Buying Resale - Sell points and rent to book Riviera

[Tatebeck]

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.

They buy it (they now own it) and then give it to you in exchange for what you have. In your example Interval International exchanges would have to be taxed on almost every swap since they "do not own" what they are giving to members, they are often swapping stays between different owners. But they aren't.

Members would definitely be liable for taxes on the proceeds if they rented out for money (minus their costs). But not if they do a swap

 

[Sandisw]

They buy it (they now own it) and then give it to you in exchange for what you have.

Not how booking a cruise works for travel agents.

Obviously the broker believes the owner doesn’t have to pay taxes….this is simply my opinion that it doesn’t fall under bartering and thus, taxes owed would be the same.

 

[Tatebeck]

Not how booking a cruise works for travel agents.

Obviously the broker believes the owner doesn’t have to pay taxes….this is simply my opinion that it doesn’t fall under bartering and thus, taxes owed would be the same.

They take money that they have. And they use it to buy something. That they then give to you. They bought something to trade for the thing that you already had.

If I want a blue bike, but I already have a red bike. And you want a red bike but they are sold out. If you go buy a blue bike and trade it to me, we traded...

 

[Tatebeck]

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!

When you make a straight up trade for a similar item, you are acquiring the new thing at the cost basis of the previous thing. Otherwise there could be infinite taxes. You can have 3 people trade the same items around in a circle and you would have to pay tax on the value of each item for each trade?? That would be ridiculous.

If we all buy one $5 item and swap them around in a circle 100 times, we did NOT each make $500 in value and we do NOT have to pay taxes on $500 of income. We each have acquired whatever item we have ended up with for $5. If I sell that item for $10 later, then I have made money and must pay tax on $5 of profit.

 

[Tatebeck]

From Paul in this thread: https://www.disboards.com/threads/trade-rent-points-for-dcl-cruise.3889877/

"What I can tell you is that we've invested a lot of time and research into this process and would not be taking the direction we are without feeling that it represents the proper manner to handle these transactions. Owners that elect to utilize our point swap programs will not be receiving a 1099 for those rentals as we believe that is the proper manner of handling that exchange.

It is the same process that Disney is utilizing at the end of the day in allowing the use of points for various other things like cruises, ABD's,etc. It is also the same type of process that allows them to utilize Interval International as an exchange partner."

 

[Girlstar30]

So if we sell our vacations points via one of these places like davids and we turn

From Paul in this thread: https://www.disboards.com/threads/trade-rent-points-for-dcl-cruise.3889877/

"What I can tell you is that we've invested a lot of time and research into this process and would not be taking the direction we are without feeling that it represents the proper manner to handle these transactions. Owners that elect to utilize our point swap programs will not be receiving a 1099 for those rentals as we believe that is the proper manner of handling that exchange.

It is the same process that Disney is utilizing at the end of the day in allowing the use of points for various other things like cruises, ABD's,etc. It is also the same type of process that allows them to utilize Interval International as an exchange partner."

So if we sell our vacations points using Davids or dvc rental store for the purpose of turning around and booking a new hotel room like riv ourselves, is that not taxable because vacations points for hotel were sold to buy points at different hotel according to this logic? I'm just wondering your thoughts because isn't that the same thing these swaps are doing?

 

[Tatebeck]

So if we sell our vacations points via one of these places like davids and we turn



So if we sell our vacations points using Davids or dvc rental store for the purpose of turning around and booking a new hotel room like riv ourselves, is that not taxable because vacations points for hotel were sold to buy points at different hotel according to this logic? I'm just wondering your thoughts because isn't that the same thing these swaps are doing?

Selling/ renting and receiving anything in return that is in cash/check is a hard stop. That closes the transaction and you will have to pay tax if you received more than you paid for the points. The fact that we get a "discount" by buying into DVC is what makes this price difference and ends up costing us in taxes. What you do with the money after that hard stop does not matter, whether you buy a different vacation or something else

All of the swaps, DVC 7 month trading, DVC cruises, world collection, interval international, and third party swaps are acting in a way in which you give your home resort points up in exchange for something else of an equal market value. So now you have got vacation 2 for the price of vacation 1, rolling your discount from DVC over to a different vacation, minus the fees, etc that the exchange take out

 

[Girlstar30]

Selling/ renting and receiving anything in return that is in cash/check is a hard stop. That closes the transaction and you will have to pay tax if you received more than you paid for the points. The fact that we get a "discount" by buying into DVC is what makes this price difference and ends up costing us in taxes. What you do with the money after that hard stop does not matter, whether you buy a different vacation or something else

All of the swaps, DVC 7 month trading, DVC cruises, world collection, interval international, and third party swaps are acting in a way in which you give your home resort points up in exchange for something else of an equal market value. So now you have got vacation 2 for the price of vacation 1, rolling your discount from DVC over to a different vacation, minus the fees, etc that the exchange take out

Thank you I guess it's hard for me to understand having to pay tax if you received more than you paid for the points. Do you have to figure out how much these points are worth year after year based on your contract size? I know it's best to call the experts if the time comes, just like to have an understanding, thanks again!

 

[Sandisw]

From Paul in this thread: https://www.disboards.com/threads/trade-rent-points-for-dcl-cruise.3889877/

"What I can tell you is that we've invested a lot of time and research into this process and would not be taking the direction we are without feeling that it represents the proper manner to handle these transactions. Owners that elect to utilize our point swap programs will not be receiving a 1099 for those rentals as we believe that is the proper manner of handling that exchange.

It is the same process that Disney is utilizing at the end of the day in allowing the use of points for various other things like cruises, ABD's,etc. It is also the same type of process that allows them to utilize Interval International as an exchange partner."

Not sure why you need to keep posting. As I said, my opinion is that I don’t know if the IRS would view it the same way.

I get to have my opinion and since I don’t rent, and I don’t book cruises for my clients this way, it’s no more than that.

If someone wants to use the cruise swap and is comfortable not reporting it as a rental, that’s on them.

By this logic, any owner who rents needs to simply have the money paid to someone else on their behalf who then books them a trip and no one owes taxes at all.

 

[TinkAgainU]

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.

This is true, although I swear doing taxes this week I was thinking "is there even going to be anybody there to check this?" Lucky for the IRS, I'm afraid of them

 

[Tatebeck]

Not sure why you need to keep posting. As I said, my opinion is that I don’t know if the IRS would view it the same way.

I get to have my opinion and since I don’t rent, and I don’t book cruises for my clients this way, it’s no more than that.

If someone wants to use the cruise swap and is comfortable not reporting it as a rental, that’s on them.

By this logic, any owner who rents needs to simply have the money paid to someone else on their behalf who then books them a trip and no one owes taxes at all.

And I am not sure why you keep posting either or why you seem to be calling me out(?) when I am simply trying to get the most correct information out there about how taxes work with rentals vs swapping (as related to this thread). If you keep responding then I will as well to help explain the differences.

Yes anyone can have an opinion on how they think something works. Any anyone's opinion can be wrong once more info is revealed, even my own. In this case my opinion is backed up by numerous companies and how they handle swap opportunities. Which leads me to think that I am correct in how this works.

As to your last point, no that logic does not work. Some things are only allowed to be done by companies, not just any random person. So if you had a friend that wanted to start a travel business and is properly registered, then I think that they might indeed be able to handle swaps for you. But if it is just a random individual, then no I do not think that you can have them try to perform this swap to lower tax burdens.

Example to help someone visualize this:

The absolute closest thing that I can think of to describe something like this (trading in something for a like product as part of a business transaction) is trading in a used car. Have you ever traded in a car?

In most states, if you go to trade in a personal used car as part of purchasing a different car, then the VALUE of that car you trade in is subtracted from the value of the new car for tax purposes, lowering your tax burden on the new car. If your old car happens to have the same value as the car you are trading for from the business, you will in fact not pay taxes on the new car. And you will not be required to list the full value of the car you just traded for as net income. You will still likely have to pay to register the car as that is different and is related to operating the car, not purchasing it.

If you were to sell the car to someone and then buy a new car separately, then the new car will be taxed at full price. This is why sometimes it is better to trade in your old car for less money than someone else is willing to buy it for if the trade in price plus the savings in taxes is more than the price you could sell it for on the private market.

 

[Brian Noble]

Just so I am clear, because I don't think I've seen you say one way or the other: Is this your professional opinion as someone with unlimited representation rights before the IRS?

(Note I am not asking you to render an opinion on my tax situation, nor would I rely upon your answer in any way.)

 

[Tatebeck]

Just so I am clear, because I don't think I've seen you say one way or the other: Is this your professional opinion as someone with unlimited representation rights before the IRS?

(Note I am not asking you to render an opinion on my tax situation, nor would I rely upon your answer in any way.)

Lol No.

I have no representation rights before the IRS.

I am simple stating my opinion on how I believe I think it works for swaps and how all of the companies, whether 1st or 3rd party, are able to offer various swap opportunities without tax implications to the individual timeshare owner. I would think (and am assuming) that these companies include/employ/contract with people more professional than myself, which led them to their opinions and policies.

If it turns out that all of the companies (and me as well) are incorrect, then they will likely go after the large companies where most of the money lies before they go after individual members, and I will adjust my opinion accordingly.

 

[Brian Noble]

Gotcha. As a professor, I am well-trained in stating my opinion as ironclad fact, and game recognizes game.

In other words: I'd still be asking my tax accountant if I were in this position. YMMV.

 

[Tatebeck]

Gotcha. As a professor, I am well-trained in stating my opinion as ironclad fact, and game recognizes game.

In other words: I'd still be asking my tax accountant if I were in this position. YMMV.

I'll admit that I am assuming these large companies have various accountants and tax professionals that have helped determine their current policies. So it is possible that they haven't actually done any of that lol

 

[Brian Noble]

The brokers offering a point swap might have done that. Or they might have given the opinion that happens to make their service appear to be more valuable. Either way, the broker is not my tax accountant, and I'd want my tax accountant to offer an opinion on whether a point swap is a barter transaction (which would potentially have tax consequences), or a service I am buying (which presumably would not).

 

[Sandisw]

And I am not sure why you keep posting either or why you seem to be calling me out(?) when I am simply trying to get the most correct information out there about how taxes work with rentals vs swapping (as related to this thread). If you keep responding then I will as well to help explain the differences.

Yes anyone can have an opinion on how they think something works. Any anyone's opinion can be wrong once more info is revealed, even my own. In this case my opinion is backed up by numerous companies and how they handle swap opportunities. Which leads me to think that I am correct in how this works.

As to your last point, no that logic does not work. Some things are only allowed to be done by companies, not just any random person. So if you had a friend that wanted to start a travel business and is properly registered, then I think that they might indeed be able to handle swaps for you. But if it is just a random individual, then no I do not think that you can have them try to perform this swap to lower tax burdens.

Example to help someone visualize this:

The absolute closest thing that I can think of to describe something like this (trading in something for a like product as part of a business transaction) is trading in a used car. Have you ever traded in a car?

In most states, if you go to trade in a personal used car as part of purchasing a different car, then the VALUE of that car you trade in is subtracted from the value of the new car for tax purposes, lowering your tax burden on the new car. If your old car happens to have the same value as the car you are trading for from the business, you will in fact not pay taxes on the new car. And you will not be required to list the full value of the car you just traded for as net income. You will still likely have to pay to register the car as that is different and is related to operating the car, not purchasing it.

If you were to sell the car to someone and then buy a new car separately, then the new car will be taxed at full price. This is why sometimes it is better to trade in your old car for less money than someone else is willing to buy it for if the trade in price plus the savings in taxes is more than the price you could sell it for on the private market.

I am backing my opinion up with my work as a travel agent and how things work.

And the brokers choosing not to issue a 1099 doesn’t always mean it’s been rentals are not reportable.

That’s all because when you rent on your own, no one is issuing a 1099 and you are required to self report.

So, is the lack of 1099 proof its not taxable or just that the broker, who is acting as both, doesn’t have to issue one in this situation?

That’s is two complex different situations. IIRC, David’s doesn’t issue them.

We can move on because I simply am not convinced that swapping through a broker absolves tax reporting. But, as I said, I don’t do taxes or work with the IRS.

 

[Tatebeck]

I am backing my opinion up with my work as a travel agent and how things work.

And the brokers choosing not to issue a 1099 doesn’t always mean it’s been rentals are not reportable.

That’s all because when you rent on your own, no one is issuing a 1099 and you are required to self report.

So, is the lack of 1099 proof its not taxable or just that the broker, who is acting as both, doesn’t have to issue one in this situation?

That’s is two complex different situations. IIRC, David’s doesn’t issue them.

We can move on because I simply am not convinced that swapping through a broker absolves tax reporting. But, as I said, I don’t do taxes or work with the IRS.

I believe David's doesn't send them out themselves simply because they are a Canadian company, not because they don't think it is taxable. But I believe members do get 1099s now from Paypal (I believe, haven't rented with them myself), as their payment processor is now required to report the payments.

That is fair to mention that they may just not be sending out 1099s even if it is taxable. But then it is important to mention that not only does DVC Rental Store say that they aren't sending a 1099 but they specifically state that there is a "tax benefit". Which they wouldn't (or at least shouldn't) say if they simply do not issue a 1099 but expect you to report it on your own taxes. And that would be odd anyway since they do report normal rentals so why wouldn't they just send them anyway if swaps were considered to have some form of taxable profit.

https://dvcrentalstore.com/blog/tips-for-renting-out-dvc-points/

 

[Sandisw]

I believe David's doesn't send them out themselves simply because they are a Canadian company, not because they don't think it is taxable. But I believe members do get 1099s now from Paypal (I believe, haven't rented with them myself), as their payment processor is now required to report the payments.

I do also think that it is important to mention that not only DVC Rental Store say that they aren't sending a 1099 but they specifically state that there is a "tax benefit". Which they wouldn't (or at least shouldn't) say if they simply do not issue a 1099 but expect you to report it on your own taxes.

https://dvcrentalstore.com/blog/tips-for-renting-out-dvc-points/

Good question and maybe someone who has done it has the documents.

The thing is, though, is that without the 1099, are owners simply not reporting it because they are told it doesn’t count?

Or, do owners report it but because of the swap it is tax neutral so no taxes owed?

Notice they do call it rental income…

There is a big benefit to the rental store to do this because they get to turn around and earn commission from the cruise line which my guess helps to offset the income they are earning.

Lets be fair, though, unless someone gets audited, without a 1099, the IRS doesn’t know so seems like a pretty safe way to structure it.

I’m with Brian…I’d have my tax account to weigh in if I was going to do it.

ETA: If someone was going to do this, I would double check the rates as a cash guest too....because the examples being shown are great compared exchange via DVC...not sure they are always the best deal when it comes to DCL pricing......even paying taxes, one might still come out better booking directly with DCL.