Buying Resale - Sell points and rent to book Riviera

[A_Johnson]

We are looking at buying a our first contract as a resale (location TBD - but likely not Riv). I was thinking about the Riviera booking restrictions and wondering...If I buy a resale contract for BLT or PVB but then one year want to stay at Riviera, couldn't I just rent out my points and then rent from someone who can book Riviera for me? Seems like this could be a viable option for getting around the resale booking restriction even if maybe I have to rent my points out for slightly less than what I have to pay for RIV points.

 

[Disney.dad]

We are looking at buying an our first contract as a resale (location TBD - but likely not Riv). I was thinking about the Riviera booking restrictions and wondering...If I buy a resale contract for BLT or PVB but then one year want to stay at Riviera, couldn't I just rent out my points and then rent from someone who can book Riviera for me? Seems like this could be a viable option for getting around the resale booking restriction even if maybe I have to rent my points out for slightly less than what I have to pay for RIV points.

It can be a very valid strategy. You can definitely do it in 2 parts, rent either on your own or thru a rental agency and then rent either thru an agency or by an owner directly. I know of at least 1 company that has a swap program that I am almost sure would let you use rental credits without taking the cash and booking one of their DVC rentals from someone else. Doing a swap avoids the income tax implications of the rental where you would lose a ton of ground depending on your tax bracket you are in.

 

[marmentrout85]

This would definitely be a viable option and probably something we'll end up doing down the road for future resorts like Lakeshore Lodge.

 

[Tatebeck]

Yeah, it will work. Just takes some extra effort to do and you lose a bit of value on the points each time you do it. But if you get a great resale deal it may not matter much if you only do it occasionally to get into a newer resort.

 

[A_Johnson]

It can be a very valid strategy. You can definitely do it in 2 parts, rent either on your own or thru a rental agency and then rent either thru an agency or by an owner directly. I know of at least 1 company that has a swap program that I am almost sure would let you use rental credits without taking the cash and booking one of their DVC rentals from someone else. Doing a swap avoids the income tax implications of the rental where you would lose a ton of ground depending on your tax bracket you are in.

Ah didn't think of tax implications on income from renting out points. I'm sure a 3rd party rental company would take a spread on the point swap, so I'd have to do some math on which option would be a better value - might be a negligible difference on 150-200 points.

 

[AstroBlasters]

It can be a very valid strategy. You can definitely do it in 2 parts, rent either on your own or thru a rental agency and then rent either thru an agency or by an owner directly. I know of at least 1 company that has a swap program that I am almost sure would let you use rental credits without taking the cash and booking one of their DVC rentals from someone else. Doing a swap avoids the income tax implications of the rental where you would lose a ton of ground depending on your tax bracket you are in.

Rental credits would be the way to go.

 

[ShaneDJ]

Easier just to buy RIV direct points.

Costs more, but then you control your reservations and avoid the hassles of renting.

 

[Brian Noble]

I'd check with my tax accountant about point swaps. The brokers' have a vested interest in participants treating them as if they were untaxed, but the IRS generally considers barter exchanges to be a taxable event. Granted, the brokers are not about to file a 1099-B but still.

 

[atthebeachclub]

I'd check with my tax accountant about point swaps. The brokers' have a vested interest in participants treating them as if they were untaxed, but the IRS generally considers barter exchanges to be a taxable event. Granted, the brokers are not about to file a 1099-B but still.

I agree; I don’t think these are technically “untaxed” per my previous reading of IRS rules (I had hoped to do a barter for work done with our dentist at one time, but the IRS unfortunately indicates this isn’t possible). I think the point owner just won’t get reported earnings statements but they are still responsible for reporting themselves.

 

[Tatebeck]

If it's a vacation swap, IMO it would just be like using your points in the world collection, or for a cruise, or putting them in Interval International to use at one of their resorts. You use your points to get a vacation somewhere else. I have never heard of anyone paying taxes on the "value" of the trip they got after using their point in any of those cases. And I'm sure the IRS would be going after these big swap partnerships as it would be easy money if it truly was taxable.

 

[atthebeachclub]

If it's a vacation swap, IMO it would just be like using your points in the world collection, or for a cruise, or putting them in Interval International to use at one of their resorts. You use your points to get a vacation somewhere else. I have never heard of anyone paying taxes on the "value" of the trip they got after using their point in any of those cases. And I'm sure the IRS would be going after these big swap partnerships as it would be easy money if it truly was taxable.

Good points…

 

[Tatebeck]

Basically you are making change. If I give you $2000 worth of $20 bills and you give me $2000 worth of $100 bills, no one has gained anything, we just swapped even values of a similar product. Income was net zero for everyone involved.

From : https://www.crowell.com/en/insights/publications/barter-exchange-reporting-relief

"Thus, both parties to a barter transaction will have income to the extent of the value of the property or services exchanged. Assuming that services are exchanged in an arm's-length transaction, the amount of income inclusion to each party should be the same, and should reflect the fair market value of the goods or services exchanged. Furthermore, assuming that the transaction is in all respects a business transaction, both parties probably also have offsetting business deductions in the same amount. The timing of the deduction may be delayed in some cases due to a capitalization requirement, or may be delayed because of certain tax accounting rules (including the "economic performance" rule). In the typical case, however, the deduction may be fully available in the same tax year as the year in which the income is recognized, which means that both parties may have no net income from the transaction, regardless of the valuation of the property or services exchanged"

Income $2000 and deduction/cost $2000. Profit $0

 

[Ruttangel]

You can do this, just as you could for VDH, CFW etc…. Is it worth the hassle though, up to you, personally I’m not a fan of RIV as a hotel but the food is really good at QS and Topolinos

 

[Brian Noble]

Basically you are making change.

I am not sure this is true. The value of the points might be $20, but the cost to me is less than that, and the difference strikes me as reportable income, whether in cash or in trade. If that weren't the case, rentals would also be net zero, and I think most of us agree that they are not.

But, I am not an accountant, nor did I sleep at a Holiday Inn at night. This is why I pay a professional, and I'd ask them for their opinion if I were contemplating a point swap.

 

[Tatebeck]

I am not sure this is true. The value of the points might be $20, but the cost to me is less than that, and the difference strikes me as reportable income, whether in cash or in trade. If that weren't the case, rentals would also be net zero, and I think most of us agree that they are not.

But, I am not an accountant, nor did I sleep at a Holiday Inn at night. This is why I pay a professional, and I'd ask them for their opinion if I were contemplating a point swap.

It in no way would imply that rentals would be net zero. Rentals are different than barters/swaps.

Selling something or renting something is putting the value you receive against your cost. Income gained (Value) vs cost
Bartering puts the value of what you are receiving vs the the value of what you give up. Value vs Value

By design, we are given a discount on DVC rooms because we are buying into that product. That value does not come into effect as any kind of net gain unless we rent or sell.

Say you really want a certain fancy blue bike that normally costs $1000 , but they have a really good sale on the same bike but they only had it in red at $500. So you buy the red one. Then after the sale is over you end up finding someone that has the blue bike but really wanted red so you do a straight swap. The VALUE of both bikes would be the same. You did not MAKE $500 by finding a blue bike to swap. You ended up getting the blue bike for $500. It sort of rolls the cost basis over to the new trade. And it doesn't come into play as income unless you end up selling or renting the bike after the swap. Only in a case of obvious value difference (like trading the bike for a car with one side gaining more value than the other) would tax come into play

So we get a really good deal as DVC members by buying into it, then we swap for a different vacation at the same value (but we got our DVC on sale). If we were to turn around and sell/rent the swap we received then we would have to use the cost of our points we used to determine how much income we actually had.

A discount is not income and is not taxable unless you use that discount to generate income. This is how I believe the swaps, cruise program, Interval International, etc are able to do it.

 

[Sandisw]

If it's a vacation swap, IMO it would just be like using your points in the world collection, or for a cruise, or putting them in Interval International to use at one of their resorts. You use your points to get a vacation somewhere else. I have never heard of anyone paying taxes on the "value" of the trip they got after using their point in any of those cases. And I'm sure the IRS would be going after these big swap partnerships as it would be easy money if it truly was taxable.

The big difference though is that the swaps through the exchange programs are not rentals and never become them.

Your points are used to book something else directly via the exchange.

When you swap via a broker, it’s completely different because your actual points are used for a rental and you agree to use your payment for the broker to act like a travel agent…which they end up earning commission on too.

 

[Tatebeck]

The big difference though is that the swaps through the exchange programs are not rentals and never become them.

Your points are used to book something else directly via the exchange.

When you swap via a broker, it’s completely different because your actual points are used for a rental and you agree to use your payment for the broker to act like a travel agent…which they end up earning commission on too.

What do you think Disney does with the points you give them for a cruise? They sell them or use them to rent out a reservation. And what do you think interval international does with them? They get a reservation that they then rent out. All the points we turn in or swap become a rental eventually.

Saying that it would be okay for company A and company B to do it with no tax burden but then saying that company C cannot do basically the same thing would be ridiculous

 

[Sandisw]

What do you think Disney does with the points you give them for a cruise? They sell them or use them to rent out a reservation. And what do you think interval international does with them? They get a reservation that they then rent out. All the points we turn in or swap become a rental eventually.

Saying that it would be okay for company A and company B to do it with no tax burden but then saying that company C cannot do basically the same thing would be ridiculous

Of course, DVC rents them when you trade, but we , the owners have nothing to do with the actual rental, so we?

There is never a renters reservation on our account.

Now, if an owner transfers points to a broker, and then the broker rents them, and books the cruise, I agree it matches what Disney does .

But in this case, that is not what happens. You rent a reservation and instead of the broker paying you directly, they act as a TA and just pay the company on your behalf with your rental proceeds.

So, when it comes to whether or not someone earned rental proceeds, they do…whether or not they use it to book the cruise directly with the TA arm of the broker.

How would it be different than any owner who rents, and instead if having the renter pay them directly, they send it to a friend and then the friend books them a cruise? Or they have a different TA do it?

Again, my comment is not about the broker or DVC, I am talking about whether an owner is only liable for taxes if the actual money hits their account.

IMO, if you earn rental proceeds, you’ve earned them, regardless of what you did with those proceeds.

 

[Tatebeck]

Of course, DVC rents them when you trade, but we , the owners have nothing to do with the actual rental, so we?

There is never a renters reservation on our account.

Now, if an owner transfers points to a broker, and then the broker rents them, and books the cruise, I agree it matches what Disney does .

But in this case, that is not what happens. You rent a reservation and instead of the broker paying you directly, they act as a TA and just pay the company on your behalf with your rental proceeds.

So, when it comes to whether or not someone earned rental proceeds, they do…whether or not they use it to book the cruise directly with the TA arm of the broker.

How would it be different than any owner who rents, and instead if having the renter pay them directly, they send it to a friend and then the friend books them a cruise? Or they have a different TA do it?

Again, my comment is not about the broker or DVC, I am talking about whether an owner is only liable for taxes if the actual money hits their account.

IMO, if you earn rental proceeds, you’ve earned them, regardless of what you did with those proceeds.

It doesn't matter if it is DVC making a reservation then renting it out themselves or if it is the member making the reservation then using a swap company. DVC members are explicitly allowed to rent.

Again what do you think Disney is doing when you use points for a cruise, etc. They are using the money brought in from the rental from those points to cover your cruise!

There is a very real difference between trading/bartering something vs selling one thing and renting another in a separate transaction.

The member whom the points come from for swaps do not, by definition, have any proceeds. The definition of proceeds is: "money obtained from an event or activity." If you have obtained no actual money, you have obtained no proceeds. The company(s) in the middle (Disney, a swap company, Interval International, etc) are the only ones in the scenario who have proceeds.

 

[Sandisw]

It doesn't matter if it is DVC making a reservation then renting it out themselves or if it is the member making the reservation then using a swap company. DVC members are explicitly allowed to rent.

Again what do you think Disney is doing when you use points for a cruise, etc. They are using the money brought in from the rental from those points to cover your cruise!

There is a very real difference between trading/bartering something vs selling one thing and renting another in a separate transaction.

The member whom the points come from for swaps do not, by definition, have any proceeds. The definition of proceeds is: "money obtained from an event or activity." If you have obtained no actual money, you have obtained no proceeds. The company(s) in the middle (Disney, a swap company, Interval International, etc) are the only ones in the scenario who have proceeds.

I simply don’t agree an owner isn’t liable for taxes since I don’t consider this a barter situation since the broker is not trading the owner something they own, since there is a rental and a cruise company involved.

Good thing is I don’t rent and since I work in travel, I don’t need to worry!