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Treatment of sales of domains
- Is the income from selling domains a capital gain? - Maybe, if you sell only occassionally. If the domain looks like inventory, then it is not.
found from search for "domain name" depreciation
http://www.webmasterworld.com/forum25/1446.htm - purchase of domain names written off entirely in first year
http://www.affiliates4u.com/forums/affiliate-marketing-lounge/52195-domain-name-depreciation.html - All domains only have a lawful value as set by ICANN and Nominet. Private valuations are an expression and not a fixed sum. Expenditure on acquisition of a domain can be wholly written off except for the ICANN/Nominet value, unless you wish to display the domain as a non tangible asset. However you do not "own" the domain, merely register the name for two years, so the registration period is the value and that is set by Nominet/ICANN
treatment of domain name in germany - http://www.internationaltaxreview.com/?Page=10&PUBID=35&ISS=23723&SID=682906&TYPE=20
- The Supreme Tax Court has held the name to be a non-depreciable, intangible fixed asset, to be capitalised at its purchase cost. It refused the taxpayer's claim for an immediate expense deduction, as well as his alternative claim to regular depreciation over six years.
http://www.taxalmanac.org/index.php/Discussion:Website_depreciation_or_expense
Bottom Line (talk|edits) said:
5 December 2007
I had a client that purchased a website and domain name for $100,000. Hotels paid him for a listing on his website. He wanted to depreciate it over 3 years saying that what he had purchased was software. My research showed that it should have been an intangible asset because what he was purchasing was a customer list. He insisted and wound up doing the return himself because I was uncomfortable with the position. He was audited on it and told the auditor that I had advised him that it was a 3 year write-off. Client (now former client) hired a CPA to defend him again claiming that I had advised him to take this stand. I (fortunately) had a copy of my research and memo to my client to protect myself. Last I heard, client lost and is having to write this off over 15 years.
http://www.taxalmanac.org/index.php/Discussion:Domain_names_-_how_to_treat_them.
http://www.namepros.com/377342-legal-tactics-reduce-irs-tax-owed-2-print.html
http://www.namepros.com/377342-legal-tactics-reduce-irs-tax-owed-3-print.html
- Thats exactly what the IRS agent told me if I buy and sell on a reguar basis then basically i own a domain store and i couldnt use schedule D, capitol gains for sales, but an occassional sale is OK. He couldnt give me the number, or income threshhold from sales that constitutes the change over because no one has been brought to court to determine that.
google search: "domain name" "capital gains" irs
http://slashdot.org/articles/06/04/15/0132242.shtml
April 15, 2003 - http://www.dnjournal.com/columns/tax_tips.htm
- Tips On Proper Reporting of Your Domain Name Sales on U.S. Personal Tax Returns
- The first issue to explain to your tax professional is that domain names are service contracts - some mistakenly think them to be tangible personal property. (Try to explain that as she repeatedly flips through her tax guide only to find no specific IRS rules or rulings!) As service contracts, most tax advisors handle domain name sales by applying tax rules related to trademarks!
- A lawsuit involving Sex.com (the SEX I mentioned above to get your attention) could result in a court ruling that domains are considered property. However, that ruling is far from certain and will be years before final appeals are exhausted. So, for now, they are service contracts. The good news is that as service contracts, taxes on sales of property (for those states that have such a tax) probably do not apply.
- Google search: selling a trademark "capital gains"
- Google search: is selling a trademark ordinary income or a capital gain
- Taxation of ideas - http://www.ipmall.org/hosted_resources/IDEA/pdf/8_IDEA_1964_25.pdf
http://answers.google.com/answers/threadview/id/288629.html - Tax treatment of domain names
- "Tax Implications in Buying a Domain Name", by Myron Frans - Faegre & Benson LLP
- "Business Beat - Name Game Is Big Money" (July 2000) - MinnesotaBusiness Magazine
http://www.moniker.com/domain-masters/ep-2005-05-18/page-1.jsp
- And generally speaking, an asset that is ever sold in a C corporation never gets a capital gain rate of 15%. There is no such thing as capital gains in C corporations for that favorable tax treatment.
- Evan: Extra taxes plus the IRS released some statistical information that, when you're unincorporated on what they call a Schedule C or Sole Proprietorship, the audit ratio which is really something that is a variable that you really don't take into consideration for tax planning, but just some statistical information, those entities get audited 11 times more than if you were a corporation.
- Evan: Well, generally speaking, the registration fees and renewal fees are an annual type of expenditure; and annual expenditures are spent in the year that you incur them, so there usually is not a capitalization requirement for that. Other, I guess, realms from that would be, let's say that you acquire a domain name. When you acquire a domain name, that's a little different; because that's deemed to be an asset to the IRS that has value that exceeds beyond one year. And, generally speaking, we consider those Section 1231 assets, which are kind of a hybrid, which is really the best treatment that you're going to get out of an asset for the IRS. Meaning that, if it appreciates and you sell it, in general you'll get capital gains at 15%. If you sell it at a loss, you get an ordinary loss. So, there's some recapture rules, but generally speaking, those are how you treat those two items.
- Monte: Okay. So, the actual annual renewal fees is just an annual fee and it's treated that way; but if you sold it for a profit, then it's a capital gains event at 15%.
- Evan: Yes.
Google search: "Section 1231" "domain name"