You haven’t stated what state your timeshare is located in, although because you’re posting in the Florida forum, I’ll assume it’s in Florida. That being the case, the above post with respect to a non-judicial foreclosure is correct, insofar as the end result is concerned
if the foreclosure is strictly for the maintenance fees. If you don’t contest the foreclosure, the developer can’t come after you for a deficiency. If you still have a loan, the answer could change if the loan is recourse (likely) and the lender decides to pursue you for the deficiency (less likely). As to tax implications, by all means consult a tax adviser. But the answer there also depends on whether you have a loan or not. If you don’t, there will almost certainly not be a tax consequence, given that you are realizing nothing in the transaction so there will be no gain to be taxed. If you have a loan, the outstanding balance could be considered income to you if forgiven in the foreclosure or deed in lieu. There is also the question of whether there will be a credit impact as a result of either transaction.
@Grammarhero keeps a running tally of timeshare foreclosures and whether they resulted in negative reports to the credit agencies. Bottom line: if the foreclosure is for maintenance fees, the likelihood of a report to credit is less likely (but not zero). Finally, both a foreclosure and a deed in lieu have impacts for future loan applications, primarily mortgage loans. The current 1004 loan application has questions about whether, in the last 7 years, you have deeded property (and the question does not specify what kind of property, so timeshares are included) in lieu of foreclosure or had any property foreclosed. If you choose option 2 or 3 and will be applying for a mortgage loan in the next 7 years, to answer these questions truthfully you will need to disclose what happened here.