Yet Another Timeshare

[Snaggletooth]

Yes, a bad one. Rules are clear: For "personal use" capital assets - Gains are taxable, Losses are not allowed. But for "Investment Property" - Losses ARE allowed.

Client bought in 2000. Salesman says just "schedule your vacation time in lovely Florida" and "invest now and your property will double in 5 years".

Facts: Client was allowed use only when able to commit an entire year in advance, and was able to have "Personal Use" only once in 10 years. Taxes, Fees, Maintenance allocations, etc. amounted to $3500 a year.

Client tried to sell for 3 years to rid himself of the horrendous fees, and put property on E-Bay for $10. Other sellers in same community were on E-bay as well, selling for $1. No buyers. Client finds transfer company who will transfer title back to developer for $2900.

Total loss approached $15,000 counting the $2900 transfer fee. Is this loss deductible??

[Kram BergGold]

Questions you should ask

The property was not rented. So to dedcut the loss it has to be investment property. Ddi the owner or a friend of the owner ever stay there? If yes, it was not investment property.

[Snaggletooth]

Mark

Client did not rent the property to others. Theoretically, client did not operate any rental properly, he simply bought the right to stay in the resort if he could properly schedule his visit. However, he did have title to partial ownership, although no right to operate it.

This "partial" ownership brought him nothing except assessments from taxing authorities, insurance companies, maintenance companies, and management fees.

[Burke]

Wish I could say otherwise, but I don't see any way out on this one. Personal use property.

[dan doshan]

Timeshare gets confusing. Don't the powers to be consider personal use to be all use of the timeshare including all others that have an interest in it. Not just the time your client had use of. 3500 in fees each year sure seem like a rip off.

[Gary2]

Investment use would imply an expectation of making a profit on the sale. With extremely rare exceptions, a timeshare won't pass the snicker test on that.