Reg fees: How does the IRS see them? Legal disclaimer provided.

[jacal1]

Okay, I'll do the disclaimer: anything posted in this thread will be assumed to be casual advice that should be checked through a qualified tax attorney.

That said, do you put reg fees under "legal and professional", "rental", or somewhere else if you do a Sched C?

Do you add them all up and balance them against your total sales and revenue, or only count the ones regarding domains you sold?

 

[agentjon]

Nice, i had the same question. Any advice on filing taxes and claiming income for domain sales would be greatly appreciated.

 

[mbuna]

I put them under "Misc".

 

[AussieDomainer]

It might benefit you to check out www.domaintaxguide.com

I've heard it's quite good, could be worth the $79 if you're heavily into domaining. Not much good for me though as I'm not in the US

 

[tobycoke]

Technically it is a lease or rental but it probably doesn't matter much how it's classified if the end result to the tax man is the same.

 

[fonzie_007]

Assuming you are a business entity, domain name renewals are expenses and domain name purchases must be amortized.

 

[Dave_Z]

Okay, I'll do the disclaimer: anything posted in this thread will be assumed to be casual advice that should be checked through a qualified tax attorney.

Come to think of it, that's really the only solid advice here. :p

Different jurisdictions have differing views on this matter. Best to ask the one
you're in.

 

[agentjon]

Good input, i might have to look into that tax guide, sounds intriguing.

Anybody have it already, PM me, thanks.

 

[jacal1]

Technically it is a lease or rental...

That's what I figured, but couldn't you make the argument that what is really happening is the registrar is registering/holding the name for you for a fee? Thus "legal and professional" fees rather than rent?

Thanks in advance!

 

[TheBulldog]

There is a section specifially for domain names/hosting/etc on schedule c.

Mine was kind of big this year.

 

[AdoptableDomains]

It all pretty much comes out the same. I don't think I would use "rent" since that is normally for real property or assets like vehicles. I think "Commissions and FEES", or "Other" are probably the best category.

Amortizing cost is a huge question. Obviously if you purchased at six figures, the IRS wouldn't want you costing it in a single year since that's likely a long term asset. I certainly wouldn't amortize anything I purchased for reg fee or close to it. Even if purchased as a snap or pool purchase at $60-75 I think the whole fee would qualify as one time cost, part being reg fee and the balance basically a drop catch fee. The real question is at what point dollar wise does it make a difference. I also think intended use and your normal MO is a big factor. If you buy and sell names normally in a years time, then it's easy to argue the whole price is a short term cost. If you buy not for sale, but for parking revenue only, then it may be a different situation.

I do disagree with those who consider it as inventory though. Domains are not a tangible product and have zero value if allowed to expire, so I don't think it should be considered inventory even though sometimes referred to that way.

 

[Dave_Z]

That's what I figured, but couldn't you make the argument that what is really happening is the registrar is registering/holding the name for you for a fee? Thus "legal and professional" fees rather than rent?

Good luck convincing your tax authorities that when your registrar's contract
defines your relationship with one another. Then again, make sure they don't
find that out either. :D

 

[fonzie_007]

Assuming you are a business entity, domain name renewals are expenses and domain name purchases must be amortized.

FYI this is the info an IRS rep told me over the tax tollfree hotline.

 

[jacal1]

FYI this is the info an IRS rep told me over the tax tollfree hotline...

As far as renewals, by any chance did they say what line to put them on?

And did you get the feeling that they meant you could add up ALL renewals for your entire portfolio, or just renewals for domains you sold against those sales?

 

[fonzie_007]

It was well over a year ago, so I don't recall how the conversation went. I would have to scrounge up my tax return, but I believe the expenses were on my schedule C.

 

[AdoptableDomains]

and domain name purchases must be amortized.

The question is really over what time period and starting at what amount. I think it's fairly clear if you spend $50k to buy a domain to start a business, it has to be amortized over 15 or 25 years. For resale, I'm not sure that's the case.

Another theory: Investment Income and Expense

Domain purchases not for development, but for holding as investments are similar to stocks, bonds, futures, commodity investments, etc.. You probably couldn't expense your acquisition costs until you had the sale though. One advantage might be to classify them long term investments and the income capital gain. Capital gains taxes are generally lower than normal income tax rates.

The real issue is that to my knowledge none of this has ever been testing to any extent in tax court, and no specific rules exist for domains registered for resale rather than the startup cost of a business.

Based on the crappy names I've seen on drop lists, many might just consider it gambling income. In that case you can simply deduct gambling losses from gambling income. However, if you have an overall loss, you can't offset regular income like you could with a business.