Tax implications of selling DVC

[ohiominnie]

Hey there. We recently sold off 4 VWL contracts. They were completely paid off and we're going to turn around and use ALL of that money towards the down payment of a house we're building in Florida.

I know we'll have to get in touch with an accountant or tax attorney, but I'm wondering, ball park wise, what the sale of our DVC contracts means for tax purposes. If we're rolling the money over into another real estate interest (in about 5 months) does that change anything?

Just would like to have a figure in my head so we aren't shocked come tax time.

Thanks in advance.

 

[jerseygal]

If you've had the timeshare more than 1 yr, then if there is gain, it will be reported as long term capital gain..in most cases, 15%, some lower income taxpayers, 5%....

If less than 1 yr, then it will be short term gain, taxed at Ordinary Income Tax Rates...simply put, whatever bracket that your regular income falls in, that is what the gain would be taxed in...could be as high as 35% for very upper income taxpayers.

If there is loss, there is no deduction allowed.

Hope that helps!

 

[ohiominnie]

Thanks! Let me make sure I understand this.....

You're only taxed on the difference between what you sold it for and what you bought it for, right?

You are NOT taxed on the entire sales price. (whew)

If you've had the timeshare more than 1 yr, then if there is gain, it will be reported as long term capital gain..in most cases, 15%, some lower income taxpayers, 5%....

If less than 1 yr, then it will be short term gain, taxed at Ordinary Income Tax Rates...simply put, whatever bracket that your regular income falls in, that is what the gain would be taxed in...could be as high as 35% for very upper income taxpayers.

If there is loss, there is no deduction allowed.

Hope that helps!

 

[Thumper4me]

Ohio Minnie,

You are correct. You are taxed on the portion above your original purchase price. For example, you paid $10,000 for the original contract and sold it for $12,000. Your taxable gain would be $2,000 and that is the amount applicable to the rate rates mentioned above. I hope this helps.

Kelly

 

[toocherie]

Kelly: wouldn't they also be able to deduct from the gain the costs of sale (i.e., commissions, closing costs, etc.)?

 

[ACDSNY]

Ohio Minnie,

You are correct. You are taxed on the portion above your original purchase price. For example, you paid $10,000 for the original contract and sold it for $12,000. Your taxable gain would be $2,000 and that is the amount applicable to the rate rates mentioned above. I hope this helps.

Kelly

Would the amount of the taxable gain be reduced by the sales commision?

 

[Thumper4me]

Yes. Any costs associated with selling the property would also be deducted to reach the true "taxable amount". Sorry, I was trying to make it as simple as possible.

 

[jerseygal]

You basically compare the cost of the timeshare...Cost plus closing costs to sales price less any costs associated with the sale...sale price less closing costs(which could include brokers fees) on the sale portion and that is the taxable gain which you will pay capital gains tax on..Remember, important to hold on to property for 1 yr or more for the gain to be a capital gain rather than ordinary gain.

Any loss unforunately cannot be deducted.

Hope this helps and makes it clearer!

 

[ACDSNY]

Yes. Any costs associated with selling the property would also be deducted to reach the true "taxable amount". Sorry, I was trying to make it as simple as possible.

Thanks for the confirmation. I thought it would, but I wasn't sure.