[MUD-Dev] Are gold pieces taxable?

Boyle Boyle
Thu Jun 26 22:01:27 New Zealand Standard Time 2003


From: Koster, Raph [mailto:rkoster at soe.sony.com]

> From Julian Dibbell's blog:

>   http://www.juliandibbell.com/playmoney/index.html

> OK, so I realize I'm getting ahead of myself here, but what exactly
> do I tell the IRS next April?

Awesome article Raph.. is this what you're going to be doing, now
that your game is 'finished'? :) Don't bother to answer, I know it's
not done...

So many approaches to take!

Pre-note: I do not have the tax code at my fingertips, nor do I want
to look everything up, so treat all my tax trivia as hearsay.

  1.  If they recognize gold-pieces acquired in Norrath as 'income'
  then they'd also have to classify the cost of acquiring that
  income as a 'business expense.'  If that were the case, then not
  only would your subscription fee be a cost of income, but so would
  your modem charges and your electricity, if you spend at least 50%
  of your time doing 'business' with those assets, correct?  Not
  only that, but you could then qualify your den as a 'home office.'
  Or, better yet, you could count the expense of that spiffy new
  sword as a business expense, since virtual equipment makes as much
  sense as virtual cash.  Oh, the headaches as you try and figure
  out depreciation due to nerfs!  And what about your character?
  You can sell them.. so gaining levels should count as income, but
  what if they die and lose experience?  You could try to buy up
  characters at below market value just so you can forcibly
  depreciate them to offset gains!  Hmmm... does that mean the IRS
  can tax my college education, because it made *ME* more
  valuable????

  2. If they really base their estimates on the "GDP" of Norrath,
  how would they go about taxing income in a foreign land?  Can the
  US tax income generated by a company on a company's private
  island?  What if they moved the server off shore?

  3. The most likely scenario I see is that monetary value in a
  virtual economy is treated just like the stock market (the
  parallels abound) and that you're only taxed at the time of sale
  at the capital gains tax rate.
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