Business & farm

I think a few more comments are needed here to help you understand what's going on and clarify a previous comment:

• As you mentioned, you had a business (sole proprietorship) and reported this activity each year; whether that was income or a loss you received the economic benefit each year.
• If you purchased the domain originally, have you been amortizing the purchase price?
  • If so, do you know what your basis is in the domain name asset?
  • You note "only paid a total of $800 over time".  Not sure what this means.
  • Understanding this is key as there could be some ordinary component to your gain.
• You gain on the sale is your selling price (SP) minus your basis in the domain name
• This is generally capital gain, except for any recapture of amortization of the purchase price of the domain name; this component will be taxed at ordinary income tax rates.
• The remaining gain is capital gain and the capital gain tax rate is either 0,15% or 20% depending on your specific taxable income level.  One of the comments indicated 10% which is not correct.
• In conclusion, you do have a gain on the sale as your past yearly business activity has no bearing on the sale of the domain name.  As noted, this activity was taken into account each year you filed a tax return and received the economic benefit in that respective year.