here's the scenario:
- started an online software subscription product in 2008, the only product of the business.
- business that owns the product is a single-member LLC (disregarded entity)
- paid taxes yearly on profits, and as per previous bullet, no different from "supplemental" income (schedule c).
- time spent growing and enabling the product was 'sheer' intellectual property and my personal time (let's say on average 15hours/week coding parts of the product)
- sold complete ownership of product (not the business)... let's say for $80k
NOW, how do I determine how much of the $80K will be subject to taxes? The product was not the results of "capital expense" but rather my time. However, the product was the primary "capital/asset" of the business. Clearly, I shouldn't be paying taxes on full $80k but instead, is there a "cost basis" I can come up with for the product?
Tax Gurus - I would love to hear your thoughts on this.