I’ve previously written about taxing the virtual world. Let’s say you’re playing an online game, one of those that have their own worlds, such as EverQuest or SecondLife. I own Russ’ Gold Depot, and you agree to purchase those 100 acres from me for $100 — not 100 gold pieces, but 100 real U.S. Dollars. What’s my income?
The U.S. Tax Code would subject me to tax on the gain. After all, my basis is $0, and now I have $100, right? Luckily, the IRS’ current opinion is “That’s so weird.”
Unfortunately for online enthusiasts, that opinion is unlikely to hold for long. Last Saturday a panel at New York University actually debated this issue. “Tax and Finance at the State of Play/Terra Nova Symposium had several speakers talking about this issue according to a CNet report.
“Given growth rates of 10 to 15 percent a month, the question is when, not if, Congress and IRS start paying attention to these issues,” said Dan Miller, a senior economist with the Congress’ Joint Economic Committee told CNet.
Another interesting issue might confront heirs of online real estate magnates. Suppose I own $1 million in virtual land. Does this virtual real estate factor into my estate?
Or what if I trade assets, going from a red paperclip to a house (like Kyle MacDonald of Canada)? Bartering is absolutely taxable, so wouldn’t I owe real tax on my gains?
Unfortunately for virtual world fans, it’s almost a certainty that the IRS and other government agencies will look into this eventually. So if I do sell my gold depot, I’m also likely to come into possession of a slip of paper: a 1099-MISC reporting the transaction to the IRS.
Tags: VirtualTransactions