CanadaDisney05
DIS Veteran
- Joined
- Mar 20, 2017
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We started going down this path in another thread, but I figured it would get more direct traffic in it's own thread. I've seen a couple of threads, where people say that you cannot claim depreciation of the purchase price on rental income because there are specific rules for timeshares. Does anyone have a link to something official from the IRS? I have not been able to track anything down.
In my uneducated opinion, I would assume that because DVC is a right-to-use (instead of deeded) timeshare, it would be similar to any other lease. Unlike a deeded timeshare where you own a stake in the property indefinitely, a right-to-use timeshare is effectively a lease to use the property for a period of time based on the point charts. You wouldn't be able to deduct depreciation using the IRS depreciation table (because you don't really own anything), but you should be able to recover the cost paid per point leased. In other words, if you paid $20,000 for a 150 point contract that had 25 years remaining, you effectively leased 3,750 total points for $20,000, or $5.33 per point. It would only make sense that you can claim $5.33 per point on top of the per point maintenance fees you paid.
At the end of the day, you paid X + 25Y = Z for the right to use that property for a period of time, where X = upfront cost, Y = maintenance fees, and Z = Total Cost. It would be illogical if you can deduct Y but not X.
Edit:
From the link below, I found the following quotes interesting
https://www.irs.gov/publications/p527#en_US_2018_publink1000218995
In my uneducated opinion, I would assume that because DVC is a right-to-use (instead of deeded) timeshare, it would be similar to any other lease. Unlike a deeded timeshare where you own a stake in the property indefinitely, a right-to-use timeshare is effectively a lease to use the property for a period of time based on the point charts. You wouldn't be able to deduct depreciation using the IRS depreciation table (because you don't really own anything), but you should be able to recover the cost paid per point leased. In other words, if you paid $20,000 for a 150 point contract that had 25 years remaining, you effectively leased 3,750 total points for $20,000, or $5.33 per point. It would only make sense that you can claim $5.33 per point on top of the per point maintenance fees you paid.
At the end of the day, you paid X + 25Y = Z for the right to use that property for a period of time, where X = upfront cost, Y = maintenance fees, and Z = Total Cost. It would be illogical if you can deduct Y but not X.
Edit:
From the link below, I found the following quotes interesting
https://www.irs.gov/publications/p527#en_US_2018_publink1000218995
Rental of property.
You can deduct the rent you pay for property that you use for rental purposes. If you buy a leasehold for rental purposes, you can deduct an equal part of the cost each year over the term of the lease.
Personal use of rental property.
If you sometimes use your rental property for personal purposes, you must divide your expenses between rental and personal use. Also, your rental expense deductions may be limited. See chapter 5, Personal Use of Dwelling Unit (Including Vacation Home).
A dwelling unit doesn’t include property (or part of the property) used solely as a hotel, motel, inn, or similar establishment. Property is used solely as a hotel, motel, inn, or similar establishment if it is regularly available for occupancy by paying customers and isn’t used by an owner as a home during the year.
Property used for personal purposes.
If you do use a dwelling unit for personal purposes, then how you report your rental income and expenses depends on whether you used the dwelling unit as a home.
Not used as a home.
If you use a dwelling unit for personal purposes, but not as a home, report all the rental income in your income. Because you used the dwelling unit for personal purposes, you must divide your expenses between the rental use and the personal use as described earlier in this chapter under Dividing Expenses . The expenses for personal use aren’t deductible as rental expenses.
Your deductible rental expenses can be more than your gross rental income; however, see Limits on Rental Losses in chapter 3.
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