posted 11-23-2004 06:13               

Guy buys a timeshare from developer for $15,000.

5 years later sells same timeshare for $5000.

What are his options for dealing with his $10,000 loss?

Can he write off the loss incrementally for a certain number of years ?

Must it be written off against gains he realized from say, stocks etc?

Any info would be appreciated!! Thanks-Maz

posted 11-23-2004 08:10            

quote:

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Originally posted by calihockey33:
Is there any way to claim it as a rental property, then get the write off?

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Start by reading this:
http://www.tug2.net/advice/donate.htm

posted 11-23-2004 08:38               

quote:

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Originally posted by calihockey33:
Is there any way to claim it as a rental property, then get the write off?

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In most cases, no. See Dave M's various comments in this thread pertaining to vacation homes. If you own four weeks at the same resort, you might be able to make it work. But with just one or two weeks owned at a specific resort, it's not possible.

posted 11-23-2004 10:45               

As for deducting the loss after converting the timeshare into rental property, the loss, if any, will be significantly less than the $10,000 as calculated in Maz's initial post. Why? Because as explained in Roger's link, your tax basis for determining loss will be the fair market value (or cost, if lower) on the date you convert the timeshare to a rental property.

posted 11-23-2004 13:43               

quote:

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Originally posted by Dave M:
…Unless there is some unusual event, such as hurricane damage, it's likely that the fair market value at the date of conversion will be about the same as what you eventually sell it for. Thus, it's most likely that you will have no deductible tax loss.

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So can you adjust your basis to reflect any special assessments related to capital improvements? And if so, could you not also allocate your annual fees to ongoing expenses versus capital reserve accounts? (Some timeshare operations show those separately on their fee statements; they're broken out separately on my VRI statement.)

posted 11-23-2004 15:27               

If the special assessment payments and reserve fund payments are paid prior to converting the property to a rental property, there would likely be no adjustment for purposes of claiming a loss. The basis (i.e., the tax cost) for determining loss is the lower of cost or fair market value, as discussed above.

However, for purposes of calculating taxable gain, a special assessment for capital items and the reserve portion of each year's MFs can and should be added to cost.

posted 11-24-2004 06:01               

quote:

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Originally posted by Maz:
.... was considering taking the loss against regular employment income as one would do on a second home that had lost value.

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The result on sale of the second home that loses value is the same as discussed above. No deduction is allowed for the loss on sale of that property, assuming it was used primarily for personal purposes. That follows the general tax rule, as Lisa states above, that no loss is allowed on property held for personal use.

posted 11-24-2004 15:03               

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Originally posted by jferegrino:
Think on the positive side, you have the loss (which I do not believe you can deduct, I would recommend seeking an accountant) from the original purchase price, but.....you are saving a great deal of money by not paying anymore maintenance fees.

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This reminds me of those 60% off discount offers. I can't afford to pass up the deal because for every $100 I buy, it only costs me $40 and I save $60. Since I am saving more than I am spending, I come out ahead, right?