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We have a single member S-Corp with a single main asset which is a website that has been operated for 12 years. We are currently looking to sell this website and I'm wondering how this will be taxed on the personal level.

When the site was originally created it was not profitable or something we were monetizing. It took four years to reach the stage where we started monetizing the business and then in year 4 formed the LLC to which we filed to be treated as an S-Corp in that first year of taxation.

Since then it's been a fairly typical structure: we paid myself a salary as the web developer for the site and then had pass-through income each year after expenses were reported by the business.

In the event that we find a buyer for the website how would this be taxed? Would you simply treat this as a long term capital gains transaction at the personal level? Furthermore, how is the cost basis for the asset determined.

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In the event that we find a buyer for the website how would this be taxed? Would you simply treat this as a long term capital gains transaction at the personal level?

Probably. Details depend on how it is structured, but if you're just selling the interest in the LLC then it's basically the same as any other asset sale.

Furthermore, how is the cost basis for the asset determined.

This is a more interesting question. When you formed the LLC 4 years ago - what exactly did you transfer into it (i.e.: contributed to your S-Corp), and what was the cost basis of that? Do you know? Can you document it?

Depending on the amounts involved you'll probably want a CPA to guide you through this transaction and its reporting.

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  • It wouldn't be selling the interest in the LLC. It would basically be selling the single website as we have others that are not mature enough to sell yet. As for what was transferred over, basically the work I did on the site which had just been sweat equity at that point and the site itself was the company's only assets.
    – Shawn
    Feb 11 at 8:31
  • @Shawn so basically your basis is zero. The company may have a different basis though, depending on how you booked your expenses.
    – littleadv
    Feb 11 at 8:39
  • Aren't asset sales (like selling a website) are taxed as ordinary income? Feb 11 at 13:50
  • @gaefan it depends. If the OP is in business of creating websites for customers - then yes. But from the OP's description it doesn't sound so
    – littleadv
    Feb 11 at 17:30
  • Makes sense, appreciate the help. @littleadv
    – Shawn
    Feb 11 at 17:35

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