IRS Regulations on Timeshare Donation
Since there is so much wrong on the Internet and some timeshare forums regarding getting rid
of a timeshare by timeshare donation I’ve purposely restricted this to specific IRS quotes. The
process is specific and Fair Market Value (FMV) has a specific legal definition to the IRS.
(The following verbiage has been taken almost exclusively directly from IRS documents)
Internal Revenue Service Review of Appraisals - Real Estate
Cost or Selling Price of the Donated Property
The cost of the property to you or the actual selling price received by the qualified organization
may be the best indication of its FMV. . .
1. Comparable Sales
“Selection of Comparable Sales. . . the amount of weight given to a sale depends on the degree
of similarity between the comparable and the donated properties. The degree of similarity must
be close enough so that this selling price would have been given consideration by reasonably
well-informed buyers or sellers of the property.” (Publication 561 -Determining the Value of
Unusual Market Conditions or example, liquidation sale prices usually do not indicate the FMV.
Also, sales of stock under unusual circumstances, such as sales of small lots, forced sales, and
sales in a restricted market, may not represent the FMV. (Publication 561 - Determining the
Value of Donated Property)
2. Capitalization of Income (Doesn’t apply)
3. Replacement Cost New or Reproduction Cost Minus Observed Depreciation
This method, used alone, usually does not result in a determination of FMV. When the replacement
cost method is applied to improved realty, the land and improvements are valued separately.
Appraisals are not necessary for items of property for which you claim a deduction of $5,000 or
(Publication 561 - Determining the Value of Donated Property)
Generally, if the claimed deduction for an item of donated property is more than $5,000, you must
attach Form 8283 to your tax return and complete Section B.
Form 8282 - Purpose of Form
Donee organizations use Form 8282 to report information to the IRS and donors about dispositions
of certain charitable deduction property made within 3 years after the donor contributed the
property. (Form 8282 - Donee Information Return (Sale, Exchange, or Other Disposition of
20% penalty. The penalty is 20% of the underpayment of tax related to the overstatement if:
• The value or adjusted basis claimed on the return is 200% or more of the correct amount, AND
• You underpaid your tax by more than $5,000 because of the overstatement.
40% penalty. The penalty is 40%, if:
• The value or adjusted basis claimed on the return is 400% or more of the correct amount, AND
• You underpaid your tax by more than $5,000 because of the overstatement.”
1. If the property is sold for cash, the sale price must determine the FMV of the timeshare
2. Based on Form 8282, the time limit for this sale extends to 36 months from the date of
donation. Thereafter, it doesn’t apply to valuation.
3. Only a licensed and qualified appraiser can give you a donated timeshare FMV. Your
depressed sale circumstances has no bearing on the deduction you can claim.
4. A timeshare donation value from $500 to $5,000 can be granted if there is no specific sale
price for the donated timeshare.
5. If the title is held for more than 36 months, the $5,000 non-appraisal timeshare donation
credit can be taken with little risk of audit. The deduction is granted immediately and only
subject to change if it is later sold for cash within 36 months of the timeshare donation date.
6. Finally, What if you do face an audit? Unless the error caused you to write off such a large
amount that you actually underpaid your taxes by $5,000 based on the overstatement of
value alone, you are no subject to a penalty.
Dr. Ken Rich is a on the board of Community Health Training, Inc., a non-profit organization (NPO)
that accepts timeshare title as a direct donation instead of reselling it. Details on the process can
be found at http://www.communityhealthtraining.org/Timeshares/ .
He can be contacted at SeniorDirector@CommunityHealthTraining.org .