If you sell a timeshare and use all the proceeds to buy another one, are you still required to report as income? I just recently sold my Kaanapali Beach Vacation Resort interest and bought into DVC, so I'm not sure how to treat the income.
-
The TUGBBS forums are completely free and open to the public and exist as the absolute best place for owners to get help and advice about their timeshares for more than 30 years!
Join Tens of Thousands of other Owners just like you here to get any and all Timeshare questions answered 24 hours a day!
Selling timeshare and using proceeds to buy another
- Thread starter bsilly
- Start date
Spence
Banned
None, the transactions have no relation, income from the sale should be reported.
The really big question
What are you selling that is giving you a profit? I assume you purchased resale - it would be a virtual miracle if you bought retail and are making money on the resale price. Just interested.
What are you selling that is giving you a profit? I assume you purchased resale - it would be a virtual miracle if you bought retail and are making money on the resale price. Just interested.
Dave M
TUG Lifetime Member
I concur with Spence. The transactions are treated independently of each other. If you have a gain on the sale, it's taxable. Period.
Even if there is no gain, you should still report the sale on Schedule D. Losses are generally not deductible.
See the Taxes and Timeshares article in the Advice section (link at the top of this page) for more timeshare tax info.
Theoretically, if you regularly rent your timeshare to others and expect to do the same with the new timeshare, you could do a tax-free swap (with the seller of your new timeshare getting cash) to avoid income tax when disposing of a timeshare with a built-in gain. However, the legal fees to be sure it's done properly would usually be more than what the tax on the gain would have been!
Even if there is no gain, you should still report the sale on Schedule D. Losses are generally not deductible.
See the Taxes and Timeshares article in the Advice section (link at the top of this page) for more timeshare tax info.
Theoretically, if you regularly rent your timeshare to others and expect to do the same with the new timeshare, you could do a tax-free swap (with the seller of your new timeshare getting cash) to avoid income tax when disposing of a timeshare with a built-in gain. However, the legal fees to be sure it's done properly would usually be more than what the tax on the gain would have been!
BocaBum99
TUG Member
Dave,
What happens when a developer offers you an equity exchange for your timeshares and you pay the difference in the value?
Do you need to report anything on a schedule D?
Let's use a theoretical example.
Let's say I bought an Orange Lake 2 bedroom unit for $3000. Closing $225. I rented it for 2 years and took a standard flat depreciation.
Now, I trade it into Fairfield and receive 154000 points in exchange for that timeshare. The original purchase price is $15000, but they give me a $3000 equity exchange. So, I pay $12000 plus closing.
What happens in that situation for tax purposes?
Do I have to declare a sale of the Orange Lake and have a higher tax basis for my Fairfield?
What happens when a developer offers you an equity exchange for your timeshares and you pay the difference in the value?
Do you need to report anything on a schedule D?
Let's use a theoretical example.
Let's say I bought an Orange Lake 2 bedroom unit for $3000. Closing $225. I rented it for 2 years and took a standard flat depreciation.
Now, I trade it into Fairfield and receive 154000 points in exchange for that timeshare. The original purchase price is $15000, but they give me a $3000 equity exchange. So, I pay $12000 plus closing.
What happens in that situation for tax purposes?
Do I have to declare a sale of the Orange Lake and have a higher tax basis for my Fairfield?
johnmfaeth
TUG Member
I agree that they are unrelated transactions. I think bsilly might also be thinking about the "rollover" within 2 year exemption from federal capital gains taxes that applies only to your "primary" residence.
So unless you live in a box the rest of the year, making this your only owned lodging, you are out of luck on that one
John
So unless you live in a box the rest of the year, making this your only owned lodging, you are out of luck on that one
John
Dave M
TUG Lifetime Member
I think you have been taking a very, very long nap, John !
That rollover provision was done away with in 1997. It's no longer possible to roll the gain over by purchasing a new residence. Gain of up to $250,000 ($500,000 on a joint return) on the sale of a residence is exempt from tax, assuming the taxpayer has owned and used the home as a principal residence for two of the past five years before sale. Any additional gain is taxable.
- Joined
- Jun 6, 2005
- Messages
- 15,930
- Reaction score
- 1,962
- Resorts Owned
- Grandview At Las Vegas
[triennial - points]
Not Talking All That Much Money Anyhow.
We took the (resale) timeshare plunge in 2002 -- paid $3,500.
Went there on vacation that year, took the "owner update," got shown the New Section, went home, found an equivalent (resale) New Section timeshare, bought that for $1,925 via eBay, resold our $3,500 Original Section timeshare for $3,500.
Even though we in essence got $1,500 or so back for "upgrading" to the New Section, I don't think anything taxable happened.
Later, we spent that $1,500 or so on...
We took the (resale) timeshare plunge in 2002 -- paid $3,500.
Went there on vacation that year, took the "owner update," got shown the New Section, went home, found an equivalent (resale) New Section timeshare, bought that for $1,925 via eBay, resold our $3,500 Original Section timeshare for $3,500.
Even though we in essence got $1,500 or so back for "upgrading" to the New Section, I don't think anything taxable happened.
Later, we spent that $1,500 or so on...
...more timeshares. So it goes.
-- Alan Cole, McLean (Fairfax County), Virginia, USA.
johnmfaeth
TUG Member
Hi Dave,
I sold the last house in 1992 and intend to stay in this one until they plant me, too much work moving.
Lots of me is getting dated these days.....
John
I sold the last house in 1992 and intend to stay in this one until they plant me, too much work moving.
Lots of me is getting dated these days.....
John
Jya-Ning
TUG Member
Then you have loss, not income. Not CPA, but you can not file the TS loss. For a moment, I thought you were talking a like to like exchange to defer your gain.
Jya-Ning
Dave M
TUG Lifetime Member
As stated earlier, you must still report the sale. Failing to do so will invite a visit from the IRS, because the IRS will be notified of the sales price and will have no idea whether you have a taxable gain.
Report the sale on Schedule D, show the selling price and the cost and then show "0" in the gain/loss column. You will get no tax benefit from the sales commission. It's not separately deductible.
dvcbwv
TUG Member
- Joined
- Feb 5, 2007
- Messages
- 28
- Reaction score
- 0
- Resorts Owned
- DVC BWV
DVC BLT
DVC GCV
DVC OKW
HGVC Flamingo
HGVC Bay Club
Wyndham Grand Desert
...but there's always room for one more.
Actually, I sold some of my DVC points at a very nice profit. I am sure Uncle Sam is enjoying his cut as well...
Tracy
What about State Tax?
I sold my Hilton Head property last year and had a profit of $1,900. The closing company withheld a percentage (I think 7% but need to check my records) and sent to the State of SC for withholding. I don't live in SC so won't be filling taxes there and not sure if I can this money back or not. Has anyone else had this happen?
Gary
I sold my Hilton Head property last year and had a profit of $1,900. The closing company withheld a percentage (I think 7% but need to check my records) and sent to the State of SC for withholding. I don't live in SC so won't be filling taxes there and not sure if I can this money back or not. Has anyone else had this happen?
Gary
Dave M
TUG Lifetime Member
Most states have a law that gains on the sale of real estate located in that state are taxable there. Thus, you should file a SC tax return for 2006.
Assuming the closing company withheld 7% of the sales price, you'll have a refund coming. I believe you'll complete the top section and lines 5, 6, 9, 14, 18, 22, 23 and 29 of the basic tax return, along with Schedule NR. Your tax will likely be less than $48, the tax on $1,900. That's because you'll likely get some benefit on Schedule NR from your federal itemized deductions or standard deduction (line 45) and personal exemptions (line 46). You'll need to attach the withholding statement (Form I-290) to your return.
For other instructions and the tax calculation tables, see this index of SC tax form links.
Assuming the closing company withheld 7% of the sales price, you'll have a refund coming. I believe you'll complete the top section and lines 5, 6, 9, 14, 18, 22, 23 and 29 of the basic tax return, along with Schedule NR. Your tax will likely be less than $48, the tax on $1,900. That's because you'll likely get some benefit on Schedule NR from your federal itemized deductions or standard deduction (line 45) and personal exemptions (line 46). You'll need to attach the withholding statement (Form I-290) to your return.
For other instructions and the tax calculation tables, see this index of SC tax form links.