Selling Timeshare Acquired as Form of Payment

[Djenders]

So five years ago I did a website for a timeshare. They paid partially in cash and the rest as a deeded week.

I've read a lot about not being able to claim a loss on a timeshare, but nothing specifically about a property acquired this way.

I've always tried to rent it out, or have my association rent on my behalf. I haven't been successful in renting and never claimed any income o past tax returns, obviously.

Anyone have any experience with this? Any thoughts on being to claim a loss because it was received as payment of services?

Thanks,
Dennis

 

[Dave M]

It doesn't matter how you got it. What matters is how it was used. Since you consistently tried to rent it, you can try to claim a loss (it would be treated as a section 1231 loss). However, be prepared to show evidence - if you get examined by IRS - that you tried to rent it each year - receipts for ads, copies of e-mail messages between you and the resort regarding rental efforts, etc.

Not in your favor is that it appears you never showed the rental property on your tax return, showing depreciation and maintenance fees as an expense and then deferring the loss under the passive loss rules. Thus, it's likely that if you are examined, the IRS will treat the loss as a nondeductible personal loss and force you to prove that you made legitimate regular efforts to rent the week. Even if you can show some evidence that you tried to rent it, those efforts must have been more than just a casual attempt here and there.

Good luck!