Please help on "Assets" questions on FAFSA...

Paying for College
1

<p>I am so confuse right now...I read the FAFSA Help Guidelines on Questions 88 and 89, but I am still lost. </p>

<p>Here are the properties my parents own:
-a rental property worth $250,000
-our house where we live in, which costs $480,000
-my dad operates a mechanic shop (which he does not own), and he has $10,000 worth of equipment</p>

<p>So...where do I put all these numbers under the assets questions (88 and 89)?
Do I need to list my house at all, since FAFSA said to not report my primary residence? </p>

<p>Also, do I need to even list the rental property that is worth $250,00 because FAFSA said "Do not report A small business with fewer than 100 employees. If your parents own and control a small business that has fewer than 100 full time or full-time equivalent employees, do not report the business as an asset." My parents own a small busines (but they rent it out to people) that has less than 100 employees...so I do not need to report this?</p>

2

<p>collegekid</p>

<p>-You don't need to list your house (primary residence)</p>

<p>-I think you do need to list the rental property as the instructions say "what is the net worth of your parents' investments, including real estate...net worth means current value minus debt"</p>

<p>-Re: the mechanic shop...it sounds like it falls under "Do not include the value of a small business that you own and control and that has 100 or fewer full-time employees"</p>

<p>You can always call them and ask. I have never had to wait more than a few minutes to talk to someone (be careful though...sometimes they give contradicting information)</p>

3

<p>"Here are the properties my parents own:
-a rental property worth $250,000"</p>

<p>OK-- generally, the equity in the rental property is a parental asset. Equity is current value (250K) minus what they owe the bank on the property. Estimate current value conservatively-- how much could you sell it for in a quick sale? But see below...</p>

<p>-our house where we live in, which costs $480,000</p>

<p>Your primary residence is excluded in FAFSA-- don't include it anywhere.</p>

<p>-my dad operates a mechanic shop (which he does not own), and he has $10,000 worth of equipment.</p>

<p>OK-- so is he an employee? Or does he own the business but not the building? If he's an employee (and gets a W2), then the 10K of equipment is a parental asset. Estimate value conservatively. If there's a loan against the equipment, then the asset is the current value less the loan.</p>

<p>But if he's a small business owner, then he doesn't report these business assets anywhere on FAFSA (this is new for '06).</p>

<p>"Also, do I need to even list the rental property that is worth $250,00 because FAFSA said "Do not report A small business with fewer than 100 employees. If your parents own and control a small business that has fewer than 100 full time or full-time equivalent employees, do not report the business as an asset." My parents own a small busines (but they rent it out to people) that has less than 100 employees...so I do not need to report this?"</p>

<p>Do they treat the rental property as a business, either through incorporation, or by filing a schedule C to record income and expenses? If so, then the equity in the rental becomes a small business asset, and isn't reportable under the new guidelines, as I understand them.</p>

4

<p>To FresnoMom and sblake7:
Thanks so much! So..</p>

<p>-sblake7, my parents filed Schedule E (it looks similar to Schedule C with the income and expenses) for the rental property. The rental property is a small business asset, with fewer than 100 employees. Does this mean I do not have to report the rental property of $250k on FAFSA?
-If I do need to report it, should I list the rental property of $250,000 under Parents' Net Worth of Current Investments (Question 88) or Parents' Net Worth of Businesses/ Investment Farms (Question 89)? </p>

<p>Also, My dad is an employer of the mechanic shop, but he rents the property from another person. Therefore, he owns the business but not the building. He does, however, own the mechanic equipments/machinery. So do I need to list the equipment,which is worth $10,000?</p>

5

<p>On the machine shop-- it's a small business, and the assets (not the income) is exempt from reporting on FAFSA this year.</p>

<p>On the rental-- not really sure. It's a new guideline, and while as FresnoMom said the instructions call for real estate investments to be included as assets, the new instructions call for small business assets to be exempted. You can ask the FAFSA folks for clarification-- but if it was me I think I'd interpret it as being a small business, since you record and report income and expenses from it, and therefore not report it. But that's just one parent's opinion. And you know what they say about opinions--</p>

6

<p>ok thankk you sblake7 and fresnomom. i dont think i am going to report the rental property.</p>

<p>I was wondering if they check up on what you put on the FAFSA? Do yuo need to send in tax forms and bank account balances? I am asking because my parents do not know the amount we have in the bank. Therefore, i don't think the cash savings, checking accounts, and savings total will be completely accurate. So do anyone know if we later send in this information to verification?</p>

7

<p>Your parents know, or can get, the bank balances. Put down the correct amounts on the day you file.</p>

8

<p>In whose name is the rental property? If it's owned by "Sam Blake and Susan Blake", then it's an investment asset and has nothing to do with a "small business". If it's owned by "Sam Blake & Sons" or "SB Co.", then it's owned by the small business and doesn't need to be reported.</p>

<p>The question is all in the ownership - since they've filed Schedule E rather than C, it sounds like a parental asset which must be reported.</p>

9

<p>from <a href="http://studentaid.ed.gov/students/publications/completing_fafsa/2007_2008/ques5-5.html%5B/url%5D"&gt;http://studentaid.ed.gov/students/publications/completing_fafsa/2007_2008/ques5-5.html&lt;/a>

[quote]
Rental properties. Generally, rental properties must be reported as investment assets rather than as business assets. To be reported as a business, a rental property would have to be part of a formally recognized business. (Usually such a business would provide additional services, such as regular cleaning, linen, or maid service.)

[/quote]
</p>

<p>If it is a parental asset and not a small business you must report it - the income shows up on your tax returns & red flags will pop up if you do not include it which could cause problems with your financial aid.</p>