TP sold his timeshare; issued 1099S

[Taxadvisor VA]

TP purchased his first timeshare in July 2003 for $24K. Over the next 12 years, he upgraded to a larger place (more BR; more livable space) and consequently paid $72K from beginning to end. He sold his time share for $4K in Sept. 2015 and just provided me with a 2015- 1099-S.

What is his cost basis? __________ His first time share cost $24K but with all the upgrades his total cost ballooned to $72K.

He sold his time share for $4K and I do have a settlement sheet (rather brief) indicating some costs associated with this transaction.

Does he really have a capital loss of ($68K)?________

Has anyone handled a transaction like this one before? How do you recommend entering on the tax return?

Thanks in advance,

Taxadvisor VA

[David1980]

Non-deductible personal loss?

[mactoolsix]

From a recent Spidell seminar:

Gain or loss on disposition
Many times timeshare owners tire of the annual cost and are either unwilling or unable to use
the timeshare each year. The owners will sell the timeshare. Because a timeshare is a personal asset,
any gain is taxable (gains are rare on the sale of timeshares), and a loss is nondeductible.

[taxea]

Non-deductible personal loss?

Isn't personal loss not deductible only if sold to relative? There are specific rules for sales of timeshare. I would do the code research, or google the question

[Burke]

Personal loss never deductible. It is treated much as a second or vacation home is. Gain, yes. Loss, no.

[Roland Slugg]

What is his cost basis? His first time share cost $24K but with all the upgrades his total cost ballooned to $72K.

Based on the facts given, his cost basis is $72,000.

Does he really have a capital loss of ($68K)?

Yes. Actually, it's a little more than that because of the selling expenses you referred to that appear on the settlement statement.

How do you recommend entering on the tax return?

In Part II of F-8949. Enter the selling price, as it appears on F-1099S, in column (d) of F-8949, so it will agree when the IRS matches it with the 1099S form. Enter the basis and selling costs in column (e) of F-8949. In column (f) enter the letter L, and in column (g) enter the amount of the loss. This should produce a $0 in column (h), which is the amount of the loss he can deduct ... none.

* * * * *

Commentary: Although common by a few regular contributors here, I avoid adding personal opinions (and never post political commentary or rants about tax policy), adhering to the view that this is not the place for such ramblings. However, I will make an exception in this case.

The client referred to in the OP spent $72k for the right to use a condo or similar vacation property for, presumably, one week each year. He probably forked over another $500 to $1,000 annually as his share of taxes and maintenance, and he finally bailed out recovering $4k. Thus, his total/net out-of-pocket cash cost for the twelve years was at least $68k ($72k less $4k) and probably more like $75k to $80k, counting the ongoing annual costs. That's roughly $6,500 per year. And that doesn't even take into consideration the opportunity cost of all those funds.

For the same $6,500 he could have spent a week ... or two ... almost anywhere in the world, and had money left over. Such is the economic reality of time-share ownership, and I have never understood why anyone with even a room-temperature IQ would consider buying such a thing.

Gains are rare on the sale of timeshares.

O'contraire. The salesmen who sell them to the econimically naive public do quite well.

[BHoffman]

"...room temperature IQ..." Hahahahahaha!!!!

Thanks for the laugh today!