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Virtual Income, Real World Taxation

Will the IRS soon be opening an office in the virtual world of Second Life? At the blog Virtually Blind, which is devoted to the legal issues that impact virtual worlds, Benjamin Duranske explains:

Though it is widely understood that profits made running a business that deals in virtual goods or services are taxable, tax agencies have not yet seriously pursued enforcement, and there is an open question regarding when these profits are taxable. Two recent presentations suggest that enforcement is getting incrementally closer, both in the EU and the United States, and more interestingly, both commentators suggested that profits may be taxed even before they are converted to 'real' currency.

One of the two presentations focused on U.K. tax law and the other on U.S. tax law. The latter was by Bryan Camp, law professor at Texas Tech University, who said that profits made in virtual worlds could be taxable even before they are withdrawn as dollars. A video recording of Camp's presentation is available via the Second Life Cable Network. Is that a tax-collector avatar I see in the audience?

Posted by Robert J. Ambrogi on October 26, 2007 at 11:28 AM | Permalink | Comments (0)


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