Sell More? Domain Related Year-End and Tax Issues

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Year-end can be a great time to sell domain names. Revisit your clients in December with these thoughts in mind.

Year-end time does bring some “look back” thoughts. Picture your potential client thinking “what did I intend to do this year?”.  Most of us procrastinate and don’t meet our own goals. Engage them to let them make a big move at the end of the year. Catch them trying to knock off as many to-dos as possible, including acquiring a better domain name.

December can be a slower work time, so your CEO and Decision Maker clients may have some extra time to consider buying a better domain name, without the constant day-to-day today battles. I think this is especially true of non accountant professionals. (Doctors, Lawyers, Professionals). Also don’t be afraid to take a guess they used their cell phone and text them.. one time.

Then there are Marketing Managers spending budgets.  In many cases if they don’t spend it, it goes back.   Give managers and division level decision makers a chance to spend their budget not on supplies, or consumables, but something like a domain name that will help them for years to come.

Lastly, use this time to review direct inquiries received during the year. Try to restart conversations about transactions. It not unusual to also use the “year-end discount” to try to encourage a transaction.

My experience is most potential inquirers who have their eye on a specific domain, want it, and know they want it.  Their desire can only increase with time. The economy is better, even messages from 2015 and 2016 are worth a quick note. Let them make you an offer for year-end. My experience is, and its confirmed with sales from old leads farmed by Uniregistry, that pop up occasionally.

Tax issues.

In a prior life I prepared tax returns for clients, and did tax and estate planning. Nothing is this post should be considered specific tax advice.  Do your own research. Or engage a paid professional (with good E&O Insurance).

Blogs and articles point can you in new directions, or summarize understanding and explain different rules.  My recommendation is to read and internalize the IRS (or your country specific agency) publication appropriate to each issue.  For instance for intangible personal property see Publication 544 Disposing of Assets.

Your not just researching the tax treatment for you, you may also be picking up tips for your buyers.  You can use year end to motivate a buyer to close. Even an intangible asset placed in service in December can receive a mid-year or mid-quarter deduction for 2019, and THIS IS IMPORTANT, a full year deduction for 2020.

So it looks like if you place in service a domain name in December 2019, you receive some tax benefit in 2019, and full year of depreciation in 2020. If you bought a capital asset domain name in January 2020, you would receive only a partial deduction for 2020.

Deducting as a capital asset certain intangible business business property allows you to deduct the cost of a domain name over 17 years.  So this would be for a buyer using the domain name in their business. I also use this method myself for “businesses” where I buy the domain and it is the main source of the value of the business.

Personal domain investors can seemingly either be traders, or report capital gains on domain sales as individual assets, or show schedule C income.

Domain Traders Can reduce their taxable inventory by holding high levels of inventory at year end. The easiest names to sell at year end may be “liquid” short names, as some domain name buyers buy-up.

Pay renewals. For this next one, you need to be disciplined about the effect on next years taxes, because your pulling forward a deduction. You can pay ordinary and necessary current invoices for renewals at year end to reduce this years income. Your not saving money on taxes, but shifting the timing. Yo are saving cash between now and your next estimate due date, or April 15th.

Lastly for USA taxpayers don’t forget about your QBI deduction. Class “C” corporations got a big Trump tax break. To help individuals who personally report their company income as S Corporations or LLC’s taxed as partnerships, you can deduct 20% of your income(subject to certain limits). This is a special  before AGI deduction.

Good luck.

  1. It’s great that you’ve talked about these tax issues here, Page. I have had some of these issues, and now I know what causes these issues. Hopefully, my lawyer will help me to solve these issues as soon as possible.

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