Second Life - Virtual World

[WellManicuredMan]

Re: Second Life - Virtual World

Update: IRS taxation of online game virtual assets inevitable

If you are a hard-core player of virtual worlds like World of Warcraft, Second Life, EverQuest or There, IRS form 1099 may someday soon take on a new meaning for you.

That's because game publishers may well in the not-too-distant future have to send the forms ... even when those players don't convert the assets into cash.

Some friends got me to start playing World of Warcraft a few months ago. Now I'm addicted. I don't understand how you could be taxed for virtual game items and money unless you made actual real money by selling it to someone else (this is against the rules for WoW though, and if the company catches you doing this they will ban your account).

Is this article trying to say that I might have to pay taxes on the silver and gold I get from killing monsters, etc? That makes no sense.

[cschin4]

Re: Second Life - Virtual World

Do you think alot of us are trading our "real worlds" for fantasy worlds? Seems like there is a never ending parade from TV to computer to video games to music, etc. I really worry about today's kids as they are just "plugged in" all the time. I think all these things are like the opium of the masses. If we are all plugged in to our fantasy worlds then who has time to care about anything else? I do my best to unplug my kids but it is a losing battle. And, I find I am more and more plugged in as well.

[Broken Arrow]

Re: Second Life - Virtual World

Is this article trying to say that I might have to pay taxes on the silver and gold I get from killing monsters, etc? That makes no sense.

The way I understand it is that many virtual items appears to have a real life dollar equivalent to it. So, when these items are bought and sold with real money, it's still commerce of sorts, even though the items in question are virtual rather than real. The fact that some people have amassed vast quantities of these virtual assets only draws attention to the issue.

However, I don't think you are at risk of being taxed just for playing a game within its virtual confines.

[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.

[vsjhoc]

I'm going to open a virtual account in the Caiman Islands.

[GrimJack]

I'm going to open a virtual account in the Caiman Islands.

No! No! Open up a 2nd Life 'Caiman Islands' and make money hiding money but do it from a 1st life Caiman Islands.