We expect to receive $150,000 for the sale of a domain name this year. How will this be taxed?

conger

(We have owned the Domain Name for 20 years. It was purchased for 20 bucks or so and each year itcost us 10 or 20 bucks to keep it updated.

Will it be taxed as a long-term capital gain? If so, wht is tx? Or ordinary income? Or ome other tax schedule?

We live in Florida so do not believe the State of Florida will want to collect tax on this sale.…Is that accurate?

THANK YOU

MatthewD

Hi ConGer,

That is a great question. It all depends on why you bought the domain. If you bought it as an investment (kind of like buying an investment property or asset), then yes, it could be treated as an investment and a long-term capital gain. Did you deduct the yearly fees as a business expense? If so, then you cannot include those as part of the basis in the investment. If you didn't then the yearly registration fee is included in your cost (adjusted basis).

Long-term investments (capital gains) are taxes at the next lower tax rate than you marginal tax rate. Which is a big advantage if you go that route.

Report the sale on the Stock or Investments Sold page. See the Income Menu.

Yes, Florida will not collect any tax on that investment sale.