Taxed on proceeds from sale of timeshare ?

[Ken Hannan]

Sorry if this has already been covered, but I can't seem to find an answer.

We are in the process of selling a Marriott Timeshare at a significant loss - sale price is about half of what we paid for it, and with a 40% commission on that sale price (to Marriott!), the resulting proceeds will be about 25% of our purchase price.

While I understand that losses on timeshares are not tax deductible, my question is, will we be taxed on the proceeds we receive from the sale ? I don't see how that could be, seeing that we paid for it with income that was already taxed, and we'd just getting some of that back.

Thanks!
Ken

 

[paxsarah]

I am not a tax accountant, but as I understand it you would only be responsible for tax on any gains, not the gross proceeds of the sale. Since you have a loss, you won't owe tax on the transaction.

 

[davidvel]

I've never heard of being taxed on a loss in property value either, unless there is foregiveness of a loan/debt in conjunction therewith, which I presume Marriott financing doesn't do. Which is still not a tax on the loss.

 

[Ken Hannan]

There is no debt on the timeshare, it was paid in full about 10 years ago. Would be great if we don't get taxed on the resulting sale! Can't wait for the closing, being done with this timeshare, and no more annual fees!! It was great while it lasted, but, it sure wasn't an investment, that's for sure!

Thanks.

 

[dioxide45]

Others can chime in, but I think Marriott will issue a 1099. So you will have to report it on your tax return. However, once you take your cost basis in to consideration, you will have a loss and owe no tax on the proceeds.

 

[funtime]

Yes. I sold a timeshare to Marriott and they issued a 1099. fortunately I made a profit, so I owed tax.

 

[Saintsfanfl]

You will get a 1099 for the entire gross before Marriott's 40%, but the 40% is a valid tax deductible cost. It sounds like you would have a loss anyway. In either case, make sure and entire the 1099 as is, and then enter your cost basis.

 

[Saintsfanfl]

Or to be on the safe side hire a tax professional.

 

[CO skier]

Sorry if this has already been covered, but I can't seem to find an answer.

We are in the process of selling a Marriott Timeshare at a significant loss - sale price is about half of what we paid for it, and with a 40% commission on that sale price (to Marriott!), the resulting proceeds will be about 25% of our purchase price.

While I understand that losses on timeshares are not tax deductible, my question is, will we be taxed on the proceeds we receive from the sale ? I don't see how that could be, seeing that we paid for it with income that was already taxed, and we'd just getting some of that back.

Thanks!
Ken

None of the following should be considered tax advice.

This is just how, after much research, I treat timeshares sold at a loss, so that the tax software does not generate a tax deductible loss (which would be a problem).

You have neither a taxable gain nor a tax deductible loss.

The amount of the 1099 (usually a 1099-S) is reported on Form 8949 Part II with box 'F' checked.

1 (a) Description of Property = "Marriott Timeshare"

1 (b) Date sold

1 (c) Date acquired

1 (d) Proceeds = amount reported on 1099

1 (e) Cost or other basis = amount reported on 1099

1 (h) Gain or (loss) = 0

Then follow the instructions to enter 0 on Schedule D line 10.


If this is not the correct tax return treatment, and the IRS wants to audit me over a timeshare to show me how it should be treated, I can certainly produce documentation that clearly shows there is no tax liability.

 

[Ken Hannan]

We did have to fill out a portion of a Form 1099 as part of the sale package/agreement, so yes I assume we will be getting one when the sale is closed.

Thanks all!

 

[Saintsfanfl]

None of the following should be considered tax advice.

This is just how, after much research, I treat timeshares sold at a loss, so that the tax software does not generate a tax deductible loss (which would be a problem).

You have neither a taxable gain nor a tax deductible loss.

The amount of the 1099 (usually a 1099-S) is reported on Form 8949 Part II with box 'F' checked.

1 (a) Description of Property = "Marriott Timeshare"

1 (b) Date sold

1 (c) Date acquired

1 (d) Proceeds = amount reported on 1099

1 (e) Cost or other basis = amount reported on 1099

1 (h) Gain or (loss) = 0

Then follow the instructions to enter 0 on Schedule D line 10.


If this is not the correct tax return treatment, and the IRS wants to audit me over a timeshare to show me how it should be treated, I can certainly produce documentation that clearly shows there is no tax liability.

I am fairly certain this is correct. I came to the same conclusion and all of my timeshare investment sales are on 8949 as either C - Short Term or F - Long Term. I am dreading the return for 2017 but it is a good problem to have.

 

[Ken Hannan]

We did have to fill out a portion of a Form 1099 as part of the sale package/agreement, so yes I assume we will be getting one when the sale is closed.

Thanks all!

Correction: We had to fill out Form W-9 which will presumably be used for a Form 1099...

 

[Saintsfanfl]

We did have to fill out a portion of a Form 1099 as part of the sale package/agreement, so yes I assume we will be getting one when the sale is closed.

Thanks all!

Correction: We had to fill out Form W-9 which will presumably be used for a Form 1099...

You might get a settlement statement at closing but a 1099 is usually generated following the end of the calendar year.

 

[LoveMyTS]

Need to ask, but why is Marriott getting a 40% commission on the sale?

 

[Saintsfanfl]

Need to ask, but why is Marriott getting a 40% commission on the sale?

Because that is what they charge if you want to hire them as your broker and have them list a unit for sale. It might seem like alot, but in almost every case the 60% net proceeds are higher than what you can get elsewhere. They are able to offer things like mrp conversions and possible DC enrollment that a buyer cannot get elsewhere. To a buyer it also seems like they are buying from the source (even though it is not actually the case). Some of these weeks are sold through a sales presentation where the price seems very attractive to points.

 

[Ken Hannan]

Need to ask, but why is Marriott getting a 40% commission on the sale?

... it's one of their "benefits of ownership" was a shocker when we inquired about selling this for sure! Just another issue with them. Good riddance (keeping fingers crossed).

 

[T_R_Oglodyte]

Just to be clear on claiming losses from timeshare sales, and based on the excellent timeshare and taxes articles in the Help section .......

Except in rare instances timeshares are personal property, and losses on the sale of personal property are never tax-deductible. For example, if you buy a new car from a dealers lot, that car loses value the moment it leaves the dealers lot and beomes a used vehicle. If you sell the car two days later, you can't claim a loss on the sale.

So when it's time to enter the basis, the basis would not be larger than the net proceeds from the sale.

 

[LoveMyTS]

Business Timeshare
To qualify as a business timeshare, you had to use the timeshare for business lodging or hold the timeshare with the expectation of making a profit.

Rental Property
If the timeshare was rented to third parties, you can forget any loss deductions. The rental of a timeshare triggers the vacation-home rules, and the vacation-home rules kill timeshare loss deductions.

Personal Use
Personal use of the timeshare does not produce a loss deduction, because personal losses are not deductible for tax purposes.

However, personal use simply reduces your percentage deduction on a business timeshare loss. For example, if you use the timeshare 60 percent for business and 40 percent for personal use, you would deduct 60 percent of the loss if your business use meets the business test.

Business Lodging
Business lodging is exempt from the vacation home rules. Thus, if you purchased the timeshare interest to reduce your cost of business lodging, and if that’s how you used it, then you could deduct the loss on your timeshare as a cost of business lodging.

If you purchased the timeshare as an investment with the hope of making a profit, and you never used it for personal purposes or rented it, you have a profit motive and you may deduct your loss.

IRS Rules:
https://www.irs.gov/help-resources/...se-of-business-property-condo-timeshare-etc-1

http://www.nolo.com/legal-encyclopedia/how-deduct-loss-on-timeshare-sale.html

 

[LoveMyTS]

... it's one of their "benefits of ownership" was a shocker when we inquired about selling this for sure! Just another issue with them. Good riddance (keeping fingers crossed).

I'm guessing the 40% fee from Marriott only applies if you have Marriott broker your TS, correct? I have never sold, just bought...

 

[vacationtime1]

I'm guessing the 40% fee from Marriott only applies if you have Marriott broker your TS, correct? I have never sold, just bought...

That is correct.

 

[Saintsfanfl]

Just to be clear on claiming losses from timeshare sales, and based on the excellent timeshare and taxes articles in the Help section .......

Except in rare instances timeshares are personal property, and losses on the sale of personal property are never tax-deductible. For example, if you buy a new car from a dealers lot, that car loses value the moment it leaves the dealers lot and beomes a used vehicle. If you sell the car two days later, you can't claim a loss on the sale.

So when it's time to enter the basis, the basis would not be larger than the net proceeds from the sale.

To clarify my position I buy and sell timeshares as investment property. This is why I use form 8949. Cost basis can exceed the net proceeds from the sale resulting in a loss on form 8949. I almost never have a loss but it could happen.

For most people that are selling the timeshare they own that they originally bought for personal use it should probably be handled differently. I'm assuming itemized deductions but I'm not a tax expert.

 

[SmithOp]

To clarify my position I buy and sell timeshares as investment property. This is why I use form 8949. Cost basis can exceed the net proceeds from the sale resulting in a loss on form 8949. I almost never have a loss but it could happen.

For most people that are selling the timeshare they own that they originally bought for personal use it should probably be handled differently. I'm assuming itemized deductions but I'm not a tax expert.

Correct, its capital gain or loss. If a loss there is an adjustment column to 0 out the loss, with code L. You can't take a loss on property.

If its your primary residence lived in 2 of the last 5 years, use code H to adjust gain (up to $250K single/$500K mfj).


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[T_R_Oglodyte]

To clarify my position I buy and sell timeshares as investment property. This is why I use form 8949. Cost basis can exceed the net proceeds from the sale resulting in a loss on form 8949. I almost never have a loss but it could happen.

For most people that are selling the timeshare they own that they originally bought for personal use it should probably be handled differently. I'm assuming itemized deductions but I'm not a tax expert.

One one of the old iterations of the BBS I posed that identical situation to Dave McClintock, the CPA who authored the Timeshare and Taxes article. His response was that even if someone is buying and selling timeshare as a business, the person still needs to establish that the timeshare is not personal property. Being able to demonstrate that it is a true business and not a hobby would certainly factor in. I would also imagine it would be neater if the buying and selling were done through an LLC so that there is clear and distinct entity that is conducting the business and there is no comingling of personal and business accounts.

 

[Saintsfanfl]

In my thinking I've been doing it as an investment similar to buying and selling stocks. From what SmithOp is saying it can't result in a loss for property. I didn't realize that but that works for me. I am going to continue to do it as I have been which seems easier than doing it as a business. I have almost no expenses outside of the obvious cost basis.

 

[Saintsfanfl]

Correct, its capital gain or loss. If a loss there is an adjustment column to 0 out the loss, with code L. You can't take a loss on property.

If its your primary residence lived in 2 of the last 5 years, use code H to adjust gain (up to $250K single/$500K mfj).


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I'm looking at the IRS instructions and the non-deductible indicates property held for personal use. Property held strictly for an investment purpose seems to be deductible. Am I missing something? I realize this won't apply to the vast majority of people selling their timeshares.