New Tax Question...

Hopefully I put this in the right forum..

I really have read all I can find, and there is a lot of information on taxes and deducting timeshare expenses... But I can't find the answer to my question. If it out there, please do point me to it...

I have many residential rentals in a college town in Ohio. I have professionals and students alike who lease homes and apartments from me (actually my LLC).

My question is... If I use my timeshare weeks as an incentive for people to sign a 1 year lease with me, or if I do a drawing with anyone who renews a lease in an apartment building fo rthe next year and enters into a drawing for a week at "X" resort during Spring Break, can I expense my maintenance fees as "Advertising" for my LLC?

Example: "2 bedroom apartment for rent. Sign a lease before September 1st, and get a free 1 week stay at Smugglers' Notch in Vermont during Spring Break, March 10th - 17th."

Obviously there would be much more disclosure as to what is included etc.. But my question is simply about the fees being expensed as advertising.

2nd Question. If I want to purchase more timeshare weeks in order to do this on a larger scale, lets say I want 10 timeshares, can I purchase them and hold them in the LLC and expense the annual fees as long as I use them for advertising and giveaways in my rental company?

Thank You,
-Matt

I deduct anything that has to do with business...of course I have to claim any income arising out of that business

What you have described is clear to me...it is business...I would deduct it

However it gets fuzzy for me if you mix business and personal. So I assume your timeshares are owned by your LLC and that you never use them yourself

A better answer to your question would be,,,dont ask me , talk to you CPA or tax attorney.

Yes, if you do it right, I think. Since it's the LLC that's using the week for advertising, you need to rent the week to the LLC for x number of dollars. Just make the rental rate equal to your costs. It's cleaner to write a check out from the LLC to you personally so you have a paper trail. Theoretically, the LLC could rent it for market value from you which might be even more than the expenses. The only problem is that you'd have to then report that as income on your personal tax return, so what's the point.

vckempson said:

Yes, if you do it right, I think. Since it's the LLC that's using the week for advertising, you need to rent the week to the LLC for x number of dollars. Just make the rental rate equal to your costs. It's cleaner to write a check out from the LLC to you personally so you have a paper trail. Theoretically, the LLC could rent it for market value from you which might be even more than the expenses. The only problem is that you'd have to then report that as income on your personal tax return, so what's the point.

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I think that I can buy the timeshare with the LLC, and be able to depreciate it. Also, if I deposit a week with an exchange power of 18, and am able to exchange it for two weeks through RCI, then I can use one week for myself... And expense half of the fees through the company.

Does that make sense? Not that I am saying that the IRS makes sense..

-Matt

I believe the IRS would view that use of the timeshare NOT as "advertising" but rather as "business entertainment." And if you dig through the business entertainment rules, you will eventually find (among many other limitations) a prohibition against deductions related to "facilities" such as private clubs, vacation homes, yachts, etc. So I think you would be playing a losing hand.

Deduction of a completely variable expense, such as a registration fee for the user, might be OK. But costs related to the ownership or maintenance of the "facility" would not. Note that you MIGHT achieve a more favorable result if you didn't own the timeshare, but rather simply paid a rental fee on behalf of the user.

ronparise said:

I deduct anything hat has to do with bisiness...of course I have to claim any income arising out of that business

What you have described is clear to me...it is business...I would deduct it

However it gets fuzzy for me if you mix business and personal. So I assume your timeshares are owned by your LLC and that you never use them yourself

A better answer to your question would be,,,dont ask me , talk to you CPA or tax attorney.

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Having gone through 2 audits, I would stay away from deducting this expense with a 10 foot poll. Even if DaveM says I can do it, I wouldn't because it would be way too hard to explain in an audit.

If the OP wants to offer a timeshare as an incentive, he needs to buy a timeshare in the name of the LLC and then it's sole purpose must be for business. If he uses it personally, I believe all bets are off.

BocaBum99 said:

Having gone through 2 audits, I would stay away from deducting this expense with a 10 foot poll. Even if DaveM says I can do it, I wouldn't because it would be way too hard to explain in an audit.

If the OP wants to offer a timeshare as an incentive, he needs to buy a timeshare in the name of the LLC and then it's sole purpose must be for business. If he uses it personally, I believe all bets are off.

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Pretty much what I said...ie I assume the LLC owns it

ronparise said:

Pretty much what I said...ie I assume the LLC owns it

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I think your assumption is wrong. If the OP bought the timeshares in the name of the LLC, then he wouldn't even be posting this question on TUG. It would clearly be a business expense since that is what he bought it for.

The reason why he has a tax question is that his timeshare is probably in his own name and was bought primarily for personal use, but now he wants to use it for business expenses. This is my presumption.

If he does indeed want to use it for business expense, her should probably transfer it out of his name and into his LLC.