I have a question about what to report as an asset, and its gonna be a long one. My dad, my uncle (my dad’s brother), and my grandparents (my dad and uncle’s parents) saved up and bought a multifamily house about 20 yrs ago. The house was bought under my dad and my uncle’s name, so they both own 50% of the house. My dad got married and had kids (me and my sister) and my uncle got married and started a family of his own. Both families, including my grandparents, lived in this house on seperate floors for more than a decade. My uncle eventually got divorced and his wife got custody of his kids and left the house, so now my uncle inhabits one floor by himself. My grandparents still live on one floor too. However I do not live in this house because my dad and my mom bought a new house about 4 or 5 years ago and we moved there. Of course since my uncle and grandparents still live in the old house, the old house wasnt sold because if it were, my uncle and grandparents wouldn’t have anywhere to live However the floor that my family used to live on is now rented out. My question is how to report this on FAFSA. Would it be reported as an asset and be reported as half the house’s value?
Yes, if I am understanding correctly from your post that you do not live in this house and your father is 50% owner of the property.
@BelknapPoint, How would they handle the rent? Do they have to report all of it since it’s their floor that’s rented out or only half because the dad and brother each own half of the house?
I think the easiest (and best) way to report the rental income is to report the amount that dad actually receives in rent.
So I have to report half the value of the house as an asset, and also have to report the rent my parents receive from the house?
@Academicstress, The house is an asset because it’s not your primary home. And the rent is considered income. So yes, both have to be listed.
Your father and uncle own the house. You need to ask what type of ownership they have:
joint tenancy or tenancy in common.
If they have joint tenancy (which, btw, has nothing to do with living there or being a “tenant”), it means that they own the property jointly, each owning 100% of the property. One of them cannot sell off his “share.” If one of them dies, the other one still owns the entire property.
Tenants in common means that the value of the house is divided between them. Let’s say they own it 50/50. If one of them dies, that person’s 50% does not automatically go to the other owner (unless it is specifically stated as such in the will). Each person can sell his 50% to the other person or to a thrid person – or leave his 50% to someone else at death, or can sell off half of his 50% (so that he owns 25% and a third person owns 25%).
My guess is that they own the house as tenants in common, in which case the value of your dad’s asset is 50% of the value of the house. However, if they own the house as joint tenants, the value of your dad’s asset is 100% the value of the house (even though your uncle is also an owner).
The portion of the rent he receives is income. The floor that the tenants live on is irrelevant.
I disagree with this, as far as how to report the asset value on FAFSA if the brothers own as joint tenants. If there is a joint tenancy ownership situation and the brothers agree to sell the house, they will not both receive 100% of the sale proceeds (an obvious impossibility). If OP’s dad is a joint tenant owner with the uncle of this non-primary home property, I think that dad’s asset value should be reported on OP’s FAFSA as 50% of the current fair market equity value, unless there are other relevant facts that we do not know.
Hmm. Well that’s certainly more advantageous to the OP. If the joint tenants were married – which is usually the case for joint tenancy – the dad’s asset value would e 100%. I suppose this is one of those instances where the legal circumstance (he owns 100% of the asset jointly with his brother) differs from the on-the-ground reality (since the owners are not spouses they would have to split the proceeds). Unless they had set up a corporation to own the house, which would be a whole other thing.
On the other hand, if they are joint tenants, the OP’s dad CANNOT sell his “share.” So he does not have any funds available to him unless the brother agrees to sell too.
But chances are they are tenants in common, which is usually the case for non-married owners.
This is the only guidance on ownership of assets in the FSA Handbook - I agree with @BelknapPoint. It makes no difference whether or not the asset can actually be sold, as far as FAFSA is concerned, by the way :
Part ownership of asset
If the parent or student has only part ownership of an asset, the student should report only the owned part. Generally the value of an asset and debts against it should be divided equally by the number of people who share ownership unless the share of the asset is determined by the amount invested or the terms of the arrangement specify some other means of division.
I don’t mean to get into the weeds, but in the case of joint tenant owners of a property, an owner does not have “only part ownership of an asset.” The idea of joint tenancy is that both/all owners have full ownership. Nobody has a partial interest in the property.
“Part ownership” specifically means tenancy in common.
But it likely a moot point because I bet the OP’s dad and uncle have a tenancy in common.
Joint tenancy in most states is rare. Almost all standard forms for purchase by non-married persons is tenancy in common. Tenants in common don’t have to own the property in equal portions either, so one could own 90% and ten other people own the other 10%.
Joint tenancy is not rare in most states. In fact, I would hazard to say that joint tenancy is a common way to hold property throughout the country, primarily by married couples. Perhaps you are thinking of tenancy by the entirety? Or perhaps you mean that joint tenancy in most states is rare among non-married couples?
Agree. Joint tenancy is very common.
Sounds like half of the house is an asset of the dad.
Sounds like all the rent is dad’s income, since he’s renting out “his floor”.
since it is rental, the home value has depreciation, you should match what your dad reported to IRS regarding Net income and depreciation,
The rental income if reported on the tax return, should already be included in income.