For Sale .ca sales and the GST

[dcsun]

a little off topic but can domain sales be qualified for capital gains exemption???

I'm no income tax specialist, but I don't think so. I'm sure it's been tried many a time to convince someone that "it's like real estate", but I've never heard of them buying that argument. They're considered business inventory as far as I know.

From the CRA website:
"Capital property - includes depreciable property, and any property which, if sold, would result in a capital gain or a capital loss. You usually buy it for investment purposes or to earn income. Capital property does not include the trading assets of a business, such as inventory."

 

[TheLegendaryJP]

I concur this what I found to be true as well.

 

[DropWizard.com]

I'm no income tax specialist, but I don't think so. I'm sure it's been tried many a time to convince someone that "it's like real estate", but I've never heard of them buying that argument. They're considered business inventory as far as I know.

From the CRA website:
"Capital property - includes depreciable property, and any property which, if sold, would result in a capital gain or a capital loss. You usually buy it for investment purposes or to earn income. Capital property does not include the trading assets of a business, such as inventory."

If the assets are for income and you accept an unexpected offer and only sell that domain I believe there is a position for capital gains tax rates. The definition of a capital gain is an unexpected windfall. Rev Canada has a history of saying "no" and losing in court after. Domains would only be considered inventory if you engage in selling on an ongoing basis.

Also should you reach the point of a portfolio sale it would help to have had the domains in a LTD. company. The shares of a Canadian Controlled Small Business Corporation qualify for a special 500k lifetime capital gains exemption when the shares are sold. You must have owned the shares for a min of two years. This is also very useful for anybody planning on passing their portfolio on to their children when they retire. It's a great tax (retirement) planning move.

Your accountant can give you more info.

 

[revolution1]

thanks for the info. When you are a corporate entity though wouldn't you have to sell all of your portfolio thus your "company" or could you do it on a domain by domain basis??

 

[ianccc]

500k lifetime capital gains exemption

I thing this exemption has changed, I will look into it however I thing the formula is different

 

[domainatrix]

Fascinating exchange of ideas above; just goes to show that very few domainers have a full understanding of the tax consequences. I have had a few conversations with different accountants, and they don't always have the same advice. Some things are for certain; others are not:

a) don't ever charge GST on non-Canadian sales
b) file for GST if you do more that $30K in business
c) tax consequences for domain sales absolutely depend on the nature of your business
d) if you primarily in the business of buying and selling domains, they are definitely considered inventory and there is no capital gains treatment.
e) however, if you develop websites or buy domains to generate monthly investment income, there is a capital gains treatment if a sale occurs as an extraordinary event
f) there is still a $500K Capital Gains Exemption for small business shares, but the whole business must be sold or transferred

I've never heard of domains as intellectual property???

Remember, the nature of your business, and they way you set up your company (corp, partnership, etc) will affect what you can and can't do with taxes, sales, etc. If your doamins are held within a corporation, you are also protected from being sued personally with regard to your domains.

 

[DropWizard.com]

thanks for the info. When you are a corporate entity though wouldn't you have to sell all of your portfolio thus your "company" or could you do it on a domain by domain basis??

You'd sell the shares not the domains as one transaction. Selling the domains one by one would just be ordinary selling transaction and would be taxable within the corporation at small biz rates.

The corporate method is preferable for a large portfolio purchase or the passing on to children of the family business (or farm)