Definition of an Asset for FAFSA

From the page AVG-23 in chapter 2 Application and Verification Guide, the definition of an Asset: “An asset is a property that the family owns and has an exchange value”.

I am a small percentage limited partner in many LLCs. I have no control over the partnership nor any ability to sell or exchange the ownership. All control is under the manager of the partnership. I get 1065 K-1 each year from these partnerships that report pass through income and losses for the tax year. Most of these partnerships report losses or have previous losses as reported on my tax return. Most of these partnerships own property and run a business but in the partnership’s name. I believe these partnerships are not assets under the FAFSA definition and thus are not reported as investment or business. Has anyone else taken this stance on FAFSA form for limited partnerships? I am guessing the CSS form will not allow this.

The FSA Handbook mentions Schedule K-1 only once:
The FAFSA instructs the applicant to add line 1 of the 1040 form to lines 3 and 6 of Schedule 1 and box 14 (code A) of Schedule K-1 (Form 1065) as an option for determining the income earned from work. But when the values of lines 3 or 6 or box 14 are negative, this will reduce the total and can wrongly affect the Social Security allowance. If values from lines 3 or 6 or box 14 are negative, treat them as zero when deter- mining the income earned from work.

You would report income. The assets do not technically belong to you, correct? You just make (or lose) money from them?

The income/loss flows directly to the tax return from the K-1. I am trying determine if the partnerships are reported as assets under the FAFSA asset definition. I have seen a few old reports that they are valued at zero because of the lack of control.

I do not believe that the partnerships are assets for FAFSA purposes. But some may well be & I am not savvy enough to know. See post below.

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However, you should read this to determine whether you are required to report anything as an asset: Small Business Exclusion and Financial Aid. The gentleman who runs is incredibly knowledgeable. I rarely dealt with anyone who had limited partnerships when I worked in financial aid (I worked at schools with little need based aid, and typically those with money to invest in partnerships didn’t qualify for aid).