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Re: Getting rid of your timeshare (by Dr. K.):

I'm glad you took the time to read our IRS report. However, I'm sorry you didn't understand it. It might help if you follow some of the sections back to the original IRS publications it was drawn from. To go back and site each one per page and paragraph would be burdensome and unproductive for most readers.

It is clear in IRS publications that any timeshare sold within 36 months of the donation date must be valued at the cash receipt value. The IRS is also clear that without that sale within that period a value of no more than $5,000 can be taken. The concept of FMV doesn't apply in this direct circumstance except when established by the cash receipt.

Reading the IRS publication on instructions to appraisers is where FMV come into focus. It's first point is to be considered FMV it must be a transaction between two parties, neither of which has to sell nor have to buy under pressure. Does that sound like a normal desperate sale many owners are going through? Next in those instructions is to consider ALL sales, not just resales. If fact, when an honest appraisal is done several things have to be taken into consideration. 1. Condition and age of the unit - since all units are kept in the same condition, this becomes a moot point. 2. The size and date use of the units. 3. The number of sales at various prices as recorded in county records. This must include all resort sales as well as resales. When you look at 20 resales in a resort versus 2000 new sales at the resort it is unethical to NOT consider new sales in part of that appraisal. Just because one type of seller is wildly successful (the resort) and another (a craigslist ad) is not is not grounds to exclude either from forming comps for inclusion

These instructions are clear in IRS publications. Following those instructions the $5,000 donation credit is NOT fraudulent or even subversive. It is dictated by the IRS. The only caveat we note to donors is that they must enter when and what they paid for the unit. If they paid less than the $5,000 they are supposed to enter the lower figure and take only what they paid as their deduction.

One other comment on a different issue I've been reading here. We find timeshares are rarely accepted back under any circumstances. In one sense it is foolish for a resort to do so. As long as that timeshare is carried on the books it generates value just like a bad debt mortgage does for the bank. A $3,895 outstanding due bill which has gone unpaid is still entered in accounting books as an asset to be paid someday. By being counted as an asset it allows the resort to continue working with debt services in their own right. As soon as they go through foreclosure that asset is no declared worthless, the positive $3,895 is removed from the positive side of the ledger. The timeshare being but back into inventory does not add it in until it's sole again. In other words a bad debt carried on the books is still more profitable than converting that asset into a new inventory item. If you dig deep enough you'll find this is one of the basic reasons there are literally millions of homes facing foreclosure that the banks aren't pursuing. They prefer the positive balance sheet effect the mortgage provides before it is negated and replaced with a negative valued property needing a quick low cost sale to clear the account.