Time Shares

[linda]

Does anyone know if the sale of time shares is considered a personal loss or an investment loss? Clients paid $17000 for two time shares. They advertised for sale, which cost them $4,465 through various websites. The time shares did not sell, so they paid a company $3,295 to take them off their hands. I guess I want to know if the loss is a deductible one.
Thanks for your help.
Linda

[Bill Tubbs]

Why did they buy them?

If they bought the time shares because they intended (at the time) to use them, then the purchase was personal. If they bought them with the intent of renting them out, or hoping they'd appreciate in value, then they're investment property.

Bill

[Koss]

Timeshare

My gut reaction is that the loss on the sale of a timeshare would be a nondeductible loss unless the timeshare was used in a trade or business, or was originally purchased and held solely as an investment.

In plain English: unless it was a rental property, it's not a deductible loss.

Theoretically, one could purchase a timeshare and simply hold it as investment property, kind of like holding common stock that doesn't pay dividends, or buying vacant land, or gold coins.

Problem is, you only purchase investment property if you have a reasonable expectation that the value is going to increase over time. That is almost unheard of for a timeshare. I don't think you could convince the IRS that a timeshare was purchased and held as an investment.

Some people have successfully rented them, though.

Burton