[sweeps]

Update: Taxing Virtual Worlds

In one recent law review article, a quartet of professors from Iowa State University argue for a "cash-out" rule--virtual profits in virtual currency wouldn't be taxed when used "in world"; they would be taxed only if they were converted into profits in real currency and transferred out of the game. They would apply this "cash out" rule to all sorts of virtual games. If you try to set up a system where people are taxed within the games, there is more chance people will game the system (so to speak) and claim unjustified losses, warns one of the authors, William Dilla, an accounting professor at Iowa State University. In other words, you'll get virtual abusive tax shelters.