Webb and Lehrer Write on Historical Tax Considerations for Short-Term Timeshare Products in Top Vacation Ownership Industry Magazine

Articles / April 11, 2012

Real Estate Partner Rob Webb and Washington, D.C., Income Tax Partner John Lehrer published “Short-Term Timeshare Products: Historical Tax Considerations” in the April/May issue of Developments, the magazine of the vacation ownership industry.

In their article, Webb and Lehrer explain that the timeshare industry is currently focused on the development of new, short-term offerings to meet the growing consumer demand for non-perpetual vacation products. They suggest that among the most significant factors affecting the vacation product structure are federal income tax considerations, particularly the “sale versus lease” issue.

The “sale versus lease” determination came into greater focus when the IRS issued its Windrifter ruling—a heavy facts and circumstances-based analysis. The ruling was later typified in the Tax Court’s decision in Grodt & McKay Realty v. Commission. The court held that the purported sales transactions in Grodt & McKay were not true sales for federal income tax purposes.

One of the many issues product developers will need to consider, they conclude, is what, if anything, can be done structurally to such products and the rights given to purchasers therein, or to the tax laws, so that the resulting timeshare interest purchase transactions are characterized as a sale and not a lease of the underlying property.

In a series of forthcoming articles, Webb and Lehrer will also discuss the numerous tax laws affecting timeshare products imposed at each of the federal, state and local levels.

Read full article.