Capital Gains if Buying More DVC?

[Huskerpaul]

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

I think you know the answer your federal, state, and local governments would provide.

 

[BrianLo]

Flipping a contract in 24H is certainly a power move. Buyers remorse?

I'd at least let it close ROFR... but yes you'd have to pay tax on the difference.

 

[disneydad7281231]

Flipping a contract in 24H is certainly a power move. Buyers remorse?

I'd at least let it close ROFR... but yes you'd have to pay tax on the difference.

No remorse. I am a forward thinker and when something comes to mind I like to collect some info. If we end up wanting to go direct in 3-4 years or something I don't see selling it for less then I am getting it (I could be wrong), but we wouldn't cut and run we would buy back in.

Seems like its viewed as income and gets taxed as income regardless of if you reinvest unlike when buying and selling homes. Kind of what I figured.

 

[DL1WDW2]

I wonder If you can call DVC Member Services for advice…in the meantime I just found this online and plan to read it :
Apparently there are 4 articles total … Good luck .


Also, I would consider walking into an H&R Block Office to ask but then again I live in their hometown Kansas City, Mo and trust this company… They built a Cancer Survivors Park and personally funded a cancer Foundation Hotline . If the advisor is not 100% certain about advice , they have a source to find the correct legal advice before you walk out the door and will represent you if you are audited .
I would never ask any of those locations that are temporary with a folding screen …





When it comes to IRS … there is never a quick answer…

 

[crisi]

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.

Given what you have said, Yes.

 

[Mle8308]

The IRS didn't hire those 87K agents for nothing!

 

[Genie+]

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.

It might end up being less than you think though. Broker commission and capital improvement portion of dues (for all dues you paid) will cut into that $30-40pp, but I haven’t sold ours yet so I’m still as curious as you.

 

[eticketplease]

No remorse. I am a forward thinker and when something comes to mind I like to collect some info. If we end up wanting to go direct in 3-4 years or something I don't see selling it for less then I am getting it (I could be wrong), but we wouldn't cut and run we would buy back in.

Seems like its viewed as income and gets taxed as income regardless of if you reinvest unlike when buying and selling homes. Kind of what I figured.

If you are going to go direct after a few years then buy direct before offloading it so that you would qualify for the member add on pricing. Also if holding out for Poly 2 just remember current members will be able to add on before new members.

 

[Stank]

Round trip closing costs + seller’s commission + you’re probably going to get negotiated down a few bucks pp = I doubt a theoretical $30-40pp top line spread is going to net you a profit.

We’re talking minuscule capital gains tax here, if at all.

 

[Genie+]

I think in the future DVC will offer something for these scenarios. Pretty sure they’ll eventually make someway to turn restricted resale points back into direct. For a cost. From there it’s a no-brainer to piggy back that system to trade resort. DVD would get what now goes to broker fee plus the upgrading to keep/add direct privileges.

 

[RoseGold]

Once you add in closing and broker fees, you might not have any gains to tax. Depending on when you bought this, you might be flat or even lose a little money.

 

[disneydad7281231]

I think in the future DVC will offer something for these scenarios. Pretty sure they’ll eventually make someway to turn restricted resale points back into direct. For a cost. From there it’s a no-brainer to piggy back that system to trade resort. DVD would get what now goes to broker fee plus the upgrading to keep/add direct privileges.

They would be smart to do that. Look at the resort and say this resort is X amount to make your resale direct.

 

[eticketplease]

They would be smart to do that. Look at the resort and say this resort is X amount to make your resale direct.

That is true as they would not have to ROFR a contract to then sell it back to make money.

However as an owner I prefer ROFR to be in place so if I was to sell the price would not be rock bottom like other timeshares.

 

[disneydad7281231]

I think using CAPITAL GAINS was a bad way to put it. More or less when you sell at anytime. 2, 5, 10 years after buying if there is a profit is it still taxed if you are reinvesting.
From what I have gather is that is a yes.

 

[disneydad7281231]

That is true as they would not have to ROFR a contract to then sell it back to make money.

However as an owner I prefer ROFR to be in place so if I was to sell the price would not be rock bottom like other timeshares.

I still think they could do ROFR. I would think it could just be an option if you are fine with resale and no benefits you keep that but if you are interested in turning your resale purchase into direct there is the option at $100 a point or something. I am sure that will bring down there direct sales though too.

 

[pianomanzano]

I think in the future DVC will offer something for these scenarios. Pretty sure they’ll eventually make someway to turn restricted resale points back into direct. For a cost. From there it’s a no-brainer to piggy back that system to trade resort. DVD would get what now goes to broker fee plus the upgrading to keep/add direct privileges.

They would be smart to do that. Look at the resort and say this resort is X amount to make your resale direct.

With RIV, VDH, CFW, and the Poly tower coming online later this year, I don't think DVC is in any rush to provide any kind of paid option to convert resale points to unrestricted points. Their priorities are always going to be selling out resorts. Also, with the disconnect of today's direct and resale prices, if they were to even entertain the idea, the cost to do so would probably be pretty cost prohibitive.

 

[Genie+]

With RIV, VDH, CFW, and the Poly tower coming online later this year, I don't think DVC is in any rush to provide any kind of paid option to convert resale points to unrestricted points. Their priorities are always going to be selling out resorts. Also, with the disconnect of today's direct and resale prices, if they were to even entertain the idea, the cost to do so would probably be pretty cost prohibitive.

I think more likely than not. Timeline is the bigger question to me. Right now they make zero profit off the resale market. Those transactions do not sell direct anyway, so this would be an extra stream of profit. 100s of millions in resale profits yearly, plus profits on the upgrade aspect of points washIng. This path also helps them during periods of saturation. They haven’t really had that yet but the risk grows as the club expands.

There’s no way they haven’t entertained the possibility backstage. It’s a question of should they and which path. The moves they’ve made in recent years could have this possible door in mind.

 

[Sandisw]

I think more likely than not. Timeline is the bigger question to me. Right now they make zero profit off the resale market. Those transactions do not sell direct anyway, so this would be an extra stream of profit. 100s of millions in resale profits yearly, plus profits on the upgrade aspect of points washIng. This path also helps them during periods of saturation. They haven’t really had that yet but the risk grows as the club expands.

There’s no way they haven’t entertained the possibility backstage. It’s a question of should they and which path. The moves they’ve made in recent years could have this possible door in mind.

I am sure they have but with the doubling down in restrictions, they want the products different.

Makes no sense for them to let people bypass direct points to start only to upgrade later and end up with less

Not to mention that the DVC resort agreements would need to be upgraded to change the rules to account. While not a huge thing, just don’t see it until they have decided to stop selling new resorts.

Plus, DVD has the benefit of aggressive pricing which we saw with VGF. By doing that, they sold a lot of points without needing to convert resale points.

 

[deserrai]

CPA here...i would not recommend attempting a 1031 exchange for a timeshare property. You have to get a third party agent involved which they charge a fee to do because you are not allowed to receive payment yourself. Also, the property must be "like kind" meaning if you could pull off calling a timeshare a business or investment asset and not a personal asset, the asset you exchange for would have to be the same. Meaning you could not use it personally. 1031 exchanges are usually only beneficial for very large real estate transactions. If there is any gain after all the closing costs, just pay it.

Also, whoever sold the second home and used the personal residence exclusion, know that you only get the exclusion if it was your primary residence for two of the last five years.

 

[ocdb8r1]

Seems like its viewed as income and gets taxed as income regardless of if you reinvest unlike when buying and selling homes. Kind of what I figured.

As others have said, you should really tax professional advice on this.

However, what you reference above is an old (no longer in effect) IRS rule changed in 1997. It used to be that so long as you reinvested the proceeds from the sale of a primary residence into a new primary residence, you were exempted from paying taxes on the gain. This was replace several years ago with a straight exemption of capital gains on up to 250k for a single individual or 500k for a couple filing jointly on the sale of a qualified primary residence. There is no longer an unlimited exemption if you "reinvest" the gain.

Round trip closing costs + seller’s commission + you’re probably going to get negotiated down a few bucks pp = I doubt a theoretical $30-40pp top line spread is going to net you a profit.

We’re talking minuscule capital gains tax here, if at all.

Agree. The total gain after all the costs is likely to be smaller than you think....and then the tax on that even smaller.