B3-3.4-05, Capital Gains Income (03/04/2026)

The lender must obtain:
•    copies of the borrower’s signed personal federal income tax returns for the most recent two years, including IRS Form 1040, Schedule D, and 
•    evidence that the borrower owns a portfolio of assets that can be sold if additional income is needed to make future mortgage loan payments

Note: Due to the nature of this income, the current receipt of the income is not required to comply with the Allowable Age of Credit Documents policy. However, documentation of the asset ownership must be in compliance with the Allowable Age of Credit Documents policy (see B1-1-03, Allowable Age of Credit Documents and Federal Income Tax ReturnsB1-1-03, Allowable Age of Credit Documents and Federal Income Tax Returns, for additional information). 

The lender is not required to verify continuance unless they have reason to believe the income may not continue.

Average Income: Depending on the historical trend of the income, the lender must calculate qualifying income as follows:

• Stable or Increasing: Calculate an average income amount using the most recent two years personal federal income tax returns.
• Decreasing: Calculate an average income amount using the most recent year personal federal income tax returns.

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.