# Using Market Value to Calculate Income from Assets

During the certification process, owners are required to determine the value of eligible household assets and any income derived from such assets. Any asset income is included in the annual income calculation for the household.

Owners need to verify, among other things, the following asset information:

• Market value of the asset (the value of the asset on the open market or the face value of the investment vehicle)
• Costs incurred in the disposition of the asset (such as penalties for premature withdrawal or broker and legal fees or settlement costs for real estate transactions)
• Income generated by the asset in the form of interest or dividends

Once the market value and costs of converting the asset to cash are verified, the cash value of the asset can be calculated with the following formula:

#### Market Value – Costs to Dispose of the Asset = Cash Value

The HUD 50059 for the certification will reflect the cash value (not the market value) of the asset.

However, when calculating income from the asset, managers need to be aware that the interest rate must be applied to the market value (not the cash value) of the asset.

Generally, the formula to calculate interest income from an asset is as follows:

#### Market Value x Interest Rate = Income From Asset

Applying the interest rate against the cash value of the asset may result in the miscalculation of household income.

Example: A Certificate of Deposit (CD) has a market value of \$10,000, cash value of \$9,875, and earns interest at a rate of 5%.

Correct: \$10,000 (Market Value) x 5% (or 0.05) = \$500 (Asset Income)

Incorrect: \$9,875 (Cash Value) x 5% (or 0.05) = \$493.75 [which rounds up to \$494] (Asset Income)

In this case, the HUD 50059 for the certification should reflect the CD’s actual income as \$500.

Remember, when the cash value of all household assets combined exceed \$5,000, use the greater of actual or imputed asset income in the household income calculation.