Reporting Rental Income

[CarouselOfLands]

I'm hoping someone here can help me with this. I'm looking at DVC and while I know I shouldn't necessarily count on reselling points in years I have excess as a deciding factor towards buying into DVC, I'd like to learn the implications of doing so.

When one rents points, how do you report it on your federal (and state) tax returns? What do you use as the cost basis for the points?

What happens if you rent banked points from a previous year where you paid the MF fees in the previous year, not the year the income was generated?

What happens if you rent borrowed points from a future year where you don't know or pay the MF fees in the year the income was generated?

Is DVC considered a right to use or a purchase of actual real estate interest?

What else should I need to know?

Thank you everyone very much in advance for your help. I sincerely appreciate it.

 

[z28wiz]

Those questions are best answered by an accountant or tax attorney. Sent from my iPhone using DISBoards

 

[drusba]

"Renting points" is the commonly used euphemism for what you actually do which is renting a resort room reservation -- you make a reservation in another's name and use your points to do that. As far as income goes you report the rental price and possibly get to deduct actual costs of renting which could include a portion of your annual dues for the rental period, and which annual dues those are depends on when the rental period is not whether you are using banked, borrowed, or current use year points (annual dues are calculated and charged pursuant to a calendar year not your use year). You don't get to deduct some intrinsic value for the points, including because the points are legally deemed by the official DVC documents to have no monetary value -- they instead represent the actual real estate interest you own, which has value.

DVC is an actual real estate interest; you own a small percentage of a "unit" in the resort. A"unit" is usually a combination two or more rooms at the resort but it can be one room.

 

[Dean]

I'm hoping someone here can help me with this. I'm looking at DVC and while I know I shouldn't necessarily count on reselling points in years I have excess as a deciding factor towards buying into DVC, I'd like to learn the implications of doing so.

When one rents points, how do you report it on your federal (and state) tax returns? What do you use as the cost basis for the points?

What happens if you rent banked points from a previous year where you paid the MF fees in the previous year, not the year the income was generated?

What happens if you rent borrowed points from a future year where you don't know or pay the MF fees in the year the income was generated?

Is DVC considered a right to use or a purchase of actual real estate interest?

What else should I need to know?

Thank you everyone very much in advance for your help. I sincerely appreciate it.

I forget the form numbers, fortunately my CPA knows them. It's the same process as renting out a vacation home except you don't have the 15 day exemption and you can't depreciate it. In general terms you report the rental price and deduct the dues related to those points plus any other expenses such as mailings, paypal fees, damages or listing fees (Redweeks, TUG, ebay). While I think it'd be possible to be in a situation to depreciate it, I think this would be a very unusual situation only applicable to one who bought strictly for rental and never used it personally with some other very specific criteria as well.

IMO it's best to buy around the number of points one will use. I'd only buy extra for a VERY good deal that made sense otherwise, when looking at small contracts it's reasonable to count up somewhat and for future needs when they're pretty set. Sometimes you get points you can't use in a purchase, renting those can make sense. Buying extra with the sole intent of renting them really doesn't make sense to me though some disagree.

 

[CarouselOfLands]

Thanks for the help so far everyone. I'm curious how everyone here handles it, but I agree a CPA or tax attorney would be good to ask. Does anyone have one they would recommend I could email my questions to that is familiar with DVC? I'm having trouble finding one that actually knows DVC rules. You can private message me if you aren't comfortable posting the name here directly. Thanks again for the help.

 

[Dean]

The timeshare CPA guru is Dave McClintock. He has an article on this subject (Timeshare and Taxes) on TUG and possibly on redweeks IIRC.

 

[CarouselOfLands]

Thanks Dean for the reply. I made some contacts and it appears he has retired from the TUG unfortunately.

 

[Dean]

Thanks Dean for the reply. I made some contacts and it appears he has retired from the TUG unfortunately.

Did the advice article not answer your questions? There are actually a couple of CPA's here as well who are DVC members though I'm not sure there's anything unique about DVC from a tax standpoint compared to other timeshares. I don' think the deeded vs RTU actually matters, DVC is both. I wonder if you're making this too complicated, from a tax standpoint it's pretty simple for rental in that it's total minus expenses (mostly dues)= profit then your tax rate. You can't depreciate it and you can't deduct losses, only gains. You can't deduct any donations and if you sell later, you can have gains but not deduct losses. You can deduct RE taxes and mortgage interest (only in some situations).

 

[CarouselOfLands]

It did for the most part. Thanks for the help Dean; I really appreciate it.

 

[DVCcurious]

Don't claim anything and if you get audited just claim ignorance.