Post by vinitwins on Dec 19, 2006 12:11:15 GMT 6
www.wired.com/news/columns/0,72317-0.html?tw=rss.culture
wo weeks ago, Ailin Graef announced that her avatar inside Second Life had amassed virtual-property holdings worth $1 million in U.S. funds.
But it's got tax lawyers wondering when the IRS will show up. If you make a boatload of profits inside a game -- will the taxman soon want his cut?
Let's say you've been playing World of Warcraft for the last year and you've got a few level-60 characters. Well, according to the going rates on IGE or eBay, you've created an account that could be worth more than $1,000. And then there's all your gold: According to the rates currently posted at IGPlace.com, a piece of WoW gold is worth 18 cents.
Almost everyone agrees these days that if you "cash out" -- and sell a valuable avatar or big stash of gold on eBay, exchanging virtual goods for real greenbacks -- you owe taxes on the profit. That's not news.
But what about stuff that stays inside the game? If you played WoW for three years and racked up $4,000 worth of avatars and gold, but never cashed out -- should you still be paying annual taxes on your increased value, as if it were income? This is where the rubber hits the road, because the profits currently locked up inside these worlds are becoming big enough -- hundreds of millions at least, and maybe billions -- that they are a juicy target for the IRS.
Could they tax this stuff? Is there a tax argument in favor of it? Many tax experts say yes. What's more, in-game trades of valuable virtual goods could qualify as barter -- and the IRS already taxes barter.
benami accounts to avoid taxes are commonplace in india, now we'd have to resort to creating dummy second life and WoW accounts as well...
V
wo weeks ago, Ailin Graef announced that her avatar inside Second Life had amassed virtual-property holdings worth $1 million in U.S. funds.
But it's got tax lawyers wondering when the IRS will show up. If you make a boatload of profits inside a game -- will the taxman soon want his cut?
Let's say you've been playing World of Warcraft for the last year and you've got a few level-60 characters. Well, according to the going rates on IGE or eBay, you've created an account that could be worth more than $1,000. And then there's all your gold: According to the rates currently posted at IGPlace.com, a piece of WoW gold is worth 18 cents.
Almost everyone agrees these days that if you "cash out" -- and sell a valuable avatar or big stash of gold on eBay, exchanging virtual goods for real greenbacks -- you owe taxes on the profit. That's not news.
But what about stuff that stays inside the game? If you played WoW for three years and racked up $4,000 worth of avatars and gold, but never cashed out -- should you still be paying annual taxes on your increased value, as if it were income? This is where the rubber hits the road, because the profits currently locked up inside these worlds are becoming big enough -- hundreds of millions at least, and maybe billions -- that they are a juicy target for the IRS.
Could they tax this stuff? Is there a tax argument in favor of it? Many tax experts say yes. What's more, in-game trades of valuable virtual goods could qualify as barter -- and the IRS already taxes barter.
benami accounts to avoid taxes are commonplace in india, now we'd have to resort to creating dummy second life and WoW accounts as well...
V