You don't actually own real estate, just a contract for services.
Suppose you paid $5000 for the right to use certain resorts on certain weeks. You sell that contract on the secondary market for $8000, and buy a new contract to use a better resort on better weeks for $14,000. Because it happened on the secondary market, you liquidated your first arrangement for a $3000 capital gain, and you have a new arrangement in which your basis is $14,000.
However, if you are doing this in-house, then the company is allowing you to upgrade from your first arrangement to your second arrangement for an additional payment of $6000. You don't really know what the trade-in value of the first arrangement is as you aren't really selling anything. Just because they tell you that "this is a $14,000 contract but we'll let you upgrade for only $6000 more instead of $9000 more" doesn't make the $3000 "profit" a "real" figure in the financial sense. If you do it in-house, I don't think you are selling anything, you are simply changing the conditions of your arrangement and paying another $6000. If you ever sold the new arrangement on the open market, your cost basis would be $11,000 (what you paid) instead of $14,000 (the alleged value).
Someone may point out that this is not how a used car trade-in would be handled (if you had a car that appreciated in value) but that's because a car is a physical object that you can have title to and the car has one owner at a time. What you "own" with a time share is permission to use certain facilities, and the person offering the contract is the only person who provides the services. If they agree to provide better facilities in return for more money, you haven't "sold" anything or realized a gain in the previous contract. (In my opinion.)
