Taxes & Domains: Do You Treat Your Domains As "Inventory" or Do You "Amortize" Them?

[The Rover]

Obviously the forums aren't a source for tax advice, however, that said, I'm curious what many of you do when it comes to your domains and taxes. I keep hearing that if your domain purchases are merely hand regs (or aftermarket domains that are less than $500) that the IRS is fine with you classifying them as normal businesses expenses. In other cases, I hear that you're supposed to treat all domains that were purchased to be resold, as inventory. In other cases, I hear that amortization is best.

What you do? Does your strategy differ? Do you write them off as a regular business (other) expense, classify them as inventory or do you somehow amortize them over 15 years?

 

[Name Trader]

I run my business from an offshore tax haven. Really.

 

[JB Lions]

Simple income and expenses

Income - domain sales, parking revenue

Expenses - buying domains (aftermarket, hand regs, wherever), renewals, any domain tools I use, advertising

I've lived in 2 different states doing this, have been using an accountant last 18 years, this is how we do it.

 

[CamSee.com]

I run my business from an offshore tax haven. Really.

Thank You, Which Country has no Capital Gains tax that would be best to kinda consider moving to were want to have a golden domain collection to sell? cheers

 

[twiki]

We're in Europe and use 1-year amortization. Domains are always regged for 1 year btw. Value decreases until expiry time. If renewed the, amortization will reset again for 12 months. Otherwise they get removed from inventory.

This is however a different situation in the US - BUT AFAIK in case of digital intangible assets like these you have to mark in your losses over time so inventory + amortization is probably the best way to account for them. There are regulations for this, talk for your accountant.

This is btw one of the reasons why Tesla got into Bitcoin, if bitcoin goes lower they make losses and pay less tax for that year while not actually losing value as it definitely goes back up later. So they get like a "loan" for losses due to digital intangible assets getting depreciated in value.

Edit: On the flip side, gains with such assets are only marked in when transformed in cash, meaning when you actually sell them and receive that income.

 

[Name Trader]

Thank You, Which Country has no Capital Gains tax that would be best to kinda consider moving to were want to have a golden domain collection to sell? cheers

There are many tax havens in the world. Just search for "offshore tax havens"

 

[MadAboutDomains]

Thank You, Which Country has no Capital Gains tax that would be best to kinda consider moving to were want to have a golden domain collection to sell? cheers

Whenever I talk to anyone about taxes and domains they almost always without fail manage to mention capital gains.

If you buy something with the sole intention to sell it it's not capital gains.

By that logic a car trader could claim capital gains on every car he sold. Or a hotdog man for every hotdog.

Money made from domains that you intended to sell is profit.

I'm no tax man, but when you buy and sell things and those things are the things that you trade in it's not capital gains.