The sale of a domain name could be taxable if you made a profit or you could have obtained a tax benefit if you had made a loss. If the domain name was used in a business and you deducted or unused the cost, you must recover this deduction on Form 4797.A domain name can be considered an asset in several situations. If a domain name is purchased and converted into a brand identity, the IRS generally considers the money spent as capital costs that must be amortized over time. In this case, the value of a domain that makes it an asset is its role in brand recognition, which can generate long-term commercial benefits.
If you buy domains with the intention of selling them later, they could be treated as inventory and counted as expenses such as the cost of goods sold. Another scenario is that someone buys domains and finds ways to monetize the traffic that goes through them. These domains are basically tools used in generating income, in other words, assets.
