The tax man

Retired_member41 · Feb 26, 2011

I was just looking at a post where the seller has been offered 13k and realised something reminded me about a conversation I'd had.

For example

Now they have been offered 13k for it they may aswell sell it at auction. Because your going to have to put it on your books at 13k and pay tax on something they haven't yet sold.

Which reminds me. The big hitters on here who have threads running for months with comments like 50k offered but want 200k etc. If ltd do they put it on their p and l?

Often thought you could make the likes of giant and the likes bust by lodging a complaint with the tax man. Imagine having to change all those fivers on the p and l report to thousands each. Ouch.

Would force them to sell to survive.

I'm sure most domainers think they can list cost price till they sell. Maybe it's just something the tax man hasn't worked out yet?

I am referring to the honesty and fairness clause relating to a ltd company and the correct reporting.

Or maybe my other half has explained it wrong. I know there are some clever people on here who I've spoken to and emailed. So maybe someone could clarify.

If it's right then those who have lovely portfolios and are ltd, do they write values up and down as they should?

Edwin · Feb 26, 2011

I don't get what you're saying. Are you suggesting that the act of receiving yet rejecting an offer magically causes accounting changes?

archibel · Feb 26, 2011

I think you're getting confused with the accounting requirement to value inventory (in this case domains) at the "lower of cost or net realizable value".

Net realizable value is the current saleable value of the domain and cost is what you paid for it.

However, the key is LOWER OF

(Receiving an offer higher than what you paid might indicate its net realizable value has increased but you are not allowed to increase the asset value on your balance sheet and there is no way you should recognize any revenue - this would completely rewrite the rules of accounting.)

Hope this makes sense.

Retired_member41 · Feb 26, 2011

Hi

Yes it sort of makes sense.

But I'm still confused as to why it leads you to think you should increase the value of the asset on your books when you now know the true value of it. But it's not considered good accounting?