Selling Websites (Assets)

I heard a few months back that there is a significant difference in income verses the sale of assets...

Website designs would be services, but the sale of live web properties are assets...

I also heard that some people buy and sell websites at years end only for tax purposes....

Does anyone have the scoop in the tax differences of selling assets vs services when it comes to income..?

 

Hey Clasione,

You have helped me alot under different names. I have always respected your opinions.

My 2 cents--
Since you are in NYC, you also need to check out the local and state tax scenarios as well.

Are you a sole propriator? LLC, etc?

what tax bracket are you in ?

Is your source of income only from the web? Do you have 1099's? Do you have employees? Etc etc..

These are just some othe the questions that will also determine the answer to your questions.

Offsetting income via deductions, and the selling of assets at the year end to reduce tax liablility or take a loss is common practice in any business. Selling assets at the end of the year to make a profit under the current tax laws to avoid future increases of tax changes is also a common practise.

There is no true blanket answer, unless someone knows your full tax Scenario.

When you sell an asset in general, a cost basis is established, to determine if their was a profit or a loss. The tax assessment is normally based upon your current tax bracket. Services are also taxed upon your tax bracket... Business deductions and expenses reduce the overall liablity....

Like I said there really isn't a blanket answer, because the entire tax scenario has to be evaluated. If you don't have an accountant, or bookkeeper that handles your tax picture, it might be wise to review your situation on a monthly basis.

Eric Gehler
( you have helped me as blackbeltdomain, and as aimusava )

 

Bigebiz is right. Without knowing a lot more, it would be impossible to give you the correct answer for your situation. For instance, you can responsible for paying social security taxes on service income while being exempt on gains from the sale of assets.

In also depends on the structure of your business. A corporation might pay you "the employee" a salary and a dividend. A CPA can advise you of what is an acceptable salary. The IRS might have issues with paying all the profit as a dividend with no salary to avoid payroll contributions if you are working full-time for the "corporation". There are many different strategies depending on what your tax bracket is and a good CPA could help you plan for the end of the year.

Selling a business at the end of the year and offsetting the gain with the purchase and expensing of a vehicle, or equipment for the business, would be just one way to reduce your tax liability.

 

Thanks very much for both of your detailed answers.

As far as now, I did get to discuss it with my accountant yesterday. He recommended that more than likely we will include it as income to the company becasue most of the costs to develop them were time rather than actual expenses.

Other than putting a number of hours together and paying out a salery to create them, there wasn't much overall expence... At this point we will be reveiwing it in more detail near years end.

Thanks for the insight though.