I have a question regarding Capital Gains as income on a customer whose sole business is renting and flipping houses. Due to the nature of his business, can we add in or count as income his Capital Gains from flipping house or must that be excluded? This would make a difference on whether they would qualify or not for a loan. Thanks!

From Appendix Q

Capital gains or losses generally occur only one time, and should not be considered when determinine effective income.

However, if the individual has a constant turnover of assets resulting in gains or losses, the capital gain or loss must be considered when determining the income. Three years' tax returns are required to evaluate an earning trend. If the trend:

o Results in a gain, it may be added as effective income, or

o Consistently shows a loss, it must be deducted from the total income.

Creditor must document anticipated continuation of income through verified assets. Example: A creditor can consider the capital gains for an individual who purchases old houses, remodels them, and sells them for profit.

Thank you Rlcarey! I greatly appreciate your response!