For the past several years my parents have been earning an adjusted gross income of under $20,000. However in late 2014 they sold a property causing their adjusted gross income to rise to $280,000. They didn’t actually use this money to pay off debt and reinvest in other property until early 2015 so it does not show up on their tax returns for 2014.
My parents are not able to support me monetarily, they only gained such a large amount of money from selling a property. Is there any way that I can still get financial aid?
Are you sure it’s income? It could be a capital gain. You can ask a FA officer to review your request for FA and use professional judgment to find this is a one time event.
If they reinvested the capital gain in another property within the time allow, such as a 1031 exchange, they won’t recognize capital gain in 2015. BUT the asset will appear.
@twoinanddone It shows up on the adjusted gross income line. Will a FA officer still be able to judge it as capital gain?
On what adjusted gross income line? On your 2014 taxes? You said it wasn’t on 2014 taxes.You said they reinvested the money, and usually people do that within the grace period to avoid including it as a capital gain.
No, the FA officer is going to take that as income and they don’t really care what kind of income it is. You can still ask for a one time exception, but your family still has some kind of asset worth something, even if it is less than $280k.
@twoinanddone Sorry I miss stated that. The $280k is on the 2014 taxes as adjusted gross income. It was reinvested until 2015 so reinvesting it doesn’t show up.
Will I not get any aid then because the AGI is $280k?
You could take a gap year.
Why should the school give you institutional aid when your parents had access to over a quarter of a million dollars but chose to reinvest it?
@madison85 because the income is a one time thing and is not reoccurring so the sold property is actually inflating the actual income. Therefore, wouldn’t it make sense for it to be under assets instead of AGI?
Also, would FA officers take into account that this is a capital gain and not a typical income if I contacted them and give me some aid?
It is income if that’s how your parents structured the sale. All you can do it ask the FA office. Usually the professional judgment if granted if the money is withdrawn from an IRA or 401k because of an emergency, job loss, etc., not when swapping land or reinvesting. My friend sold a piece of land for her daughter to go to college last year and her income increased. Most people who earn $20k per year don’t have $280k pieces of land to sell. We can’t see your family’s financial situation, don’t know if you are talking about a FAFSA only school or a Profile school, so don’t know what factors the school is considering.
What did they reinvest the money in?
The net gain is included in AGI and the proceeds are included in assets as of day the FAFSA was submitted.
Look at it from the government and the school’s point of view: your parents had well over a quarter of a million dollars - why shouldn’t that pay for college? Why should the college have more responsibility for you than your own parents?
So the gain was $280k, but how much was the net proceeds? Look on Schedule D. If the basis was $120k and they have a gain of $280k, then they received cash of $400k!
^^ It’s probably worse than that. If $280k was the taxable income under capital gains rate, what was the actual again?
^What you are trying to say?
@thumper1 @twoinanddone @Madison85 I am talking about the FAFSA and state aid being taken away, not any school aid because I know that my school aid won’t be taken away if they FAFSA aid isn’t.
My parents own a business and for the last 3-4 years our AGI has been negative due to us having to put in a lot of money. We can’t sell the business because no one will actually buy it. This year, in order to pay the bills and other business expenses we had to sell our farm which raised our AGI to $283k. If we didn’t sell the farm then our business would’ve gone bankrupt and we would’ve lost our farm for less money. Obviously the $283k isn’t going to last forever so after keeping enough to pay the bills, my parents invested the remaining amount in another property. Therefore, the $283k AGI on my FAFSA doesn’t actually mean my parents will be able to support me financially.
Does that make sense?
So, are you saying you should receive need based aid so that your parents could invest in another property?
Contact your school financial aid office, and explain your situation. That is the place for you to get the best answer.
@thumper1 So you’re saying they shouldn’t invest it and just use it all up and then have nothing in 6 years? I’m asking a question, no need to be insulting. If you’re not going to help then you don’t have to answer, simple.
I’m not being insulting. But need based financial aid is not meant to support family ability to invest. It is meant to pay for college in the absence of income.
Like I said, you need to,discuss this with your college. It is possible they will view this favorably and make a professional judgment to reduce your income.
Thumper is telling you what the school financial aid officer may think if you appeal…that you believe essentially the school should give you money so your parents don’t have to support you.
Your parents are first in line to support you, not the school, but your parents are choosing to invest instead.
I’m only asking because the equity in any property other than your primary residence is an asset as well. So…say your parents paid $175,000 down payment for a property. That $175,000 would be the equity in THAT property and would be treated as an asset, just like having $175,000 in the bank.
But I’m going to guess that you qualified for either auto $0 EFC or simplified needs test whereby your assets didn’t get counted…and you lost THAT status with this addition money from the sale of that property.
@Madison85 Well if they don’t invest the money then they’re going to have nothing in 6 years because it will all be gone, so how are my parents able to support me in this case? For example if they didn’t sell the farm FAFSA would’ve given me lots of aid even though the money was there, so why can’t they give me aid now?