Capital Gains if Buying More DVC?

[disneydad7281231]

So we bought a DVC resale contract for a great deal because it it what we could afford for the time. I have thought about selling it and buying direct for the benefit.

Does anyone know if this works like selling and buying homes as in If I am reinvesting that money do you still pay capital gains?

If there wouldn’t be capital gains: Can I buy direct first then sell mine if it’s in the same year?

I know most will say talk to CPA but I always do my own taxes so don’t have one.

Thanks for input!

 

[bholbert81]

This is a great question. I am following for the answer! Thank you

 

[mkatsy]

So we bought a DVC resale contract for a great deal because it it what we could afford for the time. I have thought about selling it and buying direct for the benefit.

Does anyone know if this works like selling and buying homes as in If I am reinvesting that money do you still pay capital gains?

If there wouldn’t be capital gains: Can I buy direct first then sell mine if it’s in the same year?

I know most will say talk to CPA but I always do my own taxes so don’t have one.

Thanks for input!

That's a 1031 exchange, and there is specific paperwork that has to be done. Also, the property had to have been used strictly as an investment, not for personal enjoyment, for a specific time period. I just went through this when we sold our second home. We have to pay the tax.

 

[disneydad7281231]

That's a 1031 exchange, and there is specific paperwork that has to be done. Also, the property had to have been used strictly as an investment, not for personal enjoyment, for a specific time period. I just went through this when we sold our second home. We have to pay the tax.

So we haven’t used any points yet but if we do then I will have to pay capital gains?

 

[mkatsy]

So we haven’t used any points yet but if we do then I will have to pay capital gains?

If you have never used the contract for personal enjoyment, and have been brokering the points to earn revenue, then you owe it to yourself to get off the turbo tax and hire a CPA. You owe income tax on the revenue that the contract generated. You're playing with fire.

 

[disneydad7281231]

If you have never used the contract for personal enjoyment, and have been brokering the points to earn revenue, then you owe it to yourself to get off the turbo tax and hire a CPA. You owe income tax on the revenue that the contract generated. You're playing with fire.

Haven’t rented or used. Bought it stripped until 2025 for a deal.

 

[pianomanzano]

Relying on disboards responses should go well for an IRS audit…

 

[thanxfornoticin]

Relying on disboards responses should go well for an IRS audit…

Agreed, but sometimes the responses you get from a call to the IRS to ask them doesn't give a clear/accurate answer either!

 

[mkatsy]

Haven’t rented or used. Bought it stripped until 2025 for a deal.

ok, that gives us the answer. In order to prevent the IRS from challenging whether a vacation rental property qualifies for a 1031 exchange, it must be rented out for at least 14 nights each year for a two-year period. Now, it gets even more complicated. You can only use your property 10% of the time that you rent it, during that two-year period. Keeping in mind, that fractional ownership is still a grey area in regard to a 1031.

 

[BostonEd]

Are you saying that you're going to be able to sell your original contract for a gain??? That's incredibly rare, even for DVC. Don't forget your costs of sale affect your gain. I'd be very surprised that you have a gain, after factoring in all the costs involved in the transaction. I'd be surprised even if you don't factor in those costs!!

BOTH parties have to agree to a 1031 exchange, and even if a timeshare would qualify, I kinda doubt Disney is going to trade you their direct sale contract for your resale contract. All that stuff about vacation property, 14 days, etc etc, is completely irrelevant in this case.

 

[heynowirv]

Let's not forget that you need to have a capital gain of 250 for a single or 500 k for a married couple .We sold a second house in the Delaware Beaches and our gain as a couple was under 500 K so no taxes were involved on our federal return.

 

[LittleBitGoofy]

Let's not forget that you need to have a capital gain of 250 for a single or 500 k for a married couple .We sold a second house in the Delaware Beaches and our gain as a couple was under 500 K so no taxes were involved on our federal return.

No cap gains on a primary residence up to 500K MFJ.

 

[SteveMouse]

If you have never used the contract for personal enjoyment, and have been brokering the points to earn revenue, then you owe it to yourself to get off the turbo tax and hire a CPA. You owe income tax on the revenue that the contract generated. You're playing with fire.

Not to mention that that usage might look like commercial activity.

 

[RivShore]

Let's not forget that you need to have a capital gain of 250 for a single or 500 k for a married couple .We sold a second house in the Delaware Beaches and our gain as a couple was under 500 K so no taxes were involved on our federal return.

That exemption does not apply to 2nd homes and would certainly not apply to a timeshare.

 

[MillauFr]

Relying on disboards responses should go well for an IRS audit…

How is generating income from renting your points going to trigger an audit?

 

[AstroBlasters]

Ask a certified tax professional who deals with real estate, not an online message board.

 

[AstroBlasters]

How is generating income from renting your points going to trigger an audit?

Reporting income from a 1099-M wouldn’t…. Trying to use it a time share for deductions or 1031s…. would the potential tax savings even cover the cost of hiring a CPA to help you with the audit?

I believe the IRS can also look back at the previous 5-7 year’s tax returns…. how aggressive has someone been in those? Any mistake is the tax + penalty + interest…. is it worth it?

 

[disneydad7281231]

Are you saying that you're going to be able to sell your original contract for a gain??? That's incredibly rare, even for DVC. Don't forget your costs of sale affect your gain. I'd be very surprised that you have a gain, after factoring in all the costs involved in the transaction. I'd be surprised even if you don't factor in those costs!!

BOTH parties have to agree to a 1031 exchange, and even if a timeshare would qualify, I kinda doubt Disney is going to trade you their direct sale contract for your resale contract. All that stuff about vacation property, 14 days, etc etc, is completely irrelevant in this case.

We got our contract for about $30-40 less per point then they are going for.

All I am looking to know is if I sell it and buy another DVC contract does the profit get taxed.

 

[disneydad7281231]

Ask a certified tax professional who deals with real estate, not an online message board.

Just looking for info as it doesn’t affect my taxes I just filed but thanks for saying exactly what I mentioned in the initial post.

 

[MillauFr]

Reporting income from a 1099-M wouldn’t…. Trying to use it a time share for deductions or 1031s…. would the potential tax savings even cover the cost of hiring a CPA to help you with the audit?

I believe the IRS can also look back at the previous 5-7 year’s tax returns…. how aggressive has someone been in those? Any mistake is the tax + penalty + interest…. is it worth it?

I've had them question my return before. The laws about receiving dollars for caring for a disabled person in your house are complex and not well understood. The state issued us a W-2 for the income even though it isn't taxable. I would go round and round with the IRS. Getting audited isn't the end of the world but it is a hassle. I only do it because it saved us thousands of dollars to argue our point.