So @Proudpatriot , I typed a lot of responses to the above, asking what the cash was for if not salaries and why a small law firm was a C corp, why you would want to show a lot of cash earnings, but upon reading it back, editing, etc, I realized it was asking bunch of stuff that was none of my business. But I did not want you to think I had not read your thoughtful response to me.
I will say without specificity to any individual’s situation that assets are assets to the taxman, regardless of their use or liquidity, and so should they be for financial aid. Without these there would be too many ways to game the systems, and there are already too many!
Yes sometimes it seems unfair – for example an S-Corp/LLC that borrows money in one year and pays it back over several cannot deduct the principal portion of the amortized payments (which of course are the large percentage of it near the end of the loan) but you still have to make them, so blammo, you get taxed on that part as earnings even though you paid it to the banker.