Selling to cousin?

[Dan Murfman]

I did a search but didn't get all the info I need. But anyways my wife and I purchases an add on a few months ago. Well something came up and we have to unload the new add on. I contacted TSS to put it up for sale and was going to send in the paperwork this week. But over the weekend we were at a family gathering where my cousin was just in the process of buying DVC. So after talking we figured why don't we just sell between ourselves. What do we need to complete this sale as cheaply as possible. Thanks for any help.

 

[Lasrnw]

a title company is all you need

 

[pat@dvcstore]

I did a search but didn't get all the info I need. But anyways my wife and I purchases an add on a few months ago. Well something came up and we have to unload the new add on. I contacted TSS to put it up for sale and was going to send in the paperwork this week. But over the weekend we were at a family gathering where my cousin was just in the process of buying DVC. So after talking we figured why don't we just sell between ourselves. What do we need to complete this sale as cheaply as possible. Thanks for any help.

Timeshare Closing Services can handle the transfer for you. Just be sure to have the sale price high enough to pass ROFR. Even though it's family, DVC will exercise their right if it's priced too low.

 

[manning]

I won't tell if you won't. Sell it for a high price to pass ROFR. What actually changes hands in money is between the two of you.

 

[Caskbill]

If you contact Disney and inform them that it's a sale between relatives, they may waive their ROFR.

Years ago I sold points to my brother, and Disney waived ROFR and sent me a letter to that effect.

 

[Caskbill]

I won't tell if you won't. Sell it for a high price to pass ROFR. What actually changes hands in money is between the two of you.

But he still has to report any capital gain to the IRS and pay taxes on it.

If he bought 200 points at $60 and sells at $80, that's $4000 profit to declare.

 

[Dan Murfman]

Thanks for tips. I have contacted Timeshare Closing Services. I don't think we have to worry about capital gains as we're selling SSR. We bought the add on but then had something come up unexpectedly. I'll give member services a call to see if we can skip ROFR but I don't think it should be that much of a problem. Though my cousin is probably a little concern as she has 2 deals bothwhere Disney used ROFR.

 

[manning]

But he still has to report any capital gain to the IRS and pay taxes on it.

If he bought 200 points at $60 and sells at $80, that's $4000 profit to declare.

All Uncle Sam wants is the tax. You adjust the amount of money that exchanges. Consider it an expense of doing business. Nothing is free. You are paying for the guarantee it passes ROFR.

 

[Caskbill]

All Uncle Sam wants is the tax. You adjust the amount of money that exchanges. Consider it an expense of doing business. Nothing is free. You are paying for the guarantee it passes ROFR.

It makes no difference what amount of money actually exchanges, it's what amount that's listed in the documents that counts. Sale price of property becomes public record.

If the owner purchased 200 points at $60, and sold to the cousin at $70, but they put down $80 in the contract so as to get past ROFR, the basis for the tax will be a sale price of $80, not $70. The seller will have to declare a profit of $20/point ($4000). So what I'm saying is if you artifically raise the 'selling price' to get past ROFR, you can wind up owing taxes on money you never received.

If the IRS computer searched the public records and found you sold for a listed sale price of $80, the IRS agent isn't going to just take your word that you sold to your cousin and only got $70.

Remember, if you put down $80, the new cost basis for the cousin is $80 when he eventually sells it later. Even though his true cost basis should only be $70. You're the one who would be paying the taxes on that $10/point difference between what you got and what you said.

That's why I said it's better to request Disney waive their ROFR rather than just artifically inflate the 'selling' price.

 

[Dean]

I won't tell if you won't. Sell it for a high price to pass ROFR. What actually changes hands in money is between the two of you.

It's illegal to put one price in the contract and secretly accept another, it's called Real Estate Fraud. I know it does happen though.

Here's what I'd do. Contact DVC member admin and ask if they'll give an automatic waiver for a family member. If so, follow their directions for ROFR; create a deed and get it recorded in Orange County. If not, you have to decide how much the sale will be for and submit the ROFR the regular way followed by closing. You shouldn't need a closing company in this situation regardless unless you just want someone to do the extra work.

 

[manning]

It's illegal to put one price in the contract and secretly accept another, it's called Real Estate Fraud. I know it does happen though.

Here's what I'd do. Contact DVC member admin and ask if they'll give an automatic waiver for a family member. If so, follow their directions for ROFR; create a deed and get it recorded in Orange County. If not, you have to decide how much the sale will be for and submit the ROFR the regular way followed by closing. You shouldn't need a closing company in this situation regardless unless you just want someone to do the extra work.

You pay the full price in the contract. According to tax rules you can gift up to 11,000 dollars to each individual, no strings attached, per year. Tax free. Could be more or less the minimums are changing.

Caskbill- the intent is to pay the full tax. The other options should be approached first.

 

[Dean]

You pay the full price in the contract. According to tax rules you can gift up to 11,000 dollars to each individual, no strings attached, per year. Tax free. Could be more or less the minimums are changing.

Gifting and selling real estate are different issues. While you can legally gift things, you cannot list one price on a real estate contract in this situation with the purpose of clearing ROFR and then agree privately to a different price. I know it's done but it is illegal. You could give it away for free but with ROFR, you'd be giving it to DVC instead of a cousin.

 

[manning]

Gifting and selling real estate are different issues. While you can legally gift things, you cannot list one price on a real estate contract in this situation with the purpose of clearing ROFR and then agree privately to a different price. I know it's done but it is illegal. You could give it away for free but with ROFR, you'd be giving it to DVC instead of a cousin.

Exactly, it is two different events. You list it for 50,000, you sell it for 50,000 you get paid 50,000.

No strings attached, you gift the cousin 11,000. If your wife wants to she can gift her up 11,000.

 

[lizziepooh]

Can you deduct the broker fee or maintenance fees from the capital gain amount?

 

[Caskbill]

Can you deduct the broker fee or maintenance fees from the capital gain amount?

To the best of my knowledge it's done just like any other real estate transaction. So the cost basis for the sale would be adjusted according to broker fees paid just like any real estate commission for a regular home sale.

Maintenance fees probably not since they're a standard expense and would not be considered to be money paid to enhance a sale. Your broker should know for sure what would qualify and what won't. But I'm sure maintenance fees would not since they include items such as taxes, utilities, salaries, furniture, and probably the least part of your maintenance fees: actual maintenance.

If I recall, if you sold your house and had to relace a broken window, that's maintenance and you can't adjust the selling cost basis by that amount. But if you completely remodel your kitchen for the express intent on selling the house, then you can adjust the sale cost basis by that amount. Disclaimer: As always, on the boards, this is only my personal understanding. You should always check with professionals in regards to tax issues.

 

[Dean]

Exactly, it is two different events. You list it for 50,000, you sell it for 50,000 you get paid 50,000.

No strings attached, you gift the cousin 11,000. If your wife wants to she can gift her up 11,000.

You can believe what you want or kid yourself if you chose. But I can tell you that if you set up a real estate transaction with a rebate (aka tax free gift) that is secretive and not included in the contract, you are in violation of the law in FL.

 

[Dean]

Exactly, it is two different events. You list it for 50,000, you sell it for 50,000 you get paid 50,000.

No strings attached, you gift the cousin 11,000. If your wife wants to she can gift her up 11,000.

Last try and I'll quit. If you combine the events in any way but do not include it in the contract, you will be in violation of the law no matter how you word it. If you agree to it ahead of time, you are in a very precarious situation legally no matter how you word it. Even if you get the full amount then give back the "gift", it is not legal. As I noted, it's done all the time, but I wouldn't post it on the net that I was planning it in any way. Remember with the government your really guilty till proven innocent.

 

[CarolA]

Somehow I don't get the feeling OP is giving this thing away.....

 

[doubletrouble_vb]

It appears to me the OP plans on collecting the amount he paid for it. Given its SSR it seems highly unlikely it would get ROFR'd. Assuming it is a 100 point add-on the difference between what he paid and what it is selling for now as a resale might be what? perhaps $10 per point? maybe $15? So we would be talking about a $1,000 or $1,500 capital gain. What would be the tax implications of that amount?

 

[Dean]

Somehow I don't get the feeling OP is giving this thing away.....

No, it appears they are trying to sell and give their cousins a break at the same time. A win win for everyone if they can get it done. Unfortunately, it has been suggested they jack up the price then rebate some it after closing, simply to clear ROFR. The thing to do is see if they can get an automatic ROFR from DVC due to the family thing, if not, it's simply a regular sale subject to all the risks and limitations. Maybe even more with family at times.