Form 1099-MISC Do I need to send this with a form 1040-NR

[janner66]

Hi,

I have received a form 1099_MISC from my timeshare owners after renting it out through the company.

The form has an incorrect address. The postcode is wrong.

I contacted the resort and they have told me that they don't think it will matter as I do not need to send it with my tax return.

Along with the form I received a leaflet that said "This 1099-MISC form, along with your rental statement, should be given to your tax preparer."

It also says that any incorrect information submitted to the IRS will result in a $260 fine.

Do I need to send this off with the form 1040NR? and if so, will an incorrect post code subject me to a fine?

Many Thanks

 

[Taxing Matters]

The Form 1099-MISC is for your information in preparing the return. You do not need to attach it to the return. See page 56 of the Form 1040-NR instructions in the section titled "Assembling Your Return". The issuer will send the original form to IRS and the IRS will match it with your return so you want to ensure you report the income correctly.

 

[janner66]

Thanks very much for the reply.

 

[janner66]

I would also like to report the income correctly but am having difficulty understanding the instructions.

I think I have filled in Schedule E correctly.

Gross Rent received was $1000 (I have placed this in 3.Rents Received)
Commissions & Travel Agency Fee was $380 ( I have placed this in 8.commissions)
Maintenance Fees were $417.50 (I placed this in 11.management fees)
Net Rent was $620.00
Total balance in my account was $403.00
Amount of refund $217.00. (This was paid into my account for next year)

I therefore get total expenses of $797.50 and a loss of $202.50.

Is this correct?

Do I have to declare the the refund I received of $217.00 anywhere please? Originally it came as a cheque but I could not cash a cheque in dollars so asked the resort to pay it into my resort account to help pay for next year's maintenance fees.

I have placed the loss of $202.50 in line 18 and 23 of the 1040NR

I think that is all I have to do with form 1040NR I hope.

Last year I asked for this to be treated as effectively being connected to an active trade or business and I believe that carries over indefinitely.

Thank you kindly for your help.

 

[janner66]

I'll just post it and hope for the best. I think the cheque I received will go against expenses next year anyway.

 

[FlyingRon]

You've lost me. The "balance in your account" has nothing to do with taxes. What "refunds" are you talking about? Unless it corresponds to some amount that you paid and claimed as a deduction/expense the previous year, it doesn't enter into this.

You have a gross receipt of $1000 and expenses of 797.50. You have a net INCOME of 202.50 NOT A LOSS.

Further, if you had or reserved any personal use of the unit, then you need to prorate the parts of the fees that aren't directly related to the rental.

 

[janner66]

Sorry. It is very difficult to explain.

The refund was issued after the timeshare resort rented out the apartment. They called it a refund but I guess it is more income.

They rented it out for $1000, took $380 for commission and then also took $417.50 towards next years maintenance fees. The $217.00 was what was left over from all this.

I have now credited my account with it however.

I realise I am not with a loss.

 

[FlyingRon]

It still doesn't add up. 1000-380-417.50 is 202.50 not 217.

Did you make any personal use of the timeshare? As I mentioned, you may not get the full 417.50 if you did.

Do you have a loan on this unit? Insurance? If you paid expenses, you may be able to deduct these.

38% is a hell of a commision. Most vacation rentals go for 5% plus a few more if they allow the renter to pay by credit card.

 

[janner66]

The discrepancy of $15 is because they charged me that later due to the maintenance fees rising for that year. I received a separate invoice for the $15. (not sure why it is 0.50 out though!)

No we are unable to use the timeshare.

No insurance or loans.

The commission and travel agency fee is set by the timeshare people for renting it out on our behalf.

So, I have roughly got it correct. Does this mean I will end up paying tax on $202.5?

 

[FlyingRon]

Yes, you report everything on schedule E and it transfers over to your main 1040 as additional income.

 

[LdiJ]

The discrepancy of $15 is because they charged me that later due to the maintenance fees rising for that year. I received a separate invoice for the $15. (not sure why it is 0.50 out though!)

No we are unable to use the timeshare.

No insurance or loans.

The commission and travel agency fee is set by the timeshare people for renting it out on our behalf.

So, I have roughly got it correct. Does this mean I will end up paying tax on $202.5?

Actually no, because no one has taken depreciation into consideration. You would depreciate the cost of the timeshare over its useful life, which I believe would be 27.5 years, so you would get a deduction for depreciation as well.

I personally think its absurd that you have to file a tax return over the one or two week rental of a time share, when you have no other US based income. However, the law is the law and its likely that you will be paying almost nothing anyway.

 

[STEPHAN]

Is there depreciation on timeshare ownership?

 

[LdiJ]

Is there depreciation on timeshare ownership?

There is on any rental property. If its treated as a rental and taxed as a rental then there is depreciation.

 

[Taxing Matters]

If its treated as a rental and taxed as a rental then there is depreciation.

That statement is too broad. Consider the following situation. Alan buys a home which he then leases to Becky. Becky in turn subleases the home to Carl. Certainly Alan, who owns the property and has a basis in the structure may depreciate it. But while Becky's lease to Carl is a rental arrangement too, Becky has no depreciation deductions because she does not own the property and has no basis in it. So it is not always the case that rental income means that depreciation deductions are available to the lessor.

So in order to answer the question whether depreciation is available here the issue as I see it would be whether the timeshare buyer receives an actual interest in the property itself, such that he or she has a basis in the property that he or she may depreciate. That will turn on the details of the timeshare deal.

 

[janner66]

I suppose I share the apartment with 51 other people. I don't consider myself the owner of it, more of an owner of a week. It would be nice to put some depreciation on the form. How do I go about working out a value though if it's applicable?

Thanks for everyone's help.