The Orlando Sentinel looks at ways in which timeshare developers can defer income tax payments on purchases financed by the customer.
According to a story by the Sentinel's Jason Garcia, Marriott Vacation Worldwide Corp. will defer $40 million in federal and state income tax payments in 2013, and another $10 million per year for the next several years. United States tax laws allow developers to defer income tax payments when buyers finance their timeshare purchase.
When the timeshare is financed over an extended period of time:
"...the time-share company can choose to pay its income taxes on the profits stemming from those financed sales using what's known as the 'installment method.' Instead of the full amount of income tax in the year a sale occurs, the company pays it over time as the buyer pays back the principal on the loan."
This tax payment process does not impact profitability, as the developer is able to immediately recognize all income stemming from the sale.
Marriott Vacation Worldwide markets timeshares under the brands Marriott Vacation Club and The Ritz-Carlton Destination Club.
A Disney Vacation Club spokesperson refused to comment on its own tax deferral policies.
Disney Vacation Club offers buyers loans for up to 10 years at rates of 8.99 to 17.5% depending upon the amount of down payment and credit-worthiness. At one time DVC revealed that approximately 75% of all sales were financed.
For the complete story visit OrlandoSentinel.com.
