Treating domain sales as "Capital Gains"

[DomainEngineer]

Hi,


I have one very specific question regarding domain-sales. (not regarding ppc income, which I just treat as income)

Q: Which USA tax form will you use (Schedule C, Schedule D, Or some other form) for treating domain sales as "Capital Gains"?

I am asking this question because different tax forms have different treatment for capital gains. For example, if you treat domain sames just like stocks, then you have short-term and long-term capital gains depending upon how long you held the stock/domain.

So which form is more appropriate?

Any tips/suggestions/ideas are all welcome very much.

Thanks.

How about using Schedule-C for: all the expenses (including registration/renewal fees) and ppc income, and

then using Schedule-D for: domain sales treating them as capital-gains (acquisition cost of sold domain will be ZERO because expenses are already deducted on Schedule-C and entire sale will be subject to capital gains in this case using Schedule-D)?

This way all your expenses will be deducted from your ppc income and you pay capital gains tax only on the sales. Also this way you only pay long-term 20% tax if you sold the domain after 2 years of owning it.

I heard some people using this as this appears most optimal and reasonable way to do it.

What you guys think?

 

[Deleted member 5660]

My tip is to talk to an accountant when you start your business, not when the taxes are due because it may be too late.

From what I have been told ... if I understand things correctly ... if you are in the business of buying and selling domains then any profit from a sale is regular income. If you are in the advertising business and sometimes sell a domain then possibly the domain can be treated as a capital asset ... but ... you cannot deduct the purchase of a capital asset purchase as a regular expense. A capital asset has to be depreciated, or, in the case of intellectual property, amortized over 15 years. So if you buy a domain for $15K (and you want it to be a capital asset) you get a $1K deduction per year for 15 years (or until you sell the asset). Again, this is what I understand and is meant as a guide when you ask an expert.

 

[DNQuest.com]

Yes, setting up your domain business properly at the start is more adventageous than at tax time. I strongly suggest you use Sub-S or LLC. Then you can treat all expenses and revenue easily. You can still use sole propietorship, but the important thing is to have a seperate checking account for your "business". All money spent on obtaining domains are deductible and all monies are concidered revenue (PPC, affiliates, sales). Then there is no need to worrry about capital gains, ET AL.