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Originally Posted by 12clicks
remember that domain sales are capital gains and because of our republican controlled government, the tax rate for cap gains is still just 15%
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Well if you are in the business of buying and selling domains for resale such as a broker, it is generally understood that the domain costs should be expensed in the year they are sold as cost of goods sold and any revenue resulting in the sale of such should be treated as gross sales, the difference between each being gross profit from which one pays normal taxes not capital gains taxes.
If however you purchase one for your own businesses use (not intended for resale), then there is some confusion as the IRS has not ruled on how to classify such purchases and sales and thus people generally report them in one of two ways.
Some consider it's purchase price an expense written off in the year purchased. For example, if you bought a domain for traffic that only lasted for 6 months that would seem logical. The problem is if you later sell that domain where do you declare that revenue. Those that expensed it will usually just add any revenue from selling it into a general sales account as business income.
Others consider it's purchase as an asset, which if later sold capital gains tax is paid which often is less than ones income tax bracket. If the domain is for ones company name for example, like yahoo.com, I suppose this is what they would do.