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Merlo
Merlo, Accountant
Category: Tax
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Experience:  25+ years tax consulting. Specializing in returns for US citizens living abroad
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My husband earned $3000 on the sale of a timeshare. However,

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My husband earned $3000 on the sale of a timeshare. However, that amount was less than was actually paid for it. As I understand it, the $3000 is considered a capital gain. Is that correct? Can I deduct the loss to offset the capital gain?

Your question here is not quite clear.

 

How did you figure he had a gain if the amount you sold it for was less than you paid for it?

 

Where did the gain come from?

 

 

 



Edited by Merlo on 2/1/2010 at 12:14 AM EST
Customer: replied 6 years ago.
Yeah, it confuses me too. :)

About 5 years ago, the timeshare was purchased at $18,500(downpayments, with payments made monthly thereafter, much like a mortgage). Prior to paying it off entirely, he sold sold it last year for $12,900. It was during the settlement of the sale of the timeshare that the $3000 check was cut.

So I guess I'm wondering is: does that 3K represent a gain or loss?n

Thank you!

Hello LeoMaura,

 

If you paid $18,500 for the timeshare and sold it for $12,900, then you had a loss of $5,600. So where did the $3,000 check come from? Who gave you that check and what did it cover?

 

Did the buyer assume your loan or something?

 

 

Customer: replied 6 years ago.
Buyer did not assume loan - the $3K was disbursed to us by the title company as part of the sales settlement. The itemization is rather detailed. It starts with a total seller credit of 12,900 (the sale price) and then subtracts commission, payoff loans, title/escrow charges, closing, transfer fees, etc. What's left after all those subtractions is $3K.

So if this is a loss, then is the loss even greater than 18,500 minus 12,900? I just can't wrap the notion that this IS a loss if we got a check at the end of it.

Hello again Leo,

 

Thank you for the additional information. That helps.

 

Your loan payoff was included in the transaction which is why you ended up with a $3,000 check. But that is not a gain to you.

 

The only figures that really come in to play here are the price you sold the timeshare for and the price you paid for it. And based on those figures you had a loss of $5,600. The $3,000 check you received was what you were owed after paying off your remaining loan balance, but that does not represent a gain to you.

 

In other words, when you originally bought this timeshare you made a downpayment and then financed the rest, and of course you continued to make monthly payments on the loan. When you sold it, you still had a balance due on the loan, and so the proceeds of the sale were first used to cover the balance due on your loan, and then you got a check for the difference. But that is not a gain for you. That is just a partial return of your original money paid on the loan. The fact remains you simply had a $5,600 loss here.

 

But the loss on the sale of a personal asset is not deductible, so you have no loss to claim here for tax purposes. But you also have no gain to pay taxes on.

 

If this was helpful please press the Accept button.

 

Thank you Leo

 

 

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