Taxes on sold properties

[mikemax32]

Originally Posted by pooh bears mom

How do you know how much of your MF is capital improvement?

It's on the annual disclosure we get w/ the annual budget, and on the dues statement. i found my dues statements (online I think) and took the capital improvement piece.

It's debatable if it's allowed because it's a budgeted improvement contribution, not the actual improvement. I won't get into the debate, just know that the IRS may have a different opinion than you.

[MagicJourneys]

I have not yet sold any of my DVC contracts, but when I do I will report the gain, minus the closing costs (from buying and selling) minus the total of the "capital reserves" portion of the dues that I have paid during my ownership. If you think of your DVC points as owning a vacation home, the "operating expenses" portion of the dues is equivalent to paying for repairs (which would not be a deductible expense upon resale) but the "capital reserves" portion is akin to paying for capital improvements like a new roof or furnace, the cost of which would be deductible against any capital gain. This seems to me to be an entirely reasonable, good-faith position, but if the IRS begged to differ the only consequence would be a slightly larger tax bill. Of course I would add the obligatory disclaimer that I am not a tax professional and everyone should consult their accountant or tax lawyer.

[pooh bears mom]

Originally Posted by mikemax32

It's on the annual disclosure we get w/ the annual budget, and on the dues statement. i found my dues statements (online I think) and took the capital improvement piece.

It's debatable if it's allowed because it's a budgeted improvement contribution, not the actual improvement. I won't get into the debate, just know that the IRS may have a different opinion than you.

Thank you, I have not sold any yet. I always thought the total MF's were deductible. Not sure if it is worth selling...

[ldo]

we have sold 2 contracts. We take a conservative approach: sales price minus selling expenses (taxes, fees, commissions) or the net proceeds minus our basis (purchase price plus buying expenses/closing costs). Typically timeshare annual fees are not deductible. We did not net out capital reserves on prior sale--but I'm going to send to our accountant for our 2020 sale. So, we can deduct EVERY years' capital reserves? Looks like it was $1.0663/point for AKV. Can I aggregate for all years owned? Say, 7 years' worth?

[pooh bears mom]

Just curious why some are only taking a certain portion of maintenance fees instead of the total maintenance fees. Sorry for my confusion but those are all fees paid to support the timeshare. So really you can only deduct cost paid and broker fees and selling fees and maybe half of the maintenance fees per year?

[MagicJourneys]

Originally Posted by pooh bears mom

Just curious why some are only taking a certain portion of maintenance fees instead of the total maintenance fees. Sorry for my confusion but those are all fees paid to support the timeshare. So really you can only deduct cost paid and broker fees and selling fees and maybe half of the maintenance fees per year?

Think of it as selling a vacation home. The maintenance fees have three components: operating expenses, property taxes, and capital reserves. "Operating expenses" are like basic repairs such as repainting and gardening, which would not be deductible when selling a vacation home (or any home). Property taxes are deductible when paid (if you itemize) as opposed to when selling the property. "Capital reserves" are equivalent to making a capital improvement to your vacation home, such as replacing the deck or the boiler. Such improvements would increase your basis and reduce your taxable gain upon selling the property. (By the way, looking at some of my old statements, the capital reserves are considerably less than half of the total maintenance fees).

[pooh bears mom]

Originally Posted by MagicJourneys

Think of it as selling a vacation home. The maintenance fees have three components: operating expenses, property taxes, and capital reserves. "Operating expenses" are like basic repairs such as repainting and gardening, which would not be deductible when selling a vacation home (or any home). Property taxes are deductible when paid (if you itemize) as opposed to when selling the property. "Capital reserves" are equivalent to making a capital improvement to your vacation home, such as replacing the deck or the boiler. Such improvements would increase your basis and reduce your taxable gain upon selling the property. (By the way, looking at some of my old statements, the capital reserves are considerably less than half of the total maintenance fees).

thank you. in terms of taxes if you never itemized them can you do it when you sell?

[MagicJourneys]

Originally Posted by pooh bears mom

thank you. in terms of taxes if you never itemized them can you do it when you sell?

Unfortunately I am almost certain the answer is “no”. (Although I am not a tax professional).

[zafiro]

Originally Posted by Hi from RI

Hi,
Hoping someone here can provides some guidance. My DH does our taxes (he is a retired teacher not a CPA) but this year is different. We sold a couple of contracts in 2020 so I know I had read a long time ago that when filing from the 1099 we need to do something to subtract the maintenance fees we paid. How do we do this and is that correct? We are going to call the lawyer because the proceed amount on the 1099 is much more than the amount we were paid so that is confusing. My DH insists he can do the taxes again but depending on how complicated this is I am not sure about doing this ourselves.

This is not advice, but here is how I would look at it:
Gather all of your property info regarding total purchase price from all of your purchase closing documents.
Gather all of your 1099s from those properties.

A. Do a basic 1099 "proceeds" (price - closing, broker and misc. fees) minus the total cost of acquiring each from your purchase closing docs. This is your basic highest taxable gain scenario since you are omitting any concern for MFs.

B. Take that amount and now subtract all of the years of MFs you've paid on those properties (don't worry about MF breakdowns for this step) to give you a new "taxable gain" amount.

IF A & B are drastically different; I mean in the area of what it would cost to hire a tax accountant ($500 and up), then I would definitely get a professional to help because you'll want to legally credit those expenses against your taxable gains. You don't need someone crazy expensive to do this minor accounting for you.

IF A & B are close and under the amount it would take to hire a professional, let it fly. You'll always be able to easily amend your return if you find out better info later, and the IRS does its own checks on your return so they may flag any error that they detect.

[CarolA]

Folks there is no way you can use the all the member fee to increase your basis If you do that and IRS audits you you are doomed. the capital reserve portion is questionable in my opinion


Now if every year you report the income you get from renting, then you probably could report the maintenance fees as an expense related to that income. But otherwise routine maintenance is not deductible unless you have that income.

Thank about it this way are you increasing the value of your house when you sell it by how much you paid the house cleaners? If you are that’s creative also but I wouldn’t recommend it



I just did the taxes for my mother and we sold her house this year. When you figure out the basis for the gain the iRS gives you some guidance. And fees that I might’ve paid to have the house cleaned, or routine maintenance were not included. I was able to increase her bases for the remodeled bathroom a few years ago, and major repairs related to a storm. But not because we fixed the toilet because it was leaking.


Over the past two years I’ve sold about all of my Dvc, I have not increased the cost of the acquisition by anything. Because I don’t think that anything is supported. Based on what I remember from when I used to actually do taxes, I believe I would have to prove that the capital reserve had actually been spent on increasing my asset. Which would be the unit that I own a portion of. I’m sure Disney is not going to give me that information