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Just sold my website for $200,000
How much taxes should I expect to pay?
Dark_Angel




msg:787552
 12:12 am on Sep 5, 2005 (gmt 0)

Hello,

I have my own personal website that I had for about 5 months, that I just sold for $200,000.

The buyer is located overseas, and I am located in California. The website was a personal website where I was making money by putting ads on the page, and then received a great offer, so I sold it off.

Question is, since the buyer is overseas, I'm in CA, how much taxes should I expect to pay on that $200,000 sale? I've heard some say 25% other 38% and some others 59%, so I'm confused.

I will be seeing a CPA probably in about a month or so, but does anyone here have an idea about what I should plan on giving away to big brother?

Thanks for your time!

 

netchicken1




msg:787553
 12:25 am on Sep 5, 2005 (gmt 0)

Let me get this straight....

You sold a 6 month old personal website, which only made money from adverts for $200,000?

Unbelievable.....

ganderla




msg:787554
 12:37 am on Sep 5, 2005 (gmt 0)

I would saw you should have talked to a cpa, lawyer, and financial advisor before selling.

You are going to pay big time taxes.
You could probably set up a 401K and put some in that to avoid taxes, but you have to expect at least 30%.

vBMechanic




msg:787555
 12:48 am on Sep 5, 2005 (gmt 0)

I would be very careful about making any domain changes until you are sure the payment is fully clear. An overseas buyer with an offer too-good-to-be-true sounds very convenient.

Dark_Angel




msg:787556
 12:48 am on Sep 5, 2005 (gmt 0)

Let me get this straight....

You sold a 6 month old personal website, which only made money from adverts for $200,000?

Unbelievable.....

That is correct. The website is very popular, around 4,000 in Alexa, with over 1.3 million page views. The site also generated alot of income, so actually the $200K price was very very low.

But yes I know I need to see a CPA, if it is 30% I can probably deal with it, if it is 50%+ I'm going to flip

Dark_Angel




msg:787557
 12:50 am on Sep 5, 2005 (gmt 0)

I would be very careful about making any domain changes until you are sure the payment is fully clear. An overseas buyer with an offer too-good-to-be-true sounds very convenient.

That is why I used www.escrow.com and had contracts written up and signed by both parties before the exchanged happened. A very popular man who runs a few high traffic websites purchased me site.

vBMechanic




msg:787558
 1:07 am on Sep 5, 2005 (gmt 0)

Then congratulations are in order! Champagne is on you.

Vishal




msg:787559
 2:19 am on Sep 5, 2005 (gmt 0)

Hey Dark Angel congratulations on the sale. I know the feeling.

No I do not think you will have to pay 30% or 50% tax on this. As profit earned from this sale can be considered as capital gain and hence you will likely pay only about 15% tax, but it might be best to see capital gain % for tax in your state.

Here is the math I did on the money I got from my site.

Total Sale amount - Total invested in site - Commission of sale (if any) - Any other expense involved with the sale or site whatsoever = Net Earning from the site.

Now take this Net Earning and put it in CAPITAL GAIN COLUMN and see how much you will owe. In Oklahoma it is about 15%, and I think in calirofnia it will be about the same too.

If you do not want to spend too much money in going to CPA, just go to H&R block and put the income as capital gain and let them do the rest for you.

Hope this helps.

DXL




msg:787560
 2:19 am on Sep 5, 2005 (gmt 0)

That is correct. The website is very popular, around 4,000 in Alexa, with over 1.3 million page views. The site also generated alot of income, so actually the $200K price was very very low.

Which raises the question, why would you sell a major cash cow after six months if the site generates enough that 200k is a "very low" offer. Not to mention revenues could be double by next year.

The whole story sounds fake to me, but more power to you if its actually true.

Vishal




msg:787561
 2:23 am on Sep 5, 2005 (gmt 0)

Sometime the *need* of money would make you sell Gold at the price of Steel. Or maybe he just has some other plans, so I would not discredit the post based on that.

Dark_Angel




msg:787562
 2:24 am on Sep 5, 2005 (gmt 0)

Which raises the question, why would you sell a major cash cow after six months if the site generates enough that 200k is a "very low" offer. Not to mention revenues could be double by next year.

The whole story sounds fake to me, but more power to you if its actually true.

Well maybe I worded it wrong. I had the site evaluated by one of those website brokers, and they gave me an estimage for $300K on the site based on income, and traffic.

The site is still very young, only about 5 months old, just so happened to have grown very quickly.

I sold it for 2 reasons... 1.) To fund another business 2.) Because I don't see the site doubling in income in a year (could be wrong), so I wanted to invest into another market that has more potential

Dark_Angel




msg:787563
 2:26 am on Sep 5, 2005 (gmt 0)

Total Sale amount - Total invested in site - Commission of sale (if any) - Any other expense involved with the sale or site whatsoever = Net Earning from the site.

I understand that part, but some people have told me that I have sales tax, income tax, capital gains tax, FICA, and some other wierd fees.

Do I pay sales tax, and income tax, and FICA on the sale of a web property?

Vishal




msg:787564
 2:28 am on Sep 5, 2005 (gmt 0)

No I do not think you have to pay sales tax. As this was not the sale of product, but of the business (entire site).

Also, if you do not have any business registerted, then I would just file it along with personal tax (that is what I did, married filing jointly :) ).

Dpeper




msg:787565
 4:02 am on Sep 5, 2005 (gmt 0)

I think it would be taxed at short-term capital gains, which depending on your tax bracket could put you from about 36%-44% or so. I did this a while back not 200k but enough to have the need and went and saw a CPA, they were pretty resonable, and they ended up saving me alot of money in the end. So I would highly recommend seeing a CPA.

Dark_Angel




msg:787566
 5:20 am on Sep 5, 2005 (gmt 0)

I think it would be taxed at short-term capital gains, which depending on your tax bracket could put you from about 36%-44% or so.

Well that just ruined my day. The difference between 25% and 44% is $33,000.

FalseDawn




msg:787567
 5:31 am on Sep 5, 2005 (gmt 0)

Wow, people who believe that anybody would pay 200K for a 6month old website with nothing but advertising revenue are more stupid than the idiot making the original claim...

figment88




msg:787568
 5:36 am on Sep 5, 2005 (gmt 0)

I'm no expert, but my CPA told me that business sales have two components -- assets and good will which can be taxed at different rates. What percent of the sales goes into each column varies depending on how the sale was structured.

Basically, the IRS puts sellers and buyers at odds - sellers want a bigger percentage as assets and buyers want good will.

I'm sure I over simplified, and may have it backwards, but for the current situation I don't think it matters. Since the site was only six months old, you will not get any capital gains even if the entire sale was viewed as assets. All 200k will plop right into your income column on your tax form.

I'm guessing you'll have to pay the 15+ percent self-employment tax, then full state and federal income taxes on the remainder.

You can dump up to 25% off into a SEP IRA, but then it won't be available to finance your new venture.

One way to go might be if your new venture will require investment, you might want to spend now and you might be able to treat it all as part of the same business. For example, if you could profitably spend 50k on the new business, then your net taxable revenue might be down to 150k.

You should really see a CPA before 30 days. That would bring you all the way to November and then there isn't much time left in the year.

andrea99




msg:787569
 5:46 am on Sep 5, 2005 (gmt 0)

well heck, if you're going to use the money to fund another website it should just all be a part of your same sole proprietorship business--you won't pay taxes until website number two makes money.

Dark_Angel




msg:787570
 6:24 am on Sep 5, 2005 (gmt 0)

Wow, people who believe that anybody would pay 200K for a 6month old website with nothing but advertising revenue are more stupid than the idiot making the original claim...

Jealous? And YES somebody did purchase my 6 month old website based on sales revenue alone. My website is currently ranked 2,000 in Alexa with over 1.6 million daily page views, and 120,000 daily uniques. Traffic is golden.

And this thread was not to talk about how much I made. As I can care less if you believe me or not, but I am asking about taxes, and how much I should plan on spending.

Dark_Angel




msg:787571
 6:27 am on Sep 5, 2005 (gmt 0)

I'm sure I over simplified, and may have it backwards, but for the current situation I don't think it matters. Since the site was only six months old, you will not get any capital gains even if the entire sale was viewed as assets. All 200k will plop right into your income column on your tax form.

I'm guessing you'll have to pay the 15+ percent self-employment tax, then full state and federal income taxes on the remainder.

Okay, so in the worst case scenario I pay 15% plus full state and federal income taxes. Any idea how much those are? Then maybe I can come up with a real %

I will see a CPA very soon, but free advice is always good, and it helps prepare me better

ogletree




msg:787572
 7:19 am on Sep 5, 2005 (gmt 0)

In one post you say 4000 in alexa and another you said 2000. Which one is it? I seriously doubt they bought the site because of advertising claims. I'm sure they bought it because of the traffic that it gets. It must have some very specific eyebals they want to target.

Dark_Angel




msg:787573
 7:23 am on Sep 5, 2005 (gmt 0)

In one post you say 4000 in alexa and another you said 2000. Which one is it? I seriously doubt they bought the site because of advertising claims. I'm sure they bought it because of the traffic that it gets. It must have some very specific eyebals they want to target.

Well just checked it out again right now, and it is 3,4xx so I guess it went up a little.

Actually the company that purchased the site bought it to promote their own website which was in the same catagory, but they mostly bought it based on what I was making. Let's just say advertsising revenue was in mid $xx,#*$!! per month, but that's all I can say on that as I am under NDA and NCA for 2 years.

I sold the site for a rather low asking price because I wanted to fund another much larger business venture.

zulu_dude




msg:787574
 8:46 am on Sep 5, 2005 (gmt 0)

I remember seeing this site get sold on a popular forum and the buyer got just as much unbelief from people there. But someone did buy it for $200,000.

From what I could gather, it's a very clever website model, which explains why it gathered popularity so quickly.

Sometimes good things can be true as well! Instead of giving the poor dude flak, we should be happy for them! After all, isn't that most people's dream... set up a website and sell it 6 months down the line for $200k? I sure wouldn't mind...

Vishal




msg:787575
 4:00 pm on Sep 5, 2005 (gmt 0)

Yes I will have to agree that if it is short term capital gain, then you might not gain much. But you can try looking at it in different manner.

When did you first registered the domain?
If you actually started thinking about the business and did you even made an investment (a book is also an investment) of even 10 bucks or so?

There is a very fine line for someone consider the actual start date of a business for home based businesses. I am not saying you should temper with the actual dates, but maybe there might be few things you need to think over and then think when you started the business, maybe it can save lot of $$$$.

Hope this helps.

Easy_Coder




msg:787576
 1:39 am on Sep 7, 2005 (gmt 0)

Dark_Angel, if that site was already generating lotsa ad revenue as you stated then you no doubt already have a CPA? So, why ask a bunch of geeks and not your/a CPA?

bnhall




msg:787577
 1:52 am on Sep 7, 2005 (gmt 0)

I asked my accountant this same question. Here's what they said:

- If your core business is NOT selling websites (ie this was a one-off)
- If you registered the domain more than 12 months ago
- Then this is Long Term Capital Gains, taxed in the US at 15%.

Congrats!

ganderla




msg:787578
 2:39 am on Sep 7, 2005 (gmt 0)

It should only be short term if you sell the business as 100% of share value, not an asset sale. As I understand it, buyers do not like 100% of the shares type of sale.

Dark_Angel




msg:787579
 3:16 am on Sep 7, 2005 (gmt 0)


I asked my accountant this same question. Here's what they said:

- If your core business is NOT selling websites (ie this was a one-off)
- If you registered the domain more than 12 months ago
- Then this is Long Term Capital Gains, taxed in the US at 15%.

Congrats!

- I am not in the business of selling websites.
- The domain was registered un April 2005.

So am I screwed at paying 45 -- 55% taxes just like regular income?

figment88




msg:787580
 3:33 am on Sep 7, 2005 (gmt 0)

So am I screwed at paying 45 -- 55% taxes just like regular income?

That would be my guess. I think your last post summed it pretty well.

My guess is you have three choices:
1) suck it up
2) you can put 25% in a SEP IRA.
3) make business investments

Of these, 3 is probably the most palatable. I look it as everything is discounted by about 1/3 (you can't get out of all the self-employ tax).

Still, these are big decisions that should be decided before the end of the year which is why you should talk to a CPA ASAP.

While you are at, don't forget your city's business license. The state of CA shares revenue information with municipalities.

Easy_Coder




msg:787581
 10:16 am on Sep 7, 2005 (gmt 0)

So am I screwed at paying 45 -- 55% taxes just like regular income?

ask your cpa

This 58 message thread spans 2 pages: 58 ( [1] 2 > >
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