Filing timeshare rental income

[susiequeve]

Does anyone know if you have to claim income from a 5 day timeshare rental? I rented my Cape Cod timeshare last year for only 5 days and receive a 1099 from the government.

Any info would be greatly appreciated.

 

[DeniseM]

This TUG article should have the info. you need: TS Taxes

And this recent thread - Tax Thread

For more info. use the search function and search for "tax."

 

[Dave M]

Yes, you must report the income, but you will have some expenses that can be offset aghainst the income. See the Rental Income and Vacation Home sections of this Income Taxes and Timeshares article from the TUG Advice section.

(Edited to note that you beat me to it, Denise!)

 

[susiequeve]

Thanks to both of you for the advise.

Susiequeve

 

[Spence]

Thanks to both of you for the advise. Susiequeve

Advise is a verb, maybe you mean advice? I doubt the 1099 came from the government, it came from whatever organization you brokered the rental through. They sent it to you and the government. So, my advice to you is to account for it on your taxes.

 

[susiequeve]

Hey Spence, Thanks for the ADVICE !!

 

[wbtimesharer]

I was wondering how one would get a 1099 on a personal rental. I did not realize that it was done through an agency. That must be who sent it.

Bill

 

[JimIg23]

LO MF split

Another rental tax Q if anyone knows:

If you spilt a lockoff and rent the studio part and use the one-bedroom for personal use. (and are not a normal every year renter) For dedection purposes, would you apply 1/3 or 1/2 of the year MF/taxes to the rental as a deduction against the rental income? Example: You rent your studio side of the 2 bedroom LO unit for $1000. You use the 1 bedroom for personal use. The total annal FF/taxes/SA is $1,000 in a combined bill. What would you use as a deduction against the rental income? Thanks!

 

[Dave M]

The tax rules provide that you should make a reasonable allocation of the expenses. That applies to depreciation as well as the MFs and taxes.

Because the square footage, fair market value and rental value of the studio are all likely to be less that one half of the total, I believe something in the range of 25%-35% of the total would be appropriate, but it's your call.

Also, if you have used the unit for personal use (occupancy, exchange, gift to a friend or relative, etc.) in any prior year, depreciation should be calculated based on resale value or your purchase price, whichever is lower.

 

[JimIg23]

Thanks Dave! I always low ball my deduction figures. Better to be owed than to owe when it comes to the IRS.

 

[Dave M]

I would suggest the opposite approach. You won't win any medals (or money) for passing up deductions to which you are legally entitled.

I believe I am as ethical about income tax filing issues as can be, probably in part because of my 40+ years as a tax-oriented CPA. However, there are many gray areas and your question is a good example of that. That's why I suggested that "it's your call".

When it comes to making a true judgment call, if you make a reasonable decision, you won't have to worry about penalties in the unlikely event that the IRS audits you. Sure, the IRS might disagree with your judgment and ask you pay some additional tax and interest on the unpaid tax, but that's all.

Those who take positions that are contrary to the law or that have no basis in fact or that are very unlikely to be sustained are the ones who have to worry about what happens when the IRS calls.

 

[mtwingcpa]

Dave -

A further spin on the lock-off situation, unless the lock-off unit constitutes a "dwelling unit" in its own right (ie: has a kitchen), I would suggest that the limitations of IRC 280A (so-called "vacation home" rules) would likely apply to the lock-off rental IF you have used the non-lock-off portion for personal purposes during the year. The consequence of that would be that rental losses are limited to income, with a less flexible carryover rule than if the passive loss rules had applied instead.

 

[Dave M]

The vacation home limitation rules of Section 280A don't apply in this situation and would rarely apply to a timeshare owner.

The first part of Section 280A provides that the limitations of the section apply to a dwelling used as a "residence" by the taxpayer during the year. Section 280A(d) provides that a dwelling is used as a "residence" only if it is used for personal purposes for at least 15 days during the year. That normally won't be the case for a timeshare unless the taxpayer owns at least three weeks at a single resort.

See the last section ("Vacation Homes") of the TUG Income Taxes and Timeshares article (in the TUG's Advice section) for more on vacation homes as it relates to excluding rental income under the vacation home rules.

 

[JLB]

Maybe I missed it, but I don't see it mentioned, just links to it, but I will advice you to file a Schedule E.

Unless you live in the Ozarks, of course, in which case you can do your taxes however you want to.

 

[Lee B]

I think that if you get a 1099, you want to use Schedule E. Include (the proportion of) what you pay in maintenance as an expense. The depreciation would be so minimal (I think) that you can leave it off.

 

[Dave M]

Lee -

See the link in my above post for the information on what to claim as deductions, including how to compute depreciation - which can be enough in many situations to eliminate any net taxable income.

 

[JLB]

When we put any of our weeks in the rental program, the annual fee is enough to do that.

Lee -

See the link in my above post for the information on what to claim as deductions, including how to compute depreciation - which can be enough in many situations to eliminate any net taxable income.

 

[Timeshare Von]

Not that anyone needs one . . . but that seems like yet another reason to NOT use a rental/property management company to rent your timeshare!!!

 

[mtwingcpa]

The vacation home limitation rules of Section 280A don't apply in this situation and would rarely apply to a timeshare owner.

I'm not sure about that. See IRC 280A(d)(2)(A). It appears that use by OTHER timeshare owners would be attributed as personal use by the owner in question. I suppose this result might depend on whether we are talking about a deeded/specific unit type of timeshare (where the section mentioned above would clearly appear to apply) versus a floating arrangement where no specific unit is assigned (where application of the section is less clear).

 

[hipslo]

Not that anyone needs one . . . but that seems like yet another reason to NOT use a rental/property management company to rent your timeshare!!!

Rental income from renting out a timeshare is under almost all cases reportable to the IRS, whether or not a 1099 is received from the renter or a management company.

 

[Dave M]

mtwingcpa -

Even in most floating week arrangements, the owner has a deed to a specific unit for a specific week. No one else has an ownership interest in that deeded property, as would be required under the subsection you cite.

In order for that provision to apply, one would have to aggregate a number of separate deeds to treat the multiple deeded ownerships as one, even though the single owner in our example has no control over those other owners and how they use their ownership. Nor does the owner have any way to determine how those other owners used their ownership.

Is it possible that a court might aggregate such multiple ownerships for purposes of the vacation home rules? Yes. Is it likely? I don't think so, at least based on the Blue Book interpretation of the intent of Congress.

 

[mtwingcpa]

No one else has an ownership interest in that deeded property, as would be required under the subsection you cite.

I disagree with your interpretation. The subsection in question refers to a "DWELLING unit," not an "OWNERSHIP unit." That's the problem. For this reason 280A would appear to applicable to virtually all timeshare situations as I see it. The fact that timeshare ownership does not otherwise "fit" very well under 280A is unfortunate, but only Congress (or an "activist" judge) can change that.

Note that ownership of a property as "tenants in common" would also suffer from the likelihood that one owner does not necessarily have knowledge or control over the actions of other owners. But, I'm not aware of any AUTHORITATIVE holding that a "dwelling unit" owned by tenancy in common would not be subject to 280A when there has been personal use by ANY of the owners.

Congressional intent (if any) only comes into play if there is ambiguity in the wording of the statute. I see no ambiguity. A dwelling unit is a dwelling unit is a dwelling unit. And the statute is silent on issues related to knowledge or control. I don't particularly "like" this result, but I don't see any way around it save for the "what did the Tax Court judge have for breakfast" factor.

Beyond that I guess we will have to agree to disagree.

 

[hipslo]

I'm not sure about that. See IRC 280A(d)(2)(A). It appears that use by OTHER timeshare owners would be attributed as personal use by the owner in question. I suppose this result might depend on whether we are talking about a deeded/specific unit type of timeshare (where the section mentioned above would clearly appear to apply) versus a floating arrangement where no specific unit is assigned (where application of the section is less clear).

If you were to take this position, wouldnt you then also need to attribute RENATL activity by other owners as well, in order to be consistent, and then aggregate everything for all owners? That would be a pretty unworkable approach, which I believe is one reason that the approach that DaveM mentions is generally taken, as a practical matter.

 

[hipslo]

If you were to take this position, wouldnt you then also need to attribute RENATL activity by other owners as well, in order to be consistent, and then aggregate everything for all owners? That would be a pretty unworkable approach, which I believe is one reason that the approach that DaveM mentions is generally taken, as a practical matter.

Also, think about the implications of taking this position to its logical conclusion. Let's say I wanted to get into the business of purchasing and renting out timeshares. So, I purchase two weeks at each of 5, 10, 20, 30 or more differnent resorts. Does anyone really think that none of my rental income would be taxable because in each case the unit is a "residence" and I am entitled to the benefit of the 280A short term rental exclusion? If so, good luck with that audit!

 

[mtwingcpa]

Also, think about the implications of taking this position to its logical conclusion. Let's say I wanted to get into the business of purchasing and renting out timeshares.

A taxpayer who is "actively" engaged in a "trade or business" of buying, selling or renting timeshare units WITH AN EXPECTATION OF PROFIT is arguably not subject to IRC 280A or 183. For example, I've never heard it argued that a hotel would be subject to such limitations. Note that "actively" and "trade or business" are terms of art with their own complicated definitions.

Edited comment: Upon further thought, I believe I have way over-simplified a complicated situation, especially with respect to IRC 280A. Please view my comment above as simply "food for thought."