First, my disclaimer: I don't do much trademark law. However, I'll try to offer some thoughts.
Something one learns by the end of the first year of law school is that anyone can sue for anything. Yes, they can sue. However, whether they'll prevail and collect (or even survive summary judgment) are different questions.
You have a number of things working against you in your example. First, "time-magazine" is exactly the trademark term and it's a bit difficult to argue that it refers to something else than Time Warner's magazine. e-zines are generally not referred to as "magazines" as far as I know. If you had called it time.com or even time-zine.com, I think you'd have a stronger case. It would also help if your web page wasn't about news and/or current events. In other words, it would help if your site was clearly distinct from the subject matter of Time Warner's magazine.
Second, there's an Anti-Cybersquatting law that you might run afowl of. I'd suggest you don't offer to sell the domain name. I think they can offer to buy it, but I think your offer to sell can trigger revocation of your domain name.
In fact, I wonder why they haven't already gone over your head and requested that a domain name registrar simply re-register the domain name to them. My understanding is that all that's needed is a registered trademark. However, there have been exceptions. A recent one was a travel agency and domain owner winning vs. the city of Barcelona, Spain for barcelona.com.
Perhaps they're trying to get you to offer the domain for sale to trigger the Anti-Cybersquatting law and get your domain for free (plus whatever fees to get domain and a few hours of attorney time).
The last factor against you (that I can think of off the top of my head) is that the trademark, Time Magazine, is rather famous and tends to get stronger protection. This is true because of the strong impression in consumers' minds, not because of any favoritism for the haves vs. the have-nots. I realize it's possible that your situation may be different and that you probably picked "Time Magazine" because it's a trademark we'd all be familiar with. Most of my examples are like that too and I always have to disclaim that famous marks are treated differently.
Just off the top of my head, your best arguments are that (i) you use the domain name legitimately without any intent to damage the other party's mark, (ii) the goods/services are different (if they are), (iii) you don't hold the domain name merely to sell it, and (iv) domain names are different than trademarks so domain name usage itself is not enough to show trademark infringement.
The last point is this: identical trademarks can peacefully coexist so long as the goods/services are sufficiently different that consumers won't be confused that they come from teh same place. For example, I had my car fixed at Uptown Body and Fender in Oakland (strongly recommend them, btw) and they have no affiliation (as far as I know) to Uptown Records which sells prerecorded music. But only one gets uptown.com -- that's the nature of addresses generally and domain names specifically, addresses must be unique. And either can own that without infringing the other's trademark.
I hope that's helpful despite my minimal familiarity with trademark law.