807 2y ago

A bunch of stock is a source of income too, but it wouldn't be wrong to use some of it. If the business is worth enough then selling it can replace all the income you would have ever gotten from it. It's not as simple as "income goes away". The specific numbers make all the difference.

bb88 2y ago
> A bunch of stock is a source of income too, but it wouldn't be wrong to use some of it. Normal US tax law that most people fall under says no, stock itself is not income. It's only taxed at the time of sale. If you ask for mark to market taxing then any increase in market value during the calendar year will count as income -- even if you didn't sell anything throughout the year. But usually those people are drawing a direct income from trading.
- s1artibartfast 2y ago
  Yes, but I think these tests look at both income and assets (like stock). That is why people get dinged for owning assets, even if they are a source of income.

s1artibartfast 2y ago

IF I have stock and make $XX,XXX in dividends, how is that different? IF I have own apartments and make $XX,XXX in rent, how is that different? I think the idea is that Yes, the expectation is for people to make actual sacrifice before they qualify.

adastra22 2y ago
If this was inventory they were counting, sure. But you can’t sell part of a small business. Let’s say the parents own a restaurant, and the value of the land, building, and kitchen equipment is a few million. Do they sell an oven from the kitchen to put you through school? Sell the parking lot? It’s an all or nothing thing. The business needs all its assets to function, and shouldn’t be considered any more than for its income potential.
- throwaway2037 2y ago
  Lease back for land and building is definitely possible. Most capital efficient corps do not own their own land and buildings for precisely this reason.
  - adastra22 2y ago
    It is sometimes an option, not always. Depends on the cash flow of the business and current market risks. Not every business is automatically eligible. Small mom and pop restaurants often can’t get a loan on demand, at least not on predatory terms.
- jorvi 2y ago
  Situation: You have parents A, B and C. - Parents A own a small business. - Parents B sold their small business two years ago, and put the money in the stock market. - Parents C just scrimped and scraped and over the years saved up money equal to parents A and B. I’m not sure why you’re so hellbent on giving specifically parents A a free pass. Why the unequal treatment?
  - s1artibartfast 2y ago
    Thanks for explaining this much more clearly than I did.
ehnto 2y ago
That's economic suicide not sacrifice, for many small businesses the asset produces the revenue. Sell the asset you may as well close the business. It is not a fair assessment of a family's means at all. It's not equivalent to making all your income off one rental and having to sell it, but it is closer to that. If you sell it, you have no income now. But a small business also creates jobs and provides novel value to the community, so even more is lost than just a single income.