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Tax on sold domains? but how much

Discussion in 'Business & Tax Advice' started by alexander, Apr 7, 2009.

  1. alexander

    alexander Newbie

    Apr 7, 2009
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    I am american and this year plan to sell all my domains.

    1: How are they taxed on my return..


    2: how can I save on these fees.

    I was planning on selling on SEDO, do they report to the IRS directly?
  2. octane

    octane Registered Member

    Feb 20, 2008
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    If they don't sell for more than $600, there is no need to do anything.

    If they are selling for more than $600 (Remember - just because you're asking more than $600, doesn't mean you're making more than $600) I would consult a lawyer, as domains can get tricky, especially depending on who buys them due to the fact there is no tangible good.

    I've seen cases where a domain could be sold for $100,000+ and noone pays or collects taxes because it's implied or assumed value, as the actual value is only the $7 it's "worth".

    Bottom line: Talk to a lawyer.
  3. shockwave

    shockwave Junior Member

    Mar 10, 2009
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    Tax is only on profit which is selling price minus costs

    It is up to you to report your numbers. Sedo and others report total numbers not what each person sold. IRS can get details if they are suspicious
  4. davidson

    davidson Registered Member

    Jul 26, 2008
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    I have to respectfully disagree with Octane. In fact, I think he's blowing smoke out of his ass. All income in taxable. There is no law or rule that says income is not taxable if it's less than $600. I think he may be referring to the rule that says that a company does not have to issue a 1099 if the amount of the payment is less than $600. The money is still taxable even if no 1099 is reported to the IRS. He is actually confusing the issue by bringing that up. It has no relevance to your situation.

    There are two possible treatments to your problem. I would say it depends largely on whether you have a business entity. For example, if you have a business, you could claim the sale of the domains as ordinary business income which could be offset by any ordinary expenses. The rate you ultimately pay depends on a number of factors. If you have a sole proprietorship, you will pay the rate equal to your personal rate as business income is taxes the same way as all other income. Other business entities may offer some additional benefits or tax advantages.

    The second possible situation is that you don't have a business entity and you declare the income as capital gains. Think in terms of the stock market. You buy a stock in the hope that it appreciates in value. You sell it at a profit an you pay tax on the difference.

    Octane's argument of an implied or assumed value is crap, too. You owe tax on the income - not the value of the asset. Value fluctuates according to market conditions. No gain or loss is actually realized until the asset is sold. Once sold, the value of the asset is established. You pay tax on the gain or deduct the loss.

    I would be careful about asking for tax advice from people in a forum like this. They may know a lot about black hat marketing, but many would prefer not to be totally honest in their dealings with the IRS. There is a lot of misinformation and false knowledge on the internet. Be very careful.

    Octane's only reasonable comment is that you should seek advice from a competent tax professional.