Revision 25-4; Effective Dec. 1, 2025

1. A person who lives in a nursing facility owns a 160-acre farm where the person’s spouse continues to live. One hundred acres of land are set aside in a Conservation Reserve Program (CRP). The couple’s son farms the other 60 acres and pays all expenses. In return for use of the land, the son pays the person one-quarter of the net profit he produces. For several years, the person has received $6,000 from the CRP during the month of September. The son's most recent IRS Schedule C form shows net farming income of $7,000 for the year.
   
   Action: Consider the income from the land set aside for CRP as lease or rental income. As neither the person nor the person’s spouse participates in the production of farm income, also consider this farm income as rental income. Do not give any deductions for expenses. If the person or the person’s spouse incurs expenses, consider these expenses as deductions in netting the income. Other common examples of lease income include hunting or fishing leases, subsidy payments, surface exploration or bonuses.
    

2. A person supplements their Social Security income by making quilts. The person sells the quilts through a consignment shop, which keeps 10% of the sales price. Each month, the person makes and sells two quilts, which retail for $450 each. The material for each quilt costs $75. The person also pays their niece $150 per quilt to do the actual quilting stitch. The person runs their business out of a rented apartment, which includes a living area, kitchen, bathroom and two bedrooms. The person uses one of the bedrooms as the workshop. The person pays $400 per month in rent. Utilities for the apartment are $150 per month. The person is also repaying their son $50 per month for money he loaned the person for the purchase of a new sewing machine, which is used to produce the quilts.
   
   Action:

   Amount	Action
   $900.00	gross monthly income (two quilts at $450 each)
   – 90.00	consignment fee (10% of $900)
   – 150.00	cost of materials ($75 X 2)
   – 300.00	payment to niece ($150 X 2)
   – 100.00	rental expense for workspace ($400 for four rooms)
   – 37.50	utility expense for workspace ($150 for four rooms)
   $222.50	net monthly income from sale of two quilts

   Note: The $50 payment on the principal of the loan to the son is not an allowable expense. Similarly, if the person bought the sewing machine outright, it would be the purchase of a capital asset and would also not be an allowable deduction. However, the rental of a sewing machine would be allowable. Refer to the chart in the E-6210 Self-Employment Expenses.

3. An eligible couple produces a yearly cotton crop. The couple belongs to a co-op that stores the cotton while waiting for a better price. The co-op members receive coupons, which are a loan against the eventual sale price of the crop.

   Action: Proceeds from the sale of the crop are income in the month the person actually receives the profit. Any coupons cashed against the eventual sale price of the crop are considered income at the time they are cashed.