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"Buying" a TS week thru a 1031 Exchange

tahoeJoe

tahoeJoe

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I am in the process of selling some income property and planning on doing a 1031 exchange. I have a Qualified Intermediary (QI) on board and am shopping for replacement properties. Most likely the "like-kind" replacement property won't be the exact same price and I may have a few grand left on the table.

I could pay gain on this "boot" or reinvest it. Since a few thousand dollars is not enough to buy anything "real" I though about buying a resale TS week(s). Maybe a lock-off or a high Starwood SVN points property; SVV or WKV?

Does anybody have experience with this? My thought was I could deduct the annual MFs as a rental expense and, occasionally rent some of the days/weeks derived from this ownership and use the others.

The purpose for doing is NOT to make money on the week I might rent but rather to deduct the MFs, use the week occasionally, and not pay taxes on the capital gain and recaptured depreciation.

Thoughts?
 
vacationhopeful

vacationhopeful

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tahoeJoe said:
I am in the process of selling some income property and planning on doing a 1031 exchange. I have a Qualified Intermediary (QI) on board and am shopping for replacement properties. Most likely the "like-kind" replacement property won't be the exact same price and I may have a few grand left on the table.

I could pay gain on this "boot" or reinvest it. Since a few thousand dollars is not enough to buy anything "real" I though about buying a resale TS week(s). Maybe a lock-off or a high Starwood SVN points property; SVV or WKV?

Does anybody have experience with this? My thought was I could deduct the annual MFs as a rental expense and, occasionally rent some of the days/weeks derived from this ownership and use the others.

The purpose for doing is NOT to make money on the week I might rent but rather to deduct the MFs, use the week occasionally, and not pay taxes on the capital gain and recaptured depreciation.

Thoughts?
Click to expand...

Be careful ... you are require to exchange "LIKE for LIKE". Rental income should be a proved before you think you going to convert for personal use. In other words ... rent your NEW timeshare for several years - even at a loss of the MFs before you start to use it yourself. And remember the old adage, 10% maximum usage or 14 days max ... except a 7 day rental period, does not even make a 1 night stay before it becomes "personal use" under the 10% rule. And if you are using it as a personal thing, NO deduction except the listed RE tax.

Also, YOUR stated "The purpose for doing is NOT to make money on the week..." that statement alone will disqualify this as a "LIKE for LIKE" exchange ... as you are CLEARLY trying to avoid Capital Gains or RECAPTURE of previously deducted capital gains.... the penalties and interest are really big and bad ....

GET PROFESSIONAL INCOME TAX ADVICE before your get the CHECKS CUT or the DEAL DONE!....
 
klpca

klpca

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So you would pay tax on the leftover cash(equity?) vs paying maintenance fees on the timeshare. I would think that in the long run the tax would be a lot less.

I would also think that your personal use would technically kill it as a true 1031 (but that would be nearly impossible to track).

...unless you post your plans on an internet forum, lol :D:D:D - couldn't resist.
 
tahoeJoe

tahoeJoe

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vacationhopeful said:
Also, YOUR stated "The purpose for doing is NOT to make money on the week..." that statement alone will disqualify this as a "LIKE for LIKE" exchange ... as you are CLEARLY trying to avoid Capital Gains or RECAPTURE of previously deducted capital gains.... the penalties and interest are really big and bad ....

GET PROFESSIONAL INCOME TAX ADVICE before your get the CHECKS CUT or the DEAL DONE!....
Click to expand...

Thanks for the advice. For the record I would never admit to the statement "...NOT to make money... ."
I'm not that stupid.
 
DeniseM

DeniseM

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tahoeJoe said:
Thanks for the advice. For the record I would never admit to the statement "...NOT to make money... ."
I'm not that stupid.
Click to expand...

Well, except you already posted it here, so it's a done deal! :D
 
R

RuralEngineer

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1031

having done a 1031 in the past i cannot image why you would want to do this. you can acquire contracts for $1. hmm, you are trying to do a 1031 for rental real estate + timeshares.
 
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