Capital Gain Tax on selling website

In the US and Canada, is reselling a website, considered capital gain so it would be taxable?

Let say I purchase a website 1000$ and sell it for 10000$, is the 9000$ considered as capital gain thus taxable ?

Any of you had this experience with their accountant or fiscal expert ?

 

In the US for sure it is. The amount of time between the buy and sell determines whether it is a short or long term gain. In the US the rates, at least for 2008 are far better for a long term gain.

 

In Canada, I don't classify it under Capital Gains. On my tax return, I classify it under business operations. My total sales would be $10,000 while my amount spent on products for resale would be $1,000 - making a $9,000 profit which would be subject to taxes.

Set yourself up as a business, even if it is a Sole Proprietorship and if you work from home, then you can claim a portion of your home as office space, portion of your utilities, etc - thus reducing your overall profits and in turn reducing the overall amount you'd pay tax on.

So in this case, if you could come up with $1,000 worth of deductions - then it would be $10,000 sale minus $1,000 products for resale minus $1,000 business deductions = $8,000 net profit and subject to taxes.

I'm not an accountant but this is how my accountant does it for my tax return and no problems.

Be careful though... set yourself up as a business and then you will have to charge GST and/or Provincial Tax depending on where your customers are. If they are in the US, then it is 0% tax but if they are in Canada, it would depend on what province the buyer is in.

 

That may be the proper way in Canada. I have no way of knowing. That would be a very stupid way to do it in the US as capital gains rates are lower than ordinary income and are not subject to FICA tax.

Now that would be the proper way for a domain trader to do it in the US as that is their business, buying and selling.

 

Actually, in the US, depending on the turn-around time of the gain (year or less) it would be considered a short-term gain and be taxed at the normal income rate. If you hold the domain longer than a year before the sale then you will see a lower tax rate by decalring it as capital gains rather than income.

 

In the US for 2009, a large portion of your long term capital gains will be tax free. (I think the amount is around $65,000, but I don't want to look it up right now.) So if you had the choice, long term capital gains are the way to go. Short term capital gains are taxed at regular income rates, however, they are not subject to Self-Employment taxes, so that is still better than declaring it as business income. However, if the IRS decides that buying and selling websites is your business you may have to declare your income on a Schedule C and pay the extra taxes.

 

Long term or short term, capital gains tax will be on Property and other securities. And since website is neither it is your business income. Unless you had sold the website as a "company" and and now you are selling the "company" shares et al.