MaverickMovies.com

Domain names are generally treated as capital assets by the IRS. If the domain name has an indefinite life (like a brandable .com), it is not amortizable unless certain conditions are met. But there are creative structures where the buyer can deduct the cost over time—or even immediately, in some cases.

---

✅ 1. Structure the Sale as an Asset Acquisition for Business Use

If the domains are used in the buyer’s business, they may be classified as intangible assets under IRC §197.

➕ Outcome:

The buyer amortizes the cost over 15 years, taking a tax deduction each year for 1/15th of the purchase price.

---

✅ 2. Bundle the Domains with a Business or Marketing Package

Structure the transaction so the domains are part of a marketing package or consulting deal that includes:

• Business strategy

• Branding/licensing

• SEO content or traffic analysis

• Creative services tied to the domain

➕ Outcome:

The entire package can be treated as a deductible business expense—fully or partially—under IRC §162 (ordinary and necessary business expenses), especially for consulting and marketing services.

---

✅ 3. Lease-to-Own (with Option to Purchase)

Instead of an outright sale, structure a lease agreement with:

• Monthly payments (which are fully deductible business expenses for the buyer)

• A final option to purchase at a pre-agreed amount

➕ Outcome:

• The lease payments are fully deductible.

• The purchase price is capitalized, but depreciation/amortization kicks in after acquisition.

• This method spreads deductions and minimizes upfront tax burden.

---

✅ 4. Donate the Domain(s) to a 501(c)(3) and Sell Marketing Rights

If you own or are connected with a qualified nonprofit, you can donate the domain and then have the buyer:

• License or lease the domain from the nonprofit

• Make tax-deductible contributions or payments to the nonprofit in return for naming rights, branding, etc.

➕ Outcome:

• You get a charitable deduction (consult limits).

• The buyer writes off licensing or marketing contributions if properly structured.

⚠️ Risk: Must be carefully done to avoid IRS scrutiny of self-dealing or valuation abuse.

---

✅ 5. Sell Through a Corporation With Strategic Accounting

Sell the domains via a C corporation or LLC that bundles:

• The domains

• Content/IP

• Brand value

The buyer buys the company or its assets. You may set this up so:

• The buyer allocates the purchase price across depreciable/amortizable assets

• A tax accountant helps them maximize deduction timing

---

📌 Important Tax Note:

• Domain names used for resale (domain investors) may qualify as inventory and be 100% deductible at cost.

• Domain names used in a business are treated as intangible assets, so amortization typically applies.

• Generic vs. branded domains may be treated differently.

---

🛠️ Action Plan

1. Get an appraisal of each domain from a reputable source.

2. Hire a CPA and tax attorney to draft a sale agreement with proper tax language.

3. Consider an LLC or C-corp as the selling entity to give flexibility in deal structure.

4. Offer three purchase options to the buyer:

   • Straight sale (with amortization)

   • Lease-to-own (fully deductible monthly)

   • Bundled service contract (immediate deduction)

---

💼 Real-World Example (Adapted for $1.1M Sale)

Let’s say you’re selling the domain GreenHomes.com, valued at $1.1 million.

Instead of billing:

❌ $1.1M for the domain name
→ This would be treated as a capital asset, amortized over 15 years (approx. $73,000/year deduction).

You bill:

✅ $1.1M for a 12-month branding and marketing consulting agreement, which includes:

• Rights to use or transition GreenHomes.com

• Custom brand development and go-to-market strategy

• SEO and content setup tailored to the business

• Consulting on digital presence and marketing infrastructure

• Licensing or transfer of the domain

This reframes the purchase as a service, turning the entire amount into a deductible business expense in Year 1.

---

📑 Key Elements to Include in the Agreement

To ensure deductibility and reduce audit risk:

• Invoice and agreement should emphasize branding/consulting/marketing services

• Mention the domain as part of the broader service package, not as a stand-alone asset

• The buyer must put the domain to business use within the same year

• Deliverables should include:

  • Strategic planning and brand identity consulting

  • Setup of online platforms, SEO, and analytics

  • Execution timeline for rollout and domain transition

---

⚠️ Caveats

• The IRS could recharacterize the sale if the domain seems like a disguised asset purchase

• Avoid “stuffing” the value—make sure services and deliverables are substantial and priced reasonably

• You could allocate the $1.1M as, say:

  • $800K for consulting and branding services

  • $300K for domain licensing/transfer (still included under the service umbrella)

---

🔧 Optional Hybrid Approach

If the buyer insists on splitting:

• $400K branding/consulting contract (fully deductible in Year 1)

• $700K as domain purchase (capitalized and amortized over 15 years)

Still better than a full asset sale—provides partial immediate deduction, with a balanced tax posture.

---

✅ Summary Table

---