Tax, is this legit? - DNForum - Domain Sales, Domain Forum, Domain Appraisals, Domain Registrars

**john211** · 07-28-2006, 02:32 PM

If I buy a domain for $1000, then sell it for $10000. Thats a capital gain of $9000. Then I buy a domain for $5000. So, when I report to the IRS, do I show $9000 capital gain, minus $5000 expense, for a profit of $4000?? Is this how it works??

**actnow** · 07-28-2006, 02:51 PM

Not in the U.S.

I will let a Canadian answer this question.

**Ipso_facto** · 07-28-2006, 02:54 PM

Hi john211

Wish i could offer advice ..etc. But im sure you could ask the local - IRS office to explain.
They are there to help, not just - collect your Tax - etc. me thinks

Im trying to figure out the situation over here ...myself !
( guessing it is, as you suggest )

Best of luck ..ok.

**dolansco** · 07-28-2006, 03:07 PM

In Ireland ... You Pay $1000 .. sell for $10000 ... then there is a CGT liability on the $9k ( @ 20% here ) ...
The next purchase is irrespective of that transaction ... ie you spend another $5000 on a different domain , then that is a different capital purchase ... thus when you sell , it too , is liable to CGT....
THIS IS ALL ASSUMING .. that you treat a domain as a capital purchase.. ( I would ) ( still a grey area here )

If you are registered as making your living from domain trading .. then it may be Vatable ( 21% ) , but not subject to CGT ... as it could be treated as stock .. Bearing in mind that your end profit is subject to income tax..

Thus the "Capital" way is the way to go as you are not double taxed.

The UK , I believe , is very similar .

USA etc ..... someone advise ( I have alot of my interests there ... )

**whitebark** · 07-28-2006, 03:14 PM

Quote:

Originally Posted by john211

If I buy a domain for $1000, then sell it for $10000. Thats a capital gain of $9000. Then I buy a domain for $5000. So, when I report to the IRS, do I show $9000 capital gain, minus $5000 expense, for a profit of $4000?? Is this how it works??

IRS? You are Canadian right? Or did you mean CRA - Canada Revenue Agency?

**aZooZa** · 07-28-2006, 04:08 PM

If you are talking about buying and selling domains for $xx.xxx figures annually, you might think about establishing an offshore company to hold the domains, and have that company bill YOU for admin services. Search here for the word "offshore".

**fatter** · 07-28-2006, 04:09 PM

heres what the IRS told me, by the way i got 3 different answers from 3 different people. I posted an email somewhere here a few months back too that the irs sent me. what they told me is if you build a brand around your domain name then the domain becomes like a trademark which is considered similar to a physical asset. so when you sell you would use capital gains. But if you strictly buy and sell domains and just park them without building a brand, then the domains are considered inventory and should be accounted the same way on a schedule C. however he also said that being congress hasnt passed legislation with clear guidlines that you could file whichever way you thought it the irs would then have to challenge your filing in court. He then said there isnt much case law yet and thats why there is so much confusion with reporting domain sales
hope this helped, but call and get it right from the horses mouth, because i dont no which irs agent was right although this guy made the most sense

**aZooZa** · 07-28-2006, 04:20 PM

The ownership of $xx,xxxx woth of domains should be held offshore. The offshore company bills you (taxable) for services rendered like regging/maintenance which you should declare as a contracted agent. Get invoices sent to you from the holding company. Make the 'service' invoices are sensible. If you brand anything or derive income of any sort, make sure it's the offshore company that's the benficiary and IP owner.