Tax Question

[ATCMickey]

To anyone with experience,

When you rent your points, is the rental income gained on the rental a taxable sum (for personal federal income tax purposes)?

Do you depreciate your ownership interest (or a better question...can you?...seeing as how it has a $0 value at the end of 2042?)?

If you depreciate, over how many years do you do it?

Obviously an owner may use points for personal use and other times for rental use. Is an ownership interest only depreciable for the portion of time it is used as a rental or can it be depreciated regardless of (personal/rental) status?

Hoping there's a tax guru out there somewhere that may be able to provide an educated response. Any feedback would be most welcome to this novice owner. Thanks in advance.

ATCMickey

 

[TheRustyScupper]

Per my accountant . . .

1) DVC is not a depreciated asset, as it is a lease interest, not property. *
2) Rental income should be declared as ordinary income.
3) Only taxable items with DVC ownership
. . . mortgage interest in certain circumstances
. . . real estate taxes listed on the DVC statement


* As with any other leased property, the landlord (in this case DVC)
gets the depreciation for the real estate, not the tennant.

 

[ATCMickey]

Per my accountant . . .
1) DVC is not a depreciated asset, as it is a lease interest, not property. *
* As with any other leased property, the landlord (in this case DVC)
gets the depreciation for the real estate, not the tennant.

RustyScupper,

Thanks for the reply. I guess that would be an additional question I'd have. When purchasing, we are given (what I thought was) a deeded interest in a portion of a building. So is what we are purchasing a lease or an ownership interest (that happens to terminate in 2042)? I would agree with DVC getting the depreciation if they technically own it...but if they've sold the buildings to us members (with a contract that we automatically revert ownership back to them at no cost in 40 years), then I would think we'd get the depreciation. At the end of 2042 my basis would be $0 and the property would revert back to DVC with no taxable event. Just thinking out loud.

Thanks again,

ATCMickey

 

[RobDoc]

Since our DVC contracts are very specific about limiting use to personal and not commercial, it may be difficult to defend any depreciation deduction. Claiming any rental income is another issue that certainly falls under the tax code, but defending any business expenses may be a challenge.

While we do have a recorded deed, it is based on Right-To-Use the property and we do not own the property itself. While many do deduct the property taxes paid, they are actually paid by DVD- the owner of record for the property.

I'd expect you could deduct your annual fees against the income (at least up to the value of the points used for the rented reservations) but would think trying to depreciate the value of the property itself would be a tough thing to defend with the IRS.

Good luck!

 

[ATCMickey]

Thanks Doc for the info.


ATMMickey

 

[TheRustyScupper]

ATCMickey:

1) You have some good, rational, well-reeasoned thoughts.
2) Unfortunately those same ideas are also known as tax fraud.
3) I own several rental properties, and have to be careful what to deduct.
4) If I tried deducting my timeshares, I'd might get to meet cellmate Bubba.

5) Just stick with deducting the annual taxes.

 

[EdTreo]

Where do you find annual taxes statement?

 

[ATCMickey]

ATCMickey:

1) You have some good, rational, well-reeasoned thoughts.
2) Unfortunately those same ideas are also known as tax fraud.
3) I own several rental properties, and have to be careful what to deduct.
4) If I tried deducting my timeshares, I'd might get to meet cellmate Bubba.

5) Just stick with deducting the annual taxes.

RustyScupper,

Not trying to manipulate it, just understand it. The reason I ask those questions rather than throwing caution to the wind is so that I don't have a cellmate. I would venture to say that there are probably a ton of people on this board that rent their points and never declare a single cent of it. Please don't make the error of mistaking an honest attempt to understand things as an attempt to commit fraud in the inducement. I'm sure you asked a lot of questions before you purchased your first property. I'm sure none of your initial questions were ever misconstrued as a contemplation of fraud.

With all due respect,

ATCMickey

 

[DBBN]

Where do you find annual taxes statement?

The property tax information is provided as a line item on your "Annual Dues Statement". Note a line for "estimated" and another line for "actual" property tax paid. If you don't have a statement see these links:

http://disboards.com/showthread.php?t=532208

http://www.disboards.com/showthread.php?s=&threadid=483351

 

[TheRustyScupper]

. . . Please don't make the error of mistaking an honest attempt to understand things . . .

1) Sorry about that.
2) Did not mean to sound flip or condescending.
3) With property, it is important to understand the tax codes.
4) There are a lot of deductions that logically apply, but don't.
5) There are a lot of deductions that don't logically apply, but do.
6) Examples of real estate items which may or may not be deductible
. . . property taxes (typically fully deductible)
. . . closing costs
. . . sales commissions
. . . sales taxes
. . . legal expenses
. . . travel-lodging-food expenses
. . . repairs-maintenance-upkeep
. . . telephone expenses
. . . mortgage interest (typically if investment or 2nd home)


NOTE: Some of the above may apply to TimeShares, some may not. If you want to take more than mortgage interest and real estate taxes as deductions, or claim this as an investment, then you should speak with a professional tax adviser.

 

[CarolA]

Per my accountant . . .

1) DVC is not a depreciated asset, as it is a lease interest, not property. *
2) Rental income should be declared as ordinary income.
3) Only taxable items with DVC ownership
. . . mortgage interest in certain circumstances
. . . real estate taxes listed on the DVC statement


* As with any other leased property, the landlord (in this case DVC)
gets the depreciation for the real estate, not the tennant.

In most cases the interest can ONLY be deducted if it is secured by a real estate interest. So if you finance via one of the resale companies it is really borderline. They are actually making you a personal loan not a secured loan. Also using CC advances would not be secured by a real estate interest.

(NOTE: I am not a tax accountant nor did I stay in a Holiday Inn Express last night so I would suggest that if you have questions you might want to see an expert. I tend to err on the cautious side.... I don't want to meet Rusty's cellmate either. Martha may have done well in jail, but I don't really want to join her)