Has anyone ever donated a timeshare for a tax write-off?

Has anyone ever donated a timeshare for a tax write-off? I would be curious to hear how easy / expensive it was to do.

mariam201 wrote:

Has anyone ever donated a timeshare for a tax write-off? I would be curious to hear how easy / expensive it was to do.

Having tried once (unsuccessfully), I'll make several observations / recommendations from my experience:

1. Do NOT assume that ANY entity is even going to ACCEPT your intended "donation". You might be very surprised to discover just how selective the charitable entities are about timeshare donations. Remember, if they can't promptly turn it into cash (just as maybe you can't, if you're now considering donation), then it's just absolutely worthless to them. If they can't sell it, it's a burden, not a blessing. They (understandably) have no interest in inheriting maintenance fee responsibilities.

2. Do some homework on the "write off" aspect of your intentions. You may be surprised about the applicable IRS laws / rules on the matter. Frankly, the likelihood of your actually deriving any tax benefit whatsoever are actually pretty slim. If you happen to belong to TUG, there are some very knowledgeable folks there familiar with every last detail of the "donation" issue --- all of their advice is posted and readily available there. I'm NOT steering you off RedWeek, but on this particular topic there is a lot of legal and tax expertise in evidence "over there", whereas I've not (at least personally) ever seen that same level of tax expertise / detail expressed here in RedWeek forums. They are not "better", just much "older" (longer established).

Good luck, but do your homework. It's not as easy (or as beneficial tax wise) as you might want to believe.

ken1193 wrote:

mariam201 wrote:

Has anyone ever donated a timeshare for a tax write-off? I would be curious to hear how easy / expensive it was to do.

Having tried once (unsuccessfully), I'll make several observations / recommendations from my experience:

1. Do NOT assume that ANY entity is even going to ACCEPT your intended "donation". You might be very surprised to discover just how selective the charitable entities are about timeshare donations. Remember, if they can't promptly turn it into cash (just as maybe you can't, if you're now considering donation), then it's just absolutely worthless to them. If they can't sell it, it's a burden, not a blessing. They (understandably) have no interest in inheriting maintenance fee responsibilities.

2. Do some homework on the "write off" aspect of your intentions. You may be surprised about the applicable IRS laws / rules on the matter. Frankly, the likelihood of your actually deriving any tax benefit whatsoever are actually pretty slim. If you happen to belong to TUG, there are some very knowledgeable folks there familiar with every last detail of the "donation" issue --- all of their advice is posted and readily available there. I'm NOT steering you off RedWeek, but on this particular topic there is a lot of legal and tax expertise in evidence "over there", whereas I've not (at least personally) ever seen that same level of tax expertise / detail expressed here in RedWeek forums. They are not "better", just much "older" (longer established).

Good luck, but do your homework. It's not as easy (or as beneficial tax wise) as you might want to believe.

Thanks. I appreciate your response.

Charities are much more fussy than they have ever been about what they take for donations. This includes timeshares, if they accept them at all. Your write-off may be limited to the market value rather than cost of the timeshare and the IRS may require some proof. Best bet is to ask a professional tax accountant about these things.

I agree that CPA DaveM at Tug has some very good advice concerning timeshare donations and the IRS. I went to that site but couldn't find his advice. It really should be a sticky in some forum for easy viewing. It would be nice if DaveM posted his IRS advice here on Redweek.

mariam201 wrote:

2. Do some homework on the "write off" aspect of your intentions. You may be surprised about the applicable IRS laws / rules on the matter. Frankly, the likelihood of your actually deriving any tax benefit whatsoever are actually pretty slim. If you happen to belong to TUG, there are some very knowledgeable folks there familiar with every last detail of the "donation" issue --- all of their advice is posted and readily available there. I'm NOT steering you off RedWeek, but on this particular topic there is a lot of legal and tax expertise in evidence "over there", whereas I've not (at least personally) ever seen that same level of tax expertise / detail expressed here in RedWeek forums. They are not "better", just much "older" (longer established).

mariam201 wrote:

Has anyone ever donated a timeshare for a tax write-off? I would be curious to hear how easy / expensive it was to do.

The answer is YES, you can get a tax write off for donating your timeshare. However, there are a few things you need to consider. 1. The write off is against your income like an other deduction, not a tax credit. 2. You have to find a non-profit organization (NPO) willing to accept your timeshare. 3. You have to be careful how your timeshare is evaluated.

Let me give you a little background. I work with a NPO that does accept timeshares. So I have a fair idea of what I'm talking about.

When you attempt to donate your timeshare you will often find that the NPO puts you together with a broker who actually sells your timeshare for whatever they can get for it. The NPO doesn't take title except at the very last second in a double closing so you are donating it to them while they are selling it to someone else. When that is done, you face a few hurdles. Some timeshares at some resorts NEVER sell and those will be rejected outright by the NPO. Until the broker sells it you continue to be responsible for all fees. When it is sold, a value is established which can't be argued with. "Your" timeshare was only worth what someone actually paid for it, therefore according to the IRS you can only deduct the amount that was actually received. Even if you have an appraisal, it doesn't matter. Even if the NPO takes title and holds on to the timeshare for awhile, if they do sell it, they are required by law to notify you if the sale price is different than the credit they gave you so you can adjust your future income deductions up or (more likely) down to coincide with the real sale price.

The NPO I work with does it differently and you may find some others that do this, also. The NPO takes title now and NEVER sells it. As such they are required by the IRS to find the Fair Market Value (FMV) based on one of three methods dictated by the IRS. 1.) What do the majority of similar timeshares sell for in the open market. Think about this for a moment. The majority are sold by the resort, therefore their sale price along with what you willingly paid for it establishes FMV. 2.) What is the rental income determine as an investment if it was bought for that purpose (doesn't apply here). 3.) What would it cost you to replace the timeshare on the open market. Again, think. You would probably have to go to the resort and pay their retail price. Therefore, if your unit is NOT sold, the FMV can be fairly and legally established as the price close to the retail price currently at the resort. That value is then your deduction. The difference can be literally thousands of dollars difference.

Two questions often arise. 1. How can the NPO take over the financial obligations and continue in business? That is a business trade secret, but I can tell you they often work our something with the resort to retire the unit. 2. Isn't there a $5,000 limit on timeshare donations? NO!! I've read this many, many places EXCEPT from anything from the IRS. Their only response is to review two publications - Pub. 561 Fair Market Value Determination and Pub. 526 Contributions.

I hope this hasn't been too technical or overwhelming for you, but I felt you deserved a technical answer. If you would like further information go to http://www.CommunityHealthTraining.org/Timeshares/ or you can contact me directly at SeniorDirector@CommunityHealthTraining.org

Dr. Ken Rich

Thank you, Dr. Rich! This will be good news to many! MD

From CPA DaveM:

There are a few errors and an omission in your post.

First, sales by the developer don't enter into determining the value that an owner should claim when determining how much to deduct for donating a timeshare. That's because the donor must value the donation based on what a willing buyer and seller would agree to as a price in the marketplace that the donor has access to - the resale market. There's an old IRS revenue ruling that makes that clear.

Second, you imply that the donor is bound - in determining value - by the ultimate sales price of the timeshare. Although that's the law when donating a car, that's simply not true for timeshares. That sales price is only one factor in determining value. As an example, many of the so-called "postcard companies" dump timeshares on ebay for practically nothing. Those same timeshares when sold properly will often fetch much more. Thus, the actual selling price (e.g., on ebay) is not determinative.

Finally, you are correct that there is no $5,000 (or any other) limit on how much one can deduct for donating a timeshare. No one has ever suggested here that there is such a limit. However, what you omitted is that if the claimed deduction exceeds $5,000, the donor must obtain an appraisal of the timeshare performed by a "qualified" appraiser in a manner that meets IRS standards. Otherwise, the donor is not entitled to any deduction.

jayjay wrote:

From CPA DaveM:

There are a few errors and an omission in your post.

First, sales by the developer don't enter into determining the value that an owner should claim when determining how much to deduct for donating a timeshare. That's because the donor must value the donation based on what a willing buyer and seller would agree to as a price in the marketplace that the donor has access to - the resale market. There's an old IRS revenue ruling that makes that clear.

Second, you imply that the donor is bound - in determining value - by the ultimate sales price of the timeshare. Although that's the law when donating a car, that's simply not true for timeshares. That sales price is only one factor in determining value. As an example, many of the so-called "postcard companies" dump timeshares on ebay for practically nothing. Those same timeshares when sold properly will often fetch much more. Thus, the actual selling price (e.g., on ebay) is not determinative.

Finally, you are correct that there is no $5,000 (or any other) limit on how much one can deduct for donating a timeshare. No one has ever suggested here that there is such a limit. However, what you omitted is that if the claimed deduction exceeds $5,000, the donor must obtain an appraisal of the timeshare performed by a "qualified" appraiser in a manner that meets IRS standards. Otherwise, the donor is not entitled to any deduction.

Dave M is a VERY savvy guy and I'd certainly take his word as being the accurate gospel truth. He definitely knows whereof he speaks....

I too was once confused about the $5k figure, thinking (incorrectly, as it turned out) that the figure was a "limitation on deductible amount". I learned later that this figure is, instead, the threshold above which claimed value a formal appraisal must then be obtained. In my own mind, I guess I then still regarded the $5k as a sort of "practical" limitation anyhow, since I personally don't know of any professional entity which does "timeshare appraisals" --- whose word would be sufficiently acceptable to the IRS. That's not to say that such entities don't exist, just that I personally have no idea how/where to find them. Frankly, I wouldn't be much interested in paying them several hundred dollars anyhow, even if I DID find them. As it turned out, however, I couldn't even manage to get the donation accepted in the first place, despite it being debt free and with all fees current. I gave up and now just convert that "weak week" over to RCI "points for deposit" each year, then using those points for other purposes. My solution is NOT one which I would particularly recommend, unless you can buy into a RCI points resort for VERY low cost AND a low annual maintenance fee -- easier said than done in these days of increasingly escalating annual maintenance fees.

Dave is a CPA who asks nothing in return for his brains* & experiences. He is a moderator at the www.tugbbs.com site. He also helps with advise at the Forums site.

Thanks JayJay & Ken for finding & posting the information.

One charity donation site has a list of timeshares they will not take, even for free. I think they may feel if it sells at all, it might take longer than the next maintance fee is due.

Is everyone here SURE the purchase of a T/S is worth it???? Even those one dollar jobs on e bay?

* At least nothing to the general public or timeshare owners when they need help. ( Its probably a different story at his real job)

kekouri asks (maybe just rhetorically, not sure):

>> Is everyone here SURE the purchase of a T/S is worth it???? Even those one dollar jobs on e bay?<< =====================================

My personal view is that each person must clarify for himself / herself ALL of the following information BEFORE even CONSIDERING timeshare purchase:

--- What exactly do I want to accomplish through timeshare purchase in terms of where I want to go, how often I can travel, how much it will cost to get there (even if the timeshare itself only costs peanuts)?

--- Are occasional rentals perhaps better suited to my lifestyle, availability, finances than actual purchase?

--- Will I actually and routinely use what I have purchased (if I buy)? (Part b of this question must also be "Am I willing to accept the fact that the prospect of "exchanging" for something else might actually turn out to be just a pipe dream?" (It's no secret that "exchanging" into desirable places througth the exchange companies has consistently become more and more difficult with each and every passing year).

--- What can I afford to spend on this luxury (and yes, it is a luxury, it's not any kind of a necessity) without disrupting my household finances, my kids' future, and/or other actual financial "investments"? (Assume, as you must, that your timeshare purchase will NOT increase in monetary value over time, and may well decrease in value).

How much of a burden are the inevitable (and always increasing) annual maintenance fees asociated with timeshare ownership on the finances of my particular household? And how much will that level of burden change with kids heading for college, retirement plans, career and income changes, family care obligations, etc.)?

It's my opinion that NO ONE should even LOOK at timeshare purchase (not even at the 10 cent timeshare listings on eBay), without first having asked of themselves (and honestly answered to themselves) clear and specific responses to each and every one of the above questions. To fail to do so is to just invite future disappointment (and expense).

Remember that it's a whole lot easier to BUY a timeshare than it is to SELL it if you make a bad choice.

In summary, CAVEAT EMPTOR (Buyer Beware).

kekouri wrote:

Dave is a CPA who asks nothing in return for his brains* & experiences. He is a moderator at the www.tugbbs.com site. He also helps with advise at the Forums site.

Thanks JayJay & Ken for finding & posting the information.

One charity donation site has a list of timeshares they will not take, even for free. I think they may feel if it sells at all, it might take longer than the next maintance fee is due.

Is everyone here SURE the purchase of a T/S is worth it???? Even those one dollar jobs on e bay?

* At least nothing to the general public or timeshare owners when they need help. ( Its probably a different story at his real job)

I respect DaveM a lot. He is the smartest member of Tug and gives of his time freely on that site.

It depends on what someone wants out of the timesharing experience as to whether or not it's worth it, such as people that have school age children or teachers that can only travel during summer or holidays. I can see why they would prefer the security of knowing their own timeshare will be available to them during their vacation time. This also includes people with other types of jobs that prefer the security of ownership (resale I hope).

And there are those northern snowbirds and Canadians that like to go south in winter. Ownership would more than likely benefit them (as it does Redweek member Ken).

I would not recommend people that are retired or have flexible schedules to own a timeshare with exception to the scenario above (snowbirds and Canadians). There are just too many rental sites (timeshares, condos, homes, apartments) on the internet now to be saddled with the ongoing committment of timeshare ownership and all the rising expenses of such. It's much easier to BUY a timeshare than to SELL a timeshare when it's no longer needed or wanted.

When we first started timesharing there were very few timeshare rental sites on the internet ... now there are many. Timeshare ownership before the year 2000 was economically feasible. You could find a resale timeshare at a reasonable price, maintenance fees were reasonable as was exchange company fees. All that's changed in the last few years .

You also have those individuals that buy a timeshare for the sole pupose of trading/exchanging it. This is the absolute worst reason for purchasing a timeshare. When they find they can't exchange that timeshare for anything/something they want, then they become disenchanted with timesharing altogether.

My advice is to buy where you like to go (for us it was the mountains and gulf/ocean front) and use exchanging as a side dish. That way if you don't get an exchange you want then you can go to your owned timeshares where you bought where you like to go (you can search first with II).

However, you have those diehard timeshare owners that wouldn't give up their timeshare(s) for anything. Tug has many of those diehard owners that really don't care to discuss the cons of timesharing ... they'd prefer to discuss the pros but there's plenty of both to discuss.

The above is just my personal opinion on the subject of timesharing, but in reality it's up to the individual regarding whether or not to purchase a timeshare.

Quote:

From CPA DaveM:

There are a few errors and an omission in your post.

First, sales by the developer don't enter into determining the value that an owner should claim when determining how much to deduct for donating a timeshare. That's because the donor must value the donation based on what a willing buyer and seller would agree to as a price in the marketplace that the donor has access to - the resale market. There's an old IRS revenue ruling that makes that clear.

This is a little confusing. Isn't the resort owner, the timeshare owner, and other buyers all considered willing participants? As such, I would think their transactions must all be considered. It is conceivable that the timeshare owner could park across the street, set up a for sale sign, and make his timeshare available for the same price as the resort owner. The resort owner could do nothing to stop that competition. Thus the same market is open to both sellers if they wished to use them.

I'm not discounting or doubting your statement. I do appreciate your comments. I would greatly love to see a copy of the old IRS ruling you speak of. It would help all of us here to be able to see how it applies. If you could find a reference for us, I, for one, would do my best to find and read it.

Quote:

Finally, you are correct that there is no $5,000 (or any other) limit on how much one can deduct for donating a timeshare. No one has ever suggested here that there is such a limit. However, what you omitted is that if the claimed deduction exceeds $5,000, the donor must obtain an appraisal of the timeshare performed by a "qualified" appraiser in a manner that meets IRS standards. Otherwise, the donor is not entitled to any deduction.

You are correct. I didn't go into that detail, but it is clear in the instruction publications mentioned in my post. According to the IRS, if a deduction greater than the $5,000 threshold is taken, the taxpayer must be able to produce an appraisal meeting their requirements. It is spelled out clearly how that appraisal is to be done, based on similar sales, based on rental income, or based on replacement costs. A taxpayer can request that the appraiser take into consideration ALL transactions and be within their right to make such a request. There are still other considerations involved in this process the donor must understand.

This goes a lot deeper than most people need at this time. The best advice is to study and read what applies, how it applies, and CYA when you do it.

Again, Thanks for your feedback.

Dr. Ken Rich

Dr. Ken Rich states/ asks, quoted only in pertinent part:

RE: >> It is conceivable that the timeshare owner could park across the street, set up a for sale sign, and make his timeshare available for the same price as the resort owner.<<

Not really. The resort developer is involved in the "initial" (i.e., immediately following construction) sales, in which the resort construction and marketing costs must first be recouped in order for the developer to make a profit (which is why he built the place at all). Hence, the extravagant (some might even say hallucinatory) prices consistently associated with developer sales. The hypothetical "guy across the street" is, by definition, involved in a (post developer sale) "resale". His prices must ALWAYS be MUCH less than those of the developer (or he won't be across the street for very long....). =====================================

Re: >> Thus the same market is open to both sellers if they wished to use them.<<

Not exactly so, for the reasons detailed above. One is, by definition, a "second hand" resale, the other is not.

Believe me when I tell you that CPA Dave M. from TUG(whose input has been kindly quoted here by jayjay) knows this arena inside and out. Personally, I would take (and I have taken) his word as the gospel truth. He definitely knows whereof he speaks (not always the case on the Internet, where any fool with a keyborad can just "weigh in" with opinion and misinformation). =====================================

Re: >> I would greatly love to see a copy of the old IRS ruling you speak of. It would help all of us here to be able to see how it applies. If you could find a reference for us, I, for one, would do my best to find and read it.<<

With all due respect, that's reaching into the man's livelihood. If he was to respond (and I personally have no reason to believe that he even visits RedWeek at all) , I'd fully expect that it would (quite justifiably) be on a "billable hours for professional consultation" basis. =======================================

P.S. My apologies for several edits, undertaken immediately after posting, to correct typo errors which I don't notice until re-reading the printed post. I'm just a lousy typist, I'll readily admit that fact.....

ken1193 wrote:

Dr. Ken Rich states/ asks, quoted only in pertinent part:

RE: >> It is conceivable that the timeshare owner could park across the street, set up a for sale sign, and make his timeshare available for the same price as the resort owner.<<

Not really. The resort developer is involved in the "initial" (i.e., immediately following construction) sales, in which the resort construction and marketing costs must first be recouped in order for the developer to make a profit (which is why he built the place at all). Hence, the extravagant (some might even say hallucinatory) prices consistently associated with developer sales. The hypothetical "guy across the street" is, by definition, involved in a (post developer sale) "resale". His prices must ALWAYS be MUCH less than those of the developer (or he won't be across the street for very long....). =====================================

Re: >> Thus the same market is open to both sellers if they wished to use them.<<

Not exactly so, for the reasons detailed above. One is, by definition, a "second hand" resale, the other is not.

Believe me when I tell you that CPA Dave M. from TUG(whose input has been kindly quoted here by jayjay) knows this arena inside and out. Personally, I would take (and I have taken) his word as the gospel truth. He definitely knows whereof he speaks (not always the case on the Internet, where any fool with a keyborad can just "weigh in" with opinion and misinformation). =====================================

Re: >> I would greatly love to see a copy of the old IRS ruling you speak of. It would help all of us here to be able to see how it applies. If you could find a reference for us, I, for one, would do my best to find and read it.<<

With all due respect, that's reaching into the man's livelihood. If he was to respond (and I personally have no reason to believe that he even visits RedWeek at all) , I'd fully expect that it would (justifiably) be on a "billable hours for consultation" basis.

My personal opinion is that if you want to contest or lock horns with regulatory, IRS or tax input or opinions from Dave M., you should be fully prepared to just get summarily "gored"....... whiich, of course, is certainly your choice and prerogative to do.

P.S. My apologies for several edits, undertaken immediately after posting, only to correct typo errors which I didn't see until re-reading the post (i.e., no change in actual content). I'm just a lousy typist, I'll readily admit that.....

KenR86:

I don't think Dave sees this BBS. Actually, he probably doesn't have the time....I think he still works full time and isn't retired ( yet).

The post above was from the tugbbs where, if you post those same questions, he might see & respond...or might another - {(John (Wonka on that bbs)}. They both wrote a series of articles related to IRS tax and timeshare ownership in several publications ( some of it is in the archives of www.tstoday.com mag. )

As JayJay & Ken say above, a lot of them are pretty knowledgeable....

Ken- I was making a bit of a joke about those $1.00 units....but I really shouldn't, its not joke to those who need to use a PCC to get rid of them.

I still think there has to be a way to make all T/S have some value....even just to try to find good getaway pricing....and you need great flexibility.

And..as Jay Jay says.... you can find rentals for less than maint fees with enough flexibility

I think DaveM is currently working as a CPA for a manufacturing industry of some kind. I always thought he was a tax man and owned his own business but evidently not. He doesn't speak much about his personal life on Tug, however I did read the other day that he's having a home built near Hilton Head, SC, so he's evidently nearing retirement.

It's interesting to see the thread of comments here. They follow two basic threads. One is the question at hand and the other is the individuals themselves. I, for one, would prefer to answer questions about myself than let others speculate about me. If there are questions regarding my or anyone else's background or expertise, let us answer those ourselves. That helps prevent irrelevance, keeps the focus on the primary question and reduces the potential for irritation and flaming.

In answer to one comment by ken 1193, the thought that the developer has the sole right to recoup his or her costs as the "initial" market and the timeshare buyer does not seems questionable. After all, doesn't the buyer have a cost basis for his possession? Isn't what he paid for the timeshare a cost he or she would wish to recover? As such they would fit into the same definition as the developer.

Interestingly, the IRS has no such difference in their calculations. They do not differentiate between the "initial" and "second hand" markets. Their regulations stating the basis for any sale is the initial purchase price, regardless of the purchase reason, stands out clearly when one reads the regulations. Even to the point of being able to use that point as the basis for a tax loss if the buyer resells the timeshare for less than what he or she paid for it.

I would propose that any questions one might have be directed to the authority of the IRS and then, if they desire, share those findings with the forum. I try to do that whenever possible. Before I ever post I have generally check with the source to answer my questions instead of giving opinion without back up. After all, if I'm doing business of any kind, I want to make sure I can do it the way I think it should be done - before I get stuck with problems I failed to consider in advance.

This, and most other forums, are great to bring questions up for research. That's one of the reasons I check on those issues I'm concerned about. I appreciate questions, comments and concerns as presented by people like ken 1193 about the question at hand. It often does send me back to research the question some more.

Dr. Ken Rich

Dr Ken Rich: I haven't checked yet, but did you get time to read the reply from Dave on the www.tugbbs.com site?

kekouri wrote:

Dr Ken Rich: I haven't checked yet, but did you get time to read the reply from Dave on the www.tugbbs.com site?

Yes, But since I currently am following my own advice and have submitted a request for direction and comment to the IRS I thought it might be a bit premature to do much more than submit what has been submitted here already. I don't desire to carry on two offensive, duplicate battles at the same time.

Please be patient. As soon as I have word from the IRS I will return with it. If you've ever asked them questions before you may know it sometimes takes a few weeks or more to get an answer. Please be patient.

Dr. Ken Rich