If you bought the time share for personal use, then just as in the case of a sale of a principal residence, no loss is allowed. If you bought the time share for investment purposes, you may be able to take the loss as a long-term capital loss.
The tax on the investment income in excess of $1,700 (may change after 2007) of a child under age 18, based on the parents’ marginal tax rate and computed on Form 8615.