You've got an amazing island resort in Second Life. The entire virtual universe is clamoring to get in, you've got a buzz like no other, and you're raking in thousands of linden dollars a month. Meanwhile, in World of Warcraft you've got a nice little auction routine going, and have managed to accumulate quite a pile of gold.
But did you list that virtual property on your taxes? How about itemizing that pile of gold? Of course not you say, it's not real ... but the U.S. government isn't so sure. With online games like Second Life assigning real-world property rights to virtual world objects, and allowing for the exchange of in-game currency for out-of-game cash, the feds want to make sure they're getting a piece of whatever action they can grab.
This article on Reuters (from that aforementioned Reuters Second Life bureau) discusses what the Congress's "Joint Economic Committee" is looking at:
Right now we’re at the preliminary stages of looking at the issue and what kind of public policy questions virtual economies raise — taxes, barter exchanges, property and wealth,” said Dan Miller, senior economist for the Joint Economic Committee. “You could argue that to a certain degree the law has fallen (behind) because you can have a virtual asset and virtual capital gains, but there’s no mechanism by which you’re taxed on this stuff,” he said.
And people wonder why I'm one of those wild and crazy libertarians. Personally, I think this is stupid -- we don't need new law, because the old law will work just fine. If you "cash out" of Second Life, you'll need to pay taxes on what you made, but until then, it's just a simulation.