I figured the answer would be clear cut. Sadly, it is not. The laws in the United States are insanely complex and written by idiots. I used to work in accounting. I hated it. :sick: When we had a question about a tax issue, we would have to go talk to the Tax Manager. He’d often try and get as an answer by perusing the IRS website. He wasn’t always successful. Sometimes we’d have to get the legal department involved. Sometimes, they couldn’t give a concrete answer because, quite frankly, tax laws can be vague.
Basically, when dealing with tax laws, you are ALWAYS walking on thin ice. You won’t go to prison for making a simple mistake. But penalties and interest can add up.
A noncapital asset is property that is not a capital asset. The following kinds of property are not capital assets.
A copyright; a literary, musical, or artistic composition; a letter; a memorandum; or similar property (such as drafts of speeches, recordings, transcripts, manuscripts, drawings, or photographs):
- Created by your personal efforts,
- Prepared or produced for you (in the case of a letter, memorandum, or similar property), or
- Received from a person who created the property or for whom the property was prepared under circumstances (for example, by gift) entitling you to the basis of the person who created the property, or for whom it was prepared or produced.
Dispositions of Intangible Property
Intangible property is any personal property that has value but cannot be seen or touched. It includes such items as patents, copyrights, and the goodwill value of a business.
Franchise, Trademark, or Trade Name
If you transfer or renew a franchise, trademark, or trade name for a price contingent on its productivity, use, or disposition, the amount you receive generally is treated as an amount realized from the sale of a noncapital asset.
Even then, it refers you to other chapters. So the answer is: there is no answer yet.
A website is many things, all intangible. A website contains copyrights, trademarks, and cash flows if it generates revenues. A website is also a domain name, which should be a clear-cut example of a capital asset.
If a book publisher is sold, are all the copyrights it owns separated out or is the entire business sale treated as a capital gain or loss?
My guess would be that if a website is sold in its entirety, it would be treated as a capital asset. However, calculating the cost basis of that asset is another matter entirely.
If the website were incorporated and you were the sole stockholder and sold your stock in the company, wouldn’t that be a simple capital gain? But again, how is the cost basis calculated? I assume any revenue for which you already paid income taxes would be factored into the cost basis because your work is what created the value of the company and you have already paid taxes on the income derived from that work.
There are tax implications in how a business is sold as well. I don’t know what they are. But I know that a business can be sold as a whole or it can be sold as assets.
When selling a business you have two options: You can opt either for an “entity sale” or an “asset sale.” Making the right choice between the two can help minimize the taxes that you will owe once the sale is complete.
The current regime in Washington is working hard to make our tax laws even more complex. :mad: