Hello All,
My name is Chris Lindgren and I am the Donation Coordinator at a company called The CharityGroup. We are a soon to be 6 year old company that has helped hundreds of people donate their timeshare to benefit their favorite non-profit. Eric has invited me to present some information about the timeshare donation process.
Firstly, I would like to address some of the info noted by
Dr. Rich.
He said: "The NPO doesn't take title except at the very last second in a double closing so you are donating it to them while they are selling it to someone else... Some timeshares at some resorts NEVER sell and those will be rejected outright by the NPO. Until the broker sells it you continue to be responsible for all fees."
Response: There are many ways to document a non-cash timeshare donation, double-closing is among them. The CharityGroup (and this is strictly speaking of our process) documents the donation as an authorized agent of the designated non-proft. Until the donation is out of the donor’s name, the donor is still responsible for the maintenance fees. As an agent of the non-profit, we never take ownership of a timeshare. It is important to research the company or NPOs handling your timeshare donation.
Ask questions such as, “What is your sell-through percentage?” “How long will you market my timeshare?” “What is the standard process?” And “Are there any fees for your service?”
These will help you make an informed decision on whether or not the company/NPO is a right fit for your situation.
Dr. Rich said: “When it is sold, a value is established which can't be argued with. "Your" timeshare was only worth what someone actually paid for it, therefore according to the IRS you can only deduct the amount that was actually received. Even if you have an appraisal, it doesn't matter. Even if the NPO takes title and holds on to the timeshare for awhile, if they do sell it, they are required by law to notify you if the sale price is different than the credit they gave you so you can adjust your future income deductions up or (more likely) down to coincide with the real sale price. If you have a $10,000 timeshare you could get only $1,500 in deduction credit.”
Response: This is not true, as timeshares, when donated to a IRS 501(c)3 charity/organization, are considered non-cash donations (IRS Tax Topic 506,
http://www.irs.gov/taxtopics/tc506.html). Albeit the donor has discretion in valuing the property for tax purposes, and some more conservative donors may opt to claim only the actual sale price, it would be wiser to establish the Fair-Market-Value (FMV), rather taking the deduction on the case-by-case basis.
As you stated, many timeshares are sold retail, yet I believe more are being sold on the secondary market than you're considering. With that said, getting a good secondary price on your timeshare involves patience and time on the open market; hence, if a donor needs to sell their property within 60 days, the pricing is going to be more aggressive than the scenario of a seller who does not NEED to sell the property and has more time to commit. This also leads me to your next point:
Dr. Rich said: “The NPO I work with does it differently and you may find some others that do this, also. The NPO takes title now and NEVER sells it. As such they are required by the IRS to find the Fair Market Value (FMV) based on one of three methods dictated by the IRS. 1.) What do the majority of similar timeshares sell for in the open market. Think about this for a moment. The majority are sold by the resort, therefore their sale price along with what you willingly paid for it establishes FMV. 2.) What is the rental income determine as an investment if it was bought for that purpose (doesn't apply here). 3.) What would it cost you to replace the timeshare on the open market. Again, think. You would probably have to go to the resort and pay their retail price. Therefore, if your unit is NOT sold, the FMV can be fairly and legally established as the price close to the retail price currently at the resort. That value is then your deduction. The difference can be literally thousands of dollars difference. This would give you $10,000 in deduction credit. In a 25% tax bracket, that's worth over $2,000 more in your pocket!
Response: I think your assuming a little too much about FMV and the market. This is a sensitive subject, as tax issues and topics are often on a case-by-case basis. Albeit, we do not know the ratio of timeshares bought and sold retail versus on the secondary market and I would not assume that everyone can take close to a retail price for a deduction, as that is up to the authorized/expert third-party to appraise the property.
Also, I believe the IRS Publication No. 561 Fair Market Value Determination goes into a few more considerations than the 3 you list above, but I would suggest anyone interested in researching it, visit the publication here:
http://www.irs.gov/pub/irs-pdf/p561.pdf.
Dr. Rich said:Isn't there a $5,000 limit on timeshare donations? NO!! I've read this many, many places EXCEPT from anything from the IRS. Their only response is to review two publications - Pub. 561 Fair Market Value Determination and Pub. 526 Contributions. … … The $5,000 limit is on taking a deduction WITHOUT any documentation to prove the FMV you deduct. Regardless of the difficulty, you have just as much right to sell at the same price as the resort does and unless you prove otherwise by selling it for less, the IRS says to use at least one of the three methods above to compute FMV.”
Response: You are correct about the rumor of the $5,000 limit; although, it is
REQUIRED that you have an expert third-party appraisal completed and attached if one claims for more than $5000. It cannot simply be done by the donor.
I hope this information helps clarify some questions about the timeshare donation process. I would love the opportunity to field any more questions or comments.
Best regards,
Chris Lindgren | Donation Coordinator
The CharityGroup
