Comments on: The IRS Cares What Type of Domainer You Are

By: Martin Legrand

Martin Legrand — Tue, 21 Oct 2008 23:04:09 +0000

Dear Sandy,

Many thanks for your clarification regarding registration fees. If one only registers domains and then sell them, the entire selling price is a capital gain, subject to normal capital gain tax then. Am I correct?

Is there any limit to the deduction of the registration fee? Is there an IRS regulation/opinion you could point me to?

Many thanks for your kind assistance in this matter.

best regards,
Martin Legran

By: Stephen Douglas

Stephen Douglas — Wed, 27 Feb 2008 10:37:35 +0000

Dang, Sandy Brooks. Cute and very very smart too! Anything she says — well, that’s what I believe in. I advise all my clients to do the same.

By: Sandy Brooks

Sandy Brooks — Tue, 26 Feb 2008 22:27:03 +0000

Paul, there are plenty of examples of assets which require annual registrations or even for which title never passes. It is the perpetual right to renew the domain name that creates value and makes domain names assets.

I want to be clear that I am talking about domain names that are bought for something more than the registration fee (i.e., an after-market sale). Registration fees are expenses; both the initial year’s fee and each subsequent year’s renewal can be written off in the year they are incurred.

There are two major problems with expensing the cost of domain names: 1) it will most likely not stand up under IRS audit; 2) a subsequent sale of the domain name would be ordinary income, with no chance of getting the favorable capital gains rates.

By: Paul

Paul — Tue, 26 Feb 2008 20:27:03 +0000

You do not OWN the domain therefore it can never be an asset – and you certainly cannot amortize a domain for 15 years when your “lease” expires after one year.

You pay for the RIGHT to use a domain name; it is an expense clear and simple.