Lawyer agrees to injunction in alleged timeshare-donation tax scheme
A Montana lawyer has agreed to an injunction that prevents him from promoting a timeshare program that allegedly allowed unhappy timeshare owners to donate their timeshare to charity and claim an inflated tax deduction.
Lawyer James Tarpey of Bozeman agreed to the injunction along with two companies he founded: Donate for a Cause and Resort Closings Inc., according to a press release and Forbes.
The federal complaint had alleged that timeshare owners paid significant processing fees to Tarpey’s for-profit company, Resort Closings, to transfer the timeshares to Donate for a Cause. Relying on inflated appraisals of their timeshare value from affiliated appraisers, the customers claimed charitable tax deductions for the timeshares and processing fees, the complaint said.
The timeshares are advertised and sold on eBay for significantly less than the appraisal amount, according to the complaint. Since 2010, the timeshare donation scheme generated more than $17.6 million in revenue, yet Donate for a Cause made charitable contributions of less than $1.5 million.
An Internal Revenue Service review of 303 appraisals for timeshares sold on eBay in 2010 found that the average appraisal was $11,187, yet their average sale price on eBay was only $383. Similarly, a review of 1,557 appraisals for timeshares sold on eBay in 2012 found the average appraisal was $10,619, yet the average sale price on eBay was only $429.
The scheme is designed to exploit difficulties in selling or even giving away unwanted timeshares, according to the complaint. “This is due to the large costs associated with owning a timeshare, the excess supply of timeshares on the resale market, and competition from developers,” the complaint says.
Tarpey gave a statement to Forbes. It reads:
“This action was simply about the United States trying to get an injunction against myself and others to stop us from appraising timeshares for charitable donations. Anyone in my position would have settled since it was just a waste of money to run up legal fees to prevent an injunction against something that I haven’t done in four years and had no intention of doing in the future. It is important to note that this settlement does not include any findings of fact or conclusions of law and therefore no finding of any wrongdoing. I adamantly believe that my appraisals were 100 percent correct. They were done in strict accordance with the Uniform Standards of Professional Appraisal Practice.
“They were not inflated. This is supported by recent case law: Cypress Condominium Association Inc. v. Katrina S Scarborough as Property Appraisers. In that case, the Florida court found that consumer-to-consumer sales prices did not represent arms-length transactions and therefore should not be considered in the equation to determine valuation for state tax-assessment purposes. Rather, the court concluded that resort sales prices were a better determining factor of fair market value.”
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