Filing timeshare rental income

[mtwingcpa]

If you were to take this position, wouldn't you then also need to attribute RENTAL activity by other owners as well, in order to be consistent, and then aggregate everything for all owners?

Actually, see proposed Reg 1.280A-3(f). It confirms my viewpoint that personal use by ANY owner is attributable to ALL owners. It also provides that (as near as I can understand it) the number of rental days and the number of other use days would similarly be based on the AGGREGATE totals of such use by ALL owners; although such allocation factors would be applied to the individual expense items of the particular taxpayer in question (ie: days are aggregated, but dollar amounts are NOT).

Note, of course, this was a PROPOSED regulation that was never finally adopted. However, if I recall correctly, it was never officially withdrawn. Thus, it hangs there as a festering uncertainty. My own guess is that positions contrary to this proposed reg would bear no better than a 50% chance of success.

Whether it is "practical" or not is not the question. There is no general exception to the Internal Revenue Code based on practicality. I presume that you would be entitled to use "reasonable estimates" of such factors where determination of actual numbers was difficult.

 

[hipslo]

A

Actually, see proposed Reg 1.280A-3(f). It confirms my viewpoint that personal use by ANY owner is attributable to ALL owners. It also provides that (as near as I can understand it) the number of rental days and the number of other use days would similarly be based on the AGGREGATE totals of such use by ALL owners; although such allocation factors would be applied to the individual expense items of the particular taxpayer in question (ie: days are aggregated, but dollar amounts are NOT).

Note, of course, this was a PROPOSED regulation that was never finally adopted. However, if I recall correctly, it was never officially withdrawn. Thus, it hangs there as a festering uncertainty. My own guess is that positions contrary to this proposed reg would bear no better than a 50% chance of success.

Whether it is "practical" or not is not the question. There is no general exception to the Internal Revenue Code based on practicality. I presume that you would be entitled to use "reasonable estimates" of such factors where determination of actual numbers was difficult.

I suspect that by any reasonable estimate, any timeshare unit is rented out at least 15 days over the course of a year, so if we were to aggregate rental use of all owners, we'd fall outside of the 280A exclusion, even if we were to conclude that it was a residence based on aggregate personal use of all owners.

However, while a few of us (you, me and DaveM, at least) might actually enjoy the technical debate on this point (hard as some folks might actually find that to believe!), I think we've gotten to the point where 99% of any eyes that are still following this thread are starting to glaze over!

 

[mtwingcpa]

I suspect that by any reasonable estimate, any timeshare unit is rented out at least 15 days over the course of a year, so if we were to aggregate rental use of all owners, we'd fall outside of the 280A exclusion, even if we were to conclude that it was a residence based on aggregate personal use of all owners.

Agreed. But then we are left with the likelihood that losses on such rentals would be subject to the 280A limitations in virtually every case.

However, while a few of us (you, me and DaveM, at least) might actually enjoy the technical debate on this point (hard as some folks might actually find that to believe!), I think we've gotten to the point where 99% of any eyes that are still following this thread are starting to glaze over!

Agreed! This discussion has drifted way past the context in which it occurred!

 

[Dave M]

I'll grant that the IRC, when taken literally, might support your position. However, neither the Code nor the proposed regulations address timeshares or discuss whether timeshare ownerships should be aggregated or treated separately. The best IRS guidance on the timeshare issue, which supports my view, is here and here. Although not authoritative, those cites suggest how the IRS might apply the law.

However, all of this is of little interest to most taxpayers. From a practical standpoint, the only impact of your position versus mine would be whether losses are never deductible or are deductible, but only under the restrictive passive loss rules as offsets to other similar passive income.

With such a minimal impact and taking into account hipslo's valid comment, I'll bow out of this discussion.

 

[mtwingcpa]

I'll grant that the IRC, when taken literally, might support your position. However, neither the Code nor the proposed regulations address timeshares or discuss whether timeshare ownerships should be aggregated or treated separately.

I disagree. Proposed Reg 1.280A-3(f) entitled "Application of the rules of Section 1.280A-1 and this section to time sharing arrangement" most certainly DOES address the aggregation of timeshare ownerships for 280A purposes. For better or worse, this proposed reg is probably the "highest" authority currently available on this topic.

As to the practical consequences of this, my own opinion is that most "casual" timeshare rentals will run aground on IRC 183 (activity not for profit) long before ever getting to 280A or the passive loss rules.

 

[BocaBum99]

What schedule should timeshare rentals be reported on? Schedule E or Schedule C? What is the trigger for deciding?

 

[Dave M]

Rental income belongs on Schedule E.

 

[hipslo]

Proposed Reg 1.280A-3(f) entitled "Application of the rules of Section 1.280A-1 and this section to time sharing arrangement" most certainly DOES address the aggregation of timeshare ownerships for 280A purposes. For better or worse, this proposed reg is probably the "highest" authority currently available on this topic.

I wouldnt get myself overly concerned about that reg. It is merely "proposed", has been so for a very long time I believe, and proposes an approach (ie - aggregating use of all owners) that doesnt make any sense and is difficult if not impossible to apply in most typical timeshare scenarios because the info that would be needed to apply it is not known or even knowable, necessarily. I believe the example given assumes 1/12 shares, or maybe even 1/4 shares, if I recall correctly, rather than the 1/52 shares that timeshares typically involve. I cast my vote, again, for DaveM's approach, which is to apply 280A (or not) based on the use of the relevant taxpayer at issue in each case, rather than ALL owners at the timeshare. I have a very difficult time believing that such an approach would not be sustained as reasonable in the event of challenge, despite the literal language of the statute and the proposed reg.

(Hey this is great I can now goof off on the TUG BBS and still delude myself that it somehow relates to my profession!)

 

[mtwingcpa]

I wouldnt get myself overly concerned about that reg. It is merely "proposed", has been so for a very long time I believe, and proposes an approach (ie - aggregating use of all owners) that doesnt make any sense and is difficult if not impossible to apply in most typical timeshare scenarios because the info that would be needed to apply it is not known or even knowable, necessarily.

The problem is, even "proposed" regs constitute "authority" for the purpose of penalties and sanctions against both the taxpayer and the preparer. So, for better or worse, you ignore this stuff at your own risk.

The additional problem is that CONGRESS included the ownership attribution factor in the statute in question, and that has to be interpreted is SOME way. The proposed reg is certainly not inconsistent with that requirement. In fact, I'm not sure what else the IRS could have done that wouldn't have created controversy in other areas. After all, the STATUTE makes no differentiation based on the TYPE of ownership involved (timeshare, tenancy in common, joint tenancy, etc.). So what basis would there be for excluding SOME types of ownership from the provision, but not others???

The only thing going against this, in my opinion, is the fact that this proposed reg has sat for over two decades (I think) without further action. That fact, if no other, would cast at least some doubt on the current viability of the provision (perhaps enough doubt to meet the "realistic possibility" standard???).

 

[Giselherr]

Rental income belongs on Schedule E.

Just a simple question -- would this also apply to "Ground Rents" (a neat little item (or a devil's creation - if you prefer)) which really only exist in Baltimore City and some parts of the surrounding counties and St.Louis MO? In accord with the "Ground Rent" the house owner is required to pay a "rent" (usually semi-annually) or the house owner risks losing the house to the ground rent owner by a legal process called "ejectment". The house owner never owns the land underlying the dwelling (except in certain circumstances) but the dwelling owner is usually liable for any taxes on the land.