Is renting out points worth it on your taxes?

[Genie+]

In our contracts it says our points have no monetary value. A member can use the points to redeem something else in the system.

 

[Tatebeck]

In our contracts it says our points have no monetary value. A member can use the points to redeem something else in the system.

Yes, thank you.

That is correct, they are merely representative of our ownership and used as tokens under the hood of the system to help visualize the system and book our DVC rooms.

The end DVC renter, whether from Disney, a third party swap, or directly from a member, does not receive any points at all in any form, they simply receive a stay in a certain room for a certain number of nights.

 

[airjay75]

You aren't personally making a reservation in the renters name and renting it, but you are still allowing Disney to rent a reservation out. Your specific points are being used to rent out a room to pay for the cruise. Same as any other swap. You just don't have to make and hold a reservation on your profile for the renter since DVC retakes control of those points like a transfer.

The exact mechanism of how a reservation is booked does not change what you are giving up (DVC points equivalent to a certain stay) or what you receive in exchange (an exact DVC cruise), which are the main deciding factor in whether it becomes taxable it seems.

Basically how you acquire something has no bearing on whether or not a transaction you make with that something later is deemed taxable or not (though it can change how much tax you have to pay, if it is taxable).

When you exchange with Disney, you are relinquishing your vacation points and receiving reservation points (both of which have a zero value in and of themselves). You no longer have dominion or control over those vacation points - whatever they entitled you to under the terms of your DVC ownership is gone. When you "swap" with a broker, you maintain complete and total control over your vacation points and the reservation you made. You could cancel the reservation the day before the renter checks in because they still belong to you. Indicia of ownership is a very significant concept in tax law.

I explained in an earlier post why I think the points exchanges directly with Disney either aren't taxable or, if they are, the amount realized is either zero or a loss - there are a couple of different ways you get there.. That's just not the case with a broker swap. You clearly have income from renting out your points. That income isn't ever directly paid to you by the broker, so they don't issue a 1099. Whether someone wants to report it on their tax return, well, that's up to them.

 

[Sandisw]

You aren't personally making a reservation in the renters name and renting it, but you are still allowing Disney to rent a reservation out. Your specific points are being used to rent out a room to pay for the cruise. Same as any other swap. You just don't have to make and hold a reservation on your profile for the renter since DVC retakes control of those points like a transfer.

The exact mechanism of how a reservation is booked does not change what you are giving up (DVC points equivalent to a certain stay) or what you receive in exchange (an exact DVC cruise), which are the main deciding factor in whether it becomes taxable it seems.

Basically how you acquire something has no bearing on whether or not a transaction you make with that something later is deemed taxable or not (though it can change how much tax you have to pay, if it is taxable).

Actually points are not used to rent the room for cash at all via the DVC exchange program.

That’s the whole point for me…it’s not even close to the same thing.

We can agree to disagree. An exchange program via DVC is not the same thing as a owner renting out a reservation and using the cash to pay for a cruise…even if the broker holds the cash for the owner and makes the payment on their behalf.

 

[mkatsy]

Actually points are not used to rent the room for cash at all via the DVC exchange program.

That’s the whole point for me…it’s not even close to the same thing.

We can agree to disagree. An exchange program via DVC is not the same thing as a owner renting out a reservation and using the cash to pay for a cruise…even if the broker holds the cash for the owner and makes the payment on their behalf.

Intercompany inventory transfer that room moves OUT of DVC inventory and IN to wherever they (Disney) “park” it to sell as cash or offload to Interval International.

 

[Tatebeck]

When you exchange with Disney, you are relinquishing your vacation points and receiving reservation points (both of which have a zero value in and of themselves). You no longer have dominion or control over those vacation points - whatever they entitled you to under the terms of your DVC ownership is gone. When you "swap" with a broker, you maintain complete and total control over your vacation points and the reservation you made. You could cancel the reservation the day before the renter checks in because they still belong to you. Indicia of ownership is a very significant concept in tax law.

I explained in an earlier post why I think the points exchanges directly with Disney either aren't taxable or, if they are, the amount realized is either zero or a loss - there are a couple of different ways you get there.. That's just not the case with a broker swap. You clearly have income from renting out your points. That income isn't ever directly paid to you by the broker, so they don't issue a 1099. Whether someone wants to report it on their tax return, well, that's up to them.

Who controls it before the reservation is used is irrelevant in the end. If you cancelled the reservation then the whole swap/rental would be cancelled and you would receive nothing in exchange. Then be blacklisted from doing it again and be left with points in holding. Good luck with that.

And fyi that's actually not how that works at all with the currency value and barters/swaps. Look up barter exchanges. They run on barter points and/or credits (ie made up currency just like DVC points and reservation points) and what is given into the exchange by member 1 and what is received at the very end by member 2 have to be valued at actual market value in dollars regardless of how many points or barter credits something costs

You can't just make up worthless currencies and convert what you want to swap to that currency to avoid taxes otherwise everyone bartering would be doing it. There are specific rules that don't allow that as a tax workaround.

If it's taxable for one company it would be for all the companies. It just doesn't appear that it is in their opinions.

 

[Tatebeck]

Actually points are not used to rent the room for cash at all via the DVC exchange program.

That’s the whole point for me…it’s not even close to the same thing.

We can agree to disagree. An exchange program via DVC is not the same thing as a owner renting out a reservation and using the cash to pay for a cruise…even if the broker holds the cash for the owner and makes the payment on their behalf.

So once they have your point from the swap you think they just let them sit there and they are never used to book a room for anyone in any way? Huh?

We can just agree to disagree at this point like you say because I don't think that is how that works at all. If you are being super technical no one is ever using points anyway if that is what you are getting at, just using their partial deeded ownership to stay at a resort they own when they reserve a unit.

They are of course not exactly the same situations, but they are very close and are close enough that they appear to be treated the same for tax purposes

Intercompany inventory transfer that room moves OUT of DVC inventory and IN to wherever they (Disney) “park” it to sell as cash or offload to Interval International.

Yeah, so they are used for rooms then sold, like I said. Moving the points/reservation inventory under a different company under the same umbrella before renting it out doesn't matter for the person that is swapping in. Otherwise again, the third party companies could do the same and transfer it to a different department to make the swap very similar again.

 

[mkatsy]

So once they have your point from the swap you think they just let them sit there and they are never used to book a room for anyone in any way? What??

We can just agree to disagree at this point like you say because I don't think that is how that works at all.

They are of course not exactly the same situations, but they are very close and are close enough that they appear to be treated the same for tax purposes


Yeah, so they are used for rooms/sold, like I said. Moving the points/reservation inventory under a different company under the same umbrella before renting it out doesn't matter for the person that is swapping in. Otherwise again, the third party companies could do the same and transfer it to a different department to make the swap very similar again.

It very much does … the IRS treats an exchange as an extension of the original sales contract, when both parties agree that the value is equal. The original sales contract was for the direct points. All resale buyers after that are assuming the life left on the original contract. The broker can’t participate in this relationship because they were not part of the original transaction. They (the broker) can only barter or sell, they can’t make an exchange in a contract they aren’t a party to.

 

[Tatebeck]

It very much does … the IRS treats an exchange as an extension of the original sales contract, when both parties agree that the value is equal. The original sales contract was for the direct points. All resale buyers after that are assuming the life left on the original contract. The broker can’t participate in this relationship because they were not part of the original transaction. They (the broker) can only barter or sell, they can’t make an exchange in a contract they aren’t a party to.

They obviously can't participate in the exact contract between DVC and the original direct buyer, but they can make their own contract with the potential swapper.

We'll just have to agree to disagree. I don't believe DVC can just contract themselves out of tax responsibilities like that by saying that the swap is equal and other companies cannot. And based on how they operate the other companies agree

 

[mkatsy]

They obviously can't participate in the exact contract between DVC and the original direct buyer, but they can make their own contract with the potential swapper.

We'll just have to agree to disagree. I don't believe DVC can just contract themselves out of tax responsibilities like that by saying that the swap is equal and other companies cannot. And based on how they operate the other companies agree

It is the tax privilege of an exchange. DVC is not saying the exchange is equal… both parties are in agreement that the exchange is equal. The receiving party in the contract (the owner) has elected to receive a different product than they purchased (of equal value). There is no income to be taxed. The owner is receiving the exact value they purchased in an alternate form, it’s just a different piece of inventory. When large corporations shift inventory from one company to another within their corporation their is no “profit” to tax because it’s all from the same wallet.

 

[Tatebeck]

It is the tax privilege of an exchange. DVC is not saying the exchange is equal… both parties are in agreement that the exchange is equal. The receiving party in the contract (the owner) has elected to receive a different product than they purchased (of equal value). There is no income to be taxed. The owner is receiving the exact value they purchased in an alternate form, it’s just a different piece of inventory. When large corporations shift inventory from one company to another within their corporation their is no “profit” to tax because it’s all from the same wallet.

Hmm, sounds very similar to a third party swap where both parties are saying the swap is equal.

And I wasn't saying it would become taxable when it is moved between the different parts of the company. But moving it to a different part of the company doesn't change whether the thing received by the company initially or when it is sold eventually is taxable or not. It either is taxable or not and moving it to a different part of the umbrella doesn't change that status.

 

[mkatsy]

Hmm, sounds very similar to a third party swap where both parties are saying the swap is equal.

And I wasn't saying it would become taxable when it is moved between the different parts of the company. But moving it to a different part of the company doesn't change whether the thing received by the company initially or when it is sold eventually is taxable or not. It either is taxable or not and moving it to a different part of the umbrella doesn't change that status.

Tax is paid when income is generated. If the exchange is of equal value, what will you tax? The value remains flat.

 

[Tatebeck]

Tax is paid when income is generated. If the exchange is of equal value, what will you tax? The value remains flat.

That depends on if it meets standard barter or barter exchange rules or is considered to be exempt from normal barter rules.

Normal barter rules are that a swap is fully taxable at market value to both parties. "You must include in gross income in the year of receipt the fair market value of goods or services received from bartering." Minus the actual costs of whatever you swapped. Which for DVC we are buying the stays at an effective discount, so there could/would be profit incurred in a swap for something else that you would get in return at a full market value.

If it exempted from normal barter rules, which it appears based on how they are run that first and third party swaps may be, then it is not taxable for an even exchange, regardless of how much you may have paid for your points before the swap.

That is why it matters if first and/or third parties are exempt and similar enough to be considered exempt.

https://www.irs.gov/taxtopics/tc420

 

[mkatsy]

That depends on if it meets standard barter or barter exchange rules or is considered to be exempt from normal barter rules.

Normal barter rules are that a swap is fully taxable at market value to both parties. "You must include in gross income in the year of receipt the fair market value of goods or services received from bartering." Minus the actual costs of whatever you swapped. Which for DVC we are buying the stays at an effective discount, so there could/would be profit incurred in a swap for something else that you would get in return at a full market value.

If it exempted from normal barter rules, which it appears based on how they are run that first and third party swaps may be, then it is not taxable.

https://www.irs.gov/taxtopics/tc420

within Walt Disney there is no barter or swap. The two parties have agreed to an equal value exchange. I’m sorry you are disappointed that the mouse wins … but come on … he always does.

 

[Sandisw]

So once they have your point from the swap you think they just let them sit there and they are never used to book a room for anyone in any way? Huh?

We can just agree to disagree at this point like you say because I don't think that is how that works at all. If you are being super technical no one is ever using points anyway if that is what you are getting at, just using their partial deeded ownership to stay at a resort they own when they reserve a unit.

They are of course not exactly the same situations, but they are very close and are close enough that they appear to be treated the same for tax purposes


Yeah, so they are used for rooms then sold, like I said. Moving the points/reservation inventory under a different company under the same umbrella before renting it out doesn't matter for the person that is swapping in. Otherwise again, the third party companies could do the same and transfer it to a different department to make the swap very similar again.

No…but what happens after no longer involves the owner.

That is a big difference IMO of why the two situations are not comparable.

One is a function of the program and one is noot.

We simply use our points to book a cruise instead of a DVC room…plus, whether Disney actual rent the room to a cash guest plays no role in my ability to swap.

If Disney doesn’t get a cash guest for every DVC room traded, who do you think covers that cost? Disney does…not the owner.

Again, I don’t buy that a cruise swap program cuz the rental market absolves an owner of taxes, simply because they were not issued a 1099.

 

[Tatebeck]

within Walt Disney there is no barter or swap. The two parties have agreed to an equal value exchange. I’m sorry you are disappointed that the mouse wins … but come on … he always does.

The mouse definitely wins, especially when you swap for cruises in their system.

Again, I don’t buy that a cruise swap program cuz the rental market absolves an owner of taxes, simply because they were not issued a 1099.

I don't think you have read what I have been saying. Someone else had said that they are just doing the bare minimum to just not issue 1099s. I agree with you that just because you don't give a 1099 doesn't mean that it's not taxable.

I have been saying that the third party swaps are close enough to the first party swaps to be considered in the same non-taxable exclusion to the normal barter rules.

Disney doesn't have a unique ability or a special deal with the IRS to get around taxes. If they are able to do a swap or make a contract that can get around the taxability of a situation, another company would also be able to do something similar to get around the same tax loopholes/provisions.

 

[airjay75]

I think the broker swaps are pretty clear - they're not barter transactions. They're a rerouting of money to avoid a 1099 obligation.

The swaps direct with Disney. I think there are multiple arguments on why they're not taxable or, if they are, there's no 1099 obligation. Not sure which one I think is the best. But, let's just assume it's akin to a barter involving credits and it's a taxable transaction.

You exchange your vacation points for reservation points. I'm sure Disney would take the position that the points themselves have no inherent value and that they do not guarantee anything of monetary equivalent. So, on the initial exchange, they'd so, ok, it's taxable, but we don't have a 1099-B obligation because you don't have to issue a 1099 that has a zero on it.

Now, when you redeem those reservation points, do you have income? I suppose you could argue you do. There wouldn't be a 1099 obligation - all the liability would be on the DVC owner if you think that was taxable income.

I think looking at the swaps direct with Disney more as something offered under the terms of our ownership as merely another way to redeem our points makes more sense to me than a barter exchange every time you choose to exchange. You paid to acquire your points. You pay annual dues on those points. And Disney provides the ways in which you can use those points. It was a purchase where you paid the fair market value for those points and Disney had an income recognition event.

And, sure, the brokers could write a contract with us too and build terms into it that would give rise to a taxable transaction today, but not later when we redeem our "credits." Say, agree to rent 100 points/year through us for the next 5 years and we'll give you $1,500 in credits toward cruise redemptions. Ok, you've got $1,500 of income today. But, they might get into a 1099 problem there because they would be issuing you official credit, and not just re-routing rental funds to a cruise they are simultaneously booking for you.

 

[mkatsy]

I think the broker swaps are pretty clear - they're not barter transactions. They're a rerouting of money to avoid a 1099 obligation.

The swaps direct with Disney. I think there are multiple arguments on why they're not taxable or, if they are, there's no 1099 obligation. Not sure which one I think is the best. But, let's just assume it's akin to a barter involving credits and it's a taxable transaction.

You exchange your vacation points for reservation points. I'm sure Disney would take the position that the points themselves have no inherent value and that they do not guarantee anything of monetary equivalent. So, on the initial exchange, they'd so, ok, it's taxable, but we don't have a 1099-B obligation because you don't have to issue a 1099 that has a zero on it.

Now, when you redeem those reservation points, do you have income? I suppose you could argue you do. There wouldn't be a 1099 obligation - all the liability would be on the DVC owner if you think that was taxable income.

I think looking at the swaps direct with Disney more as something offered under the terms of our ownership as merely another way to redeem our points makes more sense to me than a barter exchange every time you choose to exchange. You paid to acquire your points. You pay annual dues on those points. And Disney provides the ways in which you can use those points. It was a purchase where you paid the fair market value for those points and Disney had an income recognition event.

And, sure, the brokers could write a contract with us too and build terms into it that would give rise to a taxable transaction today, but not later when we redeem our "credits." Say, agree to rent 100 points/year through us for the next 5 years and we'll give you $1,500 in credits toward cruise redemptions. Ok, you've got $1,500 of income today. But, they might get into a 1099 problem there because they would be issuing you official credit, and not just re-routing rental funds to a cruise they are simultaneously booking for you.

In terms of the Disney exchange having potential rental value, we don’t tax unrealized gains … yet … the broker gain materialized in the form of the stranger's cash contribution to the transaction.

 

[RivShore]

i just tried this simple search and Google AI came up with this, its AI so it must be right. lololololol

So it seems they think they fall under the like trade thinking:

For DVC Rental Store swaps,
there's generally no income tax on the points themselves because it's treated as an even trade for a vacation, not direct cash income, so no 1099 is issued for the swap value. However, if you rent out points for cash, that income is taxable, and you'll receive a 1099 if you earn over $600, requiring you to report it as income, but the swap program avoids this by putting funds toward your trip instead of your bank account.
Key Differences for Swaps vs. Cash Rentals:

• Cash Rental: You get paid, declare it as income (W-9 and 1099 involved if over $600), and pay taxes on it like any other earnings.
• Swap: Points are used for a vacation, treated as an "even trade," and the value isn't considered taxable income; you get a vacation, not cash.

Tax Considerations (General DVC Rental):

• W-9 Form: DVC Rental Store requires this annually for all U.S. members for compliance, even for swaps.
• 1099 Form: Issued for cash rentals over $600, but not for swaps.
• Your Responsibility: It's your duty as the owner to report income if you rent for cash; swaps bypass this by going to a vacation.

In Summary for Swaps: The DVC Rental Store's Point Swap Program offers a tax benefit because it's a non-taxable exchange for a vacation, unlike renting points for cash which creates taxable income.

And from DVRS:

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

If you are using your rental income for a cruise, a trip to Universal Studios, or beach vacation, consider taking advantage of the DVC Rental Store’s Point Swap Program. Not only will you get a great value for your points and a seamless experience with the help of your Swap Specialist, but there is a tax benefit. While income from a standalone rental is taxable, income from a swap goes right to your vacation. It is considered an even trade, and no 1099 is issued.

 

[airjay75]

My favorite use of AI by lawyers have been the ones who cite case law in their briefs before a court and when questioned by a judge because their clerks couldn’t find the case, have to concede they used AI to draft it and so it’s possible AI just made it up.