Treatment of timeshare rental

For just one week, I'd ignore the whole thing. No Sch E. No Income reporting.

Why? He may have a loss, which would help lower his taxes?

One week's worth of rental does not make it a rental.

No Sch E. Where would you report income and deductions?

I doubt the IRS would consider it rental property. He might have Schedule A deductions that he can take. And Art is correct that you do not have to report the income (see Pub 527)

Under section 280A, a "dwelling" that is rented out for two weeks or less during a year incurs no tax recognition either of income or deductions. I don't know whether that would apply in this case, however, since it requires it to be used as the taxpayer's residence during the year.

Stu

but that is 100% of this asset.

In article , Gil Faver >>> No Income reporting.

But there's no profit motive. So no loss.

you must have quite a crystal ball to deduce that from the original post.

The best article I have read on this subject (tax consequences of renting timeshares) is by David M. Fogel, EA & CPA. He explains how the rules from Section 280A get applied. Specifically, they relate to the dwelling which is defined as the condominium not the one week timeshare period. SO, it is quite possible for the owner of the timeshare to rent it for the week and still have a dwelling that is used for personal use. He also discusses Tax Court, Ninth & Tenth Circuit rulings on this issue.

Note that in the case of a time share the 14 days or less include the units of all 52 weeks of the time share holders. If the unit is rented out for 3 weeks of the year, rental is taxable. In absense of proof of 14 days or less, IRS will treat it as taxable.

After reading David Fogel's analysis in the CASEA Journal, I'm convinced there's no deductable loss and the income is to be reported.

Is this a great board, or what?

It was the first time OP rented it out. The phrasing implies that there were previous years in which OP used it personally. The conclusion that it was purchased for that personal use seems quite reasonable.

Seth

But can the expenses be deducted (up to the amount of income), so there's no taxable income remaining?

Seth

I might also imply that this is the first year of ownership.

The

it might be a resonable conclusion, but it is not assured. I assumed, upon reading the original post, that the owner put the timeshare into a pool with a profit motive. I don't know that for sure, but that, too, is a reasonable assumption.

Providing an answer based on unstated assumptions makes the answer, per se, incorrect.

Thanks Alan; the year's brand new and I've already learned something!

I interpreted the article as stating that expenses were deductible up to income, with a carryover of unused losses (like any rental that exceeds the personal use rule). I doubt that it is common for an association to provide the necessary information for calculating the rental/personal use ratio of each unit; I would assume the limit is exceeded unless the taxpayer had proof to the contrary.

In classifying a time-share as personal, business or investment property, I think the IRS might balk at a taxpayer who takes one of the latter two classifications and claims a loss on the sale. To claim it as investment means you bought it with the intent of holding it for a profit (never using it or never renting it); to claim it as business (rental in this case), it appears that your partial ownership may be affected by what the other owners do. Any thoughts?

Thank you, that is an excellent article. I wonder if that code section, as it applies to time shares, was actually intended.

Per the article it seems that only if all owners rented out the timeshare for the stipulated time, then would rental losses be deductible. Perhaps the management company of the building can keep track of the total number of weeks that each unit is available for rent, and available for personal use, so that the owners can know whether that can deduct, and if some what is the allocation ratio.

My limited experience with timeshares leads me to believe that the management company has the records of availability, use and by whom. As they are collecting fees, arranging for maintenance, etc. and filing tax returns they need to keep those records to substantiate income and expense.

In the instant case, it is highly likely that the unit was used personally by other timeshare owners. And... the tax court, ninth & tenth circuits say that the method to use for allocating expenses when you have mixed use, is to take the period of rental and divide by availability. If one assumes the unit was available for use for at least 50 weeks... you are looking at allocating 2% of the expenses to the rental income.

Best case scenario if everything fell right, is that expenses could be written off against the income and any loss would get carried forward. The OP said that expenses were less than the rental.

How did you come up with 2%?

OP said: "The maintenance fees we paid were greater than the rental proceeds (yah, big surprise).", which seems that expenses were more than the rental.