Complicated income situation

[Andrew_Qin 0]

In 2006 I entered a partnership with another person. We purchased commercial property and later opened a home furnishings store. As is common in the first few years of a new business, we incurred losses. However, the store never got off the ground and we closed it in early 2010. I have since reverted to a previous business that has successfully maintained myself and family over the course of almost 20 years. Anyway, my tax returns for 2008 and 2009 show six-figure losses. Each year's business losses, of course, are carried forward. After high expenditures to revive my previous business, my 2010 business income (line 12 on Form 1040) is just under $40,000, and that is reflected in Schedule D. However, Form 1040, line 17 (Real Estate, Partnerships, etc) show losses of $38,000, and this is reflected in Schedule E. This loss is due mainly to mortgage, property taxes and insurance on the commercial property. Form 1040, Line 21 shows my carryover losses at $150,000, And Line 22 shows losses of $148,000.

Since December, 2010, we are leasing our building to another company. The money coming in from the lease pays our mortgage, taxes, insurance and building maintenance with some to spare. Thus, the building is paying for itself and it no longer poses a financial burden on me. On form I-864, I declared my business income (Line 12) as my yearly income. To compensate for any shortage of income, I also declared some assets. Even if they did not accept any of my income, between my home (which I got an certified appraisal for) and commercial property I have much more than enough equity to cover 5x the 125% poverty guidelines for a family my size. I also declared $40,000 in cash, supported by bank documents. I included recent, full credit reports that show my credit is excellent. I have substantial assets in inventory which is paid for, but I did not include that. My wife also has a fair amount of equity in her condo and some stock investments that I didn't (I didn't have the documentation at the time I filed the I-864).

I wrote a detailed letter explaining the situation with my businesses and I documented my assets declarations. My concern, though, is how the officer who'll decide the fate of my I-864 will interpret and judge this situation. In particular, will they consider my factual earned business income, as demonstrated in Schedule C, or will they disregard that and use Line 22. If they disregard my business income, how will they calculate the assets I need to meet 5x the 125% poverty guidelines? If they decide to go by line 22, this is what I can expect: <148,000> - 35,000 = <183,000>. That would require a minimum asset declaration of $915,000. If the bottom line is simply, "is this guy financially equipped to feed, clothe and otherwise provide for his wife," the answer is obvious to any reasonable person. Unfortunately, what's reasonable is not necessarily what prevails in this game. Somehow I must work through this. A co-sponsor is not an option.

Edited May 29, 2011 by Andrew_Qin

[Andrew_Qin 0]

Another question to add here: If NVC does not accept my current asset declaration as sufficient, will they forewarn me of that before the interview? If they did, I could be prepared to declare more assets at interview time.

[Andrew_Qin 0]

In 2006 I entered a partnership with another person. We purchased commercial property and later opened a home furnishings store. As is common in the first few years of a new business, we incurred losses. However, the store never got off the ground and we closed it in early 2010. I have since reverted to a previous business that has successfully maintained myself and family over the course of almost 20 years. Anyway, my tax returns for 2008 and 2009 show six-figure losses. Each year's business losses, of course, are carried forward. After high expenditures to revive my previous business, my 2010 business income (line 12 on Form 1040) is just under $40,000, and that is reflected in Schedule D. However, Form 1040, line 17 (Real Estate, Partnerships, etc) show losses of $38,000, and this is reflected in Schedule E. This loss is due mainly to mortgage, property taxes and insurance on the commercial property. Form 1040, Line 21 shows my carryover losses at $150,000, And Line 22 shows losses of $148,000.

Since December, 2010, we are leasing our building to another company. The money coming in from the lease pays our mortgage, taxes, insurance and building maintenance with some to spare. Thus, the building is paying for itself and it no longer poses a financial burden on me. On form I-864, I declared my business income (Line 12) as my yearly income. To compensate for any shortage of income, I also declared some assets. Even if they did not accept any of my income, between my home (which I got an certified appraisal for) and commercial property I have much more than enough equity to cover 5x the 125% poverty guidelines for a family my size. I also declared $40,000 in cash, supported by bank documents. I included recent, full credit reports that show my credit is excellent. I have substantial assets in inventory which is paid for, but I did not include that. My wife also has a fair amount of equity in her condo and some stock investments that I didn't (I didn't have the documentation at the time I filed the I-864).

I wrote a detailed letter explaining the situation with my businesses and I documented my assets declarations. My concern, though, is how the officer who'll decide the fate of my I-864 will interpret and judge this situation. In particular, will they consider my factual earned business income, as demonstrated in Schedule C, or will they disregard that and use Line 22. If they disregard my business income, how will they calculate the assets I need to meet 5x the 125% poverty guidelines? If they decide to go by line 22, this is what I can expect: <148,000> - 35,000 = <183,000>. That would require a minimum asset declaration of $915,000. If the bottom line is simply, "is this guy financially equipped to feed, clothe and otherwise provide for his wife," the answer is obvious to any reasonable person. Unfortunately, what's reasonable is not necessarily what prevails in this game. Somehow I must work through this. A co-sponsor is not an option.

Correction: My business income (Line 12) is reflected in Schedule C.

[trojam227 18]

This is complicated. I am almost sure they will take your income reported on schedule C, plus assets. What is your family size and what did you claim as earned income in schedule C? This info will help figure if you have enough assets, but it sounds like you have plenty of equity & cash. Most self employed investors take a loss, but they still take a cut to live off of...

[Andrew_Qin 0]

This is complicated. I am almost sure they will take your income reported on schedule C, plus assets. What is your family size and what did you claim as earned income in schedule C? This info will help figure if you have enough assets, but it sounds like you have plenty of equity & cash. Most self employed investors take a loss, but they still take a cut to live off of...

Schedule C shows income of 38,900, but I keep hearing that they refer to Line 22, which reflects losses from previous years. Concerning assets, I have plenty, but only about $40,000 is in cash. My real estate equity is high, but I don't know if they will consider those as assets that can easily be converted to cash within a year. I don't think they will accept inventory assets and accounts receivables. I can't remember the last time I was unable to show creditworthiness. This is a very humbling experience.

[Darnell 8,479]

NVC will not forewarn you, usually.

[trojam227 18]

They can definitely use the equity in the real estate you own, plus the $40,000 cash, plus your wife's equity in her condo. The whole point of using assets is for people who's line 22 isn't sufficient. Not all income is claimed on line 22...my line 22 isn't enough, but I receive child support that is not reported on 1040 and I have the proof that I receive it weekly. You already submitted I-864 right? See what they come back with...if they ask for more, give them more.

[Darnell 8,479]

did you include any 'audited income statement' prepared by yer cpa ?

http://www.visajourney.com/forums/topic/307958-self-employed-recent-business-losses/page__view__findpost__p__4642870

Edited May 29, 2011 by Darnell

[pushbrk 13,667]

NVC will not forewarn you, usually.

Actually they will. NVC will look at line 22 and see that the income isn't sufficient. They will then send what looks like an RFE but really isn't. It will say the following. I've made bold the key section and will explain further below. It's also possible the wording will be different, so read carefully. They may actually reject your affidavit because the assets clearly don't make up for the shortage. I've seen that happen too, in a case where there was a lot of depreciation on the schedule C making line 22 a negative.

Note that this wording from NVC only refers to income which was a positive but not enough. One of the petitioners with whom I'm familiar who got this notice was a retired gentleman with hundreds of thousands in liquid assets, so no problem at the Consulate level. If assets hadn't been clearly sufficient, I would have expected to see the Consulate require a joint sponsor.

The NVC has received the information you have submitted in reference to

the Affidavit of Support. Please be advised that you, as the Petitioner, do

not appear to meet the minimum income requirement according to the

current poverty guidelines to sponsor the intending immigrant(s) for this

petition. The consular officer will make a decision regarding this

requirement at the time of your interview. In order to avoid delays, you

may wish to submit an additional Affidavit of Support (Form I-864) for a

Joint Sponsor to the National Visa Center to assist in sponsoring the

intending immigrants. To view the current poverty guidelines, visit

http://www.uscis.gov...orm/I-864P.pdf.

If you decide to use a Joint Sponsor to assist in sponsoring the intending

immigrants, please note that you the sponsor may not use Form I-864EZ

and will also need to submit Form I-864.

Historically, Consular officers ALSO go by line 22 as that is how they are trained to evaluate "income". The self employed must deal with the two-edged sword. They get the benefit of tax deductions to reduce their "income" which is GREAT, until that backfires on them when trying to sponsor an immigrant.

Edited May 30, 2011 by pushbrk

[Andrew_Qin 0]

Actually they will. NVC will look at line 22 and see that the income isn't sufficient. They will then send what looks like an RFE but really isn't. It will say the following. I've made bold the key section and will explain further below. It's also possible the wording will be different, so read carefully. They may actually reject your affidavit because the assets clearly don't make up for the shortage. I've seen that happen too, in a case where there was a lot of depreciation on the schedule C making line 22 a negative.

Note that this wording from NVC only refers to income which was a positive but not enough. One of the petitioners with whom I'm familiar who got this notice was a retired gentleman with hundreds of thousands in liquid assets, so no problem at the Consulate level. If assets hadn't been clearly sufficient, I would have expected to see the Consulate require a joint sponsor.

The NVC has received the information you have submitted in reference to

the Affidavit of Support. Please be advised that you, as the Petitioner, do

not appear to meet the minimum income requirement according to the

current poverty guidelines to sponsor the intending immigrant(s) for this

petition. The consular officer will make a decision regarding this

requirement at the time of your interview. In order to avoid delays, you

may wish to submit an additional Affidavit of Support (Form I-864) for a

Joint Sponsor to the National Visa Center to assist in sponsoring the

intending immigrants. To view the current poverty guidelines, visit

http://www.uscis.gov...orm/I-864P.pdf.

If you decide to use a Joint Sponsor to assist in sponsoring the intending

immigrants, please note that you the sponsor may not use Form I-864EZ

and will also need to submit Form I-864.

Historically, Consular officers ALSO go by line 22 as that is how they are trained to evaluate "income". The self employed must deal with the two-edged sword. They get the benefit of tax deductions to reduce their "income" which is GREAT, until that backfires on them when trying to sponsor an immigrant.

As I mentioned in my post, in addition to business income for 2010, Line 22 represents carryover losses from the three previous years. If they simply were to nullify my income and not use the negative figure for calculating the assets necessary to qualify me as a sponsor, my residential and commercial real estate equity alone are sufficient to qualify me several times over. If they take the unreasonable position of using the losses on Line 22 as the basis for calculating what I must demonstrate in assets, I would be out of the ball game.

Since I've already submitted the I-864, this is mostly academic at this point. I'll just have to wait to see how NVC responds to my AOS. If they require more assets, I do have other things I can include that would get me over the hump, but they involve inventory, accounts receivables and foreign bank accounts. I don't know if any of these would be accepted. I'll wait for NVC's response to my AOS, but it's nice to hear the advice and experience of others. Thanks.

I wonder if a call to NVC would be helpful now?

[Andrew_Qin 0]

BTW, do any of you guys with Chinese wives know the process of getting a property appraisal in China? My wife owns, with the exception of a small note, a condo in a fashionable area of Chengdu. I think she paid about RMB1,000,000 for it ten years ago, and I'm sure it has appreciated handsomely.

[pushbrk 13,667]

I wonder if a call to NVC would be helpful now?

Probably not. I would wait and see what they do. Since it's the Consulate that will make the ultimate decision, I would wait until NVC decides what to do. If you get what I quoted above, then your best chance is to have a CPA explain that the carryover losses are from prior years, so your real current income shows on line 12. If the Consulate doesn't buy that, you can add other personal assets. A foreign bank account properly documented is certainly as liquid as anything else as long as it's not some off the wall volatile currency.

Sorry, I don't know anything about appraising a condo in China but I know my inlaws borrowed against a couple of theirs, to pay cash for a new one. I suggest your wife have a chat with her banker on the subject of valuation/appraisal.

Edited May 30, 2011 by pushbrk

[Anh map 2,098]

Credit reports don't really matter. They want to feel comfortable about your personal assets.

Business inventory (unless you are a sole proprietor) isn't really a personal asset. Property held by a partnership isn't as easy to liquidate as something held personally.

The CO's are not trained accountants. So as best you can, tailor your submission (and/or prepare your RFE answer) to what they see on a regular basis.

[Andrew_Qin 0]

Thanks for the input. I will just have to wait and see what basis they use to calculate the dollar amount in assets I'll have to show to qualify as a sponsor. Logic dictates that losses incurred in a failed business that has subsequently closed have no bearing on future income. If they decide to not allow me to use any income to meet the 125% poverty requirement, the personal assets I've already declared are sufficient to qualify me by a wide margin. On the other hand, if they use the negative figure on Line 22 and expect me to show almost $1million in assets, that will pose a greater challenge.

You're right, entrepreneurship is a double edged sword: you can't always have your cake and eat it too.

[pushbrk 13,667]

Thanks for the input. I will just have to wait and see what basis they use to calculate the dollar amount in assets I'll have to show to qualify as a sponsor. Logic dictates that losses incurred in a failed business that has subsequently closed have no bearing on future income. If they decide to not allow me to use any income to meet the 125% poverty requirement, the personal assets I've already declared are sufficient to qualify me by a wide margin. On the other hand, if they use the negative figure on Line 22 and expect me to show almost $1million in assets, that will pose a greater challenge.

You're right, entrepreneurship is a double edged sword: you can't always have your cake and eat it too.

If properly explained as briefly and concisely as you did in the bold above, the Consular Officers certainly have the latitude to both understand and approve on that basis.