In a recent piece, Forbes contributor Peter J. Reilly notes that “the notion that you can come out ahead financially by giving something to charity is inherently sketchy” – and is confounded even more when the timeshare industry is involved.
What prompted these musings from Mr. Reilly?
The noted tax expert was reacting, specifically, to a private letter ruling from the IRS, in which the organization “revoked the exempt status of an organization that focused on taking donations of timeshare [intervals],” as Mr. Reilly notes.
As Mr. Reilly points out, there is a secondary market for timeshare resales saturated with consumers looking to “get out” from their obligation, including “the recurring maintenance fee;” however, many would-be sellers grow frustrated by the limitations of this aftermarket, particularly their inability to sell off their timeshare for even a fraction of what they initially paid for it.
As Mr. Reilly writes: “When you combine something that once seemed quite valuable that is now undesirable, the notion of giving it to charity can seem irresistible. That’s what GUTS was all about.”
GUTS stands for “Give Us Time Shares,” the name that Mr. Reilly is using for the sake of describing the organization affected by the IRS’ ruling, the specifics of which are redacted.
But understanding the mechanics of how they operated give a great insight into why the IRS reached the decision that it did. We’ll let Mr. Reilly explain:
“The key guy in GUTS is referred to as Founder. He is the sole voting member and was signor on the bank accounts. His sister was the treasurer. Dumping time shares is complicated stuff, so there were three other entities involved. CO-1 conducted marketing and closing services on all the timeshares and was listed as the client on all the appraisals prepared by CO-3. CO-2 was the broker. In one of those wild, inexplicable coincidences you find in the land of sketchy transactions, all three of the companies were owned by good old Founder.”
As Mr. Reilly goes on to note, GUTS required consumers to pay an upfront fee for service. In the eyes of the IRS, this put the organization “in direct competition with other for-profit timeshare resale entities;” because its activities are “mainly commercial in nature” and “serve a substantial nonexempt purpose,” the organization cannot be qualified as a 501(c)(3).
What’s more, the IRS also found issues with the organization’s practices, which it described in the private letter as “deceptive” and “untrue,” and, therefore, “incompatible with the purpose of an organization claiming to be charitable.”
In all, this is an important reminder to timeshare consumers looking for a way out of their obligation to thoroughly research and vet any and all organizations offering them a way to resell, redeem, or donate their interest.
Given the fraught nature of the secondary market for timeshare resales, a consumer could easily find themselves lured into a scam, duping them out of thousands of dollars while still leaving them twisting in the wind when it comes to their timeshare interest.
For more on this story, we encourage you to read the full Forbes piece, here.
Led by Attorney Michael D. Finn with 50 years of experience, the Finn Law Group is a consumer protection firm specializing in timeshare law. Our lawyers understand vacation ownership as well as the many pitfalls of the secondary market of timeshare resales. If you feel you have been victimized by a timeshare company, contact our offices for a free consultation. Know your rights as a consumer and don’t hesitate to drop us a line with any questions or concerns.