For those of you that have sold domain names, have you claimed that sale as "income" on your 1040's? If you are not a business, can you claim the domain name is 'private property'? Is there a tax on a domain name? Do you have to keep inventory? these may sound like over-the-top questions, but uncle sam likes to get a hold of every penny of ours that he can. Since I don't earn my living buying/selling domain names, isn't it just a hobby, or just something fun to do? I don't consider it "income", and I don't know of a tax on it. Of course, VERY FEW of us have "income" in the constitutional sense, that which the Supreme Court determined to be "corporate profit".

I think this comes down to intent and numbers. If you're talking about one or two domain names and a small amount of money, and you had intent to build said domains as personal sites when they were purchased, then a case might be made that you're selling personal property.

But if you're talking a greater number, the names were obviously commercial domain names, and you raked in some dough, and now you're posting on a PUBLIC messageboard about the situation and it's traceable directly back to you . . .

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Here in the UK - ANY profit made, no matter what the source, is taxable and therefore MUST be declared and tax paid on the profit of the sale.

I'm guessing it's the same in the US - so although it's not your primary source of income - if you do make profit by selling domain names then it will be subject to income tax and must be declared.

This is quite a black hole and all those people making money from the likes of Ebay are treading a thin line. I'm also guessing that EVERYBODY who has Ebay and paypal accounts are being watched. Those of us that are making trivial amounts of money will possibly be let off but those of us that are making bug bucks can expect a visit at some point in our lives.

Just don't get me started on paying my taxes. The amount of tax I have to pay against some of my fellow human beings who have never worked in their lives but can drive around in BMW's and Mercedes make me SO ANGRY lol

I think the idea is to tread carefully and try and look as though you are doing your bit.

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If you are a reseller then you should be getting a 1099 from the parent company. That is how they collect the taxes for you selling domain names. Unless you are GoDaddy or a company like GoDaddy then I cannot think of any other way you could be selling domain names. You would need to be a registrar to be able to do that. And if that is the case you are not just a hobbyist.

In one way you never OWN a domain name I think, you have a kind of a license to use it, or you could call it a lease I guess, or whatever term is applicable in your neck of the woods.

I think that here in Australia, a domain name would be treated as any other investment: if you are holding it to make a profit by either resale or by using it to make money (as in using it to conduct a website business) then whenever you sell the (license to) the domain name, then you will need to pay tax on the profit.

On the other hand, if you just have a domain name to run a personal site as a hobby, then it would be exempt from tax (but you can't claim expenses either of course).

Note: don't sue me if the advice is wrong

John

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If you're in the business of selling domain registrations, clearly the sales that you make will be personal income. It becomes a little bit more different if you buy a limited number of websites, develop them such that they increase in value and then sell them off 'as developed.'

You can own virtually any asset for less than a year and typically it will be treated as personal income/short-term capital gain. If you own an asset for longer than a year it can be treated as long-term capital gain. Typically, depending on your tax bracket, you will prefer to have an asset treated as a long term capital gain.

So if you sell your domain for any kind of serious money (in theory small amounts do count), make sure to contact an accountant!

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It is unfortunate that most folks opinions concerning taxes are a representation of believing what they are told, rather than relying on the law (and the intent of congress) here in America. It is also unfortunate that the internet companies provide a basis for the government to make assumptions about "income" that are inherently false. For instance, the IRC (Internal Revenue Code) says nothing about a private citizen having to keep books and records in relation to the income tax. That is different than a situation where you are in the business of making alcohol, tobacco products or firearms (even though title 27 of the CFR (Code of Federal Regulations) was never enacted into positive law, the same for title 26, re the income tax). I don't trust accountants any more than I do tax attorneys because they make their money off of our ignorance of the law. As an example, if you were going to consult with a tax attorney, wouldn't you want a straight answer to a specific question? A yes or no answer should be feasible if they knew the law. A friend of mine (not me in this case) received an IRS form 668(A) Notice of Levy. I called two different tax firms and asked the attorney if a 668(A) Notice of Levy was in fact a "levy". One attorney said "basically" and the other said "essentially". This is not a "yes" or "no" answer. If you went in front of a judge because you were ruled in for not paying your court ordered child support and the judge asked you if you had the money to catch up the payments and you said, "basically", the judge would ask you for a "yes, you do", or "no, you don't" answer. How many accountants (and tax attorneys) can answer the questions, "what is income? How is it defined? Where in the law is income defined?"

As an attorney, I assure you we know the law that we practice everyday and 'generally' know the law elsewhere. For instance with respect to a 'Notice of Levy' - I have never dealt with one, but from prior experience my gut is telling me that it is an actual levy, ie. your bank account will be frozen because if the notice of levy were just a notice to you that a levy is about to be imposed on a specific asset or bank account, the person against whom the levy will be imposed will quickly move/liquidate the asset out of harm's way.

I am not actually a tax attorney, but had previously worked in offices that dealt in tax law. It was never an issue because in 99.9% of the cases, its obvious whether something constitutes income, ie. an employer pays an employee but there are those .1% of issues out there that are pretty weird and occur so rarely that the rules get largely forgotten until (and unless) a client comes in with the issue (in which case you break out the books again). From my memory I recall issues dealing with housing, ie. if an employer pays for an employees housing, is it income? (seems obvious, right?) What about a nanny required to stay in her employer's home (for free)? (not quite so obvious anymore)

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cw, I appreciate your candor but I wouldn't want to go into court with an attorney that was acting out of 'gut feelings'. I don't want to know what my attorneys gut feeling is on an issue, I want to know the law. I would ask you to consider what is required of an actual levy. Does an administrative piece of paper constitute a replacement for due process? Doesn't a court of some kind have to be involved? Otherwise, where is our RIGHT to due process? Sure, you can be disbarred for an ethics violation, but is there a hearing involved? Do you get a chance to defend yourself (or be defended)? Is the 688(A) certified? Doesn't a levy have to be certified? The fact that a financial institution honors it doesn't make it a levy. Why would it say Notice if it is a true levy? Of course most folks with any sense would liquidate their accounts, but the freeze on the account is for 21 days. But the point is, that a notice is not a levy, even if it's pending. Where is it pending? Is there a court hearing scheduled? Is there anything on the form that says a hearing is pending? On the back of the form, the IRS states their authority is based on IRC 6331. Unfortunately, you don't get paragraph (a). It starts with paragraph (b). Why? Because if anyone decided to turn to the back of the form and wondered where para (a) was, then looked it up, they would discover that 6331 DOESN'T EVEN APPLY TO THEM! 6331 has to do with elected officials of the United States government, not Joe Blow, private American Citizen! The real crime happens at the county level, when the county recorder takes the 668(A), a non-negotiable instrument, and adds it to their lien index. The IRS is nice enough to provide the county recorder with a postage paid envelope to return a copy of the indexed document, showing that the taxpayer now has a true lien/levy against the taxpayers property. Where was the due process there? Don't I have a RIGHT do a court hearing over such a drastic measure? Are you talking about "obvious" income in the ordinary sense or in the constitutional sense? As an attorney you know full well that ordinary language is not used in courtrooms or court documents, is it? In the same way, I could ask you if you live in the United States. Would you ask me which of the three definitions of the term (defined by the Supreme Court) I meant, or would you just assume (from your gut feeling) that I meant a state of the union? If you had a client in a courtroom and the prosecutor asked your client (on the stand) if he/she lived in the United States, would you ask the court for clarification on which United States the prosecutor was referring to, or just let your client hang himself/herself by answering the question and fall into the trap of 'word art' practiced so prevalently by our own government? How can I be a Citizen of a state of the Union and be a nonresident alien with respect to the federal government at the same time? I hope your answer isn't, "you can't be". Again, I appreciate your honesty, but trusting your gut feeling will put your clients in jail if you are not 100% sure of the law and can lay it out in front of you to present your case.

What your intent is is irrelevant; income from a "hobby" is still subject to tax, as Self Employment (SE) income. SE tax is levied if your annual SE income exceeds $400.

SE tax is over & above the regular income tax owed on such earnings; it is the Social Security tax, both employee & employer's portion, currently at 15.3% combined.

If your earnings from the resale of domains is large enough, the registrar that you are reselling for will/should issue you a 1099; in this case, the IRS will be expecting to see you report such on your returns. If you receive no 1099, and fail to report such earnings, you do so at your own risk.

See Self-Employment Tax

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Going into court? No, I would know it! For instance, last year I had a trial on a home repair project where my client was alleging a defect. The general rule is simple-contracts are enforceable, if a contractor performs defective work, it is actionable. BUT, even this gets seriously complicated because it invoked the NJ Consumer Fraud Act. The statute itself is pretty clear, but there are a myriad of cases on record too and of course I had to read them. By the time of the trial naturally I was an expert in this particular area of the law, but that was a year ago, and even now if you were to come into my office on that particular issue, I would still want to consult the books!


I can appreciate that, but do more than just make a telephone call, actually go into the attorney's office, site down, bring papers with you, so that he can write down a time line, he will then look at all the facts that you have presented to him (including whatever IRS Notices that you may have brought) and then formulate an opinion on how to proceed.


The IRS is nice enough to provide the county recorder with a postage paid envelope to return a copy of the indexed document, showing that the taxpayer now has a true lien/levy against the taxpayers property. Where was the due process there? Don't I have a RIGHT do a court hearing over such a drastic measure?.[/quote]

When you buy/sell a home, deeds and mortgages are recorded and cancelled of record any day. If you buy a home, you register the deed with the county and if you took a mortgage, the mortgage gets recorded as well. Does the county's registry division require due process to ensure that every mortgage recorded is legitimate? Of course not, it would be too burdensome!

If a real estate transaction goes sour and my client is seeking damages on a breach of contract, I can bring a lis pendens against the property which gives notice to the public that the property is subject to litigation (Nobody in their right mind would buy it subject to a lis pendens). Now, if I were to bring the lis pendens without justification, I could be committing the tort of 'slander of title' and the person against whom the lis pendens was filed could theoretically go into court on an Order to Show Cause why the Lis Pendens should not be removed from the record and if they won, it would be removed and I could be subject to discipline.


Hmmm, judges I have seen are not fond of semantics and word play with laymen. I don't see how the answer to that question could contain any legal clout, because most people have one residence. Again, 99.99% of the people have no issue with the answer to this question. If the question did require clarification, I would object to get the proper facts on the record, ie. my client lives in NJ for 130 days per years, my client resides in Florida for 40 days per year, for the rest of the time he resides in Canada, is a Canadian citizen and is a green card holder.

You're discussing state citizenship. This is bringing back memories of Constitutional Law and the Dred Scot case! Taney made the ruling that poor Dred Scot was not a citizen of the United States and could not maintain a suit there and in the case Taney made repeated references to the distinction between a 'state citizen' and a 'US Citizen'

Really the only rule I know here is the 14th Amendment: Section 1. All persons born or naturalized in the United States, and subject to the jurisdiction thereof, are citizens of the United States and of the State wherein they reside.

Now I know there were some kooks out there who were trying to get out of paying the Federal income tax by essentially arguing that they were 'state citizens' only and not subject to Federal law (ie. they were not Federal citizens). Quatloos! Anti-IRS Theories: Inane tax protestor theories which never, ever win as developed by the pro-wrestling crowd.

I assure you if you go down one of those routes, your results will not be pretty, so if you are get that notion out of your head right now or you'll spend a couple of years at Club Fed.

Honestly, I don't know, I have never seen that fact pattern before. In 2007, people are citizens of the US and they are residents of the state in which they reside. In Civil Procedure they made a big to do about the concept of 'domicile' with respect to whether a state can impose jurisdiction over a particular individual.

Well, to reiterate before I went to a hearing or a trial I would be 100% confident of the applicable law. From what I have seen in my experience, many individuals have notions of fairness, equity and the 'American Way' and many times underlying these concepts are the age old money disputes that are ever so common. All notions of fairness aside, this is still essentially a money dispute between the IRS and yourself. Let the zealots and advocacy groups fight for 'tax fairness', don't get misled into fighting a long, drawn-out legal battle with the IRS, its an institutional bureacracy, you can't 'out-last' them or 'wear them down' Nevertheless, get yourself a tax attorney, minimize your damage and get the IRS OUT OF YOUR LIFE AS SOON AS POSSIBLE.

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deepsand- if you bought an old car that you really liked at a great price, drove it around and spruced it up and sold it for more than you paid for it, is that self employment income?
craig- since the content on Quatloos is almost verbatim what the content is on the IRS website, I don't buy into any of the propaganda on Quatloos. Just answer me this, how can anyone goes to jail for a law that was never enacted into positive law (and proven by being published in the Federal Register)? Since title 26 was never enacted into positive law, and is therefore not actual law, how can you be convicted under that title?
Why won't anyone in government or at the IRS simply point to the law that makes us LIABLE for the income tax? They won't, because they can't. NOWHERE in that million word document, the IRC, does it say that I am personally liable for the income tax.
The question of citizenship of a state is an important issue. We were citizens of independent colonies before adopting a federal government. To quote you, "
Really the only rule I know here is the 14th Amendment: Section 1. All persons born or naturalized in the United States, and subject to the jurisdiction thereof, are citizens of the United States and of the State wherein they reside." The key here is the phrase 'and subject to the jurisdictions of,'. The United States government DOES NOT have jurisdiction over any area outside of the federal zone (D.C., Guam, American Somoa, Puerto Rico, (and a FEW other areas), US territories (NOT STATES OF THE UNION) and areas ceded by states of the union to the US government (military bases, federal buildings, annexes). That is why, for the purposes of the income tax (even though the law doesn't OFFICIALLY exist), I, being a citizen of a state of the union, am a non-resident alien (1040NR), AS ARE YOU, because you don't live in the federal zone.

The second I read 'state citizen' I knew you were going down that route. These are intelligent arguments coming from intelligent people leading to disastrous results. So, right now I highly advise you to get a tax attorney. All of these arguments challenging the validity of the income tax have failed, have failed miserably, have resulted in imprisonment, etc. etc. etc.

Beautiful notions of constitutional liberty, the land of the free - wake up, this is the USA, welcome to 'Commerce Land' where we're all slaves to the dollar. Taxes are the reality, accept it or in 20 years you're going to wonder where your life went.

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No, that's a Capital Gain.


This is not a proper forum for a debate on a variety of legal issues which have already been decided by Courts of Law; that you may personally disagree with such decisions does not & will not render them moot.

You asked for advice within the current legal framework; and, that's what you got. We're not here to argue the merits of the Law.

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"We're not here to argue the merits of the Law."

So we should just bury our heads deep in the sand because of the obvious hand in hand activities of the judges and the feds (and the IRS)?

Here's the legal question I need answered: How do you charge someone with a crime, when there is no law that makes it a crime? Since the IRC does not require us to keep books and records for the purposes of the income tax, how can it be proved that you're committing a crime (for which no law exists)? Since section 6331 applies to ELECTED OFFICIALS and not to Joe Blow, where is their authority to tax our wages? Since the 16th Amendment (ratified or not), according to the US Supreme Court, gave the government NO new taxing powers, how can you charge a direct tax without apportionment? And last, but not least, where, in Black's legal dictionary, is "fair share" defined, which is what most folks say you are required to pay?

If we DON'T argue the merits of the law, then we might as well turn over all of our monies, chickens, pigs and goats. What about the understanding of the law (that doesn't exist)? Money Magazine took the same tax situation to ten different tax firms and came up with 10 different taxes owed/refunded. If the law (that doesn't exist) was easy to understand, we wouldn't need accountants or tax attorneys or H&R Block or just about anyone else that uses our lack of understanding of an extremely complex document to make their living.

By the way, it has NOT been settled in court concerning the counties committing fraud or not converting non-negotiable IRS forms into liens (as far as I can tell). Perhaps you have a cite?

Thanks for your input, whether I agree with you or not.
Chaz

The only case that I remember where somebody when on an argument similar to yours was a drug-related case where somebody was charged with distribution of a substance that happened to be misspelled in the statute (it was one of those long drug names and I think the state missed a letter)....the arguments that you are presenting are familiar to the Browns in NH.

Your arguments on 'not being' in the federal zone have no merit whatsoever. You're subject to tax on 'worldwide income.'

"The courts that have been presented with such arguments have ruled them to be spurious, unpersuasive, or frivolous, or all three."

Tax protester statutory arguments - Wikipedia, the free encyclopedia

This is a story I have wanted to write about. It is a local New Hampshire story about two tax protesters in Plainfield New Hampshire. It has been in the local news here over the past few months, but I haven’t seen it on the national news. I thought it was time to get it out there.
Ed and Elaine Brown have been holed up in their Plainfield home since being convicted of tax evasion in January. They have fortified their house and built a watchtower over the year preparing for this day. They have many weapons and food to last years.
They believe that there is no law requiring them to pay federal income taxes. They have payed all local, and state property taxes they have owed over the years. It’s the federal income tax they are protesting.

The couple has asked the federal government since 1994 to cite a law that requires average Americans to pay taxes on their wages.
“They have never done so, and the reason they have never done so is because no such law exists,” Elaine Brown said.

They cite that they could have payed their taxes any time over the years and they said they would if the law requiring them to do so was showed to them. They refuse to pay based on beliefs and would rather die not paying taxes then to give in.

The Browns reiterated that they could have cleared their name at any time by paying the taxes the government says they owe. It’s not ego that keeps them holed up in their Plainfield home waiting for a potentially violent clash with government agents, they said.
“Nobody would be that stupid to get into this kind of pressure and anxiety every day” unless they were standing by something they truly believed, Ed Brown said.

As of now the federal marshals are not expecting any kind of armed conflict. They are planning on waiting this out and hoping that the Brown’s surrender peacefully. The Brown’s, on the other hand, are wating for a conflict and are prepared to die.

“We know there’s a possibility that this will end badly and they will end up killing us,” Elaine Brown
The Browns, who sequestered themselves in their Plainfield home after a January jury trial, have said that if they leave, it will be either as free citizens or “in body bags.” But whether they perish or not, Ed Brown said, he’s confident the ordeal will have a positive ending.
“Only God knows the time frame,” he said. “And no matter how it ends, it will be good. It doesn’t matter. If they do something to us, they’ll make martyrs out of us.”

This sounds like it is going to end badly to me. So far both sides have been playing the wait and see game.

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