Capital Gains?

Joined
Dec 16, 2004
If someone sold their points for more than they paid, would they be subject to capital gains? Would the cost of owning those points, ie, interest on loan, dues, etc. be deducted from the gain? Has anyone had this experience?
 
It would be best to have your tax advisor take a look from the perspective of your personal situation.

Members can often (again, check with your tax professional) deduct interest expense and property taxes paid annually.

With most real estate, you could deduct the value of any improvements made to the property from any profit realized at the time of sale. With a timeshare, individual owners, most likely, did not make any improvements that could be deducted. Most components of the dues are related to the actual use of the property (transportation, utilities, housekeeping, MS, maintenance, etc.) and probably cannot be deducted.
 
You really need to consult a CPA or otherwise qualified tax advisor.

You cannot deduct any of the things you mention from a capital gain.

Each year that you owned DVC, you might have been able to deduct (from your income) the interest from the loan, (depending on the loan and your personal situation) and the portion of the maintenance dues that were attributed to property taxes.

To compute the gain from the sale of an asset, you subtract the cost basis plus the selling costs (ex. broker's commission) from the sale price. In the case of DVC , I can't imagine the cost basis as being anythign but the price you paid.

Again - not a good idea to rely on tax advice you receive from a bulletin board. You need to consult a tax professional.

Capital gains are taxed at different rates than ordinary income.

Best wishes -
 
To compute the gain from the sale of an asset, you subtract the cost basis plus the selling costs (ex. broker's commission) from the sale price. In the case of DVC , I can't imagine the cost basis as being anythign but the price you paid.

In reference to the quote above:

You need to talk to a tax professional and mentioned that DVC has a set term (prepaid vaction plan) versus actual ownership of real estate where you actually still own the property at the very end of the term. In a situation like this a case could be made that you should adjust the orginal cost for the points that are previously been used or expired.
 


It's income, but I don't beleive that it falls under capital gains. I'm retired from the IRS. I'll have to make a phone call to find out. If I don't get back to you, email me and I'll make the call when I can. I'm in work right now and can't do it at the moment
 
It certainly looks like it would be a capital asset and thus subject to the cap gains rules. As state before, part of the annual dues would be real estate taxes and thus deductable in the year paid, but most of the other expenses are more in the way of maintenance which is not deductable. If part of the maint fees are stated to be for capital improvements or future capital improvements, than you maybe able to add those expenses to your basis.
Obviously, any buying or selling fees would reduce your taxable gain when you sold the contract.

Historically, the terms capital "gains" and "timeshares" have not been used in the same sentence...maybe this is another selling point for DVC over other Timeshares or points based vacations.
 
abner1776 said:
.....(snip)....Historically, the terms capital "gains" and "timeshares" have not been used in the same sentence...maybe this is another selling point for DVC over other Timeshares or points based vacations.
Or maybe bpmorley is correct and selling DVC for more than you paid can't be considered a capital gain or loss.

That said, DVC is technically a deeded interest in a lease. Leases are "capitalized" (and sold for a gain or a loss) all the time in the business world. But as Plutofan posted, those are depreciated/adjusted for remaining value. It can get complicated.

I will be interested in what bpmorley's IRS dudes have to say. But no matter what they say (IRS has also been known to give out wrong info, LOL), if it were me, I'd still consult a tax professional - preferably one who will pay all penalties if he/she is wrong.


Best wishes -
 


Being this is a holiday week, it's tough to get in touch with anyone in work. I sent some emails out and hopefully I'll have an answer soon. Then again, there has to be a CPA somewhere on these boards. I will forward any info I get ASAP
 
Thanks for the replies. I am not thinking of selling any time soon; I was putting the finishing touches on my taxes this morning and it occurred to me that if I were to sell, I'd likely be able to get more than I paid. Since I was writing numerous checks to Uncle Sam and his state relatives, I just got to thinking. I guess along with that question, I'd have to wonder if you were being totally upfront with the IRS, would renting points be considered rental income? I do deduct the real estate tax portion of the annual fees. Didn't finance so I never had that deduction.

bpmorely, please don't go to any extreme measures to allay my curiosity.

I also sit at shows and count the number of seats and then multiply that by the ticket prices and then by the number of performances in a year to see what kind of revenue the show might be producing.

Sometimes I wonder how much change is lost in all the sofas in the United States. I bet I could retire on that. Perhaps I just have too much time on my hands. :confused3
 
disney junky said:
Sometimes I wonder how much change is lost in all the sofas in the United States. I bet I could retire on that. Perhaps I just have too much time on my hands. :confused3

My god you are just like me! One time I figured out how many points I would have to buy and the resulting cost to stay in a OKW 1 Brdm for a year! Cannot remember the figures - but it was more then Walt paid for the entire land 40 years ago!

Regardless - I have got a handle on the change thing: I have a little shelf in the garage! Each night when I get home all the loose change (and maybe a few small bills) go in to a coffee can I have placed on the shelf!

A week before our DVC trip we break out the Coffee Cans I have collected over the year - roll it up - take it to the bank and this become our "Fun Money" at WDW!

Usually it pays for a few Dinners and water mouse rentals!
 
Just so you know the IRS defines a cpaital asset as follows:

In general everyhing owned for personal or investment purposes is a capital asset.

Persoanl Use: A gain on the sale of property used for personal purposes is taxable as a capital gain. A loss on the sale of property used for personal purposes is not deductible.

This information is taken from the 2005 1040 Quickfinder handbook for tax preparers. This is not tax advise , it is only what is written in a tax handbook. Please consult a tax professional for your specific situation.
 
bpmorley said:
It's income, but I don't beleive that it falls under capital gains. I'm retired from the IRS. I'll have to make a phone call to find out. If I don't get back to you, email me and I'll make the call when I can. I'm in work right now and can't do it at the moment

I would highly recommend that you do not publish any tax advise since you maybe considered a professional under the new IRS circular 230 regulations which carry very heavy penalties for written tax advise that may not be totally proper.
 
Plutofan said:
I would highly recommend that you do not publish any tax advise since you maybe considered a professional under the new IRS circular 230 regulations which carry very heavy penalties for written tax advise that may not be totally proper.
I'm not worried about it. I was never professional when i was there, what makes you think I'm professional now. :rotfl2: As of right now the IRS doesn't seem to have a defintion on the type of timeshare that DVC is. A traditional timeshare(you get the same week every year and you own for life) is a capital asset. The answer I got was for that kind. So I just emailed back about how DVC works and that it's not owned for life. I'm not sure what the answer will be but I will forward any info I get.
 
CarolMN said:
That said, DVC is technically a deeded interest in a lease. Leases are "capitalized" (and sold for a gain or a loss) all the time in the business world. But as Plutofan posted, those are depreciated/adjusted for remaining value. It can get complicated.
-

CPA in training, and I think that is what I would probably do, if it were a business. But as an individual you wouldn't be depreciating the capital expense each year, so their wouldn't be any depreciation to account for in the gain. And I'm not sure the IRS would by that something was worth less than the person you sold it for was willing to pay.

I don't see any reason why this wouldn't be a capital gain.

Also, any income from renting I'd claim (but I'm conservative), subtracting the cost of the dues and the points.

But yep, complicated. And always consult a tax professional (gives the CPAs more business).
 
bom_noite said:
My god you are just like me! One time I figured out how many points I would have to buy and the resulting cost to stay in a OKW 1 Brdm for a year! Cannot remember the figures - but it was more then Walt paid for the entire land 40 years ago!

This is all your fault! :rotfl:

To stay in a BWV 1BR Preferred View for the entire year of 2007: 12852 points
To purchase that many points, at $92/point: $1,182,384.00
Annual dues for the year, assuming $4.50/pt: $57,834.00

(sorry to derail the topic)
 

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