Selling A Website - Capital Gains Tax?

7 replies
Since taxes are due around the corner I was curious what you all are filing website sales as. I sold a couple of websites on Flippa through 2011 and I'm not sure what these qualify as.

I think it would be a capital gains tax, but I know there are lots of website sellers on here so I'd be curious to see what you all are doing for this...

Let's discuss
#capital #gains #selling #tax #website
  • Profile picture of the author timpears
    If you owned the web site your profits would be long term capital gains. If you osned it for less than a year, it would be ordinary income.

    Please understand that I am neither a lawyer or a CPA. This is only my personal opinion and not professional advice. But if you go to the IRS web zsite, this is ezxplained fairly well.

    Ten Things to Know About Capital Gains and Losses
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  • Profile picture of the author Green Moon
    If you are engaged in the business of buying and selling websites, the gain is always going to be ordinary income.

    If you operate websites primarily for their regular income but occasionally dispose of a website, that would normally be capital gains.

    The difference turns on whether the IRS views you as a "dealer" in the websites. A dealer has to treat the capital assets as his inventory and must recognize ordinary income from his activities.
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  • Profile picture of the author Scott Rankin
    So if the website was held for less than a year, it would still be classified as: Short-term Capital Gains - correct?

    Anyone else care to chime in, please do...
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    • Profile picture of the author SteveJohnson
      Originally Posted by Scott Rankin View Post

      So if the website was held for less than a year, it would still be classified as: Short-term Capital Gains - correct?

      Anyone else care to chime in, please do...
      I'll chime in - you need to get tax advice from a tax professional, not a marketing forum thread. Somehow, I doubt that Mr. IRS is going to be sympathetic when you tell them, "well, that's what they told me on the Warrior Forum."
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    • Profile picture of the author PintOGuinness
      Originally Posted by SteveJohnson View Post

      I'll chime in - you need to get tax advice from a tax professional, not a marketing forum thread. Somehow, I doubt that Mr. IRS is going to be sympathetic when you tell them, "well, that's what they told me on the Warrior Forum."
      Originally Posted by Scott Rankin View Post

      So if the website was held for less than a year, it would still be classified as: Short-term Capital Gains - correct?

      Anyone else care to chime in, please do...
      Just like Steve said, you need expert advice.

      But I will put in that if you sell a website, you are selling off the equivalent of product. If you sell the whole company which so happens to be a website, then you would most likely treat the sale as capital gains over the cost basis of the the company (ie. how much you put in to the company to fund it). You're essentially selling the shares of the company (shares = ownership in the company).

      The other thing you can do is use cost basis when you buy a site for x dollars and sell it for y dollars. I don't really understand how this works since my accountant handled that when I sold off assets from a previous company.

      But most likely you built a site and then sold it. That would almost always be treated as ordinary income by the IRS.
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  • Profile picture of the author jakecoop79
    In tax law there is very little black and white, mostly shades of gray. This is one of those instances where good accountants can make a great case for either side.

    I'm sure there are many people here that do it both ways. You will always get conflicting advise with tax questions. I would either just pick the way that makes the most sense to you, or call an accountant. I can guarantee you will be getting the accountants opinion and not known fact. Also when the IRS audit comes, it will be the individual agents opinion also, not know IRS fact.

    So in the end, do what makes most sense to you, and pray no audit comes. Pretty much like we all do every year at tax time.
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    • Profile picture of the author blackjack
      Hi

      Green Moon is correct. It all depends on what your main business is. There is no such thing if you own something for less than 1 year then it is income over 1 year is capital gain.

      Here is an example

      Ordinary person buys shares/stock in company, keep it for 2 years and then sell it. This is capital gain.

      Stock Broker buys same stock/share and sells in 2 years time, it is income because his/her main business is buying/selling shares/stocks.

      Best advice is to check with your accountant. Don't take advice from IM forum.
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