It is common practice that colleges will review financial information from a Schedule C, K-1, or other sources and add back deductions which are perceived to be paper losses (such as depreciation) or discretionary expenses.
I am sorry that you did not know this, but it appears that there are business deductions that IRS allows but that the UVA would rather not subsidize.
Keep in mind that when people put money back into a business, such as for the purchase of equipment, vehicles, or real estate, they consider it an investment. So they may be able to write off the expenses, but the goal is to make the business more profitable in the future … when IRS will theoretically reap the benefits as well.
But when business owners have children in college, then they are making a choice as to whether to invest dollars into their business or their children’s educations. It could be smart planning for a business owner to reduce their income by investing more $$ to grow their business and at the same time qualify for more need-based aid dollars for their child – but also something that the college might not want to subsidize with its grant dollars.
I understand from your posts that you only have a very small fractional interest in the business, and thus probably no meaningful role in determining how business money is spent … but that still doesn’t change the fact that your son’s college doesn’t want to subsidize those expenses or deductions.
There is such a thing as admit/deny but that really applies to cases where colleges don’t promise to meet need for all students. In your case the problem is that the college doesn’t agree that your “need” is the same as you feel it is --or as shown on your FAFSA.
FAFSA doesn’t consider home equity or assets of a parent-owned business with less than 100 employees – but CSS/IDOC does take information about both.