We sold our old domain but kept the business. How do we separate the sale from operating revenue?
Selling a Domain While Keeping the Operating Business. A specific owner scenario, the facts that change the answer, and the records needed for a tax review.
By AE Tax Advisors Team · Updated October 28, 2026
Treat the domain transfer as a distinct asset transaction and establish its basis, character and rights sold. Retaining the operating company does not automatically make the proceeds ordinary product revenue or guarantee capital gain.
A specific business-owner situation
A business rebrands and sells its old domain to an unrelated buyer. The buyer receives only the name, not customer contracts, software or goodwill. The sale agreement should identify that limited asset and any continuing rights.
Illustrative example, not a client result.
What to establish before filing
- Document the exact property transferred.
- Reconstruct acquisition cost and prior tax recovery.
- Evaluate sale character and transaction expenses.
Which fact changes the answer?
A domain held for resale can present different facts from one used for years in an operating business. Explain the original purpose and actual use rather than assume the website address alone determines character.
A mistake to avoid
Assigning a zero basis because the domain never appeared in current bookkeeping can overlook a documented acquisition cost.
Records that support the decision
- Domain purchase and transfer agreements.
- Historical cost records.
- Prior amortization.
- Broker invoices.
The decision to document
Prepare a separate disposition workpaper tied to the agreement. Reconcile any remaining website assets and licenses so the sold right is removed without writing off property the company still owns.
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Related questions
- We bought source code and hired developers to modify it. Are all the costs treated the same?
- We changed the business name after an acquisition. Can we write off the old brand and goodwill?
Sources and editorial context
- Section 197: acquired intangibles
- IRS Form 4562 instructions: depreciation and amortization
- IRS Publication 544: sales and dispositions
General educational information prepared with AI assistance. No individual professional review is claimed. Apply the relevant tax-year rules to the actual records. Editorial policy · AI disclosure.