How do you report a sale of a time share to an upgrade timeshare?

[shf1957]

Client really just exchanged her 2 separate timeshares at one place to upgrade to 1 much better time share.

  They sent her 2 1099s forms showing the proceeds valued totally over 200,000  and exchanged it for one valued at around 325,000.   They told her to just wipe it out and there will be no taxes on it.

  I am trying to figure out how this works, i do understand it's long term since she has owned theses for numerous years and probably only paid like 75% of what they gave her as a upgrade.  

Please explain this to me and how to treat these 2 1099s forms.

[shf1957]

As of right now I put it separately on Schedule D part ll  proceeds the same price as cost.. no gain no loss. (thought this might be the way to handle this since it wasn't a home, just  time shares being exchanged/turned in for a much more elaborate time share at the same place),

[BobKamman]

So she paid $150,000 for something she sold for $200,000 and you're just going call it "no gain, no loss"?  That's creative.  

Section 1031 exchange rules don't apply to property held for personal use.  If "they" are telling her how to report it, let "them" prepare and sign the return.  If IRS can't trust time-share promoters, whom can they trust?

[shf1957]

This is why I am asking you all this question.  Seriously, I have never heard of being able to trade one  for another without having to report the gain.  It's reported on a 1099S as proceeds.  The party wrote me a note and said that this is not to be reported as income that its an exchange.  (I felt well if it was an internal exchange then why a 1099b)    In my mind, which could be wrong, It was like if you had a second home and sold it.. you must state what you bought it for and take any gain... and if you did buy a new one/exchange  that was your choice.  But on the other hand, I have been set straight with what Catholic Fathers can deduct off their pension and double dip on deducting the same expenses on their schedule A form.( And that was documented through the IRS to be allowed).   

So I thought maybe, this is something else I should be educated on, Regarding time share exchanges. I only put it on a Schedule D just to have it on the file right now.  But no I am not comfortable with it stating a wash out. 

Please if anyone can tell me if they are 100 percent wrong re: no tax/no gain applicable. 

[shf1957]

Also to have all the facts.. they turned them in and was given those amounts as credit towards a more expensive one.   ( they were given credit of like 50,000 for one and 150,000 for the other  one to be applied to a NEW one that is 290,000.  so they have a balance of around  90,000 to pay for the new one.

[BobKamman]

"The party wrote me a note and said that this is not to be reported as income that its an exchange."

Who is "the party" ?  Some people here have clients and others have customers, but I'm not familiar with that term.  If someone is telling you how to prepare the return, best course of action is to tell them to prepare it themselves.  

Time shares are more or less in the same category as used cars.  It's surprising when one has increased in value.  And dealers manipulate the prices so what may have happened here is that a couple of "properties" worth $100K were traded for another worth $150K, with another $90K thrown in because, well, parties are stupid. The numbers on paper are just to help fool the next party.  

I have a client who is a retired salesman and enjoys negotiating just for the fun of it.  He owns a timeshare in Mexico but negotiated for the purchase of another (with no intention of actually concluding the sale).  The price started at $30,000 and he got it down to $11,500.  That's the kind of people you are dealing with here.  

[shf1957]

The note came from the actual client, with a name and number to the lady at the time share that I am suppose to find time to call.  My belief is if that company wanted to make the switch possible they should have just used it as a trade in and not processed it as a sale.(As when you trade a car in for another you only pay sales tax on the difference/balance)    

This is the first time I have had this type of return with timeshare trade/exchange.   I planned to call them and ask what they paid for it and tell them they have to pay on the gain.  But after reading the note written on it. I thought it would be best to see if this was something I didn't have education on...and educate myself.  With all the tax law changes.. I gave my self a doubt that I might be wrong and they might be right.  I feel it has to be reported as a sale and if a gain they have to pay on it.. if a loss.. then too bad. no losses taken on personal second home.   And for the new one.. they'll have to wait until they sell it.  I was just hoping someone else has come across this in the past.. I've been in business since 1983 and haven't had anything like this before on a personal time share,, only on investment property.

[BobKamman]

But when you trade in a vehicle used for business for which you claimed Section 179, you have to report the gain.  Even if the dealer didn't give you a piece of paper telling you that it was reported to IRS.  

I would find out if there is a secondary market for those intervals they are selling at $290K.  You might find one that sells for $200K, and you can figure out from that what the trade-ins were worth.  We have a tax on income, not on pieces of paper.