US justice department goes after Timeshare "donation" company Donate for a Cause

[theo]

I wonder if there will be any splashback on customers who had Resort Closings handle their transfers?

Our Bay Club ownership came to us through them.

Not by choice ... the seller started dealing with Resort Closings, before approaching Seth Nock's crew. Resort Closings was stuck to the deal, like chewing gum off a hot sidewalk.

Lots of balls were dropped by Resort Closings during the process, but in the end, the deed was transferred successfully, confirmed by the Bay Club, and points were enrolled in HGVC.

Just hope the other shoe isn't about to drop.

IMO, there is really no substantive reason to worry or to be concerned about transactions for which Resort Closings, Inc. was merely the closing entity.
The alleged appraisal / tax shenanigans are clearly not in any way associated with their standard (if overpriced) transaction closing processes.

Personally, I hope that it costs Tarpey big money before all is said and done. I also have no sympathy for anyone who took an inflated tax deduction when their (...ahem) "donated" timeshare had so little actual value that they had to pay a few thousand dollars out of pocket just to get someone to take it off their hands. Think Karma...

 

[ronparise]

straight from the DOJ website



http://www.justice.gov/opa/pr/justi...scheme-involving-improper-deductions-donating

So no penalty. just told to stop doing it

I just spoke to a Resort Closings employee and askd if I had anything to worry about regarding the several deals I have in process there.... answer: No

we'll see

 

[TUGBrian]

im not sure how you read there wont be some sort of penalty involved from these clips...even at the bare minimum the fine would be to cover the cost of the investigation and the trial.

and I highly doubt they would have bothered if they were only out for that sort of penalty...that could have been done at the state level.

 

[ronparise]

im not sure how you read there wont be some sort of penalty involved from these clips...even at the bare minimum the fine would be to cover the cost of the investigation and the trial.

and I highly doubt they would have bothered if they were only out for that sort of penalty...that could have been done at the state level.

I read the whole complaint. And I didn't see it. However, as I said in a post above I may have missed it

How much is the government asking for?

 

[csxjohn]

Yikes. Just now seeing this thread.

So, the week before this lawsuit was filed, I won one of their eBay auctions, and two days before the suit was filed, I signed the papers and put the money into escrow. I'm now waiting to see whether Hilton will exercise ROFR on the transaction. I'm within the 10 day period to rescind the transaction, if I send notice.

Before I placed a bid, I did a search on this BBS, and while I found other threads that were critical of the "donate for a tax deduction" or "pay to donate" aspect of their business, I also saw lots of threads from buyers, that spoke highly of the company, and in particular, John Kushman, who is the person I'd been interacting with.

Resort Closings is handling the closing, at this point, and they've also gotten high marks, from people around here who've bought resale. So far, my transaction has been smooth, and the communication has been good. I wouldn't have placed a bid, had I not seen regular posters who vouched for them. (Do a search on "Kushman," and you'll see them.)

I've read the entire complaint, which is available online, here: http://www.justice.gov/opa/file/795811/download

It's pretty clear that the only part of their business that's subject to this complaint is the appraisals for tax purposes, and the injunctions they seek don't seem to be trying to shut down their entire operation. Had I not stumbled across this thread, I'd likely be none-the-wiser, since my google searches prior to signing wouldn't have turned any of this up, either.

That having been said, this is my very first resale purchase, which I'm only making after spending months on this board, seeking your sage advice, learning as much as I can about the HGVC system, researching what's out there, and finding what I thought was a good deal--but not too-good-to-be-true.

I'm feeling like I should rescind, at this point, but part of me is hesitating, and probably a little bit because I've become somewhat emotionally invested in getting into HGVC with a good deal, and all I'm waiting for is the word on ROFR, at this point...

...or am I?

Any thoughts or advice would be greatly appreciated.

I really don't thing you have anything to worry about. I don't see how this will affect you. You probably can't rescind even if you want to, it's very rare in re-sales.

 

[Saintsfanfl]

DFC used to have much more liberal language on their website touting the tax deduction scheme. They also used to give "off the record" tax advice on the deduction abilities. This would be part of a sales pitch in getting the "donor" to pay the fee.

They denied they were doing this but I saw it first hand. I was buying a timeshare through them in 2012 and I could see their entire notes chain with the donor and then me as the seller. I could see where the donor was concerned about the $22K tax deduction value they verbally claimed and he asked for clarification. Their answer was "yes, that is what they are going for". One of the many problems was that the specific timeshare in question never sold at $22k brand new full freight, and the "donor" knew this. This was probably an extreme case because it wasn't a value based on the original sale, wasn't a value based on any recorded resales, and it wasn't a value based on property taxes. It appeared they threw a number out there on a whim and it ended up being too high even from the scheme stand point. This was why the donor was surprised at the value they were being given but apparently they bought into the idea and paid the fee.

I think they have slowly tightened up over the years but they have continued the same model but more carefully. They have always been a pleasure to buy from but in the end touting the tax deduction pitch in exchange for a fee while giving away the item donated is outright and blatant fraud. There is a reason other timeshare disposal companies aren't doing the same thing. Frankly I am really surprised it took the government this long to do something about it.

 

[theo]

<snip> You probably can't rescind even if you want to, it's very rare in re-sales.

I don't know any of the details of the "onenotesamba" purchase at issue, but Florida law (as completely screwed up as it has recently become in regard to other timeshare matters) allows for a 10 day rescission period regardless of whether developer-direct or resale. FL sellers (and resellers) are required to provide written notice of that fact; failure to do so essentially extends the rescission period to one year under existing FL law.

 

[Jason245]

I don't know any of the details of the "onenotesamba" purchase at issue, but Florida law (as completely screwed up as it has recently become in regard to other timeshare matters) allows for a 10 day rescission period regardless of whether developer-direct or resale. FL sellers (and resellers) are required to provide written notice of that fact; failure to do so essentially extends the rescission period to one year under existing FL law.

Just wait.. the lobbiest group that keeps asking for my 5 bucks will help do away with that law soon too.

Sent from my SAMSUNG-SM-N910A using Tapatalk

 

[theo]

Just wait.. the lobbiest group that keeps asking for my 5 bucks will help do away with that law soon too.

I am inclined to disagree, since the amendment to FL law which extended rescission rights to timeshare resale transactions is actually only a very few years old now.
If ARDA didn't bother to squash implementation of that amendment before, they are unlikely to bother to attempt to get it reversed now, after the fact of passage.

Then again, remember that ARDA (the "D" stands for "Development") focuses its' influence directly upon developer related matters, ever cognizant of where the big money is --- which certainly ain't in private timeshare resale matters. In fact, ARDA generally just ignores the very existence of the resale market, since that's not where their bread gets buttered anyhow.

 

[onenotesamba]

I don't know any of the details of the "onenotesamba" purchase at issue, but Florida law (as completely screwed up as it has recently become in regard to other timeshare matters) allows for a 10 day rescission period regardless of whether developer-direct or resale. FL sellers (and resellers) are required to provide written notice of that fact; failure to do so essentially extends the rescission period to one year under existing FL law.

When I saw this thread, I immediately poured over the contract, and there's a pretty clear 10 day rescission clause in the document.

That having been said, I think I'm just going to wait it out. Nothing in the suit seems to implicate my purchase, and I could lose it through ROFR, anyway (though Hilton doesn't seem to be exercising ROFR much, if at all, these days), so I'm just going to sit tight, for the time being.

 

[theo]

When I saw this thread, I immediately poured over the contract, and there's a pretty clear 10 day rescission clause in the document.

That having been said, I think I'm just going to wait it out. Nothing in the suit seems to implicate my purchase, and I could lose it through ROFR, anyway (though Hilton doesn't seem to be exercising ROFR much, if at all, these days), so I'm just going to sit tight, for the time being.

I would be inclined to agree with your logic and decision if this is a timeshare that you want. Tarpey's well deserved legal problems should have no particular bearing upon (or any relevance to) an eBay listing item you've won, with closing details being handled by Resort Closings, Inc. Apples and oranges.

On the other hand, if this was a "donated" week for which the "donor" claims (or intends to claim) a big tax deduction based upon an inflated or exaggerated "appraisal", that is (at least potentially) a IRS problem for that "donor" which certainly does not in any way enter your orbit.

Good luck with your purchase; I hope it clears ROFR and that you successfully acquire and enjoy it.

 

[glmyers]

DFC used to have much more liberal language on their website touting the tax deduction scheme. They also used to give "off the record" tax advice on the deduction abilities. This would be part of a sales pitch in getting the "donor" to pay the fee.

They denied they were doing this but I saw it first hand. I was buying a timeshare through them in 2012 and I could see their entire notes chain with the donor and then me as the seller. I could see where the donor was concerned about the $22K tax deduction value they verbally claimed and he asked for clarification. Their answer was "yes, that is what they are going for". One of the many problems was that the specific timeshare in question never sold at $22k brand new full freight, and the "donor" knew this. This was probably an extreme case because it wasn't a value based on the original sale, wasn't a value based on any recorded resales, and it wasn't a value based on property taxes. It appeared they threw a number out there on a whim and it ended up being too high even from the scheme stand point. This was why the donor was surprised at the value they were being given but apparently they bought into the idea and paid the fee.

I think they have slowly tightened up over the years but they have continued the same model but more carefully. They have always been a pleasure to buy from but in the end touting the tax deduction pitch in exchange for a fee while giving away the item donated is outright and blatant fraud. There is a reason other timeshare disposal companies aren't doing the same thing. Frankly I am really surprised it took the government this long to do something about it.

It may be the government has only recently identified enough cases like this one you describe to make the prosecution worthwhile. Discrediting an appraisal where developer sales are at, or above the appraised value would be a lot of work. Discrediting an appraisal where developer sales are below the value would be so simple as to be a trivial task.

 

[VegasBella]

IMO, there is really no substantive reason to worry or to be concerned about transactions for which Resort Closings, Inc. was merely the closing entity.
The alleged appraisal / tax shenanigans are clearly not in any way associated with their standard (if overpriced) transaction closing processes.

Personally, I hope that it costs Tarpey big money before all is said and done. I also have no sympathy for anyone who took an inflated tax deduction when their (...ahem) "donated" timeshare had so little actual value that they had to pay a few thousand dollars out of pocket just to get someone to take it off their hands. Think Karma...

I agree with everything said here, particularly the part about having no sympathy for people who took an inflated tax deduction for a worthless "donation."

That said, I do think it's wrong of the IRS to flat out ignore the value that the county assessor has declared for a timeshare. I can't stand it when county, state, and federal tax agencies assign different values for assets.

And I think the fees and penalties that the IRS demands are very often way out of line. Obviously, if we had a simpler tax code that was just like a sliding scale based on income or a flat rate for everyone then none of this would ever be at issue. That thread is probably not allowed on TUG, however.

 

[Jodi0415]

I agree with everything said here, particularly the part about having no sympathy for people who took an inflated tax deduction for a worthless "donation." ...

Seems I've dodged a bullet thanks to veteran advice on Tug!!

Whew!! I called this company after seeing their units on EBay and reading a post on here that vouches for them! I thought what the heck I'll see what they say! I wanted to dump the Hacienda Del Mar simply because I saw something I wanted more. So I told the woman who answered the phone that I'm not desperate to get rid of my timeshare, I'm just curious about the process and if it's viable...great!

She proceeded to quote me a ridiculous figure (I honestly cant remember exactly how much, it was thousands of dollars). She said that figure included an appraisal which could result in a hefty tax deduction. Huh??!!

First I know I'm new to the timeshare culture but I hadn't heard of appraisals for timeshares. And I just don't think of Timeshare as real property. To me, if you do it right, it's heavily discounted prepaid or if you will pre-obligated accommodations.

Also...the advice I've read on here many times was playing in my head...NEVER pay someone upfront to sell your timeshare. So I said no thanks and hung up. Then the mental expletives played!!

Thank you again Tug!!

 

[Murphiavelli]

I agree with everything said here, particularly the part about having no sympathy for people who took an inflated tax deduction for a worthless "donation."

That said, I do think it's wrong of the IRS to flat out ignore the value that the county assessor has declared for a timeshare. I can't stand it when county, state, and federal tax agencies assign different values for assets.

And I think the fees and penalties that the IRS demands are very often way out of line. Obviously, if we had a simpler tax code that was just like a sliding scale based on income or a flat rate for everyone then none of this would ever be at issue. That thread is probably not allowed on TUG, however.

I mentioned a portion of this on the first page. I think the thread has gotten off topic but I will chime in again.

There are more than just ebay auctions and developer prices that determine value. I think one key point that we cannot ignore is the assessed tax value of the intervals.

I was approached in 2007 by accountants for a developer who were fighting the state of Arizona over property taxes at their resorts. The state was trying to assess tax valuations based on the retail value of the intervals being sold. The developer was trying to do it based on the comparable value of similar real estate or their original development costs. The state was not having it.

Ultimately I do not know what they arrived at, but the aftermarket valuations of the product were a factor. A factor, but not the only one.

It would be a challenge to go over every tax deduction and cross reference it with an appraised value. There is not a central timeshare MLS, and the aftermarket values do fluctuate (and ebay is not the market...).

IMHO a reasonable deduction could be claimed by SOME individuals, but sorting that out would be a headache. Especially if an Owner has documentation that the deduction was below the original amount paid.

The guilt falls to donate for the certified appraisals (especially if baseless/fraudulent) and they will likely be asked to pay a fine.

If the write-offs were greater than the appraisal and transfer fees, then they will likely be asked to cover the shortfall...

I am not a lawyer, but I have rubbed against enough of these lawsuits and settlements that I know the penalty is rarely anywhere near what was earned.

My guess is that they will be thoroughly audited and will pay a hefty penalty.


I again go back to the Timeshare Collector case in Lacey, WA, gibbs, etc.

If the IRS goes after each owner it will likely be to provide evidence of the deduction, which if they have an appraisal, and a original retail contract showing a reasonable amount paid retail, they probably would escape an audit.

 

[TUGBrian]

even the BBB is raking them over the coals now...

http://www.bbb.org/charity-reviews/...ment/project-philanthropy-in-bozeman-mt-20893

 

[Jason245]

I mentioned a portion of this on the first page. I think the thread has gotten off topic but I will chime in again.

There are more than just ebay auctions and developer prices that determine value. I think one key point that we cannot ignore is the assessed tax value of the intervals.

I was approached in 2007 by accountants for a developer who were fighting the state of Arizona over property taxes at their resorts. The state was trying to assess tax valuations based on the retail value of the intervals being sold. The developer was trying to do it based on the comparable value of similar real estate or their original development costs. The state was not having it.

Ultimately I do not know what they arrived at, but the aftermarket valuations of the product were a factor. A factor, but not the only one.

It would be a challenge to go over every tax deduction and cross reference it with an appraised value. There is not a central timeshare MLS, and the aftermarket values do fluctuate (and ebay is not the market...).

IMHO a reasonable deduction could be claimed by SOME individuals, but sorting that out would be a headache. Especially if an Owner has documentation that the deduction was below the original amount paid.

The guilt falls to donate for the certified appraisals (especially if baseless/fraudulent) and they will likely be asked to pay a fine.

If the write-offs were greater than the appraisal and transfer fees, then they will likely be asked to cover the shortfall...

I am not a lawyer, but I have rubbed against enough of these lawsuits and settlements that I know the penalty is rarely anywhere near what was earned.

My guess is that they will be thoroughly audited and will pay a hefty penalty.


I again go back to the Timeshare Collector case in Lacey, WA, gibbs, etc.

If the IRS goes after each owner it will likely be to provide evidence of the deduction, which if they have an appraisal, and a original retail contract showing a reasonable amount paid retail, they probably would escape an audit.

https://www.irs.gov/pub/irs-pdf/f8282.pdf

The thing is that the "charity" wasn't keeping the property for 3 years, they were liquidating the property and required to fill out form 8282 which indicates how much cash they actually received.

If you look at form 8283

https://www.irs.gov/pub/irs-pdf/f8283.pdf

You will see how in part 2

"Furthermore, I understand that a false or fraudulent overstatement of the property
value as described in the qualified appraisal or this Form 8283 may subject me to the penalty under section 6701(a) (aiding and abetting the understatement of tax liability)."

Part 4 is from the charity
"Furthermore, this organization affirms that in the event it sells, exchanges, or otherwise disposes of the property described in Section B, Part I (or any
portion thereof) within 3 years after the date of receipt, it will file Form 8282, Donee Information Return, with the IRS and give the donor a copy of that
form. This acknowledgment does not represent agreement with the claimed fair market value. "


The IRS uses a very simple methodology

1. accept the appraisal at face value (based on signature from appraisor)where they acknowledge that they face the risk of prosecution.
2. If charity sells property within 3 years of receipt, they need to send a form to the tax payer (and IRS) who is obligated to correct the deduction.

 

[Jason245]

even the BBB is raking them over the coals now...

http://www.bbb.org/charity-reviews/...ment/project-philanthropy-in-bozeman-mt-20893

Source of Funds
Contributions & Grants 7,108,519
Gross Rents 1,460
Loss on Sale of Inventory -6,305,066
Total Income $804,913


basically, those inflated deductions are being run through the charity and only $400k ended up going to whatever "charitable" cause they were supporting...

 

[Saintsfanfl]

Source of Funds
Contributions & Grants 7,108,519
Gross Rents 1,460
Loss on Sale of Inventory -6,305,066
Total Income $804,913


basically, those inflated deductions are being run through the charity and only $400k ended up going to whatever "charitable" cause they were supporting...

The whole fraud is the timeshares are not actually the donations, which is obvious. The donations are the up front fees charged in order to have the right to "donate" the timeshare. The fees are the charitable donations and not the timeshares. Then a very small portion of the fees are donated to real charities. It made it legit on paper as long as someone never used their brain to look at the obvious.

There was obviously never a net gain from timeshares. There might be a very tiny percentage that are taken for free and then sold for a small amount but even those are questionable because DFC always used to let timeshares with value go for bargain prices. Even most of those likely sold for less than the costs and labor of closing.

What I always found odd is the attorney in charge of the whole thing thought it was a legitimate scheme. It's not like they were hiding any of it and they never hid behind mysterious entities.

For timeshares so worthless that they could not get rid of even for $1 with free usage they would hire a third party viking ship entity to do the dirty work.

It had to end eventually. It was inevitable.

 

[theo]

<snip> What I always found odd is the attorney in charge of the whole thing thought it was a legitimate scheme. It's not like they were hiding any of it and they never hid behind mysterious entities.

With apologies for the seasonal reference, I frankly doubt that James Tarpey is actually the brightest bulb on the tree, law degree nothwithstanding.

On the other hand, he is the one who has collected millions of dollars, not us.

Time will tell how much of that money he ultimately ends up with when all is said and done.

 

[T_R_Oglodyte]

I would expect that the IRS will cross-reference the DFC "client list" through it's system for scoring returns for audit potential. Taxpayers on the DFC list who generate an elevated score based on other factors may wind up getting a larger audit.

Most people, though, will get a letter that says that the deduction has been disallowed, resulting in a revised tax calculation and notice of additional taxes and penalties due.

 

[onenotesamba]

Since I posted on this thread, earlier, expressing reservations, I feel like I should report back on how my transaction worked out.

I had an eBay offer accepted on a HGVC unit, and three days later, I learned about this lawsuit. I immediately had a panic attack that I was being scammed, even though I'd researched them, and had found positive feedback from other TUGgers. I stuck with the transaction, and it closed without a hitch.

I'll also say this: I had terrific communication throughout. They used their in-house closing company--Resort Closings, mentioned in this thread, earlier--which was more expensive than necessary, but bottom line is I got a terrific deal on eBay from this seller, I got exactly what they had listed in the ad, and my new account with the points I purchased was available on-line less than a week after the deed was recorded, and only about two weeks after Hilton declined ROFR.

I would not hesitate to buy from them again, if they had the right unit at the right price.

 

[theo]

Comparing apples and oranges...

<snip> They used their in-house closing company--Resort Closings, mentioned in this thread, earlier--which was more expensive than necessary, but bottom line is I got a terrific deal on eBay from this seller, I got exactly what they had listed in the ad, and my new account with the points I purchased was available on-line less than a week after the deed was recorded, and only about two weeks after Hilton declined ROFR.

I would not hesitate to buy from them again, if they had the right unit at the right price.

Buying from them and / or using their (slightly overpriced) in-house closing service has generally never been a problem for anyone, so your recent buyer experience simply mirrors the experience of many others who have found and successfully purchased an interval from them at an acceptable price.

That being said, the "donation" (plus serious cash, of course) / bogus appraisal / ineligible tax deduction gig is a completely separate and entirely unrelated matter --- and this unrelated matter is precisely where Mr. Tarpey has (...belatedly, but finally) succeeded in acquiring earning the focused attention of the U.S. Government.

 

[VegasBella]

I stuck with the transaction, and it closed without a hitch.

Thank you for updating.

As Theo said, buying from them is usually fine. Part of the reason buyers come out ahead is that DFC/Resort Closings may actually undervalue the timeshares when they sell them. They really do just dump them on eBay; they don't try to market them to get a high sales price.

That said, I have noticed a number of errors in their eBay listings. They really don't pay close attention or have solid knowledge of the resorts to describe the ownerships correctly. So you have to ask questions and confirm information to really know what you're getting.

One of my ownerships comes from them. I got it for under $100 (not including closing fees etc). It's tricky to fairly evaluate it but to me it's worth at least $3k.

 

[richardm]

The IRS uses a very simple methodology

1. accept the appraisal at face value (based on signature from appraisor)where they acknowledge that they face the risk of prosecution.
2. If charity sells property within 3 years of receipt, they need to send a form to the tax payer (and IRS) who is obligated to correct the deduction.

Exactly... As long as the charity was using certified appraisals and filing the secondary forms, it will be VERY difficult for the prosecutors to prove an intent to over or under value. The tax reporting process places the responsibility to determine final value upon the individual filers. It will likely come down to charges of misleading sales tactics against the charity and prosecutors will eventually push for a consent decree and fine.

The argument that most of the proceeds generated goes toward overhead won't be something that can be prosecuted. Many of America's most popular charities will have even worse percentages (readers should know that the Salvation Army consistently ranks as one of the best- so feel very good about anything you dropped into those kettles!)..

Ultimately, if Jim decides to keep the charity operational after paying the fines, I doubt the negative publicity from the "case" will even have much of an impact on future "donations". Until the underlying problem with the non-liquidity of some timeshares is resolved, there will always be individuals who are willing to pay thousands to be rid of their timeshare headaches. And, unfortunately, many people are just not willing to put forth the time or effort to learn how to do it themselves. It's much easier to point fingers, scream scam, and pay someone else to make it all go away...

Also, since I haven't heard any reports that timeshares were abandoned into viking ship LLC's- I doubt if there is much the resort developers can do to stop him either..