As you noted, and as noted in other posts in this thread, the treatment of sales of domain names is not a clear-cut issue and the answer depends on the interpretation of facts and circumstances. As long as you are consistently continuing your long-standing practice of reporting your sales on Schedule C, have already deducted your costs, and aren't continuing to acquire new domain names, you may not see this come up as an audit issue.
There was an IRS Chief Counsel Advice Memorandum issued in 2015 advising that the cost of acquiring domain names for use in a trade or business should be capitalized. However, the memo specified that the advice didn't address the issue of the cost of acquiring a domain name to be held for resale or investment.
If the sale of a domain name is incident to the ordinary course of a trade or business (i.e., represents the sale of inventory), then the domain name would be considered inventory within category 1 of the exclusions described in IRC section 1221. Consequently, income derived from its sale would be considered the disposition of a noncapital asset and be classified as ordinary income.
By contrast, if a domain name seller is not in the business of selling domain names, then the analysis is very different. Please see this article also for a more in-depth analysis of the issues to consider in determining the tax treatment of profits from domain name sales.
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