I don't believe you can take a loss on a TS unless you were using it as a business (renting it every year to make money).
I believe there is a thread on TUG about this.
I'd check with a tax lawyer or accountant.
Edititing to add this:
Here's the TUG thread -
http://www.tug2.net/advice/TUG_Taxes_and_Timeshares.htm
Relevant Info:
Selling your Timeshare – Gains & Losses
Any profit on the sale of your timeshare is taxable. If you sell at a loss, the loss is normally not deductible.
Profit on sale is treated as capital gain, subject to favorable tax rates if owned for more than one year. For gain purposes, your cost is generally your original cost, plus additions for the following items: (1) closing costs incurred when you purchased your timeshare, (2) the portion of your annual maintenance fee (for all years owned) allocated to capital reserves or used specifically for capital improvements (such as a new roof), and (3) any special assessments for capital improvement purposes which you paid. This amount should be reduced by any depreciation expense in years you rented the timeshare.
If you (and/or relatives or friends) use the timeshare, exchange it or let it go unused, a loss on sale will be personal and not deductible, just as a loss on the sale of your home or your car would not be deductible. Even though your intent might be to hold it as an investment, your personal use results in no tax loss being allowed upon sale.
If you regularly rent the timeshare to others, a loss on sale might be an allowable business loss. If you have an allowable business loss on sale of your timeshare, it is deductible as an ordinary (non-capital) loss.
If you expect to sell at a loss, should you convert the timeshare to rental property to ensure deductibility of the loss?
It isn’t that simple. If you convert property from personal to rental/business/ use, the basis (i.e., cost as determined for tax purposes) for determining gain is what you paid, as described above, just as if you hadn’t converted to rental use. However, the basis for determining loss is the lower of cost or fair market value on the date of conversion to rental use. Fair market value is to be determined based on the value in your market (i.e., the resale market), not the price you paid to the developer.
Thus, for example, if you buy a timeshare from a developer for $12,000 and the resale value when you convert to rental use is $4,000, that $4,000 is what you should use as your basis (or tax cost) for determining loss on sale if you sell it while holding it for rental use. As explained in the Rental Income section below, that would also be the value used for claiming depreciation.
In addition, the IRS might disallow the loss if you sell the timeshare before renting it for several consecutive years, since isolated transactions (such as renting a timeshare unit for one week) generally do not convert a personal investment into a business investment for IRS purposes. Also, no loss on sale would be allowed if you convert it back to personal use before selling.
