<prompt> Human: My friend and I worked on a website for a couple years. We lost interest as it wasnt too profitable. Some guy came and offered us 20k for it. We took the offer. He sent me 20k via escrow and then I sent my friend his 10k share. How do I report this for taxes? 10k capital gains?  <response>: You and your friends were partners in an ongoing business concern. When you sold your interest in that business to another person you most certainly sold an asset. You definitely dont want to be taxed at normal income rates.The tax savings alone of you going to a tax accountant will more than pay for the preparation. 