Question
I recently sold a website (which I ran for 3+ years) for a large sum and am looking to minimize my capital gains tax on the sale price.
My normal costs (outsourcers/software...etc) were all written off as expenses throughout the time that I ran the site.
From what I understand I can't include these as part of my basis since they were already written off as regular expenses throughout the years.
I'm trying to understand if I can use my time spent building & promoting the site into my cost basis? I spent a significant amount of my time.
I did pay myself from the business checking to my personal checking on a regular basis for normal living costs but this was a sole proprietorship, so not sure if that would be recognized as a proper 'salary expense'.
I understand this falls under 'sweat equity' but wondering in what circumstances the owner's time could become part of the basis.
I would also be looking for a possible consulting call to touch on additional questions.
Thank you!
Answer
In general you're correct, about not being able to write off time invested as cap gain.
And, in the future run all this by your Tax Preparer, when you start a new venture.
Way easier to optimize taxes in the beginning, than try doing it after a cap asset has sold.
You might pick up a copy of "The Transfer Pricing Answer Book" + also watch the movie "We're Not Broke!"
When you're watching the movie, ignore the point the movies producers are trying to make.
Instead, imagine how you can duplicate what companies are doing in the movie.
Also, you'll get bonus points for writing down every name off signage in the movie (Banks/Attorneys/Consultants), then research services these companies offer + read content they've written about tax optimization.
