Domains as Assets, or Expenses

[RON2]

I have heard that domain names are like phone numbers, meaning they cannot be owned. If this is true, then as domain owners we can't technically count them as assets, right?

Then I assume registration is then be considered an expense, even if you were to pay $7.5 million dollars for a high profile domain, like business.com.

I wonder, what would stop people from "hiding their assets" in domain names. What if Joe Druglord takes his two million dollars in profits and buys xxx.com on the aftermarket?

 

I'm in the UK and for accounting purposes my domains are treated as stock and I carry only the remaining portion of their registrations forward on the balance sheet so I can write off as much as possible in the profit and loss account.

 

[Omni]

Bad memories lol j/k

 

[Lats]

True, you don't own them, you lease them for a specific period of time.

It's my understanding that a lease is considered to be an asset to make use of for that period, while the registration process would be recorded as an expense.


Lats...

 

[Whois-Search]

http://www.intellectual-property.gov.uk

 

[AMERICAR]

Profits from a domain name sale are taxable, same goes for income from affiliates.

Just image having paid $10.00 for a domain name, and then selling it for 7.5 million, do you think that the tax man is not going to come knocking on your door.

:evil:

.

 

[RON2]

How about if someone bought a company that owned a domain name worth $7.5 million. The new business owners then sold the domain off for $500 to a third party.

It just seems like there is potential for companies to hide money in domains. I hope Worldcom isn't reading this.

 

[avs162]

greetings

taxevade.com if anybody wants to reg

how about the donation of domians to a nonprofit org for tax deduction

i wouldnt want to be the guienapig on this one

can they be depreciated and has anybody ever seen banks lending on domian assets or companies offering insurance against hijacking or other events impacting value.


sean

 

[NameBox]

Originally posted by AMERICAR
Profits from a domain name sale are taxable, same goes for income from affiliates.

Just image having paid $10.00 for a domain name, and then selling it for 7.5 million, do you think that the tax man is not going to come knocking on your door.

:evil:

.

I'd be surprised if a lot of companies aren't holding key intellectual property, and related assets offshore. Besides, for most "legitimate" companies, a domain is an offshoot of their brand, and would probably be expensed at nominal cost or be itemized as part of goodwill. Not talking of internet specific companies here, whose url is there business largely, but real world widget makers, etc., with an url ...

 

[NameBox]

Originally posted by safesys
I'm in the UK and for accounting purposes my domains are treated as stock and I carry only the remaining portion of their registrations forward on the balance sheet so I can write off as much as possible in the profit and loss account.

Are you expensing them or considering them a capital asset, liable for capital gains taxes or deductions in case of losses. It would seem to me that not much to expense. I'd also argue that during an audit, at least in the USA, where "expectation" of a profit is per the IRS's definition (not each owner's delusions), the taxman wouldn't look to kindly at some useless domain purchased at significant cost and then written off.

Seems a perfect way to fudge the books, or (for the criminally minded) launder money ....

Mind you, how many are fortunate enough to have seriously valuable domains, so the argument is largely moot

 

[dotsofdomains]

A domain is an asset (or liability) as the case may be.

 

The domains are treated essentially as "cost of goods sold", so the prepaid portion of the domain reges is carried forward as stock at year end on the accounts. They are accounted for at cost.

 

[domainicanicanica]

Avs162,

We think along the same lines, in that --though I haven't tried it-- I do believe you should be able to offset your taxes on domain name profits with donations of domain names to charitable organizations.

Tax man can't say a domain name has no value since he's already collecting taxes from business.com, sex.com, etc.

So the question becomes: How do you determine value for a domain name donation?

Or, maybe, the better question is: WHO determines value?

Any thoughts?

 

[NameBox]

Originally posted by safesys
The domains are treated essentially as "cost of goods sold", so the prepaid portion of the domain reges is carried forward as stock at year end on the accounts. They are accounted for at cost.

Wouldn't that imply that domain1 would have the same value as domain2 given similar prepaid reges? That's fine for domains purchased for reg fees, but how to account for purchases of domains (alone with no added value or associated site, etc.) at X thousand of dollars?

Only upon audit, would the taxman have his say. But, I'd venture those expensing domains at a significant cost, or attempting to write down a purchased domain, would face problems down the road. Safesys approach makes sense when domains are all treated as reg fee only, and given his approach, as a quasi subscription service NOT an asset.

 

[Omni]

Hmm purchased domain names sounds interesting... let me have a shot at thinking about it

 

[Omni]

Can't figure it out :sad: does anyone know?

 

If you pay a price over reg fee, thats still the purchase price of the domain so its still the cost of the goods sold - thats how it would be accounted for in my accounts. In theory the tax would have been paid by the seller anyway so its not like its a taxless inflation in value.

 

[NameBox]

Well, depending on the tax regime, it would seem like a perfect way to export capital, etc., or expense away a taxable liability (like profit!). Reduce profits ... Buy Domains!

I know that in some jurisdictions, the tax man is very, very, adverse to allowing expensed (except under considerable scrutiny), intellectual property transactions (under which a domain purchase would fall, i.e., nothing "tangible"), from foreign nationals or companies. Very hard to discern if this is a legitimate 3rd party transaction when something is purchased at 100 - 1000 times its nominal value.

At least for speculative purchases this would seem to be a problem. If the domain was leading to real revenue, i.e. key ins leading to revenue, than you could prove its relative value.

At that point, safesys, wouldn't you account for the value of the domain in goodwill?

 

I see what you mean, if a domain cost say $5,000 accounting for it as cost of goods sold and holding on to it past the financial year end would mean that it would be effectively writing the whole purchase off against profit - unless you accounted for it at the full $5k as a stock holding rather than doing the prepaid reg fee method.

I suppose this would also alter depending if you were actively looking to sell it or to solely use it as a source of revenue in which case it would be more of an asset rather than a cost of goods sold and would presumably be accounted for as an intangible asset on the balance sheet.

 

[Omni]

heh I was thinking about goodwill...