Getting out from under a vacation property often means a passel of hassles.
Time-share owners frequently discover that the resale value of their piece of paradise is only a fraction of what they paid; many are reduced to listing time-shares on Craigslist or eBay for pennies on the dollar, or paying shady resellers hundreds or even thousands of dollars to take the properties off their hands.
Meanwhile, those annual maintenance fees keep rising. That's why AARP member Linda Milgate, 61, of Santa Cruz, Calif., asked On Your Side about donating a time-share to charity via an organization called Donate for a Cause (DFC).
For owners trying to avoid myriad resale scams, DFC looks promising. It offers to help transfer title, sell the property and donate a portion of the proceeds to charities like the American Cancer Society. The owner can write off the fair market value of the time-share on his or her federal income tax return. In theory, everyone wins.
But unloading your vacation villa might not be as simple or inexpensive as the DFC pitch portrays. To donate a time-share, you first transfer title to the nonprofit DFC, founded by attorney Jim Tarpey — who also owns Resort Closings, a for-profit title company with which the charity shares staff and facilities in Bozeman, Mont. DFC funnels prospective donors to Resort Closings, which collects $2,495 from most owners to process the title transfer and other paperwork. Donors are told they can recoup several times that amount ($6,000, according to the website) by claiming the time-share's market value as a charitable donation on their income tax returns.
Not so fast, warns the IRS. While time-share owners may be tempted to claim a five-figure value based on their original purchase price or what the resort is asking for similar units, the amount you can legally deduct depends on the "fair market value" — what a "knowledgeable buyer" would pay, not what a friendly appraiser says it might be worth. Time-shares donated to DFC sometimes sell for as little as $50, Tarpey admits — a figure DFC reports to the IRS.
So DFC may be able to help you escape your time-share (at a cost of a few thousand dollars), but don't count on safely claiming a big tax write-off. And note that the average donation generates only about $400 to downstream charities, according to DFC. If philanthropy is your priority, just write a check directly to a charity of your choice.
Consumer advocate Ron Burley writes the On Your Side column for AARP and is the author of Unscrewed: The Consumer's Guide to Getting What You Paid For.
Also of Interest
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