TN 16 (02-14)

A. Introduction

This section provides instructions for determining whether a claimant or recipient (or spouse, if any) received fair market value (FMV) for a resource transferred on or after 12/14/99. If a claimant or recipient (or spouse, if any) transfers a resource for less than FMV on or after 12/14/99, the claimant or recipient may be subject to a period of ineligibility for SSI. If the claimant or recipient (or spouse, if any) received FMV for the transferred resource, the period of ineligibility does not apply. It is not necessary to make FMV determinations for resources transferred before 12/14/99.

B. Definitions

The following definitions apply for purposes of determining whether an individual has received FMV in exchange for a transferred resource.

1. Fair market value

FMV is the current market value (CMV) of a resource at the time the resource transfers. The CMV of a resource is the going price that it can be reasonably expected to sell on the open market in the geographic area involved.

2. Compensation

Compensation is the cash or other valuable consideration provided in exchange for the resource. Compensation can include real or personal property the individual received in exchange for the resource. Compensation also may include in-kind support and maintenance or services to be provided to the individual because of the transfer. Compensation also may include assumption of the transferor's legal debt.

3. Uncompensated value

Uncompensated value (UV) is the difference between the CMV of a resource and the amount of compensation the individual received in exchange for the resource.

4. Uncompensated value for jointly owned resource

The UV of a jointly owned resource is the difference between the CMV of the transferor's interest in the resource and the amount of compensation the transferor received.

C. Policy for determining the compensation amount

We use the following policy when determining the amount of compensation a claimant or recipient (or spouse, if any) receives in exchange for a transferred resource.

1. The agreement sets amount

We based the value of compensation received on the agreement and expectations at the time of transfer or contract for sale, if earlier.

Example 1: Determining compensation amount

A purchaser agreed to pay an eligible individual $10,000 in 10 installments of $1,000 each, but has thus far paid only $7,000. The compensation is $10,000.

Example 2: Determining compensation amount

A purchaser agreed to provide nursing services valued at $3,000, but to date has not provided any of the services. The compensation is $3,000.

2. Date compensation received

A transferor receives compensation when he or she receives something of value pursuant to a legally binding agreement (e.g., a contract, a bill of sale, a deed) that was in effect at the time of transfer. The transferor may actually receive the compensation before, at, or after the actual time of transfer.

3. Value of noncash compensation

a. General rule for noncash compensation

We value noncash compensation at its CMV at the time of transfer or contract for sale, whichever is earlier. The value of compensation is the gross value paid or to be paid. Expenses attributed to the sale do not reduce the value of the compensation.

b. In-kind support and maintenance (ISM)

We value compensation received in the form of ISM at its full CMV (monthly or annually depending upon the agreement) multiplied by the length of time for which it is to be provided under the agreement. We do not cap the value of the compensation at the value of the one-third reduction (VTR) or presumed maximum value (PMV).

Example: Determining whether ISM applies

Mr. Thomas transfers $30,000 cash to his sister based on a written contract that she would provide him with food and shelter for 5 years. The sister values the food and shelter at $500 per month. The CR develops Mr. Thomas' living arrangements and determines that he has a flat fee arrangement with his sister and required to pay $500 per month. The food and shelter for 5 years is worth $30,000 (5 years x $6,000 per year). Therefore, Mr. Thomas received FMV for the $30,000 he transferred. ISM is not counted because the Mr. Thomas has prepaid for his food and shelter with the $30,000 he transferred. For procedure on determining an individual’s contribution toward household operating expenses, see SI 00835.480D.

NOTE: Using the same facts as in the preceding example, assume that the CR is conducting a redetermination 2 years later and the sister providing the ISM alleges that the value of the food and shelter she provides has increased to $650 per month. Since Mr. Thomas entered into an agreement that the $30,000 covered his food and shelter for 5 years, do not re-open the LA/ISM determination due to breakpoints that may occur in that household such as an increased flat fee charge. Assume that the individual is not getting ISM for the duration of the 5 years unless the individual moves from that household to a new residence.

c. Value of services provided to the transferor

We determine the value of services provided to the transferor based on the CMV of the services (monthly or annually) and their frequency and duration under the agreement.

Example: Determining the value of services

In exchange for $9,000 cash, the individual contracts for yard maintenance services for 5 years. The maintenance company charges $150 per month ($1,800 per year). Five years of maintenance at $1,800 per year equals $9,000.

d. Assumption of a legal debt

We value compensation in the form of assumption of the transferor's legal debt at the outstanding principal amount. Interest payments are not compensation.

Example: Determining the value of compensation when the responsibility of legal debt is transferred

The individual had ownership interest in a piece of real property with a CMV of $12,000. The individual had equity of $2,000 and owed $10,000. The individual alleges that he could not keep up the payments and transferred title to the property to his brother in exchange for his brother assuming responsibility for the real estate contract. The value of the compensation received is $10,000 which is the amount of the outstanding debt. The uncompensated value is $2,000 — the difference between the CMV and the outstanding debt. For information on documenting assumption of legal debt, see SI 01150.005D.5. in this section.

4. Individual intended to get FMV

a. Resource sold

When the individual attempts to sell a resource on the open market, generally he or she offers it at a particular price. When the sale is made, the individual may accept compensation that is lower than the original asking price. If the property was sold on the open market, this difference between the asking price and the sale price is not uncompensated value. The price paid on the open market establishes the CMV for that item. If the property was sold on the open market, assume that the individual received FMV. However, if the property was not sold on the open market (e.g., it was sold to a relative) see SI 01150.005D.6. in this section.

b. Resource is not sold

If an individual gave away a resource because he or she was unable to sell it at the estimated CMV, it may indicate that the asking price was too high, but the resource still has a value. However, in rare cases the resource may have no value. Although it would still be considered a resource even if it has no value, transferring a resource with no value does not result in any uncompensated value. To develop the issue of resources with no value, see SI 01140.044. If the individual still owns the resource and alleges not being able to sell it, inform the individual about conditional benefits. For conditional benefits, see SI 01150.200.

D. Procedure for documenting the value of compensation

Use the following procedures to document the value of the compensation the individual receives for the transferred resource.

1. Cash

Obtain evidence that verifies the amount of the cash received in exchange for the transferred resource (e.g., bill of sale, contract, receipts, etc.). If such evidence is not available, obtain signed statements from the eligible individual and the person to whom the property was transferred to establish the amount of cash compensation received or to be received.

2. Noncash property

Develop the value of noncash compensation according to the instructions for determining CMV in SI 01140.100D. Document the CMV estimate with an SSA-5002 (Report of Contact) or a signed statement.

3. ISM

a. General procedure for documenting the value of ISM

To determine the value of the compensation the individual receives in the form of ISM follow the instructions in SI 00835.001. Use the actual value of the ISM. For the definition of actual value, see SI 00835.020B.1. Do not use the value of the one-third reduction (VTR) or the presumed maximum value (PMV) to set the value of the compensation.

b. Obtain statement from ISM provider

Obtain a statement either signed or recorded on a Report of Contact (DROC) screen from the individual providing the ISM to verify that he or she is providing the ISM in exchange for the transferred resource. On MSSICS, use the Person Statement (DPST) screen. On paper, use an SSA-795 (Statement of Claimant or Other Person) or the SSA-8011-F3 (Statement of Household Expenses and Contributions) if used to document the ISM determination.

c. ISM for life of eligible individual

If the agreement states that the receiver of the property will provide ISM for the life of the eligible individual, you should determine the total value of ISM using the table in SI 01150.005F. Multiply the yearly CMV of the ISM provided by the figure in the “Years of Life Remaining” column which corresponds to the age (or next lower age) of the eligible individual as of the last birthday at the time the resource was transferred.

Example 1: Total value of ISM results in FMV compensation

Valerie Payne transferred nonhome real property valued at $185,000 to her sister. As compensation, her sister agreed to provide Ms. Payne with room and board in the sister's home for the rest of Ms. Payne's life. ISM development showed that her sister's total household expenses were $1,500 per month. The household consisted of 3 persons, including Ms. Payne who was age 53 at the time of the transfer. The CMV of the ISM was $6,000 per year ($1,500/3 = $500 per month X 12 months = $6,000). Then, $6,000 X 31.61 (average years of life remaining at age 50) = $189,660 compensation. In this case, Ms. Payne received FMV for the transferred resource. We do not count ISM because the individual prepaid for her own food and shelter with the value of the home she transferred. For procedure on determining an individual’s contribution toward household operating expenses, see SI 00835.480D.

Example 2: Total value of ISM results in uncompensated value

Assume the same case facts as Example 1 except that Ms. Payne is 80 years old at the time of the transfer. As in Example 1 the ISM is worth $6,000 per year. At 80 years of age the life expectancy table indicates 7.16 years. Multiplying 7.16 years times $6,000 results in compensation of $42,960. In this case there is uncompensated value of $142,040 ($185,000 minus $42,960). Therefore, Ms. Payne is subject to a period of ineligibility for SSI because she transferred the house for less than FMV.

4. Services as compensation

a. Verify CMV with knowledgeable source

Contact at least one local knowledgeable source in addition to the provider to verify the CMV of the services if the services were not purchased on the open market. For future contributions alleged, see SI 01150.005D.6. Document your determination of the CMV of the services using either the File Documentation Notes section of the Property/Cash Given or Sold (RGIV) page, the DROC screen on MSSICS, or an SSA-5002 (Report of Contact).

b. Document the agreement for services

Verify the agreement to provide services by getting a copy of the services contract or a signed statement from the person getting the transferred resource that shows the type, frequency, and duration of the services provided. If the agreement does not specify the frequency, but rather that the person receiving the resource will provide services on an “as needed” basis, the statement must include his or her expectations as to the frequency of the services and the basis for the expectation.

Example: Compensation Received as Services

Roy Linden transferred livestock valued at $2,000 to his neighbor. As compensation, the neighbor agreed to put a new roof on Mr. Linden's home. The claims representative (CR) contacted a local roofing contractor and found that the cost of a new roof would be about $2,100. The compensation Mr. Linden received was valued at $2,100. Therefore, the CR determines that Mr. Linden received FMV for his livestock.

NOTE: The fact that the new roof's value ($2,100) exceeded the value of the livestock ($2,000) does not result in income to Mr. Linden for SSI purposes. For information on conversion or sale of a resource, see SI 00815.200.

c. Services for life

If the agreement provides services for the life of the claimant or recipient, determine the yearly value of the services. When determining the value of compensation for life services, use the life expectancy table in SI 01150.005F.

5. Assumption of legal debt

Follow these steps to document the value of compensation related to the assumption of legal debt:

• Determine the CMV of the transferred resource.

• Obtain documents from the individual to verify the assumption of the legal debt, the amount of the debt, and that the person purchasing the resource has assumed the debt.

• Contact the lender if the individual's documents do not verify this information.

• Determine the amount of compensation by comparing the CMV of the resource with the amount of debt assumed. The uncompensated value, if any, is the difference between the CMV and the amount of debt assumed.

6. CMV allegation is questionable

Assume, absent evidence to the contrary, that an individual who sold a resource on the open market received FMV. Obtain a CMV estimate from a knowledgeable third party if the individual did not sell the resource on the open market (e.g., to a relative).

E. Procedure for determining whether individual received FMV

Take the following steps to determine whether the individual received FMV for the transferred resource:

1. Determine whether transfer is valid and document the determination per SI 01150.001.

2. Determine the CMV of the transferred resource and document the determination per SI 01150.005C.

3. Determine the amount of compensation the individual received and document the file per SI 01150.005C.

4. Determine whether the individual received FMV or uncompensated value (UV) by comparing the CMV of the transferred resource with the amount of compensation.

   • If the amount of the compensation equals or exceeds the CMV, the individual has received FMV.

   • If the compensation is less than the CMV, the difference is the uncompensated value.

5. Document the file with the adjudicator's determination; for example, “Valid transfer of real property on 03/05/00 by sale on open market. Received FMV.” On non-MSSICS cases use an SSA-5002 (Report of Contact). On MSSICS, record this in the File Documentation Notes section of the Property/Cash Given or Sold (RGIV) page or the DROC screen.

If the individual received FMV for the transferred resource, the issue of the transfer is closed and the period of ineligibility does not apply. Process the case normally.

If uncompensated value exists, we require further development to determine whether a period of ineligibility for SSI is applicable. In MSSICS, you also need to indicate “Yes” or “No” in the “Ineligibility Period” question. If a period of ineligibility:

• applies, enter the start and end dates for the period of ineligibility.

• does not apply, select the appropriate reason ineligibility does not apply.

To determine if the individual meets one of the exceptions to the period of ineligibility refer to SI 01150.120.

F. Exhibit of Life Expectancy table

SSA's Office of the Chief Actuary developed the data in this table for the Year 2000 Trustees Report. Use this table to determine the value of compensation of services for life and ISM for life. After you determine the yearly value of services (or ISM), multiply it by the “years of life remaining” for the year corresponding to the individual's age and gender. If the exact age is not on the chart, use the next lower age; for example, if an individual is age 47 at the time of the resource transfer, use the life expectancy corresponding to age 40 on the chart.

G. References

SI 00835.001 Introduction to Living Arrangements and In-Kind Support and Maintenance

SI 00835.020 Definitions of Terms Used in Living Arrangements (LA) and In-Kind Support and Maintenance (ISM) Instructions

SI 00835.480 Contributions Toward Household Operating Expenses

SI 01140.100 Non-Home Real Property

SI 01150.120 Exceptions to the Period of Ineligibility — General