time share

[POCAHONTAS]

client has time share, she received a 1099Misc with an amount in box 1, she says she rented it for a couple of months. So do I report is on schedule E and if so can I depreciate the time share and deduct membership fees, assessments and capital reserves as well as the mortgage interest and r/e taxes on schedule E.

thanks

[MLINDER42]

Time share

How many weeks does she own? How many days did they use it? Can not depreciate it they only own time not the actual asset.

[POCAHONTAS]

ok so she clarified that she only gets one week out of the year and in 2007 she did not use her week so they gave it to someone else. She says it is a hotel with several rooms and she doesn't get the same room but she is guaranteed one bedroom with a kitchenette.

so I would say no on the depreciation because she only has time and not the asset. So can I still deduct all the other expenses I mentioned earlier on schedule E?

thanks so much for your help

[MLINDER42]

Time Share

I thought rent under 14 days a year does not have to be reported as income?She can not show a loss on time share rental.

[WhiteOleander]

I thought rent under 14 days a year does not have to be reported as income?She can not show a loss on time share rental.

This only applies if the property is used by the taxpayer as a residence. Page 7-7 TTB.

[erchess]

14 Day Rule

applies only to renting space in one's personal residence and I don't believe a vacation time share that wasn't used counts.

I didn't find anything definitive in TTB but what I would do is report on Sch E the income received and deduct expenses only up to the amount of the income. In other words I wouldn't show a loss which would in any event be subject to the passive activity loss rules.

[POCAHONTAS]

thanks erchess, so the mortgage interest alone is more than the rent received that is

rents = 1187
mortgage interest = 1165

do I only report 1187 of the mortgage interest and leave out the rest of the other expenses, but does it really matter because since she does not materially participate she is not allowed the loss anyway??

[erchess]

How Many Homes?

How many homes does this client own including the primary residence and the time share? Does the client itemize or could he or she do so if the interest from the time share were included?

I believe that unless the client either can't itemize because of total expenses or is already itemizing and claiming interest from a first and second home, the mortgage interest can go on Sch A.

That would leave the rent and any other expenses up to the amount of the rent on Sch E.

Any dissenting opinions? I can think of any number of people on this board who know more about rentals than I do.

[Zee]

These articles will help

Here's a link to an article that answers your question. The author is a former Big Six tax partner and an expert in timeshares and taxes (I know him personally, and you can count on his advice). Here's an excerpt and a link:

"Assuming that like most timeshare owners, you typically rent to tenants for one week or less at a time, your rentals don't qualify as a "rental" business. 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.

Even most tax advisors are not aware of this rule. Your tax advisor can review §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".

http://www.tug2.net/advice/TUG_Taxes_and_Timeshares.htm

[POCAHONTAS]

Thanks Erchess,

she only has one home and the time share interest can go on schedule A, if I deduct the mortgage interest on schedule A then her other expenses are not high enough to be up to the amount of the rent and then that will give her rental income she would have to pay taxes for, however rental income is only $320 so it doesn't make much of a difference in her refund.
so I think I can do that unless someone disagrees on this board.

[erchess]

I goofed earlier

See TTB 1040 Edition 7-8

Basically if a second home is rented out then the mortgage interest cannot be deducted on Sch A unless the home owner lived in it long enough - I forget the rest but since the client here didn't live in it at all then the test is not met.

[Kram BergGold]

My understanding

I read that the non reportableility of rental inccme for less than 14 days does not apply to timeshares unless the unit we are dealing with was not rented for more than 14 days for all owners. I would check this out.

[Davc]

An to determine personal use of the property you use the personal use of all owners .

[Roberts]

So what's the solution? Match the rent versus the expenses and "break even" on the transaction?

[POCAHONTAS]

zee posted a web link earlier in this post and it is very good