Timeshare rental activity was trade or business activity giving rise to ordinary loss on foreclosure.

• Jurisdiction: United States
• Date: 01 October 1997
• Author: Lindbloom, John W.

In a memorandum decision, the Tax Court held that a taxpayer's rental of timeshares rose to the level of a trade or business and, therefore, a loss on foreclosure was an ordinary loss (Murtaugh, TC Memo 1997-319).

After considerable investigation into the location of timeshares, Murtaugh purchased two units in a resort location that provided a good opportunity to make a profit. The seller of the units was retained to manage the rental activity, which was on a short-term basis.

The rental income was minimal during the years of operation. After the...