Overview
In This Section |
This section contains the following topics:
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1. Income Inclusions
Introduction |
This topic contains information on income inclusions, including
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Change Date |
June 30, 2015
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V.iii.1.I.1.a. General Guidelines on Income Inclusions |
The general rule set out at 38 CFR 3.271 is that all income is countable for pension purposes unless specifically excluded by 38 CFR 3.272.
The following types of income are all countable income for pension purposes:
This topic describes additional sources of income that are countable.
Note: When a Veteran’s death occurred before December 10, 2004, any insurance proceeds received after December 9, 2004, must be excluded from income for VA purposes (IVAP).
Questions: If questions arise about how to handle specific types of income, the Veterans Service Center (VSC) or pension management center (PMC) question coordinator should contact the Pension Policy & Procedure Mailbox atVAVBAWAS/CO/PENSION POL & PROC.
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V.iii.1.l.1.h. Waived Income |
If a beneficiary is entitled to receive income, such as a retirement benefit, but waives the income, the amount that would be received if not for the waiver still counts as income as described in 38 CFR 3.276(b).
The intent of this provision is to prevent a person from creating a need for pension.
Exception: If a claimant withdraws a Social Security application after a finding of entitlement to Social Security so as to maintain eligibility for an unreduced Social Security benefit on attainment of a certain age, such as age 65, do not regard the withdrawal as a waiver under 38 CFR 3.276(a).
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V.iii.1.l.1.i. Gains From Gambling |
Count net winnings from gambling as income.
Note: Gambling losses may be deducted from gross winnings during the same year to arrive at net gambling income.
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V.iii.1.l.1.k. Income From Joint Accounts |
Count income from joint bank accounts or from other jointly owned property in proportion to the claimant’s ownership share, per 38 CFR 3.271(d).
Example: A surviving spouse has a joint bank account with her nephew. One half of the interest earned by the joint account is countable income for the surviving spouse.
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V.iii.1.l.1.n. Child Support Payments |
Count child support payments as income of the custodial parent if they are payable to the custodial parent.
Do not count the child support payments as income of the child as the income is not eligible to be subject to a hardship deduction under 38 CFR 3.23(d)(6) and 38 CFR 3.272(m).
Reference: For more information on hardship deductions from a child’s income, see M21-1, Part V, Subpart iii, 1.G.10.
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2. Income Inclusions from Government Programs
Introduction |
This topic contains information on income inclusions from government programs, including
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Change Date |
June 30, 2015
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V.iii.1.l.2.a. Social Security Lump-Sum Death Benefit |
Count the Social Security lump-sum death benefit for one year beginning the first day of the month after the month in which it was received.
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V.iii.1.l.2.d. VA Pension Benefits |
Generally, do not count VA pension benefits. However, under 38 CFR 3.700(a)(4), a Veteran receiving pension is barred from receiving any other pension benefit, such as Section 306 Pension as a surviving spouse.
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V.iii.1.l.2.h. Vietnam Era Bonus Payments |
Count Vietnam Era bonus payments.
Exception: Do not count the payment if eligibility for the bonus is based on the need of the beneficiary.
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3. Income Exclusions
Introduction |
This topic contains information on income exclusions, including
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Change Date |
June 30, 2015
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V.iii.1.l.3.a. General Guidelines on Income Exclusions |
Certain items are not countable for pension purposes, either because they are
Note: VA will not count payments if Federal law requires that they be excluded from income and/or net worth for purposes of VA benefit calculations, regardless of whether the payment or program is specified in
Questions: If questions arise about how to handle specific types of income, the VSC or PMC question coordinator should e-mail the Pension Policy & Procedure Mailbox at VAVBAWAS/CO/PENSION POL & PROC.
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V.iii.1.l.3.b. Welfare, SSI, SSI Windfall, and Drug Discounts Received Under the MMA |
In general, do not count any type of benefit for which eligibility is based on the claimant’s financial need, such as Welfare, Supplemental Security Income (SSI), and savings from prescription drug discounts received under the Medicare Prescription Medication, Improvement, and Modernization Act (MMA).
Note: This also applies to any SSI Windfall income that is received. SSI Windfalloccurs when an individual receives SSI payments, and the Social Security Administration (SSA) subsequently determines that the individual was actually entitled to regular Social Security benefits. SSA converts the SSI payments to regular Social Security payments, and lists the income as SSI Windfall.
Exception: SSI payments and SSI Windfall payments are considered countable income for Old Law Pension.
Reference: For more information on this exclusion, see 38 CFR 3.272(a).
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V.iii.1.l.3.d. Income Tax Refunds |
Do not count income tax refunds, including the Federal Earned Income Credit.
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V.iii.1.l.3.h. Payments to Foster Parents |
Do not count as income payments made by a State or subdivision of a State to foster parents for care of foster children.
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V.iii.1.l.3.i. Survivor Benefit Annuity |
Do not count Survivor Benefit Annuity amounts paid by the Department of Defense (DoD) under Public Law (PL) 100-456 to the surviving spouse of a Veteran who died prior to November 1, 1953, per 38 CFR 3.272(n).
Exception: The following DoD annuity payments are countable as income:
References: For more information on
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V.iii.1.l.3.n. VA Pension as an Accrued Benefit |
Do not count VA pension that is paid as an accrued benefit.
In Martin v. Brown, 17 Vet. App. 196 (1994), the Court held that when pension benefits are paid as an accrued benefit, that payment meets the pension-income-exclusion provision of 38 U.S.C. 1503(a)(2), and, therefore, is not IVAP.
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V.iii.1.l.3.o. MOD Payment to Surviving Spouse |
Do not count the Veteran’s month-of-death (MOD) payment as income on a surviving spouse’s Survivors Pension award.
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V.iii.1.l.3.q. Joint Accounts |
If a joint owner of property, such as a bank account, acquires the other joint owner’s share because of the death of that person, do not count the amount acquired, per 38 CFR 3.272(f).
Exception: If one joint owner transfers his/her share of property to another joint owner (pension claimant) during the transferor’s lifetime, the amount acquired is countable as a gift of property.
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V.iii.1.l.3.r. Withdrawals From Bank Accounts and Certificates of Deposit |
Do not count withdrawals from regular bank accounts and certificates of deposit, as they do not constitute income events because the
Exception: If the assets are in an IRA or other retirement account, apply the provisions in M21-1, Part V, Subpart iii, 1.I.1.c.
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V.iii.1.l.3.s. AmeriCorps Program Payments |
Do not count as income any of the following types of payments received by participants in an AmeriCorps program under the National and Community Service State grant program:
An AmeriCorps program is any program that receives approved AmeriCorps positions or Corporation funds under 42 U.S.C. 12571.
Reference: For more information on payments excluded by Federal statutes, seeM21-1, Part V, Subpart iii, 1.I.11.
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V.iii.1.l.3.t. Scholarships and Grants for School Attendance |
Do not count scholarships and grants earmarked for specific educational purposes, provided that the payments are actually used for school purposes, such as tuition or fees.
Exception: Any amounts in excess of amounts actually paid for school expenses are countable income.
Reference: For information on educational expenses that may be deducted from income, see M21-1, Part V, Subpart iii, 1.G.8.
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V.iii.1.l.3.u. Proceeds of Cashed-In Life Insurance Policies |
Do not count the proceeds of cashed-in life insurance policies as income.
Rationale: Such proceeds are considered profit realized from the disposition of real or personal property, which is excluded under 38 CFR 3.272(e).
Reference: For more information on this exclusion, see
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V.iii.1.l.3.v. Proceeds of Life Insurance Policies Received After December 9, 2004 |
Under Public Law 108-454, do not count the lump sum proceeds of a life insurance policy on a Veteran who dies after December 9, 2004.
Reference: For more information on this exclusion, see 38 CFR 3.272(x).
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V.iii.1.l.3.w. Proceeds of Cashed-In Savings Bonds |
Do not count the proceeds of cashed-in savings bonds as income.
Rationale: Such proceeds are considered profit realized from the disposition of real or personal property, which is excluded under 38 CFR 3.272(e).
Important: Some savings bonds, such as Series HH U.S. Savings Bonds and some State or municipal bonds, pay interest to the holder without requiring the holder to redeem the bond. If interest is paid without redemption of the bond, the interest is countable income.
Reference: For more information on this exclusion, see
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V.iii.1.l.3.x. Payments to Veterans From a State or Municipality due to Injury or Disease |
Exclude up to $5,000.00 per year of income from a State or municipality that is paid to the Veteran as a Veterans’ benefit due to injury or disease when determining annual income for Veterans Pension benefits.
Note: This applies to determinations of annual income for calendar years beginning January 1, 2012.
Reference: For more information on this exclusion, see 38 U.S.C. 1503(a)(11).
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4. Living/Home Income Exclusions
Introduction |
This topic contains information on living/home income exclusions, including
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Change Date |
May 20, 2011
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V.iii.1.l.4.c. California State Renter’s Credit |
Do not count California State Renter’s Credit, as it is considered to be a welfare payment, per 38 CFR 3.272(a).
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V.iii.1.l.4.d. Farmers Home Administration Construction Grants |
Do not count grants made by the Farmers Home Administration to needy families in rural areas for repairs or improvements to structures.
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5. Disaster Income Exclusions
Introduction |
This topic contains information on disaster income exclusions, including
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Change Date |
June 30, 2015
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V.iii.1.l.5.a. Proceeds of Casualty Insurance Received Prior to February 2, 2013 |
Do not count the amount received from an insurance policy when a claimant loses property due to fire, flood, theft, or other casualty loss as long as it does not exceed the value of the lost property, per 38 CFR 3.272(d).
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V.iii.1.l.5.b. Proceeds of Casualty Insurance Received on or After February 2, 2013 |
In general, do not count any reimbursement income received from an insurance company, other than for personal injury. This exclusion applies only to loss or damage to property and does not apply to personal injury.
Important: Exclude proceeds of casualty insurance from net worth unless evidence of record shows that the beneficiary has no intention of using the money received as reimbursement for property loss to repair or replace that property. Request documentation showing the beneficiary’s commitment to replace or repair the property if needed.
Notes:
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V.iii.1.l.5.c. Disaster Relief Payments |
Do not count voluntary payments in the nature of relief after widespread national disaster, such as floods and hurricanes, as they are considered to be welfare under38 CFR 3.272(a).
Exception: This exclusion does not apply to disaster relief payments made in a commercial context, such as drought relief to farmers. If the operator of a business receives disaster relief, it must be treated as any other business income.
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6. Death and Disability Income Exclusions
Introduction |
This topic contains information on death and disability income exclusions, including
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Change Date |
May 20, 2011
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V.iii.1.l.6.a. RECA Payments |
Do not count payments received under the Radiation Exposure Compensation Act (RECA).
Reference: For more information on this exclusion, see PL 101-426.
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V.iii.1.l.6.b. Payments for Participation in a Program of Rehabilitative Services |
Do not count payments made as a result of a claimant’s participation in a therapeutic or rehabilitation activity under 38 U.S.C. 1718, per 38 CFR 3.272(l).
Prior to November 4, 1992, this exclusion applied only to therapeutic and rehabilitation activities under the auspices of a VA medical center.
PL 102-585, which was effective November 4, 1992, extends the exclusion to rehabilitative services programs furnished in State homes recognized by VA to provide care to Veterans in order to receive per diem payments.
Reference: For a list of State homes recognized by VA, see the following websites:
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V.iii.1.l.6.d. Provisional Income |
Do not count any awarded benefits, such as Black Lung benefits, if
VA must receive satisfactory evidence of repayment within the time limit specified in 38 CFR 3.660(b) for amending an income report.
Exception: If the claimant repays less than the total amount awarded, count the difference between the amount awarded and the amount repaid.
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V.iii.1.l.6.e. VA Burial Benefits |
Do not count VA burial benefits.
Note: If a beneficiary claims a final expense deduction and subsequently receives VA burial benefits as reimbursement for paying those same expenses, adjust the award.
Reference: For more information about VA burial expenses, see M21-1, Part V, Subpart iii, 1.G .6.c.
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7. Income From a Mortgage or Contract for Deed
Introduction |
This topic contains information on income from a mortgage or contract for deed, including
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Change Date |
May 20, 2011
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V.iii.1.l.7.b. Applying the General Principles of Income From a Mortgage or Contract for Deed |
The general principles of income from a mortgage or contract for deed apply when the VA claimant
If the VA claimant is both the seller of property and the holder of the mortgage or contract for deed, sale-of-property rules apply.
Reference: For information about the sale-of-property rules, see M21-1, Part V, Subpart iii, 1.I.9.
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8. Indian Income
Introduction |
This topic contains information on Indian income, including
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Change Date |
June 30, 2015
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V.iii.1.l.8.a. General Information on Indian Income |
American Indians may receive a variety of unique types of income. Often the Federal government is the direct or indirect source of this income and complex treaties and Federal statutes govern payments.
This topic attempts to summarize VA’s approach to counting various types of income received by Indian beneficiaries. However, it is recognized that other types of Indian income not covered here will be encountered. When this happens, contact the Pension Policy & Procedures mailbox at VAVBAWAS/CO/PENSION POL & PROC for guidance.
Reference: For more information on payments excluded by Federal statutes, seeM21-1, Part V, Subpart iii, 1.I.11.
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V.iii.1.l.8.b. Determining if Indian Income Is Countable |
Use the table below as a suggested analytical approach to determining if Indian income is countable for pension purposes.
Reference: For more information on payments excluded by Federal statutes, seeM21-1, Part V, Subpart iii, 1.I.11.
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V.iii.1.l.8.c. Income From Gaming on Indian Trust Lands |
In VAOPGCPREC 21-1997, the General Counsel held that amounts received by an individual pursuant to a per capita distribution of proceeds from gaming on Indian trust lands are considered IVAP.
The General Counsel noted that gaming proceeds are not
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V.iii.1.l.8.d. Conversion of Assets Theory – Compensation for Lost Indian Land |
Under 38 U.S.C. 1503(a)(6), profit from the sale of property is not countable income. The General Counsel has held that the underlying rationale is to exclude income from transactions that represent a mere conversion of assets from one form to another.
Applying the same reasoning, the General Counsel determined that any income received by Indians as compensation for lost land or other lost property is excludable on a conversion of assets theory. This exclusion encompasses and goes beyond the exclusion described in M21-1, Part V, Subpart iii, 1.I.9.c.
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V.iii.1.l.8.e. Business or Investment Income of Indian Tribes |
In some instances, distributions to Indian tribes that are intended to compensate the tribe for lost land are invested to produce income or are used to establish tribal businesses or native corporations. Individual Indians will in turn receive dividends or distributions from the business operations of these entities.
These types of distributions are IVAP, even though the funds for establishment of the business were intended to compensate the tribe for lost land or other property. The conversion of assets exclusion applies only to compensatory transfers. It does not apply to secondary income generated from the amount transferred as compensation.
Note: The Alaska Native Claims Settlement Act, PL 103-446, Section 506provides that profits of native businesses (cash dividends on stock received from a Native Corporation) are excluded up to $2,000 per year, per individual.
Reference: For more information on payments excluded by Federal statutes, seeM21-1, Part V, Subpart iii, 1.I.11.
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V.iii.1.l.8.f. Exclusionary Language in Specific Legislation – Payments to Indian Tribes |
Legislation providing for payments to Indian tribes may include provisions such as the following: Distributions under this Act shall not be considered income for purposes of any Federal benefit program.
If a beneficiary claims exclusion of income on this basis, first determine if the income is otherwise excludable. If it is not, e-mail the Pension Policy & Procedures Mailbox at VAVBAWAS/CO/PENSION POL & PROC for guidance.
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9. Income From the Sale of Property
Introduction |
This topic contains information on the impact of the sale of property for pension purposes, including
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Change Date |
May 20, 2011
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V.iii.1.l.9.a. Impact of the Sale of Property on Pension Benefits |
Income received from the sale of property is viewed as a conversion of assets and is not countable income for pension purposes, unless the
Note: Only the interest received from a conversion of assets is considered income for pension purposes; however, VA includes the entire amount from the sale of property when determining the net worth of a pension beneficiary.
Reference: For more information on
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V.iii.1.l.9.c. Sale of Property in the Course of Business |
If a beneficiary who operates a business sells property or merchandise in connection with the business, add any profit received from the sale of the property to the other income of the business.
Reference: For information on deductions from gross business income, see M21-1, Part V, Subpart iii, 1.G.11.a.
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V.iii.1.l.9.d. Counting Income From Installment Sales |
If a claimant or dependent sells property and receives payment in installments, count as income any amounts received over and above the sales price, but not until an amount equal to the sales price has been received by the seller.
Note: This principle applies regardless of whether the sale occurred before or after the date of entitlement to pension.
Reference: For information on the impact of installment sales on Section 306 or Old Law Pension, see M21-1, Part V, Subpart iii, 1.C.7.
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10. Asset Transfers and Life Estates: Effect on Net Worth and Income
Introduction |
This topic contains information on the effect of asset transfers, and the income associated with asset transfers, on pension benefits, including
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Change Date |
May 20, 2011
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V.iii.1.l.10.b. When a Claimant Transfers Property but Takes Income From the Property |
If a transferee takes legal title to the property and receives income from the property, a true transfer is deemed to have occurred. However, if the transferee turns income from the property back to the claimant, the income is countable under38 CFR 3.271 as a gift of money.
Reference: For more information, see 38 CFR 3.276(b).
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V.iii.1.l.10.h. Life Estate and a Claimant’s Net Worth |
When a claimant transfers an interest in property to someone other than a relative residing in the claimant’s household, retaining a life estate in the property, 38 CFR 3.276(b) requires that the transfer be disregarded in determining the claimant’s net worth for pension purposes, unless the right to ownership (control) is relinquished.
This requirement is due to the fact that the life tenant retains ownership interest in the property during his/her lifetime.
Note: If necessary, request a copy of the life estate to determine whether the right to ownership of the property has been relinquished.
Reference: For more information on the effect of property held as a life estate on pension eligibility, see VAOPGCPREC 15-1992.
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11. Exhibits: Payments Excluded by Federal Statutes in Calculating Income and/or Net Worth
Introduction |
This topic contains information on payments excluded by Federal Statutes in calculating income and/or net worth, including payments excluded for
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Change Date |
May 20, 2011
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V.iii.1.l.11.b. Exhibit 2: Payments Excluded for current-law Pension and Parents’ DIC Only |
The table below shows the payments that are excluded by Federal statutes in calculating income and/or net worth for current-law pension and Parents’ DIC only.
Note: VA will not count payments if Federal law requires that they be excluded from income and/or net worth for current-law pension and Parents’ DIC, regardless of whether the program or payment is listed in Exhibit 2.
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Change-June-30-2015-Transmittal-Sheet-M21-1MRV_iii_1_SecI_TS.doc | May 20, 2019 | 75 KB |
Transmittal-Sheet-M21-1MRV_iii_1_TS.doc | May 20, 2019 | 93 KB |
Transmittal-Sheet-pt05_sp03_TS_2-3-11.doc | May 20, 2019 | 108 KB |
Transmittal-Sheet-pt05_sp03_TS_2-3-11.doc | May 20, 2019 | 108 KB |
Transmittal-Sheet-02_13_07.doc | May 20, 2019 | 55 KB |
in Chapter 1 The Effect of Income and Net Worth on Pension and Parents Dependency and Indemnity Compensation (DIC), Part V Pension and Parents Dependency and Indemnity Compensation (DIC), Subpart iii Authorization issues
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