Tax implications when selling DVC contract for a profit

[jekjones1558]

Who has experience with this? What kind of documentation do I need for my tax preparer?

 

[miTnosnhoJ]

Who has experience with this? What kind of documentation do I need for my tax preparer?

If you have the closing statement from your original purchase and the closing statement from the sale, that should be everything they need.

 

[Maistre Gracey]

We timed the sale of of our different contracts to offset each other.
In other words, we made money on GCV, but lost on VB. Our accountant was willing to combine the two in order to not show a profit.
YMMV.

MG

 

[Dean]

Who has experience with this? What kind of documentation do I need for my tax preparer?

If you have the closing statement from your original purchase and the closing statement from the sale, that should be everything they need.

That's likely all one needs. Purchase/sale price minus closing, mailing fees, notary fees and the like from the front end plus the same on the back end but subtracting commission. No depreciation, no adjustment for dues, etc.

We timed the sale of of our different contracts to offset each other.
In other words, we made money on GCV, but lost on VB. Our accountant was willing to combine the two in order to not show a profit.
YMMV.

MG

Unless bought and sold as a unit, that is likely not the legal approach. For others reading, technically you pay taxes on profit but can't deduct the loss on timeshares.

 

[Brian Noble]

Here's a good reference on timeshares and taxes.

http://tug2.net/timeshare_advice/TUG_Taxes_and_Timeshares.html

 

[jekjones1558]

Here's a good reference on timeshares and taxes.

http://tug2.net/timeshare_advice/TUG_Taxes_and_Timeshares.html

From the linked article "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)" can be added to initial cost. I didn't realize this and haven't saved this data. Is there anywhere to get it now without a lot of research? Live and learn.

 

[mustinjourney]

From the linked article "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)" can be added to initial cost. I didn't realize this and haven't saved this data. Is there anywhere to get it now without a lot of research? Live and learn.

You can look up two years worth on the DVC dashboard (condo association notices), but that doesn't help you for the past years. Looks like the capital reserve is about 12% of the MFs.

Unrelated note -- Disney owns about 50,424 points at VGF (2% of total available points).

 

[supersnoop]

Unrelated note -- Disney owns about 50,424 points at VGF (2% of total available points).

Disney is required to retain 2% at each resort.

 

[mustinjourney]

Disney is required to retain 2% at each resort.

I know. I just didn't know how many total points there were. That's a lot of points.

 

[longboard55]

If it was me I would take every deduction possible including yearly fees, The worst that will happen is they will ask you to pay later but I doubt they would. Its a fair assumption those fees are for improvements.

The key in taxes outside of a standard work pay check is to make sure you declare all revenue but also make sure you load up expenses. I work with my daughter who sells art items, we like to get the profit down to a couple hundered bucks. The mistake people make is to not declare, if there is a 1099 missing the computers will get you.

OK the accountants can flame me now

 

[Dean]

As much faith as I have in Dave McClintock, I'm not sure the articles suggesting including capital reserves are accurate. Even if they are, reserves are a smaller % of the yearly dues roughly 1.25% on BWV. In reality only the portion that is used for upgrades should be applicable, simple replacements would not be as I read the rules. I suspect deducting the entire maint fee would be a huge red flag, timeshares on the tax forms in general tend to raise eyebrows.

 

[jekjones1558]

As much faith as I have in Dave McClintock, I'm not sure the articles suggesting including capital reserves are accurate. Even if they are, reserves are a smaller % of the yearly dues roughly 1.25% on BWV. In reality only the portion that is used for upgrades should be applicable, simple replacements would not be as I read the rules. I suspect deducting the entire maint fee would be a huge red flag, timeshares on the tax forms in general tend to raise eyebrows.

Oh, dear. Well I guess I will bring as much documentation as I have and let the tax person decide. I never thought I would be in the position of having made a profit on DVC so it never dawned on me to save any of the dues documents.

 

[Dean]

Oh, dear. Well I guess I will bring as much documentation as I have and let the tax person decide. I never thought I would be in the position of having made a profit on DVC so it never dawned on me to save any of the dues documents.

It's interesting looking around the net about timeshares and taxes. I saw several lawyer based sites suggesting that you could rent up to 14 days as a freebie like you can a condo and that's incorrect in reality though it's possible in theory. I also saw a couple suggesting you could deduct losses, also clearly wrong. The problem with timeshares for CPA's and lawyers in general is they are so foreign that if they don't have any timeshare involvement otherwise, they're extremely unlikely to have reliable information. I do agree that if one deducted the clearly applicable components and the capital reserves, the risk of penalties and an audit is fairly low.

 

[jekjones1558]

As I have tried to read up a little on this subject, it sounds like we could have rented out, without tax liability, some of our BWV points in the past because we did go ourselves at least 3 weeks each year. But instead we gave rooms to family and friends. Now that we can no longer travel we are selling and we would incur tax liability for renting out points for the contracts we will be keeping. However, I think family will be more than happy to accept free lodging so we won't have to worry about taxes!

 

[Dean]

As I have tried to read up a little on this subject, it sounds like we could have rented out, without tax liability, some of our BWV points in the past because we did go ourselves at least 3 weeks each year. But instead we gave rooms to family and friends. Now that we can no longer travel we are selling and we would incur tax liability for renting out points for the contracts we will be keeping. However, I think family will be more than happy to accept free lodging so we won't have to worry about taxes!

As I noted above, the 14 day free rental does not apply to timeshares that you use personally and in reality basically never applies to timeshares unless one is simply and only running a TRUE rental business. But in reality most people don't turn in the income on it unless they get a 1099. I'm told one of the rental companies gives 1099's and one doesn't.

 

[TinyTGO]

As far as I understand it, you can not treat timeshare sales as capital loss unless you're in the business of timeshare... rentals, transactions, etc. However whether or not that applies to you, a timeshare sale is a considered a capital gain. It's a long term capital gain if owned for more than 1 year.

http://www.nolo.com/legal-encyclopedia/how-deduct-loss-on-timeshare-sale.html

 

[Dean]

As far as I understand it, you can not treat timeshare sales as capital loss unless you're in the business of timeshare... rentals, transactions, etc. However whether or not that applies to you, a timeshare sale is a considered a capital gain. It's a long term capital gain if owned for more than 1 year.

http://www.nolo.com/legal-encyclopedia/how-deduct-loss-on-timeshare-sale.html

This is one of the articles I looked at prior to posting above. As I understand it, and I'm quite comfortable in the interpretation, it's incorrect in the 14 day rental instructions which makes the entire article suspect IMO. It would be difficult for most people to meet the 15 day usage criteria to qualify for the 14 day free rental. One would have to stay at the home resort at least 15 days in a year to meet that criteria as I read it.

 

[jekjones1558]

This is one of the articles I looked at prior to posting above. As I understand it, and I'm quite comfortable in the interpretation, it's incorrect in the 14 day rental instructions which makes the entire article suspect IMO. It would be difficult for most people to meet the 15 day usage criteria to qualify for the 14 day free rental. One would have to stay at the home resort at least 15 days in a year to meet that criteria as I read it.

As I said, in the past we ALWAYS stayed at least 21 days each year at BWV. That won't be happening any more.

 

[OKgirl]

If you have another real estate investment in mind, could you do a 1031 Exchange? It would have to be another real estate investment but I think this could apply to another timeshare, undeveloped land or vacation property. Accounts, be sure to chime in here, but it might be an option. Even if you didn't originally buy the timeshare as an investment, if you have a capital gain, then it clearly was an investment. This is a way to defer taxes, not eliminate them altogether.

 

[Dean]

If you have another real estate investment in mind, could you do a 1031 Exchange? It would have to be another real estate investment but I think this could apply to another timeshare, undeveloped land or vacation property. Accounts, be sure to chime in here, but it might be an option. Even if you didn't originally buy the timeshare as an investment, if you have a capital gain, then it clearly was an investment. This is a way to defer taxes, not eliminate them altogether.

As I understand it the answer is essentially no. It would be possible but it would have to be owned solely as a true investment purpose, not for personal use. I think that's a rare situation with DVC.