timeshare forfeiture & taxes

[JLB Please excuse me, I'm a Dick. Not a moron just a Dick Find all posts View Profile Close JLB]

If the information in Post 6 is accurate, there are not Rental-Only Timeshares:

"When determining the rental and personal use days for the 15, 14, and 10% cutoffs, you must include the combined use of all the owners of the timeshare unit."

OTOH, if you bought a timeshare for the purpose of flipping it, and wound up holding it for a few years, you would figure in fees and rental income to determine the basis, and then compute capital gain or loss when you sold it (Schedule D), as opposed to doing a Schedule E each year.

Come to think of it, this is pretty close to what the OP was saying in the OP.

So, as to Post 3, it may not be BS, pure or not pure.

If he/she has held the timeshare for 13 years, for the sole purpose of flipping it, and has never used it, and has rented it out, and has paid fees, when they sell it, their capital gain or loss would be the amount they sold it for plus the amount they have rented it out for over the years, minus all fees, minus what they paid for it.

If I'm not mistaken, there is limit to the amount of capital loss that can be taken, and you carry forward the balance. I believe we have a little more carried forward that we can use for 2016.

[ronparise Senior Member Find all posts View Profile Close ronparise]

Ron, my point is that unless the timeshares were a source of income as outlined by the IRS I don't see any way to get a tax write off as a loss. It is unlikely that most timeshares have a market value that is high enough to take a loss if you get rid of them. I guess the costs to get rid of them could be a write off. Your a broker so maybe you know, can we deduct the costs of selling your own timeshares and can these costs be inflated to provide a decent deduction ?

I think we are saying the same thing.. The IRS wants all earnings to be reported and taxes paid on the gain, but wont allow losses to be deducted. What I wanted to do with my post is to distinguish between "earnings" and capital gains (or losses)

I am oversensitive to the critics of timeshare renting, many of whom have questioned my compliance with the tax laws. I didnt mean to put you into that group...but I did, sorry

[JLB Please excuse me, I'm a Dick. Not a moron just a Dick Find all posts View Profile Close JLB]

Here's some interesting information . . . saying a timeshare you own to rent, and never use personally, can only be considered "rental only" dependent on what the other owners of the same unit do???!!!

"Rental Only Timeshares

A timeshare will qualify as a rental only timeshare if (1) it is rented at fair market value to unrelated parties for 15 days or more during the year, and (2) the owners do not personally use the timeshare for more than 14 days per year or 10% of the total days rented, whichever is greater.
When determining the rental and personal use days for the 15, 14, and 10% cutoffs, you must include the combined use of all the owners of the timeshare unit. The result is that personal use by any owner of a timeshare is considered personal use by all of the owners—for example, if you use your timeshare zero days, but the other owners use it 300 days, you have 300 days of personal use. This makes it virtually impossible for you to satisfy the fewer-than-15-days or 10% personal use tests. For this reason, few timeshares that are rented are classified as rental only timeshares.

If a timeshare does qualify as rental only, losses incurred on its sale are deductible."

http://www.nolo.com/legal-encycloped...hare-sale.html

This would make it virtually impossible to own timeshares for rental purposes.

(I did not find this. I did not read this. I did not post this.)

In all my hundreds of years of timesharing, I believe that this is the first time I have seen anyone/place of authority who said you cannot hold them as a "rental" business, unless the other owners of the same timeshare also did.

I had never considered that one owner can do is dependent on what the other owners do.

[JLB Please excuse me, I'm a Dick. Not a moron just a Dick Find all posts View Profile Close JLB]

In all my hundreds of years of timesharing, I believe that this is the first time I have seen anyone/place of authority who said you cannot hold them as a "rental" business, unless the other owners of the same timeshare also did.

On the other hand, it appears they cannot be considered rentals regardless of what the other owners do:

"Exceptions to Rental Definition
There are six exceptions to the definition of rental. Under Reg. § 1.469-
1T(e)(3)(ii), six types of activities normally defined as rentals, are treated as nonrental
activities, i.e. as businesses, in most cases. As a result, the active
participation standard and the $25,000 allowance do not apply. If the activity falls
outside the rental definition, it is passive or non-passive based on whether the
taxpayer materially participates. Following are the six exceptions:

1. The average period of customer use is 7 days or less. For example:
condo rentals, short-term use of hotel/motel rooms, and businesses that
rent videos/tuxedos/cars/tools, etc.

. . . . . .

• Determine the number of days of an average rental period in the activity.
Condo rentals falling under Exception #1 or #2 in Reg. § 1.469-1T(e)(3)(ii)
may be erroneously entered on Form 8582, Lines 1b or 1c (for activities
qualifying for $25,000 allowance). Since the activity is not defined as a
rental, it is not eligible for the special rental real estate allowance and
should be on Form 8582, line 3b. "

https://www.irs.gov/pub/irs-mssp/pal.pdf

[easyrider Senior Member Find all posts View Profile Close easyrider]

I think we are saying the same thing.. The IRS wants all earnings to be reported and taxes paid on the gain, but wont allow losses to be deducted. What I wanted to do with my post is to distinguish between "earnings" and capital gains (or losses)

I am oversensitive to the critics of timeshare renting, many of whom have questioned my compliance with the tax laws. I didnt mean to put you into that group...but I did, sorry

It didn't bother me Ron as I didn't take it as you being over sensitive. I really doubt that the majority of owners who rent their ts make much more than the cost.

[JLB Please excuse me, I'm a Dick. Not a moron just a Dick Find all posts View Profile Close JLB]

On the other hand, it appears they cannot be considered rentals regardless of what the other owners do:

"Exceptions to Rental Definition
There are six exceptions to the definition of rental. Under Reg. § 1.469-
1T(e)(3)(ii), six types of activities normally defined as rentals, are treated as nonrental
activities, i.e. as businesses, in most cases. As a result, the active
participation standard and the $25,000 allowance do not apply. If the activity falls
outside the rental definition, it is passive or non-passive based on whether the
taxpayer materially participates. Following are the six exceptions:

1. The average period of customer use is 7 days or less. For example:
condo rentals, short-term use of hotel/motel rooms, and businesses that
rent videos/tuxedos/cars/tools, etc.

. . . . . .

• Determine the number of days of an average rental period in the activity.
Condo rentals falling under Exception #1 or #2 in Reg. § 1.469-1T(e)(3)(ii)
may be erroneously entered on Form 8582, Lines 1b or 1c (for activities
qualifying for $25,000 allowance). Since the activity is not defined as a
rental, it is not eligible for the special rental real estate allowance and
should be on Form 8582, line 3b. "

https://www.irs.gov/pub/irs-mssp/pal.pdf

Considering the far-reaching affect of this, I'm surprised that I'm the only one surprised by this. Perhaps it is a factor of not many people reading it.
I'm just thinking of all of those rentals on Homeaway and AirBnB and the thousands of weekly vacation rental houses own by individuals (not hotels and motels) that rent for 7 days or less.
- - - - - -
Well, anyway, gotta go get a couple noodles and take them to the beach.

[tonyg Goomba & Super Moderator Find all posts View Profile Close tonyg]

Trying to impress the girls ?

[ronparise Senior Member Find all posts View Profile Close ronparise]

what is the far reaching effect you see

[ronparise Senior Member Find all posts View Profile Close ronparise]

It didn't bother me Ron as I didn't take it as you being over sensitive. I really doubt that the majority of owners who rent their ts make much more than the cost.

I would agree most owners that rent dont do much better than break even, But I would guess that most timeshares rentals are profitable.

[easyrider Senior Member Find all posts View Profile Close easyrider]

I would agree most owners that rent dont do much better than break even, But I would guess that most timeshares rentals are profitable.

My problem has been family and friends regarding renting my ts's. I try to keep the costs down for them. Thinking about it, I do the same for them when they need help with their properties, or really, anything.

I have been able to get up to $800 over the mf when renting to people I don't know. So I know it could be profitable. I might look into this as Im thinking my 38 years of working construction is about over.

[JLB Please excuse me, I'm a Dick. Not a moron just a Dick Find all posts View Profile Close JLB]

My problem has been family and friends regarding renting my ts's. I try to keep the costs down for them. Thinking about it, I do the same for them when they need help with their properties, or really, anything.

I have been able to get up to $800 over the mf when renting to people I don't know. So I know it could be profitable. I might look into this as Im thinking my 38 years of working construction is about over.

Did I not say something the right way?

If it's 7 days or less, it's not renting.

But, then, it's probably me not understanding what they are saying when they say,

"If the activity falls
outside the rental definition, it is passive or non-passive based on whether the
taxpayer materially participates. Following are the six exceptions:

1. The average period of customer use is 7 days or less. For example:
condo rentals, short-term use of hotel/motel rooms, and businesses that
rent videos/tuxedos/cars/tools, etc. "

[ronparise Senior Member Find all posts View Profile Close ronparise]

Did I not say something the right way?

If it's 7 days or less, it's not renting.

But, then, it's probably me not understanding what they are saying when they say,

"If the activity falls
outside the rental definition, it is passive or non-passive based on whether the
taxpayer materially participates. Following are the six exceptions:

1. The average period of customer use is 7 days or less. For example:
condo rentals, short-term use of hotel/motel rooms, and businesses that
rent videos/tuxedos/cars/tools, etc. "

if i understand correctly you are sayng that if i rent a timeshare for 7 days or less, its not renting

Take out all the qualifiers and you are saying renting is not renting. sorry, that makes no sense to me


I guess i have no idea what you are getting at


The way I read what you have quoted is that the IRS rules for rentals dont apply when the rental period is 7 days or less. The income from these rentals is handled differently.

[JLB Please excuse me, I'm a Dick. Not a moron just a Dick Find all posts View Profile Close JLB]

The quotation marks are not for anything I have said.

[JLB Please excuse me, I'm a Dick. Not a moron just a Dick Find all posts View Profile Close JLB]

"A special section of the Income Tax
Regulations prohibits treating your loss
as a “rental loss” if the average rental
period for a particular tenant is seven
days or less. Since you would rent your
single week for seven days or less, this
rule means that your loss is not a rental
loss.
Your tax advisor can review Section
1.469-1T(e)(3)(ii)(A) of the Temporary
Income Tax Regulations. This
regulation is also referred to in IRS
Letter Ruling #9505002, which gives
an indication of the IRS position on this
issue as it relates to timeshares, as discussed
above."

David H. McClintock, CPA and
John R. Czerwonka, CPA

[JLB Please excuse me, I'm a Dick. Not a moron just a Dick Find all posts View Profile Close JLB]

Here's some interesting information . . . saying a timeshare you own to rent, and never use personally, can only be considered "rental only" dependent on what the other owners of the same unit do???!!!

"Rental Only Timeshares

A timeshare will qualify as a rental only timeshare if (1) it is rented at fair market value to unrelated parties for 15 days or more during the year, and (2) the owners do not personally use the timeshare for more than 14 days per year or 10% of the total days rented, whichever is greater.
When determining the rental and personal use days for the 15, 14, and 10% cutoffs, you must include the combined use of all the owners of the timeshare unit. The result is that personal use by any owner of a timeshare is considered personal use by all of the owners—for example, if you use your timeshare zero days, but the other owners use it 300 days, you have 300 days of personal use. This makes it virtually impossible for you to satisfy the fewer-than-15-days or 10% personal use tests. For this reason, few timeshares that are rented are classified as rental only timeshares.

If a timeshare does qualify as rental only, losses incurred on its sale are deductible."

http://www.nolo.com/legal-encycloped...hare-sale.html

This would make it virtually impossible to own timeshares for rental purposes.

(I did not find this. I did not read this. I did not post this.)

"As a result, in applying the 14-day / 10 percent
rule of section 280A(d)(1) regarding personal use, or the
15-day rule of section 280A(g) regarding rental use, you
must take into account personal use and rental use by
everyone who owns a timeshare interest in the particular
unit of the resort. This was the Tax Court’s conclusion in
Fudim v. Commissioner10"

"Conclusion
It is unlikely that renting an interest in timeshare property
to tenants will result in a deductible loss, even if your client
does not have any personal or vacation use of that timeshare.
Accordingly, if your client asks you to claim a loss on the tax
return from renting the timeshare, you may need to explain
to your client the rules that prevent the loss deduction."

D a v id M . F ogel , E A , C P A

http://www.fogelcpa.com/documents/fo...sharescsea.pdf