Points rental, tax question

[EAM]

If one rents out points, e.g. FSP, DVC, etc., that one has owned for a while, I understand that one can take a depreciation deduction based on the fair market value of the points at the time the points were first rented out. I also understand that rental real estate losses can be deducted against passive activity income but not other income.

What I am not sure about is how to depreciate points when one does not rent out all the points one owns, and one may not rent out the same number of points each year. Any advice from the timeshare tax experts out there?

 

[Dave M]

The depreciation is based on the lower of resale market value of the points or your purchase price.

You would calculate the depreciation for the year on all of your points and then take a depreciation deduction for the proportion of your total points that you rent. As an example, if you rent out 40% of your points, your deduction would be 40% of the calculated depreciation for all of your points.

 

[EAM]

Thanks! That makes sense.