Treatment of timeshare rental

  • Thread starter Russ in San Diego
  • Start date

R

Russ in San Diego

For reasons I'd prefer not to go into, we own a 1-week timeshare.

In 2008, for the first time, we rented it out (the full week). How do
I handle the rental proceeds we received? The maintenance fees we
paid were greater than the rental proceeds (yah, big surprise).

Is this a Schedule E thing?
 
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A

Arthur Kamlet

For reasons I'd prefer not to go into, we own a 1-week timeshare.

In 2008, for the first time, we rented it out (the full week). How do
I handle the rental proceeds we received? The maintenance fees we
paid were greater than the rental proceeds (yah, big surprise).

Is this a Schedule E thing?

For just one week, I'd ignore the whole thing. No Sch E.
No Income reporting.
 
R

removeps-groups

For just one week, I'd ignore the whole thing. No Sch E.
No Income reporting.
Why? He may have a loss, which would help lower his taxes?
 
A

Arthur Kamlet

Why? He may have a loss, which would help lower his taxes?

One week's worth of rental does not make it a rental.



No Sch E. Where would you report income and deductions?
 
B

Brew1

Why?  He may have a loss, which would help lower his taxes?
I doubt the IRS would consider it rental property. He might have
Schedule A deductions that
he can take. And Art is correct that you do not have to report the
income (see Pub 527)
 
S

Stuart A. Bronstein

Brew1 said:
I doubt the IRS would consider it rental property. He might have
Schedule A deductions that
he can take. And Art is correct that you do not have to report the
income (see Pub 527)
Under section 280A, a "dwelling" that is rented out for two weeks or
less during a year incurs no tax recognition either of income or
deductions. I don't know whether that would apply in this case,
however, since it requires it to be used as the taxpayer's residence
during the year.

Stu
 
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G

Gil Faver

Arthur Kamlet said:
But there's no profit motive. So no loss.

you must have quite a crystal ball to deduce that from the original post.
 
A

Alan

Stuart said:
Under section 280A, a "dwelling" that is rented out for two weeks or
less during a year incurs no tax recognition either of income or
deductions. I don't know whether that would apply in this case,
however, since it requires it to be used as the taxpayer's residence
during the year.

Stu
The best article I have read on this subject (tax consequences of
renting timeshares) is by David M. Fogel, EA & CPA. He explains
how the rules from Section 280A get applied. Specifically, they
relate to the dwelling which is defined as the condominium not
the one week timeshare period. SO, it is quite possible for the
owner of the timeshare to rent it for the week and still have a
dwelling that is used for personal use. He also discusses Tax
Court, Ninth & Tenth Circuit rulings on this issue.

http://fogelcpa.com/Documents/Fogel-TimesharesCSEA.pdf
 
W

wpatch

Note that in the case of a time share the 14 days or less include the
units
of all 52 weeks of the time share holders. If the unit is rented out
for 3 weeks
of the year, rental is taxable. In absense of proof of 14 days or
less, IRS will
treat it as taxable.
 
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A

Arthur Kamlet

Note that in the case of a time share the 14 days or less include the
units
of all 52 weeks of the time share holders. If the unit is rented out
for 3 weeks
of the year, rental is taxable. In absense of proof of 14 days or
less, IRS will
treat it as taxable.
After reading David Fogel's analysis in the CASEA Journal, I'm
convinced there's no deductable loss and the income is to be
reported.

Is this a great board, or what?
 
S

Seth

you must have quite a crystal ball to deduce that from the original post.
It was the first time OP rented it out. The phrasing implies that
there were previous years in which OP used it personally. The
conclusion that it was purchased for that personal use seems quite
reasonable.

Seth
 
S

Seth

Arthur Kamlet said:
After reading David Fogel's analysis in the CASEA Journal, I'm
convinced there's no deductable loss and the income is to be
reported.
But can the expenses be deducted (up to the amount of income), so
there's no taxable income remaining?

Seth
 
G

Gil Faver

It was the first time OP rented it out. The phrasing implies that
there were previous years in which OP used it personally.
I might also imply that this is the first year of ownership.

The
conclusion that it was purchased for that personal use seems quite
reasonable.
it might be a resonable conclusion, but it is not assured. I assumed, upon
reading the original post, that the owner put the timeshare into a pool with
a profit motive. I don't know that for sure, but that, too, is a reasonable
assumption.

Providing an answer based on unstated assumptions makes the answer, per se,
incorrect.
 
B

Brew1

Thanks Alan; the year's brand new and I've already learned something!

I interpreted the article as stating that expenses were deductible up
to
income, with a carryover of unused losses (like any rental that
exceeds
the personal use rule). I doubt that it is common for an association
to provide
the necessary information for calculating the rental/personal use
ratio of each unit;
I would assume the limit is exceeded unless the taxpayer had proof to
the
contrary.

In classifying a time-share as personal, business or investment
property, I think
the IRS might balk at a taxpayer who takes one of the latter two
classifications and
claims a loss on the sale. To claim it as investment means you bought
it with the
intent of holding it for a profit (never using it or never renting
it); to claim it as business (rental
in this case), it appears that your partial ownership may be affected
by what the other
owners do. Any thoughts?
 
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G

Gil Faver

The best article I have read on this subject (tax consequences of
renting timeshares) is by David M. Fogel, EA & CPA. He explains how the
rules from Section 280A get applied. Specifically, they relate to the
dwelling which is defined as the condominium not the one week timeshare
period. SO, it is quite possible for the owner of the timeshare to rent it
for the week and still have a dwelling that is used for personal use. He
also discusses Tax Court, Ninth & Tenth Circuit rulings on this issue.

http://fogelcpa.com/Documents/Fogel-TimesharesCSEA.pdf

Thank you, that is an excellent article. I wonder if that code section, as
it applies to time shares, was actually intended.
 
R

removeps-groups

But can the expenses be deducted (up to the amount of income), so
there's no taxable income remaining?
Per the article it seems that only if all owners rented out the
timeshare for the stipulated time, then would rental losses be
deductible. Perhaps the management company of the building can keep
track of the total number of weeks that each unit is available for
rent, and available for personal use, so that the owners can know
whether that can deduct, and if some what is the allocation ratio.
 
A

Alan

Per the article it seems that only if all owners rented out the
timeshare for the stipulated time, then would rental losses be
deductible. Perhaps the management company of the building can keep
track of the total number of weeks that each unit is available for
rent, and available for personal use, so that the owners can know
whether that can deduct, and if some what is the allocation ratio.
My limited experience with timeshares leads me to believe that
the management company has the records of availability, use and
by whom. As they are collecting fees, arranging for maintenance,
etc. and filing tax returns they need to keep those records to
substantiate income and expense.

In the instant case, it is highly likely that the unit was used
personally by other timeshare owners. And... the tax court, ninth
& tenth circuits say that the method to use for allocating
expenses when you have mixed use, is to take the period of rental
and divide by availability. If one assumes the unit was available
for use for at least 50 weeks... you are looking at allocating 2%
of the expenses to the rental income.

Best case scenario if everything fell right, is that expenses
could be written off against the income and any loss would get
carried forward. The OP said that expenses were less than the rental.
 
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R

removeps-groups

(e-mail address removed) wrote:
In the instant case, it is highly likely that the unit was used
personally by other timeshare owners. And... the tax court, ninth
& tenth circuits say that the method to use for allocating
expenses when you have mixed use, is to take the period of rental
and divide by availability. If one assumes the unit was available
for use for at least 50 weeks... you are looking at allocating 2%
of the expenses to the rental income.
How did you come up with 2%?
Best case scenario if everything fell right, is that expenses
could be written off against the income and any loss would get
carried forward. The OP said that expenses were less than the rental.
OP said: "The maintenance fees we paid were greater than the rental
proceeds (yah, big surprise).", which seems that expenses were more
than the rental.
 

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