Getting rid of your timeshare

My wife and I belong to the NTOA ( National Timeshare Owners Association ) and they send out a publication called Time Sharing Today. We were interested in getting rid of two time shares. We tried selling them and donating them and nothing worked. I read and article in Time Sharing Today that suggested calling the time share and asking if they take them back. I called the two timeshares and they both agreed to take them back with just a quit claim deed. The expense was minimal and we are now free of them. Who knew just a simple phone call would start the ball rolling.

donp196 wrote:

I called the two timeshares and they both agreed to take them back with just a quit claim deed. The expense was minimal and we are now free of them.

However, the vast majority of resorts will NOT accept deedbacks. Remember, once a "deeded back" week legally reverts to the HOA, then very suddenly NO ONE is responsible for paying ANY maintenance fees on those particular weeks until and unless those weeks are somehow later resold. Accepting "deedbacks" obviously diminishes a resort's income (i.e., operating funds) and, accordingly, weakens the overall financial health and stability of the facility. In short, it's completely understandable why so relatively few resort HOA's are willing to even CONSIDER accepting "deedbacks".

In any event, congratulations on your own particular good fortune.

Ken, I wonder after all this time and the falling prices of timeshares if things are changing? More resorts might decide to go for this offer rather than try paying foreclosure cost and the time to try and stop what they probably consider a dead beat owner at this point. At this point there is a very good chance the owners will not pay and only other option for the resort is not letting owner use the unit until paid up which will not happen. At least if they take it back they can try and resell it.

I just don't see other options for the resort if they are planning on staying open. They need the cash flow to run and with so many dead beat owners there is no income to the resort. PHILL12

phill12 wrote:

Ken, I wonder after all this time and the falling prices of timeshares if things are changing? More resorts might decide to go for this offer rather than try paying foreclosure cost and the time to try and stop what they probably consider a dead beat owner at this point. At this point there is a very good chance the owners will not pay and only other option for the resort is not letting owner use the unit until paid up which will not happen. At least if they take it back they can try and resell it.

I just don't see other options for the resort if they are planning on staying open. They need the cash flow to run and with so many dead beat owners there is no income to the resort. PHILL12

That's a good idea Phil .... even if the resorts have to practically give the deadbeat units away they would still receive yearly maintenance fees from the new owners, which is the resort's bread and butter.

I know this one thing, something is going to have to change if most timeshare resorts are to remain open in the future, however I'm surprised that the majority of timeshare resorts haven't gone under before now due to unpaid maintenance fees .... they have to be cutting all kinds of services.

When I called the time shares to let them know I wanted them to take back our property I informed them that i was going to get rid of them with or without their assistance but I would give the opportunity to take them back. I was also up to date on all of my fees and assesment. It was to their advantage to take them back instead of getting stuck for possibly years of unpaid fees and legal expenses. They just charged me the next years taxes and a minimal fee for the process. We are now free of any obligation. I was advised to try that approach by an article I read in Time Sharing Today and it worked.

Why didn't you just sell it to me?? Wow I can't see to find a share to buy and you people are just giving them back???

lghtm wrote:

Why didn't you just sell it to me?? Wow I can't see to find a share to buy and you people are just giving them back???

I guess you're neither looking very hard nor in very many places, since there are (literally) THOUSANDS of timeshares being given away for pennies or for free every day in recent years. On eBay alone right now, there are more than a thousand listed every day --- many of them being offered for a dollar and STILL going unclaimed. On the Timeshare Users Group, there are a few dozen offered for FREE every single day of the week.

I have 3 that I will give you......I will even pick up the transfer fees

We are a charity that accepts timeshares, not just the resale of it. Since we don't resell it there are a few points to understand that apply to the discussion.

1. Since we don't resell, rent or use the timeshare the only way we generate cash from the donation is to charge a $500 service fee for accepting the donation. However, everything is done through an escrow company and we only get paid when the deed is finally in our name and the donor is free. 2. We advise people to try to sell first. We see our position as the last option between donating to a charity that will resell it and before paying $3,000+ to someone like TimeshareRelief.com or one of it's affiliates. 3. Once we own the timeshare the resorts send all their bills to us. They do the same things to threaten us as they do to other non-paying owners - restrict use, send nasty letters, send to collection, attempt to ruin credit, foreclosure, etc. However, since we don't have credit we don't care. 4. Based on IRS regulations we keep title for 36 months. Doing that allows us to grant a full 100% IRS legal $5,000 donation credit to the donor. In a 25% tax bracket that's worth $1,250 to the donor in a tax refund. 5. At the end of the 36 months we offer to deed the timeshare back to the resort. Interestingly, we have only had one resort want it back. The rest ignore us just like we ignore them.

For those who want to flame us for "unethical" or "dirty" dealings, please remember we are only an option to a desperate owner. If you feel no charge should be made, you take them. After all, how would you go about generating cash from a timeshare that can't be sold, rented, used efficiently, or even given away?

Given the nature of this discussion, we want to weigh in on what you can do. Deeding in lieu of foreclosure is wonderful if the resort will accept it. Unfortunately, rarely do resorts do this. From experience, the vast majority only want the ongoing income and they have plenty more ready to sell without it.

We've even seen mass foreclosure actions against several hundred timeshares in a single action by a resort. By doing it that way, they get them all back for pennies on the foreclosure cost dollar to put back into their inventory and sell all over again.

A hierarchical list of actions is: 1. Sell for any $ 2. Trade for anything 3. Donate to a reselling charity 4. Give it back to the resort 5. Donate to us and pay a fee 6. Try to break a contract by paying $1,500+ to an attorney 7. Pay $3,000+ to a commercial company to take it 8. Let it go to foreclosure and accept the negative credit report

I would have gladly used your services if the time shares didn't take them back. I think the time shares are realizing it's better to take them back then to deal with companies like yours that may not pay annual fees for a long time. Keep up the good work and I hope you put the post card companies out of business.

drk14 "4. Based on IRS regulations we keep title for 36 months. Doing that allows us to grant a full 100% IRS legal $5,000 donation credit to the donor. In a 25% tax bracket that's worth $1,250 to the donor in a tax refund."

Please provide a citation for the IRS regulation. Your CPA or tax attorney can provide the cite to you if you do not have it readily available.

Does your charity have a 501c3 exemption letter from the IRS? If so, please provide a reference number.

This information would be helpful to those planning a donation of their timeshare to your organization.

Thanks

The IRS citation can be found on our technical page along with all other relevant citations at http://www.communityhealthtraining.org/TimeshareandIRS.htm

We began as a 501(c)3 and changed to a private foundation. The specific legal difference is that a donor may deduct up to 50% of their annual income for a single donation to a 501(c)3, but may deduct only up to 30% for a private foundation. All other conditions of charitable donations apply equally.

drk14 wrote:

We are a charity that accepts timeshares, not just the resale of it. Since we don't resell it there are a few points to understand that apply to the discussion.

<snip>

For those who want to flame us for "unethical" or "dirty" dealings ...

<snip>

I have printed this info and put it in my timeshare folder for the next time that we wish to sell a unit.

-Sheila

Drk14

The link you provided takes one to your organization's web site and it does not provide a citation for the IRS regulation you reference in your post. You do provide an IRS link that provides general information about validating charitable deductions.

Your web cite paraphrases the IRS requirements "dealing with multiple levels of donation amounts" together with the IRS requirements for validation of fair market value. You stess the requirement that the IRS requires a Form 8283 declaring a fair market value signed by the taxpayer (donor) for gifts between $500 and $5000 and an appraisal signed by a "lcensed appraiser" for donations of over $5000. You point out that if the NPO (charity) sells the timeshare within 36 months the donee (charity) must file a form 8282 setting out the actual selling price to the IRS. To avoid this requirement you indicate your firm will hold the TS for 36 months. You also stess that the reported value be under $5000 to avoid the required appraisal.

You of course know that the charitable deduction must be the actual FMV and any timeshare that is worthless is of no value as a deduction. To knowingly claim a charitable deduction greater than the FMV constitutes fraud. Your real scam and it would be recognized in an IRS audit is the 36 month period your organization will hold the TS to avoid the Form 8282 requirement. You use the 36 month holding period because in the absence of fraud the IRS does not audit returns beyond the 36 month period. What you fail to stress - although you make an oblique reference - is that the IRS can audit a return for a period up to 6 years where fraud is present. In my opinion, anyone who follows your advice is playing with fire if they knowingly claim a deduction of 5,000 for a worthless timeshare. Your advice does not specifically advise fraud but the emphasis on limiting the amount of the deduction to $5,000 to avoid the appraisal and your holding the TS for a period of 36 or more months to avoid an IRS audit sure smacks of indirectly encouraging fraud.

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.

"I'm glad you took the time to read our IRS report. However, I'm sorry you didn't understand it."

I suggest you go to the official IRS site: www.irs/gov/newsroom/article/O,,I'd=106990,00.html for an article written in laymen's language that will better help you understand what is allowed as a charitable deduction. The deduction is limited to the FMV on the date of the donation and the original purchase price is immaterial. The taxpayer must declare the FMV of the timeshare on Form 8283 and a TS valued at $5,000 to avoid the need for an appraisal is a red flag for an IRS audit. I also suggest you read publication 561(determining the value of donated property) especially the section relating to determining the FMV of real estate.

Form 8283 is signed by the taxpayer and must be attached to the tax return (Form 1040). The taxpayer signs the return declaring under the penalties of perjury that the information contained therein is true and correct to the best of their knowledge and belief.

The IRS Criminal Investigation Divsion actively investigates firms that advise individuals to file false returns. If, you have not already done so, I strongly suggest you hire a tax attorney to review the advice you are giving to TS owners when soliciting TS donations. I am willing to subject myself to ad hominem attacks from you in my attempt to alert TS owners who are tempted to claim a charitable deduction for a timeshare they could not sell for $1 on EBay

If you had read the provided link entirely, you would have found several links to a full quotable analysis of IRS regulation, publications, commentaries, and forms. If you are interested here is the link again - http://www.communityhealthtraining.org/Timeshare-IRSLossClaim.pdf

I will provide the short synopsis here and summarize at the bottom. Please pardon the length - YOU ASKED FOR IT. ========================= (IRS Quote) +++++++++++++++++++++++++ All of the following quotes are directly out of IRS Publication 544 “Sale and Other Dispositions of Assets”

Fair market value. Fair market value (FMV) is the price at which the property would change hands between a buyer and a seller when both have reasonable knowledge of all the necessary facts and neither has to buy or sell. If parties with adverse interests place a value on property in an arm's-length transaction, that is strong evidence of FMV. If there is a stated price for services, this price is treated as the FMV unless there is evidence to the contrary.

All of the following quotes are directly out of IRS Publication 561 “Determining the Value of Donated Property”

In general, there are three main approaches to the valuation of real estate. An appraisal may require the combined use of two or three methods rather than one method only.

1. Comparable Sales The comparable sales method compares the donated property with several similar properties that have been sold. The selling prices, after adjustments for differences in date of sale, size, condition, and location, would then indicate the estimated FMV of the donated property. ========================= (Comment) +++++++++++++++++++++++++ (Notice: there is no differentiation between new real estate and reselling real estate and timeshare deeds are defined and governed as real estate.) ========================= (IRS Quote) +++++++++++++++++++++++++ For each comparable sale, the appraisal must include the names of the buyer and seller, the deed book and page number, the date of sale and selling price, a property description, the amount and terms of mortgages, property surveys, the assessed value, the tax rate, and the assessor's appraised FMV. ========================= (Comment) +++++++++++++++++++++++++ (Ebay is NOT a legal comparable sale.) ========================= (IRS Quote) +++++++++++++++++++++++++ Only comparable sales having the least adjustments in terms of items and/or total dollar adjustments should be considered as comparable to the donated property. =========================

(Comment) +++++++++++++++++++++++++ (Taking the majority of legal comparable sales, those farthest from the norm are least considered and since the majority of sales for any resort are those sold BY the resort, the retail price is closet to the norm, not some eBay price which is not useable.) ========================= (IRS Quote) +++++++++++++++++++++++++ 2. Capitalization of Income

This method capitalizes the net income from the property at a rate that represents a fair return on the particular investment at the particular time, considering the risks involved. The key elements are the determination of the income to be capitalized and the rate of capitalization. ========================= (Comment) +++++++++++++++++++++++++ (This method does not apply.) ========================= (IRS Quote) +++++++++++++++++++++++++ 3. Replacement Cost New or Reproduction Cost Minus Observed Depreciation

This method, used alone, usually does not result in a determination of FMV. Instead, it generally tends to set the upper limit of value, particularly in periods of rising costs, because it is reasonable to assume that an informed buyer will not pay more for the real estate than it would cost to reproduce a similar property. Of course, this reasoning does not apply if a similar property cannot be created because of location, unusual construction, or some other reason. Generally, this method serves to support the value determined from other methods. When the replacement cost method is applied to improved realty, the land and improvements are valued separately. ========================= (Comment) +++++++++++++++++++++++++ (Once sold for any price, where and at what cost would the original owner have to find a replacement of unit, date, and terms? The only legitimate source is the direct resort sales and it’s retail prices.) ========================= (IRS Quote) +++++++++++++++++++++++++ Unusual Market Conditions For example, liquidation sale prices usually do not indicate the FMV. Also, sales of stock under unusual circumstances, such as sales of small lots, forced sales, and sales in a restricted market, may not represent the FMV. ========================= (Comment) +++++++++++++++++++++++++ (In other words, those sales made when an owner simply says, “Get me out at anything you can get. FAST!” don’t have to be considered indicative of FMV.) ========================= (IRS Quote) +++++++++++++++++++++++++ Cost or Selling Price of the Donated Property The cost of the property to you or the actual selling price received by the qualified organization may be the best indication of its FMV. . . The cost or selling price is a good indication of the property’s value if: • The purchase or sale took place close to the valuation date in an open market, • The purchase or sale was at ‘arm’s length’, • The buyer and seller knew all relevant facts, • The buyer and seller did not have to act, and • The market did not change between the date of purchase or sale and the valuation date.

All of the following quotes are directly out of IRS Form 8282 - “Donee Information Return (Sale, Exchange, or Other Disposition of Donated Property”

Purpose of Form Donee organizations use Form 8282 to report information to the IRS and donors about dispositions of certain charitable deduction property made within 3 years after the donor contributed the property.” ========================= (Comment) +++++++++++++++++++++++++ (This is the best reference to timing of FMV and sale price. The IRS is specific is saying that an estimation of FMV can stand, but is automatically changed if there is a resale within 36 months.) ========================= (Comment) +++++++++++++++++++++++++ SUMMARY: 1. Fair Market Value (FMV) is determined ONLY by specific comparables giving names, county record pages, dates, dollar amounts, etc. 2. A quick liquidation sale does not qualify as a FMV. 3. Ebay is not a qualified comparable. 4. Acceptable comparables are priced closest to the average sale price of the majority of sales that qualify as FMV which are resort sales. 5. If an actual sale is accomplished, it takes precedence over and estimated FMV. 6. In order for the actual sale price to take precedence it must be within a 36 month time period of the date of donation or the IRS doesn’t want to consider it. 7. A deduction of more than $5,000 requires a certified appraisal. $5,000 is the upper limit of valuation within the above qualifications.

If you choose to advise donors to use unqualified comparables such as eBay, determine their timeshare value even though it is considered under Unusual Market Conditions, and ignore IRS law of timing at 36 months on resale, I’m happy you’re willing to face scrutiny by the IRS.

Barring substantial documentation to the presented IRS documentation I’ve provided, I would ask you to let this go and not try to prolong a possible contentious discussion without warrant. The links I’ve provided are available to everyone. I do appreciate your questioning the concepts and giving me an opportunity to present the facts as stipulated by the IRS. Like you, I believe it is in the best interest of all to have quality resources available for their own review. Also, like you and many others, I initially found the breadth of IRS publications somewhat confusing. I spent many months researching this information AND questioning the IRS directly regarding these issues, before I decided to provide this service to timeshare donors.

By the way, your link doesn't work. Why? =========================

I used timeshare utopia to get rid of a fixed week I was trying to sell. They were very helpful. I think their phone number is on their website timeshareutopia.com

thanks

To DRK14

I fully understand the IRS requirements relating to FMV and I never suggested an EBay sale met the test for a comparable sale. Early in my career I served as an IRS Tax Attorney and was involved in several U.S. Tax Court cases dealing with the FMV of real estate listed in Forms 709 and 706. My concern with your firm is that you, in my opinion, mislead timeshare owners into claiming a charitable deduction for worthless Timeshares. I suggest your motives are monetary and mine are to alert the public to scams.

Enough about FMV. Will you answer the following questions?

1. Who holds title to the timeshare during the 36 month holding period or until the property is sold. Your firm or the donor? 2. Who pays the maintenance fees during the period between the donation and the sale? 3. Has any of the donated property gone into foreclosure? Is your firm listed with Dub and Bradstreet and if so what is your credit rating.

Please answer these questions and forgo another extensive commentary on the meaning of FMV that is not helpful to anyone.

I meant Dun and Bradstreet and not Dub in question three above. This business credit reporting agency would report foreclosures of timeshares.