Tax strategies to purchase DVC

[buzlite]

This is a different kind of finance or purchase cash thread. I have thought about purchasing dvc for a long time. However the thought of doing wdw yearly yoy felt like a lot of pressure. Recently we had to chance to visit Aulani and fell in love. We are seriously considering buying a contract at the GF and using it at aulani every 2nd or third year. We also live on the west coast and may do a short weekend trip here and their at Disney Land. Not sure if this will be possible with booking windows. We have the ability to purchase the contract for cash. However most of our liquid cash sits pretax in our corporate account. If we pulled the funds we would immediately be hit with taxes (40%+). Alternatively we have access to a revolving credit line at 2.25%. This is basically a bigger limit then we would ever use. However with current inflation it seems to me the smart bet would be to purchase on the line and pay slowly over 3 years. With high inflation sinking these funds into a timeshare doesn’t seem like the smarted idea. If interest rates went up we could pay off the line immediately. I would leave/continue to put funds into our corporate etf account and rrsp (Canadian 401k) and could hopefully offset the interest with capital gains.
We are thinking about spending 30-40k for our first contract. Does this idea seem reasonable or does it seem like I’m trying to convince myself that I can have my cake and eat it too.

 

[happythoughts & pixiedust]

Put the pretax corporate cash to good use (earning greater than 2.25%) and borrow on the line to buy DVC. 2.25% is incredibly cheap money.
Or, if you're buying direct, open a new credit card that has 0% interest for 18-20 mo. A few Citi and USBank cards have these terms for good credit. Buy the new contract on the card and float for the interest free period, then pay off the cards with your 2.25% line.

 

[RoseGold]

We don't know anything about Canadian taxes. Even if we did, this isn't where to get your Canadian tax advice.

I can think of a lot of reasons for foreign nationals to completely avoid the IRS (and US probate) if they don't have to, including buying foreign property interests.

 

[bluecruiser]

We are seriously considering buying a contract at the GF and using it at aulani every 2nd or third year. We also live on the west coast and may do a short weekend trip here and their at Disney Land. Not sure if this will be possible with booking windows.

I don't know about Aulani, but if you're planning on booking VGC (Villas at the Grand Californian) at the 7-month non-home resort window, be aware it will be difficult to get a room. Because VGC has such a small number of rooms, it books up before the 7-month window.

Not sure how the upcoming Disneyland DVC tower will affect things, but that's the situation today.

 

[BrianLo]

This is a different kind of finance or purchase cash thread. I have thought about purchasing dvc for a long time. However the thought of doing wdw yearly yoy felt like a lot of pressure. Recently we had to chance to visit Aulani and fell in love. We are seriously considering buying a contract at the GF and using it at aulani every 2nd or third year. We also live on the west coast and may do a short weekend trip here and their at Disney Land. Not sure if this will be possible with booking windows. We have the ability to purchase the contract for cash. However most of our liquid cash sits pretax in our corporate account. If we pulled the funds we would immediately be hit with taxes (40%+). Alternatively we have access to a revolving credit line at 2.25%. This is basically a bigger limit then we would ever use. However with current inflation it seems to me the smart bet would be to purchase on the line and pay slowly over 3 years. With high inflation sinking these funds into a timeshare doesn’t seem like the smarted idea. If interest rates went up we could pay off the line immediately. I would leave/continue to put funds into our corporate etf account and rrsp (Canadian 401k) and could hopefully offset the interest with capital gains.
We are thinking about spending 30-40k for our first contract. Does this idea seem reasonable or does it seem like I’m trying to convince myself that I can have my cake and eat it too.

Hello Canadian Physicians!

It depends how many points you are looking at, but likely your best recourse is the outright withdrawal from your LOC and repayment over a few year period.

It partially depends on how much of a salary you are already paying yourselves. If you are sub 170k and not maxing out to your RRSP limits there’s certainly a good reason to push towards that. Then pending your provincial tax thresholds (BC, AB?) there is still some lower marginal tax rates to be had for pushing up somewhat higher.

Likely your accountant could help answer this specifically for you. They may also look at capital gains stripping and dividends….But at the end of the day a slower purchase over a few years is going to make the most sense for incorporated individuals.


I’m in a very similar boat (sans incorporation) and think GFV makes a lot of sense for a every few years visit offset with Aulani. You guys might be interested in a small contract for DIsneyland Tower in a year. Given we sort of know it will be priced the same as all other direct resorts. That’s my plan anyways.

 

[buzlite]

Hello Canadian Physicians!

It depends how many points you are looking at, but likely your best recourse is the outright withdrawal from your LOC and repayment over a few year period.

It partially depends on how much of a salary you are already paying yourselves. If you are sub 170k and not maxing out to your RRSP limits there’s certainly a good reason to push towards that. Then pending your provincial tax thresholds (BC, AB?) there is still some lower marginal tax rates to be had for pushing up somewhat higher.

Likely your accountant could help answer this specifically for you. They may also look at capital gains stripping and dividends….But at the end of the day a slower purchase over a few years is going to make the most sense for incorporated individuals.


I’m in a very similar boat (sans incorporation) and think GFV makes a lot of sense for a every few years visit offset with Aulani. You guys might be interested in a small contract for DIsneyland Tower in a year. Given we sort of know it will be priced the same as all other direct resorts. That’s my plan anyways.

How did you know
I guess it’s that obvious based on the numbers!
My accountant has given me some tax advice for the purchase and that’s pretty straight forward but in the end it’s a personal decision to take on debt to buy dvc. I know some people would definitely take the tax hit to not feel “stressed about debt”.
My other thought was about inflation. This is actually what got me thinking of dvc in the first place. With high inflation it almost makes sense to float dvc on a credit line to guard against increased rates. If rates increase more then 2% per year I should come out ahead forgetting everything else.
We really love Aulani, GF and I think we will really enjoy the grand Californian as well for quicker trips. Still haven’t had a chance to visit. I have read that it’s very difficulty to book on points though.
Thanks for the support! If the numbers look good I will probably buy 150 points on the credit line and pay 10k cash initially then pay off slowly over 3 years or quicker if interest rates go up.

 

[Madame]

This is a different kind of finance or purchase cash thread. I have thought about purchasing dvc for a long time. However the thought of doing wdw yearly yoy felt like a lot of pressure. Recently we had to chance to visit Aulani and fell in love. We are seriously considering buying a contract at the GF and using it at aulani every 2nd or third year. We also live on the west coast and may do a short weekend trip here and their at Disney Land. Not sure if this will be possible with booking windows. We have the ability to purchase the contract for cash. However most of our liquid cash sits pretax in our corporate account. If we pulled the funds we would immediately be hit with taxes (40%+). Alternatively we have access to a revolving credit line at 2.25%. This is basically a bigger limit then we would ever use. However with current inflation it seems to me the smart bet would be to purchase on the line and pay slowly over 3 years. With high inflation sinking these funds into a timeshare doesn’t seem like the smarted idea. If interest rates went up we could pay off the line immediately. I would leave/continue to put funds into our corporate etf account and rrsp (Canadian 401k) and could hopefully offset the interest with capital gains.
We are thinking about spending 30-40k for our first contract. Does this idea seem reasonable or does it seem like I’m trying to convince myself that I can have my cake and eat it too.

We bought both of our resale contracts 200 SSR & 270 BCV using a HELOC. SSR purchase was made just before the 2016 blue card changes and was paid off in 4 years. BCV was 2018 and we actually have the final payment this month. DH is in banking and gets marginally better rates than available to most, so both were locked in at 2ish percent for the duration.

We are not a family that takes on debt lightly, but this worked well for us and given what we were spending as a family of 5 traveling multiple times per year to WDW and locked into the school schedule (ie most expensive travel periods) until retirement, it was the right decision for us.

 

[BrianLo]

How did you know
I guess it’s that obvious based on the numbers!
My accountant has given me some tax advice for the purchase and that’s pretty straight forward but in the end it’s a personal decision to take on debt to buy dvc. I know some people would definitely take the tax hit to not feel “stressed about debt”.
My other thought was about inflation. This is actually what got me thinking of dvc in the first place. With high inflation it almost makes sense to float dvc on a credit line to guard against increased rates. If rates increase more then 2% per year I should come out ahead forgetting everything else.
We really love Aulani, GF and I think we will really enjoy the grand Californian as well for quicker trips. Still haven’t had a chance to visit. I have read that it’s very difficulty to book on points though.
Thanks for the support! If the numbers look good I will probably buy 150 points on the credit line and pay 10k cash initially then pay off slowly over 3 years or quicker if interest rates go up.

A prime -.25 LOC is a choice offer to only physicians and dentists.

Don’t sweat the purchase too much if you’ll spend your vacation money on Disney regardless.

Physician Financial Independence is a great Canadian FB group if you aren’t already part of it… but they’ll look at you side ways if you talk about a timeshare. The good news is it’s totally nonsensical / seems to defy all other timeshare logic and gains values.