## Section C. Section 306 Pension and Old Law Pension

#### Overview

+------------+---------------------------------------------------------+
| #          | > This section contains the following topics:           |
| #### In th |                                                         |
| is Section |                                                         |
+------------+---------------------------------------------------------+

  ------------ ---------------------------------------------- ------------
  Topic        Topic Name                                     See Page

  14           Determination of Countable Income for Section  1-C-2
               306 or Old Law Pension                         

  15           Counting the Income of a Spouse for Section    1-C-9
               306 or Old Law Pension                         

  16           Deductible Expenses                            1-C-16

  17           Adjustments Based on Changes in Income         1-C-22

  18           Changes in Marital and Dependency Status       1-C-30

  19           Handling Another Beneficiary's Award When a    1-C-39
               Surviving Spouse's or Child's Award Is         
               Terminated                                     

  20           Sale or Transfer of Real Estate or Personal    1-C-41
               Property                                       
  ------------ ---------------------------------------------- ------------

#### 14. Determination of Countable Income for Section 306 or Old Law Pension

+------------+---------------------------------------------------------+
| ##### In   | > This topic contains information on income             |
| troduction | > determinations for Section 306 or Old-Law Pension,    |
|            | > including                                             |
|            |                                                         |
|            | -   continuity of entitlement                           |
|            |                                                         |
|            | -   calendar year income for Department of Veterans     |
|            |     Affairs purposes (IVAP)                             |
|            |                                                         |
|            | -   Section 306 Pension                                 |
|            |                                                         |
|            | ```{=html}                                              |
|            | <!-- -->                                                |
|            | ```                                                     |
|            | -   countable income, and                               |
|            |                                                         |
|            | -   not countable income                                |
|            |                                                         |
|            | ```{=html}                                              |
|            | <!-- -->                                                |
|            | ```                                                     |
|            | -   Old Law Pension                                     |
|            |                                                         |
|            | ```{=html}                                              |
|            | <!-- -->                                                |
|            | ```                                                     |
|            | -   countable income, and                               |
|            |                                                         |
|            | -   not countable income                                |
|            |                                                         |
|            | ```{=html}                                              |
|            | <!-- -->                                                |
|            | ```                                                     |
|            | -   general information on determining net countable    |
|            |     income                                              |
|            |                                                         |
|            | -   determining the IVAP                                |
|            |                                                         |
|            | -   how the income segment does not audit against award |
|            |     line IVAP                                           |
|            |                                                         |
|            | -   scheduling future reductions, and                   |
|            |                                                         |
|            | -   scheduling future terminations                      |
|            |                                                         |
|            | ```{=html}                                              |
|            | <!-- -->                                                |
|            | ```                                                     |
|            | -   because the income will exceed the limit, and       |
|            |                                                         |
|            | -   due to the loss of the last dependent.              |
+------------+---------------------------------------------------------+

+------------+---------------------------------------------------------+
| ##### C    | > February 13, 2007                                     |
| hange Date |                                                         |
+------------+---------------------------------------------------------+

+------------+---------------------------------------------------------+
| #####      | > Claims for Section 306 Pension *must* be denied       |
|  a. Contin | > unless continuous entitlement from December 31, 1978, |
| uity of En | > can be established.                                   |
| titlement  |                                                         |
+------------+---------------------------------------------------------+

+------------+---------------------------------------------------------+
| ##### b    | > Income for Department of Veterans Affairs purposes    |
| . Calendar | > (IVAP) for Section 306 Pension and Old Law Pension is |
|  Year IVAP | > computed on a calendar year basis. That is, IVAP is   |
|            | > based on income received and expenses paid during the |
|            | > period January 1 through December 31 of the same      |
|            | > year.                                                 |
|            | >                                                       |
|            | > If IVAP for any calendar year exceeds the applicable  |
|            | > limit shown in the Appendix B rate charts, the        |
|            | > beneficiary loses entitlement to Section 306 Pension  |
|            | > or Old Law Pension.                                   |
|            | >                                                       |
|            | > ***Note***: Pensioners have until the end of the      |
|            | > following calendar year to submit income information  |
|            | > to establish continuing entitlement per [38 CFR       |
|            | > 3.660(b)](http://w                                    |
|            | ww.warms.vba.va.gov/regs/38CFR/BOOKB/PART3/S3_660.DOC). |
+------------+---------------------------------------------------------+

Continued on next page

14\. Determination of Countable Income for Section 306 or Old Law
Pension, Continued

+------------+---------------------------------------------------------+
| #####      | > The following types of income constitute countable    |
|  c. Sectio | > income for Section 306 Pension purposes:              |
| n 306 Pens |                                                         |
| ion Counta | -   total income from employment, business (minus       |
| ble Income |     operating expenses), interest or rents              |
|            |                                                         |
|            | -   income of a veteran's spouse in certain             |
|            |     circumstances                                       |
|            |                                                         |
|            | -   inheritances and gifts of money, including          |
|            |     contributions from adult children                   |
|            |                                                         |
|            | -   unemployment compensation                           |
|            |                                                         |
|            | -   retirement type benefits, at 90 cents on the dollar |
|            |                                                         |
|            | -   life insurance proceeds and the proceeds of         |
|            |     commercial annuities, counted at 90 cents on the    |
|            |     dollar, and                                         |
|            |                                                         |
|            | -   compensation for injury or death.                   |
|            |                                                         |
|            | > ***Notes***:                                          |
|            |                                                         |
|            | -   Social Security (SS), Railroad Retirement, Civil    |
|            |     Service Annuity, military retired pay, and other    |
|            |     public or private retirement benefits are all       |
|            |     counted at 90 cents on the dollar, per [38 CFR      |
|            |     3.262(e)(2)](http://w                               |
|            | ww.warms.vba.va.gov/regs/38CFR/BOOKB/PART3/S3_262.DOC). |
|            |     The Benefits Delivery Network (BDN) automatically   |
|            |     deducts the 10 percent. Therefore, gross amounts    |
|            |     should be entered into BDN.                         |
|            |                                                         |
|            | -   The beneficiary may deduct medical expenses and     |
|            |     legal expenses incident to the recovery.            |
|            |                                                         |
|            | -   However, [38 CFR                                    |
|            |     3.262(e)(2)](http://                                |
|            | www.warms.vba.va.gov/regs/38CFR/BOOKB/PART3/S3_262.DOC) |
|            |     will generally no longer apply to elderly           |
|            |     beneficiaries of Section 306 or Old Law Pension.    |
|            |                                                         |
|            | > ***Reference***: For specific inclusions for Section  |
|            | > 306 Pension (but not Improved Pension) countable      |
|            | > income, see [38 CFR                                   |
|            | > 3.261](http://                                        |
|            | www.warms.vba.va.gov/regs/38CFR/BOOKB/PART3/S3_261.DOC) |
|            | > and [38 CFR                                           |
|            | > 3.262](http://w                                       |
|            | ww.warms.vba.va.gov/regs/38CFR/BOOKB/PART3/S3_262.DOC). |
+------------+---------------------------------------------------------+

Continued on next page

14\. Determination of Countable Income for Section 306 or Old Law
Pension, Continued

+------------+---------------------------------------------------------+
| ##### d. S | > The following types of income are *not* countable     |
| ection 306 | > income for Section 306 Pension purposes:              |
|  Pension N |                                                         |
| ot Countab | -   income of children                                  |
| le Income  |                                                         |
|            | -   inheritances and gifts of property, as opposed to   |
|            |     money                                               |
|            |                                                         |
|            | -   the value of maintenance by a relative, friend, or  |
|            |     organization                                        |
|            |                                                         |
|            | -   Welfare and Supplemental Security Income (SSI)      |
|            |                                                         |
|            | -   VA pension, compensation, and Dependency and        |
|            |     Indemnity Compensation (DIC) benefits               |
|            |                                                         |
|            | -   United States Government Life Insurance (USGLI) and |
|            |     National Service Life Insurance (NSLI) proceeds     |
|            |                                                         |
|            | -   fire insurance proceeds, and                        |
|            |                                                         |
|            | -   any payment excluded by statute.                    |
|            |                                                         |
|            | > ***Exception***: Unearned income of a child who is    |
|            | > the claimant *is* countable when determining that     |
|            | > child's entitlement to VA benefits.                   |
|            | >                                                       |
|            | > ***Notes***:                                          |
|            |                                                         |
|            | -   The USGLI and NSLI exclusion applies only when the  |
|            |     claimant is the beneficiary under the policy. If    |
|            |     the policy is payable to the veteran's estate and   |
|            |     the claimant inherits the estate assets, the        |
|            |     proceeds are countable.                             |
|            |                                                         |
|            | -   Other casualty insurance proceeds, other than fire  |
|            |     insurance proceeds, are countable.                  |
|            |                                                         |
|            | -   Part of a child's income may be countable for       |
|            |     surviving spouse death pension if it is paid to the |
|            |     surviving spouse. For more information, see [38 CFR |
|            |     3.252(e)(3)](http://w                               |
|            | ww.warms.vba.va.gov/regs/38CFR/BOOKB/PART3/S3_252.DOC). |
|            |                                                         |
|            | > ***References***: For                                 |
|            |                                                         |
|            | -   information on payments specifically excluded by    |
|            |     statute, see M21-1MR, Part V, Subpart iii, 1.I.66.  |
|            |                                                         |
|            | -   specific exclusions for Section 306 Pension         |
|            |     countable income, see [38 CFR                       |
|            |     3.261](http://                                      |
|            | www.warms.vba.va.gov/regs/38CFR/BOOKB/PART3/S3_261.DOC) |
|            |     and [38 CFR                                         |
|            |     3.262](http://w                                     |
|            | ww.warms.vba.va.gov/regs/38CFR/BOOKB/PART3/S3_262.DOC). |
+------------+---------------------------------------------------------+

Continued on next page

14\. Determination of Countable Income for Section 306 or Old Law
Pension, Continued

+------------+---------------------------------------------------------+
| #          | > The following types of income constitute the          |
| #### e. Ol | > claimant's countable income for Old Law Pension       |
| d Law Pens | > purposes:                                             |
| ion Counta |                                                         |
| ble Income | -   total income from employment, business, interest or |
|            |     rents                                               |
|            |                                                         |
|            | -   inheritances of property or money                   |
|            |                                                         |
|            | -   Welfare and SSI                                     |
|            |                                                         |
|            | -   retirement type benefits, counted at 90 cents on    |
|            |     the dollar                                          |
|            |                                                         |
|            | -   life insurance proceeds and the proceeds of         |
|            |     commercial annuities are counted at 90 cents on the |
|            |     dollar                                              |
|            |                                                         |
|            | -   compensation for injury or death is countable at 90 |
|            |     cents on the dollar after deducting any medical,    |
|            |     legal, or other expenses incident to the recovery,  |
|            |     and                                                 |
|            |                                                         |
|            | -   gifts of property or money including contributions  |
|            |     from adult children.                                |
|            |                                                         |
|            | > ***Notes***: SS, Railroad Retirement, Civil Service   |
|            | > Annuity, military retired pay, and other public or    |
|            | > private retirement benefits are all counted at 90     |
|            | > cents on the dollar, per [38 CFR                      |
|            | > 3.262(e)(1)](http://w                                 |
|            | ww.warms.vba.va.gov/regs/38CFR/BOOKB/PART3/S3_262.DOC). |
|            | >                                                       |
|            | > ***Exception***: Railroad Retirement is countable for |
|            | > surviving spouse beneficiaries only. Railroad         |
|            | > Retirement is *not* countable income for Old Law      |
|            | > Pension veterans.                                     |
|            | >                                                       |
|            | > ***Reference***: For specific inclusions for Old Law  |
|            | > Pension countable income, see [38 CFR                 |
|            | > 3.261](http://                                        |
|            | www.warms.vba.va.gov/regs/38CFR/BOOKB/PART3/S3_261.DOC) |
|            | > and [38 CFR                                           |
|            | > 3.262](http://w                                       |
|            | ww.warms.vba.va.gov/regs/38CFR/BOOKB/PART3/S3_262.DOC). |
+------------+---------------------------------------------------------+

Continued on next page

14\. Determination of Countable Income for Section 306 or Old Law
Pension, Continued

+------------+---------------------------------------------------------+
| #####      | > The following types of income are *not* countable     |
|  f. Old La | > income for Old Law Pension purposes:                  |
| w Pension  |                                                         |
| Not Counta | -   income of the veteran's spouse or children          |
| ble Income |                                                         |
|            | -   the value of maintenance by a relative, friend, or  |
|            |     organization                                        |
|            |                                                         |
|            | -   VA pension, compensation and DIC benefits           |
|            |                                                         |
|            | -   USGLI and NSLI insurance proceeds                   |
|            |                                                         |
|            | -   fire insurance proceeds, and                        |
|            |                                                         |
|            | -   any payment excluded by statute.                    |
|            |                                                         |
|            | > ***Notes***:                                          |
|            |                                                         |
|            | -   Other casualty insurance proceeds, other than fire  |
|            |     insurance proceeds, are countable.                  |
|            |                                                         |
|            | -   Railroad Retirement is *not* counted for veterans   |
|            |     but *is* counted for surviving spouses at 90 cents  |
|            |     on the dollar.                                      |
|            |                                                         |
|            | > ***References***: For                                 |
|            |                                                         |
|            | -   information on payments specifically excluded by    |
|            |     statute, see M21-1MR, Part V, Subpart iii, 1.I.66.  |
|            |                                                         |
|            | -   specific exclusions for Section 306 Pension         |
|            |     countable income, see [38 CFR                       |
|            |     3.261](http://                                      |
|            | www.warms.vba.va.gov/regs/38CFR/BOOKB/PART3/S3_261.DOC) |
|            |     and [38 CFR                                         |
|            |     3.262](http://w                                     |
|            | ww.warms.vba.va.gov/regs/38CFR/BOOKB/PART3/S3_262.DOC). |
+------------+---------------------------------------------------------+

+------------+---------------------------------------------------------+
| ##### g    | > Calendar-year countable income is determined under    |
| . General  | > [38 CFR                                               |
| Informatio | > 3.261](http://                                        |
| n on Deter | www.warms.vba.va.gov/regs/38CFR/BOOKB/PART3/S3_261.DOC) |
| mining of  | > and 38 [CFR                                           |
| Net Counta | > 3.262](http://w                                       |
| ble Income | ww.warms.vba.va.gov/regs/38CFR/BOOKB/PART3/S3_262.DOC). |
|            | > [38 CFR                                               |
|            | > 3.260](http://                                        |
|            | www.warms.vba.va.gov/regs/38CFR/BOOKB/PART3/S3_260.DOC) |
|            | > provides the rules for computing Old-Law, Section     |
|            | > 306, and Parents' DIC payment rates. (However,        |
|            | > proportional computations no longer apply to Section  |
|            | > 306 or Old Law Pension, unless there is a change in a |
|            | > veteran's marital status.)                            |
|            | >                                                       |
|            | > Only the dollar amounts of annual income from         |
|            | > specific sources are used for these computations.     |
|            | > Drop all cents, including those resulting when        |
|            | > applying the 10 percent deduction from payments of    |
|            | > annuities or endowments.                              |
+------------+---------------------------------------------------------+

Continued on next page

14\. Determination of Countable Income for Section 306 or Old Law
Pension, Continued

+------------+---------------------------------------------------------+
| ##### h.   | > Follow the steps in the table below to determine the  |
| Determinin | > countable IVAP.                                       |
| g the Coun |                                                         |
| table IVAP |                                                         |
+------------+---------------------------------------------------------+

+-------+--------------------------------------------------------------+
| Step  | Action                                                       |
+-------+--------------------------------------------------------------+
| 1     | Determine the total sum of the beneficiary's annual income   |
|       | in dollars from                                              |
|       |                                                              |
|       | -   SS, and                                                  |
|       |                                                              |
|       | -   any other retirement or annuity.                         |
+-------+--------------------------------------------------------------+
| 2     | Add 90 percent of this total to the dollar amounts of annual |
|       | income from earnings and all other countable income.         |
+-------+--------------------------------------------------------------+
| 3     | Add in any countable income of a Section 306 Pension         |
|       | veteran's spouse.                                            |
+-------+--------------------------------------------------------------+
| 4     | Compute any deductible expenses and remove allowable         |
|       | expenses from otherwise net countable income.                |
|       |                                                              |
|       | ***Result***: The remaining balance is the claimant's IVAP.  |
+-------+--------------------------------------------------------------+

+------------+---------------------------------------------------------+
| ##         | > Complete income data must be entered into the master  |
| ### i. Inc | > record through the 306 screen. Normally, the income   |
| ome Segmen | > segment reflects actual current year IVAP. However,   |
| t Does Not | > if a future termination is scheduled, the income      |
|  Audit Aga | > segment should support the future termination.        |
| inst Award | >                                                       |
|  Line IVAP | > Award line IVAP should be the protected 1978 IVAP     |
|            | > which supports the current rate, or in the event of a |
|            | > scheduled termination, the IVAP which supports the    |
|            | > termination.                                          |
|            | >                                                       |
|            | > The system does not audit income segment data against |
|            | > award line IVAP for Section 306 Pension and Old Law   |
|            | > Pension awards.                                       |
+------------+---------------------------------------------------------+

+------------+---------------------------------------------------------+
| ##### j    | > For Section 306 Pension eligibility, the protected    |
| . Scheduli | > 1978 income data is the basis for payment for all     |
| ng Future  | > periods during which actual or estimated income is    |
| Reductions | > within the income limitation.                         |
|            | >                                                       |
|            | > The award shows the future reduction to the veteran   |
|            | > or surviving spouse alone rate based on the protected |
|            | > 1978 IVAP provided current year IVAP is within the    |
|            | > current income limit.                                 |
+------------+---------------------------------------------------------+

Continued on next page

14\. Determination of Countable Income for Section 306 or Old Law
Pension, Continued

+------------+---------------------------------------------------------+
| ##### k. S | > If the claimant's next year IVAP exceeds the          |
| cheduling  | > applicable income limit, the award provides for       |
| Future Ter | > termination January 1 of the next year. Special law   |
| minations  | > (SL) code 14 is *not* required.                       |
| Because th | >                                                       |
| e Income W | > The termination line shows the current or expected    |
| ill Exceed | > IVAP that is the basis for the termination, as        |
|  the Limit | > opposed to the protected 1978 IVAP.                   |
|            | >                                                       |
|            | > The complete income data for entry are those that     |
|            | > support the termination award line IVAP.              |
|            | >                                                       |
|            | > ***Note***: Future increases in income for any year   |
|            | > beyond the immediate next year, when reasonably       |
|            | > anticipated, are incorporated as a future date        |
|            | > termination. Establish a master record diary control  |
|            | > to verify that future income is in fact excessive and |
|            | > to verify that timely termination of the award is     |
|            | > accomplished. Use diary reason code 22.               |
+------------+---------------------------------------------------------+

+------------+---------------------------------------------------------+
| ##### l    | > Terminate the award and do *not* enter SL code 18 if  |
| . Scheduli |                                                         |
| ng Future  | -   a loss of the claimant's last dependent is          |
| Terminatio |     anticipated at the time an award is prepared, and   |
| ns Due to  |                                                         |
| the Loss o | -   the claimant's actual IVAP (as opposed to the       |
| f the Last |     protected 1978 IVAP) exceeds the current income     |
|  Dependent |     limitation for a veteran or surviving spouse alone. |
|            |                                                         |
|            | > The termination line shows the current or expected    |
|            | > IVAP that applies to the year of termination. Do not  |
|            | > use the 1978 IVAP in this situation.                  |
|            | >                                                       |
|            | > The complete income data for entry produces IVAP      |
|            | > consistent with the income amount entry on the        |
|            | > termination award line.                               |
+------------+---------------------------------------------------------+

#### 15. Counting the Income of a Spouse for Section 306 or Old Law Pension

+------------+---------------------------------------------------------+
| ##### In   | > This topic contains information on counting the       |
| troduction | > income of a spouse for Section 306 or Old Law         |
|            | > Pension. It includes information on                   |
|            |                                                         |
|            | -   the impact of a spouse's income on Section 306      |
|            |     Pension                                             |
|            |                                                         |
|            | -   establishing a spouse for Section 306 Pension       |
|            |     purposes                                            |
|            |                                                         |
|            | -   estrangement                                        |
|            |                                                         |
|            | -   establishing a spouse for Old Law Pension           |
|            |                                                         |
|            | -   exceptions to counting a spouse's income in         |
|            |     determining a veteran's IVAP, including             |
|            |                                                         |
|            | ```{=html}                                              |
|            | <!-- -->                                                |
|            | ```                                                     |
|            | -   when the veteran and spouse do not live together    |
|            |                                                         |
|            | -   the spouse's income is not available to the         |
|            |     veteran, and                                        |
|            |                                                         |
|            | -   when counting the spouse's income would cause the   |
|            |     veteran hardship                                    |
|            |                                                         |
|            | ```{=html}                                              |
|            | <!-- -->                                                |
|            | ```                                                     |
|            | -   the 38 CFR 3.262(b)(2) income exclusion and an      |
|            |     example                                             |
|            |                                                         |
|            | -   the 10 percent reduction of spousal retirement, and |
|            |                                                         |
|            | -   the overview of handling a Section 306 Pension      |
|            |     veteran's spouse's income.                          |
+------------+---------------------------------------------------------+

+------------+---------------------------------------------------------+
| ##### C    | > February 13, 2007                                     |
| hange Date |                                                         |
+------------+---------------------------------------------------------+

+------------+---------------------------------------------------------+
| ##### a    | > A spouse's countable income may be a factor in        |
| . Impact o | > determining the rate payable to a Section 306 Pension |
| f Spouse's | > beneficiary per [38 CFR                               |
|  Income on | > 3.262(b)](http://w                                    |
|  Section 3 | ww.warms.vba.va.gov/regs/38CFR/BOOKB/PART3/S3_262.DOC). |
| 06 Pension | >                                                       |
|            | > ***Note***: A spouse's income is *not* a factor for   |
|            | > purposes of Old Law Pension.                          |
+------------+---------------------------------------------------------+

+------------+---------------------------------------------------------+
| ###        | > Once the marriage between the veteran and spouse has  |
| ## b. Esta | > been established, use the criteria in the table below |
| blishing a | > to determine if the spouse can be established for     |
|  Spouse fo | > Section 306 Pension purposes, under [38 CFR           |
| r Section  | > 3.252(d)](http://w                                    |
| 306 Pensio | ww.warms.vba.va.gov/regs/38CFR/BOOKB/PART3/S3_252.DOC). |
| n Purposes |                                                         |
+------------+---------------------------------------------------------+

  --------------------------------- -------------------------------------
  If ...                            Then for Section 306 Pension purposes
                                    the ...

  the veteran and spouse live       spouse *can* be established.
  together                          
  --------------------------------- -------------------------------------

Continued on next page

15\. Counting the Income of a Spouse for Section 306 or Old Law Pension,
Continued

  -----------------------------------------------------------------------
  b\. Establishing a Spouse for Section 306 Pension Purposes (continued)

  -----------------------------------------------------------------------

+---------------------------------+------------------------------------+
| If ...                          | Then for Section 306 Pension       |
|                                 | purposes the ...                   |
+---------------------------------+------------------------------------+
| the veteran and spouse live     | spouse *can* be established        |
| apart, but are *not* estranged  | regardless of whether or not the   |
|                                 | veteran contributes to the support |
|                                 | of the spouse.                     |
+---------------------------------+------------------------------------+
| -   the veteran and spouse live | spouse *can* be established.       |
|     apart and are estranged,    |                                    |
|     but                         |                                    |
|                                 |                                    |
| -   the veteran makes           |                                    |
|     reasonable contributions to |                                    |
|     the support of the spouse   |                                    |
+---------------------------------+------------------------------------+
| -   the veteran and spouse live | spouse *cannot* be established.    |
|     apart and are estranged,    |                                    |
|     and                         |                                    |
|                                 |                                    |
| -   the veteran does *not* make |                                    |
|     reasonable contributions to |                                    |
|     the support of the spouse   |                                    |
+---------------------------------+------------------------------------+

+-----------------------------------------------------------------------+
| > ***Note***: If the spouse of a veteran receives SS benefits based   |
| > on the veteran's SS earnings record, the spouse's benefits *may     |
| > not* be considered a contribution from the veteran since the spouse |
| > has separate entitlement to these benefits. Reasonable              |
| > contributions may be found if payments are made from the veteran's  |
| > income in any amount consistent with the veteran's income.          |
+-----------------------------------------------------------------------+

+------------+---------------------------------------------------------+
| #          | > For purposes of this chapter, a veteran and spouse    |
| #### c. Es | > are *estranged* if they live apart because of marital |
| trangement | > discord.                                              |
|            | >                                                       |
|            | > A veteran and spouse are *not* considered estranged   |
|            | > if the veteran demonstrates that there are other      |
|            | > reasons for the separation. For example, the spouses  |
|            | > live apart because of family obligations or for       |
|            | > medical reasons.                                      |
+------------+---------------------------------------------------------+

Continued on next page

15\. Counting the Income of a Spouse for Section 306 or Old Law Pension,
Continued

+------------+---------------------------------------------------------+
| ##### d. E | > A veteran's legal spouse can be established for Old   |
| stablishin | > Law Pension purposes if the requirements described in |
| g a Spouse | > M21-1MR, Part III, Subpart iii, 5, are met.           |
|  for Old L | >                                                       |
| aw Pension | > The veteran does *not* have to be living with or      |
|            | > contributing to the support of the spouse. However,   |
|            | > the veteran must be able to furnish the spouse's      |
|            | > current mailing address.                              |
|            | >                                                       |
|            | > ***Note***: The spouse's income does not count for    |
|            | > Old Law Pension.                                      |
+------------+---------------------------------------------------------+

+------------+---------------------------------------------------------+
| ##### e.   | > Under [38 CFR                                         |
| Exceptions | > 3.262(b)(2)](http://w                                 |
|  to Counti | ww.warms.vba.va.gov/regs/38CFR/BOOKB/PART3/S3_262.DOC), |
| ng Spouse' | > a spouse's income is countable in determining a       |
| s Income i | > veteran's IVAP *unless* one of the following          |
| n Determin | > conditions exists:                                    |
| ing a Vete |                                                         |
| ran's IVAP | -   the veteran and spouse do not live together         |
|            |                                                         |
|            | -   the spouse's income is not available to the         |
|            |     veteran, or                                         |
|            |                                                         |
|            | -   counting the spouse's income against the veteran    |
|            |     would cause the veteran hardship as discussed in    |
|            |     M21-1MR, Part V, Subpart iii, 1.C.15.h.             |
+------------+---------------------------------------------------------+

+------------+---------------------------------------------------------+
| #          | > Under [38 CFR                                         |
| #### f. Ex | > 3.262(b)(2)](http://w                                 |
| ception 1: | ww.warms.vba.va.gov/regs/38CFR/BOOKB/PART3/S3_262.DOC), |
|  Veteran a | > a spouse's income is countable in determining a       |
| nd Spouse  | > veteran's IVAP for Section 306 Pension *unless* one   |
| Do Not Liv | > of the following conditions exists:                   |
| e Together |                                                         |
|            | -   the veteran and spouse do not live together         |
|            |                                                         |
|            | -   the spouse's income is not available to the         |
|            |     veteran,                                            |
|            |                                                         |
|            | -   counting the spouse's income would cause the        |
|            |     veteran hardship as discussed in M21-1MR, Part V,   |
|            |     Subpart iii, 1.C.15.h, or                           |
|            |                                                         |
|            | -   the spouse's income is earned income (wages),       |
|            |     ***or*** less than the spouse income exclusion.     |
|            |                                                         |
|            | > ***Reference***: For more information on the spouse   |
|            | > income exclusion see M21-1MR.V.iii.1.C.15.i.          |
+------------+---------------------------------------------------------+

Continued on next page

15\. Counting the Income of a Spouse for Section 306 or Old Law Pension,
Continued

+------------+---------------------------------------------------------+
| ##         | > Whether or not the spouse's income is available to    |
| ### g. Exc | > the veteran is a question of fact.                    |
| eption 2:  | >                                                       |
| Spouse's I | > If the veteran and spouse are living together, it is  |
| ncome Not  | > presumed that the spouse's income is available to the |
| Available  | > veteran. The presumption may be rebutted by evidence  |
| to Veteran | > of unavailability.                                    |
|            | >                                                       |
|            | > ***Example***: The veteran's spouse receives SS but a |
|            | > garnishment order directs that the spouse's SS be     |
|            | > paid to support a child from a previous marriage. The |
|            | > spouse's SS is *not* available to the veteran.        |
+------------+---------------------------------------------------------+

+------------+---------------------------------------------------------+
| ##### h.   | > Counting a spouse's income would cause a veteran      |
| Exception  | > hardship if income of the spouse is actually used to  |
| 3: Countin | > pay expenses which are beyond the ordinary and usual  |
| g Spouse's | > family requirements, but which the spouse is under a  |
|  Income Wo | > legal or moral obligation to pay.                     |
| uld Cause  | >                                                       |
| the Vetera | > In this category, there are expenditures for such     |
| n Hardship | > reasons as                                            |
|            |                                                         |
|            | -   prolonged illness of a member of the family         |
|            |                                                         |
|            | -   child care necessitated by the spouse's employment, |
|            |     and                                                 |
|            |                                                         |
|            | -   special training for a handicapped child.           |
|            |                                                         |
|            | > ***Note***: If a spouse's income is excluded under    |
|            | > the hardship provision because it is needed to pay    |
|            | > unusual medical expenses, the same expenses cannot be |
|            | > considered deductible medical expenses under [38 CFR  |
|            | > 3.262(l)](http://w                                    |
|            | ww.warms.vba.va.gov/regs/38CFR/BOOKB/PART3/S3_262.DOC). |
+------------+---------------------------------------------------------+

Continued on next page

15\. Counting the Income of a Spouse for Section 306 or Old Law Pension,
Continued

+------------+---------------------------------------------------------+
| ####       | > Under [38 CFR                                         |
| # i. 38 CF | > 3.262(b)(2)](http://w                                 |
| R 3.262(b) | ww.warms.vba.va.gov/regs/38CFR/BOOKB/PART3/S3_262.DOC), |
| (2) Income | > the *greater* of the following income can be excluded |
|  Exclusion | > from a Section 306 Pension veteran's spouse's income: |
|            |                                                         |
|            | -   all earned income of the spouse, or                 |
|            |                                                         |
|            | -   the *spouse income exclusion amount* in the Section |
|            |     306 Disability Rate Charts in [M21-1, Part I,       |
|            |     Appendix B](http://warms.vba.va.gov/M21_1.html).    |
|            |                                                         |
|            | > ***Note***: The spouse's income cannot be reduced by  |
|            | > both amounts.                                         |
|            | >                                                       |
|            | > The spouse income exclusion amount can include both   |
|            | > earned and unearned income.                           |
|            | >                                                       |
|            | > ***Exception***: If the spouse's earnings are from a  |
|            | > business enterprise, VA must determine if             |
|            |                                                         |
|            | -   this is a return on investment and, thus, *not*     |
|            |     earned income, or                                   |
|            |                                                         |
|            | -   the spouse's labor or services are substantial and, |
|            |     therefore, earned income.                           |
|            |                                                         |
|            | > The [38 CFR                                           |
|            | > 3.262(b)(2)](http://                                  |
|            | www.warms.vba.va.gov/regs/38CFR/BOOKB/PART3/S3_262.DOC) |
|            | > spouse income exclusion amount is increased each year |
|            | > by the cost-of-living adjustment (COLA) factor at the |
|            | > time of the pension COLA adjustment. Historical       |
|            | > spouse income exclusion amounts are in [M21-1, Part   |
|            | > I, Appendix B](http://warms.vba.va.gov/M21_1.html).   |
+------------+---------------------------------------------------------+

Continued on next page

15\. Counting the Income of a Spouse for Section 306 or Old Law Pension,
Continued

+------------+---------------------------------------------------------+
| ###        | > ***Situation***: A Section 306 Pension veteran's      |
| ## j. Exam | > spouse has                                            |
| ple: 38 CF |                                                         |
| R 3.262(b) | -   retirement income of \$4,000 during calendar year   |
| (2) Income |     2005, and                                           |
|  Exclusion |                                                         |
|            | -   earned income of \$3,500 during calendar year 2005. |
|            |                                                         |
|            | > Effective December 1, 2005, the spouse income         |
|            | > exclusion amount from [M21-1, Part I, Appendix        |
|            | > B](http://warms.vba.va.gov/M21_1.html) is \$3,840.    |
|            | > (This applies to calendar-year 2005 IVAP.)            |
|            | >                                                       |
|            | > ***Calculation***: Since \$3,840 exceeds \$3,500,     |
|            | > \$3,840 should be excluded. The table below outlines  |
|            | > the calculation for determining the spouse's          |
|            | > countable income.                                     |
+------------+---------------------------------------------------------+

  -------- ------------------------ ------------------------------------------------
  Step     Calculation              Description

  1        \$4,000                  Spouse's retirement income

           [x0.9]{.underline}       90 percent

           \$3,600                  Spouse's retirement income

  2        \$3,600                  Spouse's retirement income

           [+\$3,500]{.underline}   Earned income

           \$7,100                  Total

  3        \$7,100                  Total

           [-\$3,840]{.underline}   Spouse's income exclusion

           \$3,260                  Spouse's countable income
  -------- ------------------------ ------------------------------------------------

+------------+---------------------------------------------------------+
| #          | > The 10 percent exclusion of income from annuities and |
| #### k. 10 | > retirement benefits also applies when computing the   |
|  Percent R | > individual income of a spouse.                        |
| eduction o | >                                                       |
| n Spousal  | > Reduce the spouse's retirement type income by 10      |
| Retirement | > percent under [38 CFR                                 |
|            | > 3.262(e)(2)](http://                                  |
|            | www.warms.vba.va.gov/regs/38CFR/BOOKB/PART3/S3_262.DOC) |
|            | > *before* deducting the spouse income exclusion amount |
|            | > from [38 CFR                                          |
|            | > 3.262(b)(2)](http://w                                 |
|            | ww.warms.vba.va.gov/regs/38CFR/BOOKB/PART3/S3_262.DOC). |
+------------+---------------------------------------------------------+

Continued on next page

15\. Counting the Income of a Spouse for Section 306 or Old Law Pension,
Continued

+------------+---------------------------------------------------------+
| ##### l    | > Consider the questions in the table below when        |
| . Overview | > determining how to handle a Section 306 Pension       |
|  of Handli | > veteran's spouse's income.                            |
| ng a Secti |                                                         |
| on 306 Pen |                                                         |
| sion Veter |                                                         |
| an's Spous |                                                         |
| e's Income |                                                         |
+------------+---------------------------------------------------------+

  ---------------------------------------- -----------------------------------
  If \...                                  Then \...

  the spouse does not live with the        exclude the spouse's income.
  veteran                                  

  the spouse's income is not available to  exclude the spouse's income.
  the veteran                              

  the spouse's income is used to pay       exclude the income on the grounds
  expenses beyond the ordinary and usual   that to count it would cause the
  family requirements                      veteran hardship.

  the spouse has countable                 reduce the income by 10 percent.
  retirement/annuity income                

  the spouse has earned income that        exclude all earned income of the
  exceeds the spouse income exclusion from spouse.
  [M21-1, Part I, Appendix                 
  B](http://warms.vba.va.gov/M21_1.html)   

  the spouse income exclusion from [M21-1, exclude the spouse income exclusion
  Part I, Appendix                         amount.
  B](http://warms.vba.va.gov/M21_1.html)   
  exceeds the spouse's earned income       
  ---------------------------------------- -----------------------------------

+-----------------------------------------------------------------------+
| > ***Result***: When you have arrived at the spouse's countable       |
| > income, add it to the veteran's basic countable income. Deductible  |
| > expenses to arrive at IVAP can further reduce this amount.          |
+-----------------------------------------------------------------------+

#### 16. Deductible Expenses

+------------+---------------------------------------------------------+
| ##### In   | > This topic contains information on deductible         |
| troduction | > expenses. It includes information on                  |
|            |                                                         |
|            | -   the definition of ***reported annual income***      |
|            |                                                         |
|            | -   medical expenses under Section 306 Pension only     |
|            |                                                         |
|            | -   allowable medical expenses                          |
|            |                                                         |
|            | -   using medical expenses to maintain eligibility      |
|            |                                                         |
|            | -   final expenses under Section 306 Pension only       |
|            |                                                         |
|            | -   the year of exclusion                               |
|            |                                                         |
|            | -   the income from the operation of a business, and    |
|            |                                                         |
|            | -   disability retirement expenses including expenses   |
|            |     under                                               |
|            |                                                         |
|            | ```{=html}                                              |
|            | <!-- -->                                                |
|            | ```                                                     |
|            | -   Section 306 Pension, and                            |
|            |                                                         |
|            | -   Old Law Pension.                                    |
+------------+---------------------------------------------------------+

+------------+---------------------------------------------------------+
| ##### C    | > February 13, 2007                                     |
| hange Date |                                                         |
+------------+---------------------------------------------------------+

+------------+---------------------------------------------------------+
| #          | > Any deductible expense which was applicable to the    |
| #### a. Ge | > calendar year ending December 31, 1978, becomes a     |
| neral Info | > part of the protected 1978 income for Section 306     |
| rmation on | > Pension cases.                                        |
|  Deductibl | >                                                       |
| e Expenses | > Deductible expenses paid after 1978 cannot increase a |
|            | > beneficiary's protected rate. However, deductible     |
|            | > medical and final expenses paid during a calendar     |
|            | > year subsequent to 1978 can be used to keep IVAP      |
|            | > within the applicable income limit and preserve       |
|            | > continued entitlement to Section 306 Pension.         |
|            | >                                                       |
|            | > ***Note***: Medical expenses and final expenses are   |
|            | > not a factor for Old Law Pension cases.               |
+------------+---------------------------------------------------------+

+------------+---------------------------------------------------------+
| ###        | > ***Reported annual income*** refers to *all*          |
| ## b. Defi | > countable family income *before* the 10-percent       |
| nition: Re | > reduction for retirement income and the spouse's      |
| ported Ann | > income exclusion of [38 CFR                           |
| ual Income | > 3.262(b)(2)](http://w                                 |
|            | ww.warms.vba.va.gov/regs/38CFR/BOOKB/PART3/S3_262.DOC). |
|            | >                                                       |
|            | > Reported annual income does not include any income    |
|            | > that is not countable for Section 306 Pension         |
|            | > purposes, per [38 CFR                                 |
|            | > 3.261](http://w                                       |
|            | ww.warms.vba.va.gov/regs/38CFR/BOOKB/PART3/S3_261.DOC). |
+------------+---------------------------------------------------------+

Continued on next page

16\. Deductible Expenses, Continued

+------------+---------------------------------------------------------+
| #####      | > Unreimbursed medical expenses that exceed 5 percent   |
| c. Medical | > of reported annual income, can be deducted under [38  |
|  Expenses  | > CFR                                                   |
| Under Sect | > 3.262(l)](http://w                                    |
| ion 306 Pe | ww.warms.vba.va.gov/regs/38CFR/BOOKB/PART3/S3_262.DOC). |
| nsion Only | >                                                       |
|            | > ***Example***:                                        |
|            | >                                                       |
|            | > ***Situation***: A Section 306 Pension veteran has    |
|            | > retirement income of \$4,000 per year and reports     |
|            | > paying unreimbursed medical expenses of \$4,000. The  |
|            | > veteran's spouse has retirement income of \$2,000 per |
|            | > year and earned income of \$5,000 per year.           |
|            | >                                                       |
|            | > ***Calculation***: The table below outlines the       |
|            | > calculation for the deductible medical expenses.      |
+------------+---------------------------------------------------------+

  -------- ------------------------ ------------------------------------------------
  Step     Calculation              Description

  1        \$4,000                  Veteran's retirement

           \$2,000                  Spouse's retirement

           [+\$5,000]{.underline}   Spouse's earned income

           \$11,000                 Total income

  2        \$11,000                 Total income

           [x0.05]{.underline}      Five percent

           \$550                    Five percent deductible

  3        \$4,000                  Gross medical expenses

           [-\$550]{.underline}     Five percent deductible

           \$3,450                  Deductible medical expenses
  -------- ------------------------ ------------------------------------------------

Continued on next page

16\. Deductible Expenses, Continued

+------------+---------------------------------------------------------+
| #####      | > Allow all unreimbursed medical expenses that may      |
|  d. Allowa | > reasonably be related to medical care. In general,    |
| ble Medica | > the principles concerning Improved Pension medical    |
| l Expenses | > expenses are equally applicable in determining if a   |
|            | > specific claimed medical expense can be allowed for   |
|            | > Section 306 Pension purposes.                         |
|            | >                                                       |
|            | > ***Note***: Do not show medical expenses on the 306   |
|            | > screen or enter them into the master record income    |
|            | > segment unless                                        |
|            |                                                         |
|            | -   there are continuing medical expenses, and          |
|            |                                                         |
|            | -   expected year income would be excessive without the |
|            |     continuing medical expenses.                        |
|            |                                                         |
|            | > ***References***: For more information about          |
|            | > allowable medical expenses, see                       |
|            |                                                         |
|            | -   M21-1MR, Part V, Subpart iii, 1.G.42                |
|            |                                                         |
|            | -   M21-1MR, Part V, Subpart iii, 1.G.43, and           |
|            |                                                         |
|            | -   M21-1MR, Part V, Subpart iii, 1.G.44.               |
+------------+---------------------------------------------------------+

Continued on next page

16\. Deductible Expenses, Continued

+------------+---------------------------------------------------------+
| #####      | > VA cannot increase Section 306 Pension benefits       |
|  e. Using  | > because of the payment of medical expenses, but       |
| Medical Ex | > medical expenses can be used to keep income within    |
| penses to  | > the limit for continued eligibility. It is            |
| Maintain E | > permissible to allow the exclusion during the current |
| ligibility | > year if                                               |
|            |                                                         |
|            | -   the claimant's income is static, and                |
|            |                                                         |
|            | -   the claimant reports substantial unreimbursed       |
|            |     expenses actually paid early in the year.           |
|            |                                                         |
|            | > Do *not* allow prospective medical expenses in the    |
|            | > absence of evidence indicating a clear and reasonable |
|            | > expectation that they will occur.                     |
|            | >                                                       |
|            | > ***Example***: If the claimant is in need of regular  |
|            | > aid and attendance or nursing home treatment or there |
|            | > is a history of substantial recurring expenditures    |
|            | > for medical conditions, the anticipated medical       |
|            | > expenses may be prospectively excluded.               |
|            | >                                                       |
|            | > If prospective medical expenses were allowed but      |
|            | > actual calendar year expenses were not sufficient to  |
|            | > bring IVAP below the income limit, terminate the      |
|            | > award "effective" the end of the calendar year (that  |
|            | > is, on the first day of the month that follows the    |
|            | > year in which IVAP exceeds the limit).                |
|            | >                                                       |
|            | > ***Rationale***: Unless the claimant submits          |
|            | > additional evidence showing that IVAP was below the   |
|            | > income limit, entitlement to Section 306 Pension is   |
|            | > lost.                                                 |
+------------+---------------------------------------------------------+

+------------+---------------------------------------------------------+
| ####       | > VA allows the deduction of the following amounts      |
| # f. Final | > actually paid for final expenses:                     |
|  Expenses  |                                                         |
| Under Sect | -   payments by a surviving spouse or child for the     |
| ion 306 Pe |     last illness, burial, and just debts of the         |
| nsion Only |     deceased veteran, per [38 CFR                       |
|            |     3.262(m)](http://w                                  |
|            | ww.warms.vba.va.gov/regs/38CFR/BOOKB/PART3/S3_262.DOC), |
|            |     and                                                 |
|            |                                                         |
|            | -   payments by a veteran, surviving spouse, or child   |
|            |     for the expenses of last illness or burial of the   |
|            |     veteran's deceased spouse or child, per [38 CFR     |
|            |     3.262(n)](http://w                                  |
|            | ww.warms.vba.va.gov/regs/38CFR/BOOKB/PART3/S3_262.DOC). |
|            |                                                         |
|            | > ***Note***: Final expenses are deducted on a          |
|            | > dollar-for-dollar basis. There is no deductible.      |
+------------+---------------------------------------------------------+

Continued on next page

16\. Deductible Expenses, Continued

+------------+---------------------------------------------------------+
| #####      | > Deductible expenses can be applied against income     |
| g. Year of | > received for the year during which the expenses are   |
|  Exclusion | > actually paid by the beneficiary.                     |
|            | >                                                       |
|            | > ***Example***: The veteran's helpless child died in   |
|            | > 2005. The child was in the surviving spouse's custody |
|            | > and the surviving spouse paid for the child's funeral |
|            | > in 2006. The amount paid in 2006 can be deducted from |
|            | > 2006 income for the purpose of keeping calendar year  |
|            | > 2006 IVAP within the income limit and preserving the  |
|            | > surviving spouse's continued entitlement to Section   |
|            | > 306 Pension.                                          |
+------------+---------------------------------------------------------+

+------------+---------------------------------------------------------+
| ####       | > Do *not* enter expenses excluded under [38 CFR        |
| # h. Incom | > 3.262(a)(2)](http://                                  |
| e From Ope | www.warms.vba.va.gov/regs/38CFR/BOOKB/PART3/S3_262.DOC) |
| ration of  | > to arrive at income from rentals, business, or a      |
| a Business | > profession as DEDUCTIBLE EXPENSES on the 306 income   |
|            | > screen.                                               |
|            | >                                                       |
|            | > On the 306 screen, enter the net profit as EARNED or  |
|            | > OTHER income, whichever is appropriate.               |
+------------+---------------------------------------------------------+

+------------+---------------------------------------------------------+
| ##### i.   | > Under [38 CFR                                         |
| Disability | > 3.262(i)](http://w                                    |
|  Retiremen | ww.warms.vba.va.gov/regs/38CFR/BOOKB/PART3/S3_262.DOC), |
| t Expenses | > consider medical, legal, and other expenses incurred  |
|            | > prior to an award of and incident to compensation     |
|            | > based on permanent and total disability or death from |
|            | > any of the following sources as deductible expense:   |
|            |                                                         |
|            | -   the Office of Workers' Compensation                 |
|            |                                                         |
|            | -   the Department of Labor (DoL)                       |
|            |                                                         |
|            | -   the Social Security Administration (SSA)            |
|            |                                                         |
|            | -   the Railroad Retirement Board (RRB), or             |
|            |                                                         |
|            | -   any workers' compensation or employers' liability   |
|            |     statute or commercial insurance.                    |
|            |                                                         |
|            | > Use *VA Form 21-8416b*, *Report of Medical, Legal or  |
|            | > Other Expenses Incident to Recovery for Injury or     |
|            | > Death,* to develop the amounts the beneficiary has    |
|            | > actually paid during the calendar year for which the  |
|            | > beneficiary has not been and will not be reimbursed   |
|            | > by insurance or another agency.                       |
|            | >                                                       |
|            | > ***Note***: [38 CFR                                   |
|            | > 3.262(i)](http://                                     |
|            | www.warms.vba.va.gov/regs/38CFR/BOOKB/PART3/S3_262.DOC) |
|            | > refers to the Bureau of Employees' Compensation; this |
|            | > bureau was abolished in 1974. See M21-1MR, Part V,    |
|            | > Subpart iii, 1.I.66, for the most recent statutory    |
|            | > income and net worth exclusions that apply to all VA  |
|            | > income-based benefits.                                |
+------------+---------------------------------------------------------+

Continued on next page

16\. Deductible Expenses, Continued

+------------+---------------------------------------------------------+
| #####      | > For Section 306 Pension cases, the exclusion applies  |
|  j. Disabi | > only one time; that is, when the disability           |
| lity Retir | > retirement or other compensation is initially         |
| ement Expe | > awarded. The legal as well as medical expenses are    |
| nses Under | > deductible from the specific disability retirement    |
|  Section 3 | > benefit under [38 CFR                                 |
| 06 Pension | > 3.262(i)(1)](http://w                                 |
|            | ww.warms.vba.va.gov/regs/38CFR/BOOKB/PART3/S3_262.DOC). |
|            | >                                                       |
|            | > After this one-time exclusion, any medical expense    |
|            | > deductions in these cases are governed by [38 CFR     |
|            | > 3.262(1)](http://w                                    |
|            | ww.warms.vba.va.gov/regs/38CFR/BOOKB/PART3/S3_262.DOC). |
|            | >                                                       |
|            | > The amount deducted may not exceed the total (annual) |
|            | > disability retirement or compensation payments to     |
|            | > which the expenses are incident. When computing       |
|            | > countable income, only the balance, if any, remaining |
|            | > after deducting these expenses is subject to the 10   |
|            | > percent reduction for retirement type expenses.       |
+------------+---------------------------------------------------------+

+------------+---------------------------------------------------------+
| #          | > For Old Law Pension cases, in addition to the first   |
| #### k. Di | > year exclusion, unreimbursed medical expenses paid    |
| sability R | > during any succeeding year which are related to the   |
| etirement  | > disability for which the individual retired can be    |
| Expenses U | > used to reduce countable disability retirement        |
| nder Old L | > income.                                               |
| aw Pension |                                                         |
+------------+---------------------------------------------------------+

#### 17. Adjustments Based on Changes in Income

+------------+---------------------------------------------------------+
| ##### In   | > This topic contains information on adjustments based  |
| troduction | > on changes in income. It includes information on      |
|            |                                                         |
|            | -   the effective date of reductions or terminations    |
|            |                                                         |
|            | -   restoring Section 306 or Old Law Pension            |
|            |                                                         |
|            | -   the time limit to amend income information          |
|            |                                                         |
|            | -   considering Improved Pension entitlement            |
|            |                                                         |
|            | -   a veteran entitled to compensation                  |
|            |                                                         |
|            | -   the waiver of retirement under                      |
|            |                                                         |
|            | ```{=html}                                              |
|            | <!-- -->                                                |
|            | ```                                                     |
|            | -   Improved Pension and Section 306 Pension, and       |
|            |                                                         |
|            | -   Old Law Pension                                     |
|            |                                                         |
|            | ```{=html}                                              |
|            | <!-- -->                                                |
|            | ```                                                     |
|            | -   applying the end-of-the-year rule                   |
|            |                                                         |
|            | -   determining the waived amount and an example of     |
|            |     this procedure                                      |
|            |                                                         |
|            | -   adjusting prospective terminations, and             |
|            |                                                         |
|            | -   retroactive terminations.                           |
+------------+---------------------------------------------------------+

+------------+---------------------------------------------------------+
| ##### C    | > February 13, 2007                                     |
| hange Date |                                                         |
+------------+---------------------------------------------------------+

+------------+---------------------------------------------------------+
| ###        | > After entering an award at a rate based on            |
| ## a. Effe | > anticipated or expected income, if a reduction or     |
| ctive Date | > termination is required because there is an increase  |
|  of Reduct | > in annual income, the effective date of reduction or  |
| ions or Te | > termination is the first day of the year following    |
| rminations | > the year during which the increase occurred, per [38  |
|            | > CFR                                                   |
|            | > 3.660(a)(2)](http://w                                 |
|            | ww.warms.vba.va.gov/regs/38CFR/BOOKB/PART3/S3_660.DOC). |
|            | >                                                       |
|            | > ***Note***: Although [38 CFR                          |
|            | > 3.660(a)(2)](http://                                  |
|            | www.warms.vba.va.gov/regs/38CFR/BOOKB/PART3/S3_660.DOC) |
|            | > states that such reductions and terminations are      |
|            | > effective the end of the year (called the             |
|            | > "end-of-the-year rule"), VA pays benefits for that    |
|            | > last day and therefore the actual date of reduction   |
|            | > or termination ("no-pay" date) is the first day of    |
|            | > the following year.                                   |
+------------+---------------------------------------------------------+

+------------+---------------------------------------------------------+
| ##### b.   | > Terminations due to income that exceeds the limit are |
| Restoring  | > final. However, if expenses are later reported and    |
| Section 30 | > the expenses reduce the income below the limit        |
| 6 or Old L | > (restoring continuity), payment of Section 306 or Old |
| aw Pension | > Law Pension may be authorized from the date it was    |
|            | > discontinued.                                         |
|            | >                                                       |
|            | > Reopened awards that provide only for continuity of   |
|            | > entitlement to Section 306 Pension or Old Law Pension |
|            | > are not affected by the provisions of [38 CFR         |
|            | > 3.31](http://                                         |
|            | www.warms.vba.va.gov/regs/38CFR/BOOKB/PART3/S3_31.DOC). |
|            | > That is, payment will be restored from the date of    |
|            | > termination.                                          |
+------------+---------------------------------------------------------+

Continued on next page

17\. Adjustments Based on Changes in Income, Continued

+------------+---------------------------------------------------------+
| ##### c    | > Under [38 CFR                                         |
| . Time Lim | > 3.660(b)](http://w                                    |
| it to Amen | ww.warms.vba.va.gov/regs/38CFR/BOOKB/PART3/S3_660.DOC), |
| d Income I | > a Section 306 Pension or Old Law Pension beneficiary  |
| nformation | > can amend an income report any time within the        |
|            | > calendar year for which income is reported or the     |
|            | > following calendar year. However, an amended income   |
|            | > report would be significant only if the income        |
|            | > previously reported exceeded the income limit.        |
|            | >                                                       |
|            | > ***Example***: A Section 306 Pension veteran without  |
|            | > dependents reports 2005 IVAP of \$12,780. Since the   |
|            | > 2005 income limit for a veteran without dependents is |
|            | > \$12,034, the award is terminated effective January   |
|            | > 1, 2006. The veteran has up to and including December |
|            | > 31, 2006, to submit satisfactory evidence that 2005   |
|            | > calendar year income did not exceed \$12,034.         |
|            | >                                                       |
|            | > ***Notes***:                                          |
|            |                                                         |
|            | -   The income limits and spouse income exclusion,      |
|            |     although effective in December, actually apply to   |
|            |     that calendar year. For example, an income limit    |
|            |     effective December 1, 2005, applies to income for   |
|            |     calendar-year 2005 for Section 306 and Old Law      |
|            |     Pension purposes.                                   |
|            |                                                         |
|            | -   If VA does not receive the evidence before January  |
|            |     1, 2007, the veteran must be considered under the   |
|            |     Improved Pension law.                               |
+------------+---------------------------------------------------------+

Continued on next page

17\. Adjustments Based on Changes in Income, Continued

+------------+---------------------------------------------------------+
| ##### d.   | > If termination is required because of excessive       |
| Considerin | > income or net worth, determine if the income          |
| g Improved | > information of record supports an immediate award of  |
|  Pension E | > Improved Pension. If it does, award Improved Pension  |
| ntitlement | > effective the date the Section 306 or Old Law Pension |
|            | > payment is discontinued.                              |
|            | >                                                       |
|            | > An immediate award of Improved Pension after loss of  |
|            | > Section 306 or Old Law Pension entitlement is not an  |
|            | > election, and is not subject to [38 CFR               |
|            | > 3.31](http://                                         |
|            | www.warms.vba.va.gov/regs/38CFR/BOOKB/PART3/S3_31.DOC). |
|            | >                                                       |
|            | > ***Example***:                                        |
|            | >                                                       |
|            | > ***Situation***: A Section 306 Pension veteran's      |
|            | > award is terminated effective January 1, 2006,        |
|            | > because calendar year 2005 IVAP exceeds the Section   |
|            | > 306 Pension income limit. The evidence shows that     |
|            | > calendar year 2005 income is below the Improved       |
|            | > Pension maximum annual pension rate (MAPR).           |
|            | >                                                       |
|            | > ***Results***:                                        |
|            |                                                         |
|            | -   Award Improved Pension from January 1, 2006, if     |
|            |     possible                                            |
|            |                                                         |
|            | -   disregard [38 CFR                                   |
|            |     3.31](http://                                       |
|            | www.warms.vba.va.gov/regs/38CFR/BOOKB/PART3/S3_31.DOC), |
|            |     and                                                 |
|            |                                                         |
|            | -   inform the payee that restoration of Section 306 or |
|            |     Old Law Pension may be in order if expenses are     |
|            |     submitted for the period during which income        |
|            |     exceeded the Section 306 or Old-Law Pension income  |
|            |     limit.                                              |
+------------+---------------------------------------------------------+

+------------+---------------------------------------------------------+
| #          | > If the veteran is also entitled to disability         |
| #### e. Ve | > compensation and payments of pension are to be        |
| teran Enti | > terminated or reduced to a lesser rate, as the result |
| tled to Co | > of the loss of a dependent, amend the award to        |
| mpensation | > authorize payment of compensation.                    |
+------------+---------------------------------------------------------+

+------------+---------------------------------------------------------+
| ###        | > For purposes of Improved Pension and Section 306      |
| ## f. Waiv | > Pension, retirement income which has been waived by   |
| er of Reti | > the recipient, is counted as income as if it had been |
| rement Inc | > received under [38 CFR                                |
| ome Under  | > 3.276(a)](http://                                     |
| Improved P | www.warms.vba.va.gov/regs/38CFR/BOOKB/PART3/S3_276.DOC) |
| ension and | > and [38 CFR                                           |
|  Section 3 | > 3.262(h)](http://w                                    |
| 06 Pension | ww.warms.vba.va.gov/regs/38CFR/BOOKB/PART3/S3_262.DOC). |
+------------+---------------------------------------------------------+

Continued on next page

17\. Adjustments Based on Changes in Income, Continued

+------------+---------------------------------------------------------+
| ##### g.   | > For purposes of Old Law Pension, retirement benefits  |
|  Waiver of | > from the following sources which have been waived     |
|  Retiremen | > pursuant to Federal statute will *not* be considered  |
| t Income U | > as income:                                            |
| nder Old L |                                                         |
| aw Pension | -   Civil Service Retirement and Disability Fund        |
|            |                                                         |
|            | -   RRB                                                 |
|            |                                                         |
|            | -   District of Columbia (paid to firemen, policemen,   |
|            |     or public schoolteachers), and                      |
|            |                                                         |
|            | -   former United States Lighthouse Service.            |
|            |                                                         |
|            | > An Old Law Pension beneficiary may prospectively      |
|            | > adjust the amount waived for the purpose of keeping   |
|            | > annual income for the current or expected year within |
|            | > the applicable income limitation.                     |
|            | >                                                       |
|            | > ***Note***: Railroad Retirement benefits to veterans  |
|            | > are excluded from income for Old Law Pension          |
|            | > purposes, per [38 CFR                                 |
|            | > 3.262(g)(2)](http://w                                 |
|            | ww.warms.vba.va.gov/regs/38CFR/BOOKB/PART3/S3_262.DOC). |
+------------+---------------------------------------------------------+

Continued on next page

17\. Adjustments Based on Changes in Income, Continued

+------------+---------------------------------------------------------+
| ##         | > The "end-of-the-year rule" does not apply for the     |
| ### h. App | > year in which a claimant cancels or reduces such a    |
| lying the  | > waiver. If a change in the amount waived makes the    |
| End-of-the | > beneficiary's income excessive, stop the award        |
| -Year Rule | > effective the date of the change in the waiver.       |
|            | >                                                       |
|            | > If an additional amount of retirement is received     |
|            | > solely as the result of a legislated increase (or     |
|            | > COLA) and not by reason of a change in the amount     |
|            | > waived, apply the end-of-year rule, and terminate     |
|            | > benefits effective the first day of the following     |
|            | > year if the additional income causes IVAP to exceed   |
|            | > the limit.                                            |
|            | >                                                       |
|            | > If the payee reports that a waiver of retirement      |
|            | > income has been established or amended, ask the payee |
|            | > to furnish a copy of the communication from the       |
|            | > retirement source which reflects the gross retirement |
|            | > amount before the waiver and the net amount after the |
|            | > waiver.                                               |
+------------+---------------------------------------------------------+

+------------+---------------------------------------------------------+
| ##### i    | > Follow the steps in the table below if the claimant   |
| . Determin | > requests advice in determining the amount to be       |
| ing the Wa | > waived.                                               |
| ived Amoun |                                                         |
| t of Old L |                                                         |
| aw Pension |                                                         |
+------------+---------------------------------------------------------+

+-------+--------------------------------------------------------------+
| Step  | Action                                                       |
+-------+--------------------------------------------------------------+
| 1     | Compute net countable income, exclusive of the retirement    |
|       | benefit.                                                     |
+-------+--------------------------------------------------------------+
| 2     | Subtract this net countable income from the applicable Old   |
|       | Law Pension income limit.                                    |
|       |                                                              |
|       | ***Result***: This is the amount of retirement to be paid    |
|       | after waiver.                                                |
+-------+--------------------------------------------------------------+
| 3     | -   Apply the 10-percent exclusion to the total annual       |
|       |     retirement amount, and                                   |
|       |                                                              |
|       | -   subtract the amount obtained in Step 2 above.            |
|       |                                                              |
|       | ***Result***: The difference, if any, will be the minimum    |
|       | amount to waive from the annual retirement benefit.          |
+-------+--------------------------------------------------------------+
| 4     | -   Enter the total retirement amount on the 306 screen, and |
|       |                                                              |
|       | -   enter the waived amount from Step 3 (the result of the   |
|       |     calculation in Step 3 divided by 0.9 and rounded up) in  |
|       |     the OTH RET EXPENSE field on the 306 screen.             |
+-------+--------------------------------------------------------------+

Continued on next page

17\. Adjustments Based on Changes in Income, Continued

+------------+---------------------------------------------------------+
| ####       | > ***Situation***: A veteran with a dependent is        |
| # j. Examp | > entitled to \$10,080 Civil Service retirement pay     |
| le: Determ | > annually. The veteran also received \$4,400 SS, \$960 |
| ining the  | > wages, and \$2,400 stock dividends.                   |
| Waived Amo | >                                                       |
| unt Page 1 | > ***Result***: The resulting calculations below use    |
|            | > the income limit in effect on December 1, 2003.       |
+------------+---------------------------------------------------------+

  ---------- ------------------------ --------------------------------------------
  Step       Calculation              Description

  1          \$960                    Earnings

             \$3,960                  SS with 10 percent deducted

             [+\$2,400]{.underline}   Dividends

             \$7,320                  Total

  2          \$14,205                 Limit

             [-\$7,320]{.underline}   Deduction

             \$6,885                  Difference

  3          \$10,080                 Civil Service retirement pay

             [-\$1,008]{.underline}   10 percent deduction

             \$9,072                  Total

  4          [-\$6,885]{.underline}   Deduction (from Step 2)

             \$2,187                  Waived amount

  5          \$2,187                  Waived amount

             [/0.9]{.underline}       Divided by 90 percent and rounded up

             \$2,430                  Amount to be entered in OTH/RET EXPENSE
                                      field on 306 screen, per M21-1MR, Part V,
                                      Subpart iii, 1.C.17.i.

  6          \$10,080                 Total Civil Service retirement

             [-\$2,187]{.underline}   Waived amount

             \$7,893                  Net retirement

  7          \$7,893                  Net retirement

             [-\$1,008]{.underline}   10 percent deduction

             \$6,885                  Civil Service retirement pay counted as
                                      income
  ---------- ------------------------ --------------------------------------------

Continued on next page

17\. Adjustments Based on Changes in Income, Continued

+------------+---------------------------------------------------------+
| ####       |                                                         |
| # k. Examp |                                                         |
| le: Determ |                                                         |
| ining the  |                                                         |
| Waived Amo |                                                         |
| unt Page 2 |                                                         |
+------------+---------------------------------------------------------+

  ------- ------------------------ ------------------------ ----------------------------
  Step    Data Entry Income Amount Computer Countable       Description
          (If Applicable)          Income Amount            

  1       \$960                    \$960                    Earnings

          \$4,400                  \$3,960                  SS (10 percent deduction)

          \$10,080                 \$9,072                  Civil Service retirement pay
                                                            (10 percent deduction)

          [+\$2,400]{.underline}   [+\$2,400]{.underline}   Other income (dividends)

          \$17,840                 \$16,392                 Subtotal

  2       \$2,187                  \$2,187                  OTH RET EXPENSE

          [/0.9]{.underline}                                Divided by 90 percent to
                                                            compensate for automatic
                                                            computer edits that would
                                                            otherwise result in an
                                                            amount less than the actual
                                                            amount waived

          \$2,430                  \$2,187                  OTH RET EXPENSE (rounded up)

  3       \$17,840                 \$16,392                 Subtotal

                                   [-\$2,187]{.underline}   OTH RET EXPENSE

                                   \$14,205                 IVAP
  ------- ------------------------ ------------------------ ----------------------------

+-----------------------------------------------------------------------+
| > ***Note***: IVAP of \$14,205 consists of                            |
|                                                                       |
| -   \$960 earnings                                                    |
|                                                                       |
| -   \$3,960 SS                                                        |
|                                                                       |
| -   \$6,885 Civil Service retirement pay, and                         |
|                                                                       |
| -   \$2,400 dividends.                                                |
+-----------------------------------------------------------------------+

Continued on next page

17\. Adjustments Based on Changes in Income, Continued

+------------+---------------------------------------------------------+
| ###        | > To make an award which continues payment for the      |
| ## l. Adju | > balance of the current year, and terminates payment   |
| sting Pros | > as of the first of the following year, because of     |
| pective Te | > excessive actual or estimated income                  |
| rminations |                                                         |
|            | -   make the first award line on the amended award      |
|            |     effective as of the first of the current month      |
|            |     using                                               |
|            |                                                         |
|            | ```{=html}                                              |
|            | <!-- -->                                                |
|            | ```                                                     |
|            | -   reason code 96, and                                 |
|            |                                                         |
|            | -   the *1978* IVAP upon which the protected rate was   |
|            |     based                                               |
|            |                                                         |
|            | ```{=html}                                              |
|            | <!-- -->                                                |
|            | ```                                                     |
|            | -   reinsert any other previously-scheduled award lines |
|            |     for the balance of the year with existing reason    |
|            |     codes and the protected rate                        |
|            |                                                         |
|            | -   enter reason code 11 in the termination award line, |
|            |     effective January 1 of the next year, and           |
|            |                                                         |
|            | -   enter the *current* IVAP that exceeds the income    |
|            |     limit and requires termination.                     |
|            |                                                         |
|            | > ***Note***: If there is already a scheduled           |
|            | > termination established in the master record for a    |
|            | > date before the end of the year, annotate the revised |
|            | > income estimate on the award or on a note in Virtual  |
|            | > VA. No additional award action is required.           |
+------------+---------------------------------------------------------+

+------------+---------------------------------------------------------+
| ###        | > Process retroactive terminations because of excessive |
| ## m. Retr | > income by amended award actions using reason code 11  |
| oactive Te | > (Income Change or Termination).                       |
| rminations |                                                         |
+------------+---------------------------------------------------------+

#### 18. Changes in Marital and Dependency Status

+------------+---------------------------------------------------------+
| ##### In   | > This topic contains information on changes in marital |
| troduction | > and dependency status. It includes information on     |
|            |                                                         |
|            | -   removing a veteran's spouse due to                  |
|            |                                                         |
|            | ```{=html}                                              |
|            | <!-- -->                                                |
|            | ```                                                     |
|            | -   death, divorce, or annulment                        |
|            |                                                         |
|            | -   estrangement, or                                    |
|            |                                                         |
|            | -   cessation of contributions                          |
|            |                                                         |
|            | ```{=html}                                              |
|            | <!-- -->                                                |
|            | ```                                                     |
|            | -   removing a child due to death or marriage           |
|            |                                                         |
|            | -   the marriage of a schoolchild                       |
|            |                                                         |
|            | -   the loss of the last/only dependent when IVAP       |
|            |                                                         |
|            | ```{=html}                                              |
|            | <!-- -->                                                |
|            | ```                                                     |
|            | -   is within the Section 306 limit and how to          |
|            |     determine the income in this situation, or          |
|            |                                                         |
|            | -   exceeds the Section 306 limit                       |
|            |                                                         |
|            | ```{=html}                                              |
|            | <!-- -->                                                |
|            | ```                                                     |
|            | -   action when a dependent is established              |
|            |                                                         |
|            | ```{=html}                                              |
|            | <!-- -->                                                |
|            | ```                                                     |
|            | -   prior to January 1, 1979, or                        |
|            |                                                         |
|            | -   after December 31, 1978                             |
|            |                                                         |
|            | ```{=html}                                              |
|            | <!-- -->                                                |
|            | ```                                                     |
|            | -   handling a veteran with dependents, and             |
|            |                                                         |
|            | -   handling case in which the status of a spouse is    |
|            |     unresolved.                                         |
+------------+---------------------------------------------------------+

+------------+---------------------------------------------------------+
| ##### C    | > February 13, 2007                                     |
| hange Date |                                                         |
+------------+---------------------------------------------------------+

+------------+---------------------------------------------------------+
| ##         | > Changes in marital or dependency status require award |
| ### a. Gen | > adjustments.                                          |
| eral Infor | >                                                       |
| mation on  | > If there is an indication that a change in income may |
| Changes in | > have also occurred, determine entitlement based on    |
|  Marital a | > income for the full calendar year and                 |
| nd Depende | >                                                       |
| ncy Status | > fully develop the current income situation, per [38   |
|            | > CFR                                                   |
|            | > 3.260(f)](http://w                                    |
|            | ww.warms.vba.va.gov/regs/38CFR/BOOKB/PART3/S3_260.DOC). |
+------------+---------------------------------------------------------+

+------------+---------------------------------------------------------+
| ##         | > If a veteran with a running or suspended award loses  |
| ### b. Rem | > a spouse due to death, divorce, or annulment, reduce  |
| oving a Ve | > or terminate the award effective the first day of the |
| teran's Sp | > year following the year during which the death,       |
| ouse Due t | > divorce, or annulment occurs per [38 CFR              |
| o Death, D | > 3.660(a)(2)](http://w                                 |
| ivorce, or | ww.warms.vba.va.gov/regs/38CFR/BOOKB/PART3/S3_660.DOC). |
|  Annulment |                                                         |
+------------+---------------------------------------------------------+

Continued on next page

18\. Changes in Marital and Dependency Status, Continued

+------------+---------------------------------------------------------+
| #####      | > Remove the spouse from the award effective the date   |
| c. Removin | > of separation if the spouse of a Section 306 Pension  |
| g a Vetera | > veteran ceases to be a dependent because the          |
| n's Spouse |                                                         |
|  Due to Es | -   spouse is estranged from the veteran, and           |
| trangement |                                                         |
|            | -   veteran is not making reasonable contributions to   |
|            |     the spouse's support.                               |
|            |                                                         |
|            | > Do not apply the end-of-the month rule.               |
|            | >                                                       |
|            | > ***Note***: Estrangement has no effect on an Old Law  |
|            | > Pension award. As long as the veteran and spouse are  |
|            | > legally married, the higher veteran *and* spouse      |
|            | > income limitation applies.                            |
+------------+---------------------------------------------------------+

+------------+---------------------------------------------------------+
| ##### d. R | > If an estranged spouse of a Section 306 veteran       |
| emoving a  | > ceases to be a dependent because the veteran stops    |
| Veteran's  | > making reasonable contributions to the spouse's       |
| Spouse Due | > support, remove the spouse from the award effective   |
|  to Cessat | > the day after the date the veteran made the last      |
| ion of Con | > contribution to the support of the estranged spouse.  |
| tributions | >                                                       |
|            | > Do not apply the end-of-the month rule.               |
+------------+---------------------------------------------------------+

+------------+---------------------------------------------------------+
| ##### e. R | > If a child dies or marries, reduce or terminate the   |
| emoving a  | > veteran's or surviving spouse's running or suspended  |
| Child Due  | > award effective the first day of the year following   |
| to Death o | > the year of death or marriage, per [38 CFR            |
| r Marriage | > 3.660(a)(2)](http://w                                 |
|            | ww.warms.vba.va.gov/regs/38CFR/BOOKB/PART3/S3_660.DOC). |
|            | >                                                       |
|            | > However, if the child was scheduled to be removed     |
|            | > from the award from an earlier date, use the          |
|            | > previously scheduled removal date.                    |
+------------+---------------------------------------------------------+

+------------+---------------------------------------------------------+
| ##         | > If a schoolchild marries and stays in school,         |
| ### f. Mar | > continue to pay benefits until the first of the year  |
| riage of S | > after the year of marriage.                           |
| choolchild | >                                                       |
|            | > However, if the child discontinues school attendance  |
|            | > before marrying, reduce the award effective the first |
|            | > day of the month following the date the child last    |
|            | > attended school.                                      |
|            | >                                                       |
|            | > ***Note***: For purposes of Section 306 Pension or    |
|            | > Old Law Pension, an out-of-custody child can be a     |
|            | > dependent even if the veteran or surviving spouse is  |
|            | > not contributing to the child's support. Therefore,   |
|            | > cessation of contributions to an out-of-custody child |
|            | > does not affect the status of a child as a dependent  |
|            | > for Section 306 Pension or Old Law Pension purposes.  |
+------------+---------------------------------------------------------+

Continued on next page

18\. Changes in Marital and Dependency Status, Continued

+------------+---------------------------------------------------------+
| #####      | > Once the effective date to remove a dependent has     |
| g. Loss of | > been established, make a determination as to the      |
|  Last/Only | > veteran's or surviving spouse's IVAP on that date.    |
|  Dependent | >                                                       |
|  When IVAP | > Use the table below to determine the IVAP in cases    |
|  Is Within | > when the claimant's current IVAP (or expected income  |
|  the Secti | > for an end-of-year adjustment) is within the income   |
| on 306 Pen | > limit for a veteran or surviving spouse alone.        |
| sion Limit |                                                         |
+------------+---------------------------------------------------------+

+---------------------+------------------------------------------------+
| If the last         | Then ...                                       |
| dependent was a ... |                                                |
+---------------------+------------------------------------------------+
| -   spouse who had  | reduce the award to the veteran or surviving   |
|     *no* countable  | spouse alone rate based on protected 1978      |
|     1978 income, or | income.                                        |
|                     |                                                |
| -   child           | If the protected 1978 income exceeds \$3,770,  |
|                     | reduce the award to a \$5 per month or special |
|                     | Aid and Attendance (A&A) benefit rate.         |
|                     |                                                |
|                     | ***Note***: If the veteran reached age 78      |
|                     | prior to December 3l, 1978, the veteran alone  |
|                     | rate includes a 25 percent increase.           |
+---------------------+------------------------------------------------+
| spouse who *had*    | establish an adjusted protected 1978 income by |
| countable 1978      | dropping the spouse's income from the          |
| income              | protected 1978 income.                         |
|                     |                                                |
|                     | > ***Example***: The protected 1978 IVAP       |
|                     | > consists of \$150 interest for the spouse    |
|                     | > and \$200 interest for the veteran. Drop the |
|                     | > spouse's \$150, leaving an adjusted          |
|                     | > protected 1978 income of \$200.              |
|                     |                                                |
|                     | ***Note***: If medical expenses were a factor  |
|                     | in determining the protected 1978 income, do   |
|                     | not attempt to exclude the spouse's share of   |
|                     | the medical expenses. Continue to use the same |
|                     | 1978 medical expenses (assume they all         |
|                     | belonged to the veteran), but base the five    |
|                     | percent exclusion on the veteran's income      |
|                     | only.                                          |
+---------------------+------------------------------------------------+

Continued on next page

18\. Changes in Marital and Dependency Status, Continued

+------------+---------------------------------------------------------+
| #          | > Compare the veteran alone (dependency 00) rate, based |
| #### h. De | > on the adjusted protected 1978 IVAP (without the      |
| termining  | > spouse's income) to the protected 1978 rate the       |
| Income Aft | > veteran was receiving before the loss of the          |
| er Loss of | > dependent. Adjust the award to pay the *lower* of the |
|  Last/Only | > two rates.                                            |
|  Dependent | >                                                       |
|  When IVAP | > Use the table below to determine the adjustment.      |
|  Is Within |                                                         |
|  the Secti |                                                         |
| on 306 Pen |                                                         |
| sion Limit |                                                         |
+------------+---------------------------------------------------------+

+----------------------+-----------------------------------------------+
| If ...               | Then ...                                      |
+----------------------+-----------------------------------------------+
| the veteran alone    | -   make the award line IVAP the adjusted     |
| rate is lower        |     protected 1978 income, and                |
|                      |                                               |
|                      | -   use dependency code 00.                   |
+----------------------+-----------------------------------------------+

Continued on next page

18\. Changes in Marital and Dependency Status, Continued

  -----------------------------------------------------------------------
  h\. Determining Income After Loss of Last/Only Dependent When IVAP Is
  Within the Section 306 Pension Limit (continued)

  -----------------------------------------------------------------------

+----------------------+-----------------------------------------------+
| If ...               | Then ...                                      |
+----------------------+-----------------------------------------------+
| the loss of the      | -   continue the married rate                 |
| spouse and the       |                                               |
| spouse's income does | -   amend the award, effective the day        |
| not reduce the       |     following the date of the spouse's death, |
| veteran's benefit    |     with a fictitious award line IVAP that    |
|                      |     supports the                              |
| ***Example***: The   |                                               |
| veteran alone rate   | ```{=html}                                    |
| without the spouse's | <!-- -->                                      |
| income would be      | ```                                           |
| greater than the     | -   protected rate                            |
| rate the veteran was |                                               |
| receiving while      | -   reason code 96                            |
| married.             |                                               |
|                      | -   dependency code 00, and                   |
|                      |                                               |
|                      | -   the protected (married) rate              |
|                      |                                               |
|                      | ```{=html}                                    |
|                      | <!-- -->                                      |
|                      | ```                                           |
|                      | -   enter actual current income on the 306    |
|                      |     screen, and                               |
|                      |                                               |
|                      | -   annotate the award as follows: "*Spouse   |
|                      |     removed* **\[date\]***; Veteran protected |
|                      |     at married rate.*"                        |
|                      |                                               |
|                      | > ***Reference***: For more information on    |
|                      | > removing a veteran's spouse due to death,   |
|                      | > divorce, or annulment, see M21-1MR, Part V, |
|                      | > Subpart iii, 1.C.18.b.                      |
+----------------------+-----------------------------------------------+

+-----------------------------------------------------------------------+
| > ***Note***: If the veteran loses a spouse who had countable 1978    |
| > income, but the spouse is not the last or only dependent, that is,  |
| > there is still a child on the award                                 |
|                                                                       |
| -   continue to use the protected 1978 IVAP (including the spouse's   |
|     income), and                                                      |
|                                                                       |
| -   pay at the rate for a veteran with the appropriate number of      |
|     children.                                                         |
|                                                                       |
| > Do not re-compute an adjusted protected 1978 IVAP. If the child     |
| > subsequently goes off the award, continue to use the protected 1978 |
| > IVAP.                                                               |
+-----------------------------------------------------------------------+

Continued on next page

18\. Changes in Marital and Dependency Status, Continued

+------------+---------------------------------------------------------+
| ####       | > If the beneficiary's income exceeds the income limit  |
| # i. Loss  | > for a veteran or surviving spouse alone, terminate    |
| of Last/On | > the award effective the end of year, that is, the     |
| ly Depende | > first day of the following year.                      |
| nt When IV | >                                                       |
| AP Exceeds | > ***Exception***: For Section 306 or Old Law Pension,  |
|  the Secti | > the end-of-the-year rule applies to dependents lost   |
| on 306 Pen | > due to marriage, annulment, divorce, or death. If the |
| sion Limit | > dependent is lost for a different reason, the         |
|            | > effective date is the date of the event that caused   |
|            | > dependency to cease.                                  |
|            | >                                                       |
|            | > When terminating the award                            |
|            |                                                         |
|            | -   the first award line reflects current payments      |
|            |     based on the protected 1978 IVAP                    |
|            |                                                         |
|            | -   the termination award line shows the current or     |
|            |     expected (as opposed to protected 1978) IVAP that   |
|            |     supports the termination, and                       |
|            |                                                         |
|            | -   the complete income data for entry is the current   |
|            |     income that supports the termination.               |
|            |                                                         |
|            | > ***Note***: A veteran cannot maintain continuity of   |
|            | > entitlement by acquiring a new dependent during the   |
|            | > same calendar year that the last dependent is lost.   |
|            | > Only payment of Improved Pension is for consideration |
|            | > effective January 1 of the following year.            |
+------------+---------------------------------------------------------+

Continued on next page

18\. Changes in Marital and Dependency Status, Continued

+------------+---------------------------------------------------------+
| #####      | > Additional benefits under Section 306 Pension may be  |
|  j. When a | > paid and a higher income limit for Old Law Pension is |
|  Dependent | > applicable only for dependents established with an    |
|  Is Establ | > effective date on or before December 31, 1978.        |
| ished Prio | >                                                       |
| r to Janua | > Child beneficiaries of Section 306 Death Pension must |
| ry 1, 1979 | > have been determined helpless before December 31,     |
|            | > 1978. (For Old Law Pension, the applicable date is    |
|            | > June 30, 1960.) However, a veteran could have adopted |
|            | > a dependent child after December 31, 1978.            |
+------------+---------------------------------------------------------+

+------------+---------------------------------------------------------+
| #####      | > Additional benefits may *not* be paid for dependents  |
|  k. Handli | > established from an effective date after December 31, |
| ng a Depen | > 1978.                                                 |
| dent Estab | >                                                       |
| lished Aft | > However, if a veteran marries or acquires a child     |
| er Decembe |                                                         |
| r 31, 1978 | -   the higher (claimant with dependent) income limit   |
|            |     becomes applicable, and                             |
|            |                                                         |
|            | -   the spouse's income, if any, must be considered in  |
|            |     determining a veteran's continued entitlement to    |
|            |     Section 306 Pension.                                |
+------------+---------------------------------------------------------+

Continued on next page

18\. Changes in Marital and Dependency Status, Continued

+------------+---------------------------------------------------------+
| ###        | > The veteran claimant is considered to be a *veteran   |
| ## l. Hand | > with dependents* for all purposes, including hospital |
| ling a Vet | > adjustments.                                          |
| eran With  | >                                                       |
| Dependents | > Amend the award to show the new dependency code and   |
|            | > the protected rate. Use a fictitious award line IVAP  |
|            | > to support the protected rate. An SL code is not      |
|            | > required.                                             |
|            | >                                                       |
|            | > If a veteran marries, income received by the spouse   |
|            | > on or after the date of marriage is a factor in       |
|            | > determining the veteran's current (as opposed to      |
|            | > protected 1978) income. Enter the current income on   |
|            | > the 306 screen.                                       |
|            | >                                                       |
|            | > The amount of the exclusion from the spouse's income  |
|            | > after marriage is determined under [38 CFR            |
|            | > 3.262(b)(2)](http://w                                 |
|            | ww.warms.vba.va.gov/regs/38CFR/BOOKB/PART3/S3_262.DOC). |
|            | > Exclude one of the following amounts, whichever is    |
|            | > applicable:                                           |
|            |                                                         |
|            | -   the current spouse income exclusion amount from the |
|            |     Section 306 Pension rate charts in [M21-1, Part I,  |
|            |     Appendix B](http://warms.vba.va.gov/M21_1.html), or |
|            |                                                         |
|            | -   the full amount of the spouse's earnings.           |
|            |                                                         |
|            | > For the year that the spouse is established, exclude  |
|            | > the *greater* of either all earned income received on |
|            | > or after the date the spouse is established or a      |
|            | > proportionate amount of the current spouse income     |
|            | > exclusion amount from the Section 306 Pension rate    |
|            | > charts in [M21-1, Part I, Appendix                    |
|            | > B](http://warms.vba.va.gov/M21_1.html).               |
|            | >                                                       |
|            | > To calculate the amount                               |
|            |                                                         |
|            | -   divide the number of days from the date the spouse  |
|            |     is established to the end of the calendar year by   |
|            |     365                                                 |
|            |                                                         |
|            | -   round to two decimal places                         |
|            |                                                         |
|            | -   multiply the result by the spouse income exclusion  |
|            |     amount for the calendar year during which the       |
|            |     spouse is established, and                          |
|            |                                                         |
|            | -   drop the cents.                                     |
|            |                                                         |
|            | > As a result of establishing a spouse, if the          |
|            | > veteran's recomputed current IVAP exceeds the current |
|            | > Section 306 Pension income limit (for a veteran with  |
|            | > a dependent), terminate the award effective the first |
|            | > day of the year following the marriage.               |
+------------+---------------------------------------------------------+

Continued on next page

18\. Changes in Marital and Dependency Status, Continued

+------------+---------------------------------------------------------+
| ##### m.   | > If notice is received that a Section 306 Pension      |
|  Handling  | > veteran has acquired a spouse, fully develop the      |
| a Case in  | > spouse's income and dependency status.                |
| Which the  | >                                                       |
| Status of  | > If the veteran fails to cooperate in furnishing this  |
| Spouse Is  | > information, terminate the award under [38 CFR        |
| Unresolved | > 3.652](http://w                                       |
|            | ww.warms.vba.va.gov/regs/38CFR/BOOKB/PART3/S3_652.DOC). |
|            | >                                                       |
|            | > For purposes of [38 CFR                               |
|            | > 3.652(a)(1)](http://w                                 |
|            | ww.warms.vba.va.gov/regs/38CFR/BOOKB/PART3/S3_652.DOC), |
|            | > the "month in which the eligibility factor was last   |
|            | > shown by the evidence of record to have existed" is   |
|            | > the last month during which it can definitely be      |
|            | > shown by the evidence of record that the veteran was  |
|            | > unmarried. The effective date of termination would be |
|            | > the first day of the month following that month.      |
+------------+---------------------------------------------------------+

#### 19. Handling Another Beneficiary's Award When a Surviving Spouse's or Child's Award Is Terminated

+------------+---------------------------------------------------------+
| ##### In   | > This topic contains information on handling another   |
| troduction | > beneficiary's award when a surviving spouse's or      |
|            | > child's award is terminated. It includes information  |
|            | > on                                                    |
|            |                                                         |
|            | -   when a surviving spouse's award is terminated with  |
|            |     children                                            |
|            |                                                         |
|            | ```{=html}                                              |
|            | <!-- -->                                                |
|            | ```                                                     |
|            | -   in custody, and                                     |
|            |                                                         |
|            | -   out of custody, or apportionees, and                |
|            |                                                         |
|            | ```{=html}                                              |
|            | <!-- -->                                                |
|            | ```                                                     |
|            | -   when a child's award is terminated.                 |
+------------+---------------------------------------------------------+

+------------+---------------------------------------------------------+
| ##### C    | > February 13, 2007                                     |
| hange Date |                                                         |
+------------+---------------------------------------------------------+

+------------+---------------------------------------------------------+
| ##### a.   | > When a surviving spouse's award is terminated, the    |
| Surviving  | > only entitlement for children in custody of the       |
| Spouse's A | > surviving spouse is Improved Pension.                 |
| ward Termi | >                                                       |
| nated With | > When considering Improved Pension entitlement for the |
|  Children  | > children, the surviving spouse's income must be       |
| in Custody | > considered.                                           |
|            | >                                                       |
|            | > ***Reference***: For information on countable income  |
|            | > for Improved Pension, see M21-1MR, Part V, Subpart    |
|            | > iii, 1.I.                                             |
+------------+---------------------------------------------------------+

+------------+---------------------------------------------------------+
| ##### b    | > If a surviving spouse's Section 306 or Old Law        |
| . Survivin | > Pension benefit must be terminated, the termination   |
| g Spouse's | > has no effect on apportionments to children of that   |
|  Award Ter | > surviving spouse's pension. Section 306 or Old Law    |
| minated Wi | > Pension awards of surviving children who are not in   |
| th Childre | > the custody of that surviving spouse may continue.    |
| n Out of C | >                                                       |
| ustody/ Ap | > The children's continued entitlement to Section 306   |
| portionees | > Pension or Old Law Pension is determined based on the |
|            | > income limits for children alone under Section 306    |
|            | > Pension or Old Law Pension.                           |
+------------+---------------------------------------------------------+

Continued on next page

19\. Handling Another Beneficiary's Award When a Surviving Spouse's or
Child's Award Is Terminated, Continued

+------------+---------------------------------------------------------+
| ###        | > If there is no surviving spouse and a child's award   |
| ## c. Chil | > is terminated, defer adjustment of the awards for any |
| d's Award  | > other children under [38 CFR                          |
| Terminated | > 3.651](http://w                                       |
|            | ww.warms.vba.va.gov/regs/38CFR/BOOKB/PART3/S3_651.DOC), |
|            | > pending the expiration of the period within which the |
|            | > terminated award may be reopened and entitlement      |
|            | > re-established for a retroactive period.              |
|            | >                                                       |
|            | > Establish a master record control under reason code   |
|            | > 22 (Verify Income or Dependency) until the time limit |
|            | > for establishing the terminated child's continued     |
|            | > entitlement to Section 306 Pension or Old Law Pension |
|            | > has expired.                                          |
|            | >                                                       |
|            | > The awards to the remaining children are adjusted,    |
|            | > when in order, from the date of termination of the    |
|            | > child's award, at the rate payable excluding that     |
|            | > child.                                                |
|            | >                                                       |
|            | > The provisions of [38 CFR                             |
|            | > 3.31](http:/                                          |
|            | /www.warms.vba.va.gov/regs/38CFR/BOOKB/PART3/S3_31.DOC) |
|            | > do not apply as the total benefit payable has been    |
|            | > reduced due to loss of a dependent.                   |
+------------+---------------------------------------------------------+

#### 20. Sale or Transfer of Real Estate or Personal Property

+------------+---------------------------------------------------------+
| ##### In   | > This topic contains information on the sale or        |
| troduction | > transfer of real estate or personal property. It      |
|            | > includes information on                               |
|            |                                                         |
|            | -   Old Law Pension cases, including                    |
|            |                                                         |
|            | ```{=html}                                              |
|            | <!-- -->                                                |
|            | ```                                                     |
|            | -   the impact of the sale or transfer of real estate   |
|            |     or personal property                                |
|            |                                                         |
|            | -   the exclusion of profit                             |
|            |                                                         |
|            | -   calculating net profit                              |
|            |                                                         |
|            | -   the profit from the sale of property after a        |
|            |     veteran's death                                     |
|            |                                                         |
|            | -   installment sales                                   |
|            |                                                         |
|            | -   counting installment payments as income, and        |
|            |                                                         |
|            | -   payments received prior to entitlement, and         |
|            |                                                         |
|            | ```{=html}                                              |
|            | <!-- -->                                                |
|            | ```                                                     |
|            | -   Section 306 Pension cases, including                |
|            |                                                         |
|            | ```{=html}                                              |
|            | <!-- -->                                                |
|            | ```                                                     |
|            | -   income from the sale of property                    |
|            |                                                         |
|            | -   sales in the course of business                     |
|            |                                                         |
|            | -   ensuring recorded information, and                  |
|            |                                                         |
|            | -   principal versus interest.                          |
+------------+---------------------------------------------------------+

+------------+---------------------------------------------------------+
| ##### C    | > February 13, 2007                                     |
| hange Date |                                                         |
+------------+---------------------------------------------------------+

+------------+---------------------------------------------------------+
| ####       | > Profit from the sale of real estate or personal       |
| # a. Impac | > property *is* considered income for purposes of Old   |
| t of the S | > Law Pension, per [38 CFR                              |
| ale or Tra | > 3.262(k)(3)](http://w                                 |
| nsfer of R | ww.warms.vba.va.gov/regs/38CFR/BOOKB/PART3/S3_262.DOC). |
| eal Estate | >                                                       |
|  or Person | > In this respect, Old Law pension is different from    |
| al Propert | > Section 306 and Improved Pension.                     |
| y on Old L |                                                         |
| aw Pension |                                                         |
+------------+---------------------------------------------------------+

Continued on next page

20\. Sale or Transfer of Real Estate or Personal Property, Continued

+------------+---------------------------------------------------------+
| ##### b    | > Profit from the sale of the beneficiary's principal   |
| . Exclusio | > residence may be excluded from computation of income  |
| n of Profi | > for the calendar year of sale if the profit is        |
| t for Old  | > applied within the same or next calendar year to the  |
| Law Pensio | > purchase of another residence, per [38 CFR            |
| n Purposes | > 3.262(k)(4)](http://w                                 |
|            | ww.warms.vba.va.gov/regs/38CFR/BOOKB/PART3/S3_262.DOC). |
|            | >                                                       |
|            | > The report that profit from the sale of the residence |
|            | > has been applied to purchase of another residence     |
|            | > must be received by VA within one year of the later   |
|            | > of the two following dates:                           |
|            |                                                         |
|            | -   the date the profit is applied, or                  |
|            |                                                         |
|            | -   one year from the date of sale.                     |
|            |                                                         |
|            | > ***Exception***: This exclusion does not apply if the |
|            | > net profit from the sale of home A is applied to pay  |
|            | > for home B, where home B was purchased earlier than   |
|            | > the calendar year preceding the calendar year of the  |
|            | > sale of home A.                                       |
|            | >                                                       |
|            | > The purchase of a lifetime residence in a senior      |
|            | > citizen's home is considered equivalent to purchasing |
|            | > another principal dwelling.                           |
+------------+---------------------------------------------------------+

+------------+---------------------------------------------------------+
| ##### c. C | > Under [38 CFR                                         |
| alculating | > 3.262(k)(3)](http://w                                 |
|  Net Profi | ww.warms.vba.va.gov/regs/38CFR/BOOKB/PART3/S3_262.DOC), |
| t for Old  | > the net profit from the sale of property is the       |
| Law Pensio | > difference arrived at by subtracting *from* the sales |
| n Purposes | > price                                                 |
|            |                                                         |
|            | -   the purchase price or value of the property on the  |
|            |     date the property was acquired by the beneficiary,  |
|            |     or                                                  |
|            |                                                         |
|            | -   the value of the property on the date of            |
|            |     entitlement to VA pension, if the property was      |
|            |     owned by the beneficiary prior to the date of       |
|            |     entitlement to VA pension.                          |
+------------+---------------------------------------------------------+

+------------+---------------------------------------------------------+
| ##### d. P | > Profit from the sale of property after the veteran's  |
| rofit From | > death which was purchased with the individual funds   |
|  Sale of P | > of both the veteran and spouse, should be considered  |
| roperty fo | > in proportion to the amounts each contributed in the  |
| r Old Law  | > purchase.                                             |
| Pension Pu | >                                                       |
| rposes Aft | > The surviving spouse is entitled to recover fully     |
| er a Veter | > his/her share of the investment, including            |
| an's Death | > appreciation of his/her share, before charging the    |
|            | > surviving spouse with any income from the inherited   |
|            | > share of the property.                                |
+------------+---------------------------------------------------------+

Continued on next page

20\. Sale or Transfer of Real Estate or Personal Property, Continued

+------------+---------------------------------------------------------+
| #####      | > An installment sale, for the purposes of this         |
|  e. Instal | > chapter, is any sale in which the seller receives     |
| lment Sale | > more than the sales price over the course of the      |
| s for Old  | > transaction. The actual number of installments is     |
| Law Pensio | > irrelevant.                                           |
| n Purposes | >                                                       |
|            | > If a beneficiary sells property and receives payment  |
|            | > in installments, count as income any amounts received |
|            | > over and above the sales price, but not until an      |
|            | > amount equal to the sales price has been received by  |
|            | > the seller, per [38 CFR                               |
|            | > 3.262(k)(5)](http://w                                 |
|            | ww.warms.vba.va.gov/regs/38CFR/BOOKB/PART3/S3_262.DOC). |
|            | >                                                       |
|            | > ***Example***:                                        |
|            | >                                                       |
|            | > ***Situation***: A veteran sells his/her house for    |
|            | > \$80,000. The veteran receives a cash payment of      |
|            | > \$40,000 and a cash payment of \$45,000.              |
|            | >                                                       |
|            | > ***Result***: This is an installment sale for VA      |
|            | > pension purposes and \$5,000 is countable as interest |
|            | > income when the veteran receives the \$45,000.        |
+------------+---------------------------------------------------------+

+------------+---------------------------------------------------------+
| ##### f    | > If payment for a sale of property, occurring on or    |
| . Counting | > after the date of entitlement to VA pension, is       |
|  Installme | > received in installments, the payments are not        |
| nt Payment | > considered income until the claimant has received     |
| s as Incom | > amounts equal to the                                  |
| e for Old  |                                                         |
| Law Pensio | -   value of the property at the date of entitlement to |
| n Purposes |     VA pension, if the property was owned by the        |
|            |     beneficiary prior to the date of entitlement to VA  |
|            |     pension, or                                         |
|            |                                                         |
|            | -   purchase price paid by the beneficiary if the       |
|            |     property was acquired on or after the date of       |
|            |     entitlement to VA pension.                          |
|            |                                                         |
|            | > ***Note***: There is no need to distinguish between   |
|            | > principal and interest payments in the installment    |
|            | > sales context.                                        |
+------------+---------------------------------------------------------+

+------------+---------------------------------------------------------+
| #####      | > When installments are received as payment on a sale   |
| g. Payment | > made *prior to* the date of entitlement to VA         |
| s Received | > pension, count only the interest payments as income.  |
|  Prior to  | > It is necessary to secure from the claimant a copy of |
| Entitlemen | > the amortization schedule or similar document         |
| t to Old L | > distinguishing between interest and principal.        |
| aw Pension |                                                         |
+------------+---------------------------------------------------------+

Continued on next page

20\. Sale or Transfer of Real Estate or Personal Property, Continued

+------------+---------------------------------------------------------+
| ####       | > Income received from the sale of property is viewed   |
| # h. Incom | > as a conversion of assets and is not countable income |
| e From the | > for Section 306 Pension purposes, except where        |
|  Sale of P |                                                         |
| roperty fo | -   property is sold in the course of operating a       |
| r Section  |     business, or                                        |
| 306 Pensio |                                                         |
| n Purposes | -   income from the sale of property is received by the |
|            |     claimant in installments.                           |
+------------+---------------------------------------------------------+

+------------+---------------------------------------------------------+
| ###        | > If a beneficiary who operates a business sells        |
| ## i. Sale | > property or merchandise in connection with the        |
| s in the C | > business, add any profit received from the sale of    |
| ourse of B | > the property to other income of the business.         |
| usiness fo |                                                         |
| r Section  |                                                         |
| 306 Pensio |                                                         |
| n Purposes |                                                         |
+------------+---------------------------------------------------------+

+------------+---------------------------------------------------------+
| ##         | > Ensure the following information is on record before  |
| ### j. Ens | > attempting to compute countable income from sale of   |
| uring Reco | > property for Section 306 Pension:                     |
| rded Infor |                                                         |
| mation for | -   sales price                                         |
|  Section 3 |                                                         |
| 06 Pension | -   amount of the down payment                          |
|            |                                                         |
|            | -   date the first installment payment is received      |
|            |                                                         |
|            | -   frequency of installment payments                   |
|            |                                                         |
|            | -   amount of each installment payment, and             |
|            |                                                         |
|            | -   date the last installment payment is received.      |
+------------+---------------------------------------------------------+

+------------+---------------------------------------------------------+
| ##### k.   | > For Section 306 Pension, it is not necessary to       |
| Principal  | > distinguish between payment of principal and interest |
| Versus Int | > in the installment sale context. As soon as the down  |
| erest for  | > payment and installment payments received by the      |
| Section 30 | > beneficiary equal the sales price, all subsequent     |
| 6 Pension  | > installment payments constitute countable income.     |
|            | >                                                       |
|            | > ***Example***:                                        |
|            | >                                                       |
|            | > ***Situation***: A veteran reports the sale of a      |
|            | > house for \$100,000 on January 1, 2006. The veteran   |
|            | > received \$35,000 down and will receive installment   |
|            | > payments of \$620 per month.                          |
|            | >                                                       |
|            | > ***Result***: Establish a diary for September 2014,   |
|            | > the month during which the veteran's return from the  |
|            | > sale of property will exceed \$100,000. Charge income |
|            | > of \$1,860 (\$620 x 3) during calendar year 2014 and  |
|            | > \$7,440 during calendar year 2015.                    |
+------------+---------------------------------------------------------+