Hard times for resort, but not for homeowners in Whistler

Published 8:51 pm Saturday, February 20, 2010

WHISTLER, B.C. — Talk about timing, and a captive audience. If you are going to schedule a foreclosure sale, you might as well do it when the world is coming to your door.

Just a few weeks before the opening ceremonies of the 2010 Winter Olympic Games in Vancouver, B.C., a two-hour drive south of the gorgeous setting of Whistler, via the Sea to Sky Highway, lenders announced that they had seized the assets of Vancouver, B.C.-based Intrawest ULC, which operates this mountain ski resort that is hosting a majority of the key alpine events.

New York-based Davidson Kempner Capital Management which heads the lender group, said it would hold a public auction during the international winter sports festival. That had been scheduled for last Friday, but the Toronto Globe and Mail reported that day that the auction was delayed until this Friday in an effort to reach a last-minute deal.

Vancouver-based Intrawest reportedly has missed payments on a $1.4 billion loan on the resort group. The company is owned by Fortress Investment Group LLC, a private equity firm that purchased Intrawest for $2.8 billion in cash and debt in 2006.

While the Whistler Village and ski mountain may have hit difficult financial times, don’t tell the individual property owners in the area who are gratefully accepting $2,500 a night for their slope-side condos and single-family chalets during the Winter Games.

Many U.S. residents invested in second homes in Whistler years ago in anticipation of the Olympics. The potential of year-round income was also a lure. Skiers have access to the mountain-top glacier even in late summer, and the region is popular for mountain bikers, kayakers, fishermen, hikers and golfers.

One of the biggest financial decisions owners here have had to make is whether to accept the premium rental paid by Olympic renters or stay put and enjoy the Games with family and friends.

The basic rules of supply and demand clearly are in play here. With only one main arterial into Whistler Village, the supply is low and the demand high. For those with homes in the area who do choose the short-term rental road, the cash from the two-week extravaganza could come tax free.

Here’s why: According to the Internal Revenue Service, owners can pocket any fair-market rent as long as the term is 15 days or fewer and they don’t claim any of the tax deductions typically allowed on rental property, such as depreciation or maintenance. This option can come in handy for folks who do not want to be in the rental game, yet occasionally find they could rent their place.

The tax rules change, however, if the house becomes a full-time rental or investment property. Under federal tax laws, you can still use the home for 14 days or 10 percent of the rental time, whichever is greater, without jeopardizing its status as a rental property and tax shelter. For example, a Whistler home with great access to the slopes, lakes and town might be rented for 250 days a year, allowing the owner to use it for 25 days. If the home had more personal use, its status as an investment property would be in jeopardy and some of the expenses and depreciation could be disallowed.

Personal use does come at a cost. Depreciation is limited only to the percentage of time that a house is rented.

The house also must be rented at fair market value, even though “fair” is in the stratosphere for at least two weeks. If you rent to relatives at discount rates, the IRS may rule that the house is not actual rental property and disallow many of your deductions. Even though home is outside U.S. borders, Uncle Sam still wants to know the income it produces.

I’m sorry, but if I could get $2,500 a night to rent my home, my family would have to wait until the crowds go home to use the place.

Tom Kelly is available at news@tomkelly.com.