AR 87-3(9): Hart v. Bowen , 799 F.2d 567 (9th Cir. 1986) Current Market Value of an Installment Sales Contract as an Excess Resource

(Rescinded 2/9/95)

AR 87-3(9)

EFFECTIVE DATE: 5/6/87

ISSUE:

Whether the current market value of an installment sales contract is

considered an excess resource for supplemental security income (SSI)

purposes when the installment sales contract results from the sale of an

excluded home and its current market value is not reinvested in a new home

within 3 months of receipt but the periodic installments received under

the contract are reinvested in another excluded home within 3 months of

receipt.

STATUTE/REGULATION/RULING CITATION:

Section 1613 of the Social Security Act (42 U.S.C. Section 1382(b) 20

C.F.R. Section 416.1212(b) and (d)

CIRCUIT:

NINTH (ALASKA, ARIZONA, CALIFORNIA, HAWAII, IDAHO, MONTANA, NEVADA,

NORTHERN MARIANA ISLANDS, OREGON, WASHINGTON)

Hart v. Bowen , 799 F.2d 567 (9th Cir. 1986)

APPLICABILITY OF RULING:

DESCRIPTION OF CASE:

Evelyn Hart is an applicant for SSI benefits. On April 12, 1979, Mrs.

Hart entered into a real estate contract for the sale of her home. The

total sale price of the former home was $15,000. The contract governing

the transaction required a $2,000 down payment to Mrs. Hart and payment of

the remainder to her in monthly installments.

One month later, on May 24, 1979, Mrs. Hart entered into an agreement to

purchase a replacement home. Mrs. Hart purchased this home for $15,000.

The contract required a $3,500 down payment and payment of the remainder

of the sale price in monthly installment payments.

Mrs. Hart reinvested the down payment she received from the sale of her

former home into the down payment on the purchase of her replacement home.

Each month Mrs. Hart reinvests the monthly installment payments from her

former home into the monthly purchase payments for her replacement

home.

500 down payment and payment of the remainder

of the sale price in monthly installment payments.

Mrs. Hart reinvested the down payment she received from the sale of her

former home into the down payment on the purchase of her replacement home.

Each month Mrs. Hart reinvests the monthly installment payments from her

former home into the monthly purchase payments for her replacement

home.

SSA terminated Mrs. Hart's SSI benefits when she moved into her

replacement home in 1979. Mrs. Hart did not appeal this determination.

Instead, she reapplied for SSI benefits on April 12, 1983. SSA denied Mrs.

Hart's application for the same reason she was terminated in 1979: the

real estate installment contract from the sale of her former home was

treated as an excess resource. SSA determined that the contract, with a

face value of $13,000, had a current market value of $4,800. On May 18,

1983, Mrs. Hart filed a request for reconsideration. On August 10, the

denial was affirmed. Mrs. Hart then requested a hearing before an

Administrative Law Judge (ALJ).

On November 14, 1983, a hearing was held before an ALJ in Seattle,

Washington. In a decision issued on December 23, 1983, the ALJ found that

the real estate contract valued at $4,800 held by Mrs. Hart was an excess

resource and upheld SSA's denial of Mrs. Hart's application for SSI

benefits. On February 20, 1984, Mrs. Hart requested Appeals Council review

of the decision. On April 13, 1984, the Appeals Council denied her request

for review. Upon exhaustion of her administration remedies, Mrs. Hart

filed a complaint in the United States District Court. A hearing was held

before a United States Magistrate. On August 23, 1985, the district court

adopted the recommendation of the Magistrate and entered judgment

affirming the final decision of the Secretary. Mrs. Hart then appealed to

the U.S. Court of Appeals for the Ninth Circuit.

HOLDING

on of her administration remedies, Mrs. Hart

filed a complaint in the United States District Court. A hearing was held

before a United States Magistrate. On August 23, 1985, the district court

adopted the recommendation of the Magistrate and entered judgment

affirming the final decision of the Secretary. Mrs. Hart then appealed to

the U.S. Court of Appeals for the Ninth Circuit.

HOLDING

The U.S. Court of Appeals for the Ninth Circuit reversed the district

court and rejected the resource counting policy at issue because it

believed that the policy contravenes the purpose behind the home exclusion

rule in Section 1613(a)(1) of the Social Security Act as implemented at 20

C.F.R. Section 416.1212. The Court of Appeals reasoned that the proceeds

from the sale of an exempt home include not only the cash downpayment, but

also the income stream realized from the sale. Both the cash downpayment

and the income stream must be timely invested upon receipt in the

replacement home to qualify for the exclusion.

The Court found that:

STATEMENT AS TO HOW THE DECISION DIFFERS FROM SOCIAL SECURITY

POLICY:

20 C.F.R. Section 416.1212(d) provides that:

Social Security policy provides that because an installment sales

contract accepted in part payment for a house has a current market value,

it is both a proceed and a liquid resource. This could result in making

the owner of the contract ineligible for SSI benefits because the current

market value which was not reinvested in another home within 3 months

would be considered excess resources.

The U.S. Court of Appeals for the Ninth Circuit rejected this reasoning

and instead viewed the installment sales contract as part of the value of

the replacement home, the full value of which is excludable under 20

C.F.R. Section 416.1212(b) and (d).

EXPLANATION OF HOW SSA WILL APPLY THE HART DECISION WITHIN THE

CIRCUIT:

nother home within 3 months

would be considered excess resources.

The U.S. Court of Appeals for the Ninth Circuit rejected this reasoning

and instead viewed the installment sales contract as part of the value of

the replacement home, the full value of which is excludable under 20

C.F.R. Section 416.1212(b) and (d).

EXPLANATION OF HOW SSA WILL APPLY THE HART DECISION WITHIN THE

CIRCUIT:

This Ruling applies only to cases in which the SSI claimant resides in

Alaska, Arizona, California, Hawaii, Idaho, Montana, Nevada, Northern

Mariana Islands, Oregon, or Washington at the time of the determination or

decision at any level of administrative review, i.e., initial,

reconsideration, administrative law judge hearing or Appeals Council

review.

In cases where an SSI claimant or recipient sells one excluded home and

purchases another within 3 months of receipt of the proceeds, accepts an

installment sales contract as part of the sale, and reinvests all monies

from the sales contract into the purchase of the replacement home within 3

months of receipt of the payments, the value of that contract will be

considered part of the value of the replacement home and therefore fully

excludable under 20 C.F.R. Section 416.1212(b) and (d).

EFFECTIVE DATE:

Date of Publication 5/6/87