Domain names are generally regarded as intangible personal property. The nominal annual domain name registration fees are generally deductible.
http://www.irs.gov/irm/part4/irm_04-043-001-cont04.htmlIntangibles
You must generally amortize over 15 years the capitalized costs of “section 197 intangibles” you acquired after August 10, 1993.
You must amortize these costs if you hold the section 197 intangibles in connection with your trade or business or in an activity engaged in for the production of income.
http://www.irs.gov/Businesses/Small-Businesses-&-Self-Employed/IntangiblesHowever , the domain name is not a capital asset if held by someone who is in the business of buying and selling domain names (Panavision Int'l v. Toeppen, 141 F.3d 1316 (9th Cir. 1998).).
If you buy domains with the intent to sell them later, they could be treated as inventory and expensed as cost of goods sold. But when you use them for producing income the character changes.The IRS looks at the related expense as a solid and permanent business benefit. These expenses are considered capital costs that need to be depreciated .
