Selling Guide

Published April 07, 2021

For best results, pose your search like a question.

Guide Resources

For a comprehensive list of resources such as forms, announcements, lender letters, notices and more.

Visit Selling and Servicing Guide Communications and Forms

Customers Recommend Ask Poli

AskPoli

If you have additional questions, Fannie Mae customers can visit Ask Poli to get information from other Fannie Mae published sources.

Launch Ask Poli  

Download PDF Guide

You can also download the printable 1,200+ page PDF, which include links.

Download Now

B3-3.3-04, Income or Loss Reported on IRS Form 1040, Schedule D (11/13/2012)

Introduction

This topic contains information on income or loss reported on IRS Form 1040, Schedule D, including:

 

Overview

IRS Form 1040, Schedule D, is used to report capital gains and losses. Income received from a capital gain is generally a one-time transaction; therefore, it should not usually be considered part of the borrower’s stable monthly income.

 

Calculating Borrower Cash Flow from Schedule D and Required Documentation

If the income calculated on the Schedule D shows that the borrower has realized capital gains for the last two years, as may be the case when the borrower’s business has a constant turnover of assets that produces regular gains, the recurring gains can be considered in determining the borrower’s stable monthly income. In this case, the borrower must provide evidence of ownership of additional property or assets that can be sold if extra income is needed to make future mortgage payments.

The table below provides the requirements for calculating cash flow from Schedule D and the associated required documentation.

If … Then …
recurring capital gains relate to the sale of business property, lenders must obtain a copy of the applicable Sale of Business Property (IRS Form 4797) to support the recurring nature of the capital gains.
Schedule D includes principal payments on an installment sales contract, lenders must obtain a copy of
  • the Installment Sale Income (IRS Form 6252), and

  • the note or contract to verify that the borrower will continue to receive the payments for at least three years.

the capital gain on the principal payment and interest income from an installment sales contract is determined to be nonrecurring, the amount must be deducted from the borrower’s cash flow.

 

Note: Capital losses identified on IRS Form 1040, Schedule D, do not have to be considered when calculating income or liabilities, even if the losses are recurring.

 

Have You Tried Ask Poli?

Poli knows. Just ask.

Ask Poli features exclusive Q&As and
more—plus official Selling & Servicing
Guide
content.

Try Ask Poli

Related Articles


AskPoli

Customers Recommend Ask Poli

If you have additional questions, Fannie Mae customers can visit Ask Poli to get information from other Fannie Mae published sources.

Guide Resources

For a comprehensive list of resources such as access forms, announcements, lender letters, notices and more.

Visit Selling and Servicing Guide Communications and Forms

X
Having Issues with Seeing this Page Correctly?

Use Firefox or Chrome   How to do a hard refresh in Internet Explorer
We recommend that you use the latest version of FireFox or Chrome.

Download Firefox
Download Chrome
  A hard refresh will clear the browsers cache for a specific page and force the most recent version of a page.
    Hold the Ctrl key and press the F5 key.
     

Email Us
If you still have Technical Support questions, feel free to emailAsk_Poli@fanniemae.com.