Selling a business. Reinvesting Capital Gains to Avoid Taxation?

Question

This is a semi two part question. I am selling domains and websites, so I assume that it would just be assets since there is no inventory of any kind. I am looking to take the "profits" or gains from the sale of these websites and create a secondary company to reinvest the business funds into real property. Specifically purchase two homes here in Southern California. Is this a way to avoid paying on the capital gains? I'm a sole proprietor and taking a 30% hit could mean hundreds of thousands of dollars. The second part of that question is I will be essentially buying my own home and putting it under the company as well. All in all I am looking for the best ways to reinvest the funds to pay as little as possible, with my primary goal paying off both of these homes.

Any thoughts? Also after reading through many other questions the assets are over two years old, if that matters in business transactions.

Answer 1

Reinvestments of capital has never been the way to avoid taxes. If you are selling the product you created you have to pay taxes on profit(the difference between your revenue and expenses). Whatever you decided then to do with your money is your choice. It doesn' affect income taxation. Second of all, acquisition of another assets( 2 houses) has never been an expense(that's what lowers your taxes). It could later become an expense if u r renting houses to other people or use them for your business through depreciation of the cost through many years. But then, it's all in the future. As of now, it will not lower your taxes. If these houses are your primary residence(one at a time of course) and you live there for 2 years and sell them, let's say in 4 years(2 years in one house and 2 in another) you can exclude gain on sale up to $250K or $500K if you are married filing jointly from your income. Hope I answered your question

Answer 2

If you are holding the domain names for investment purposes, you could use section1031 of the tax code to defer the gains into other domain names held for investment.

Answer 3

No, that wouldn't avoid the capital gains tax, you'd still owe it for the current year.