Article about taxation in U.S., Congressional report coming this August Options

[Epictetus]

http://www.gamedaily.com/articles/features...to-death/66843/

They might end up saying that items you loot or craft are taxable, even if you don't withdraw money to your bank account.

This post has been edited by Epictetus: Aug 8 2007, 06:17 PM

[Erasmus]

Boils down to auditing capability. No way the IRS wants to get down to micro-transaction auditing. On the other hand, annual or quarterly asset valuation is possible ... assuming that value can be proven in a given time frame.

But not virtual transactions as those can be assimilated with collectibles trades like trading cards. All in all, no difference: One owes tax on income earned, after deducting expenses. The burden of proof that expenses are associated with trading will be on the taxpayer and it will take a pattern of tax court rulings to see how that will turn out.

[Dino]

http://www.gamedaily.com/articles/features...to-death/66843/

If they end up saying that items you loot or craft are taxable, even if you don't withdraw money to your bank account, I'm going to be irate.

That won't work. It's not "realized" income until you withdraw it. Otherwise they can't tax it as income, they will have to tax it as a capitol gain or something. Erasmus, check wifey on this but I'm pretty sure I'm right.

[Erasmus]

http://www.gamedaily.com/articles/features...to-death/66843/

If they end up saying that items you loot or craft are taxable, even if you don't withdraw money to your bank account, I'm going to be irate.

That won't work. It's not "realized" income until you withdraw it. Otherwise they can't tax it as income, they will have to tax it as a capitol gain or something. Erasmus, check wifey on this but I'm pretty sure I'm right.

Will do! I recall something about a case about "like kind exchange" that did not involve real estate property (there is a specific tax law about like-kind exchange of real estate). I am thinking now that it might have been a state tax case in a state that taxes tangible and/or intagible assets .... yeah, another way to get taxed! That Mod FAP is theoretically taxable in some US states for its asset value.

[Darkscorp]

"Will do! I recall something about a case about "like kind exchange" that did not involve real estate property (there is a specific tax law about like-kind exchange of real estate). I am thinking now that it might have been a state tax case in a state that taxes tangible and/or intagible assets .... yeah, another way to get taxed! That Mod FAP is theoretically taxable in some US states for its asset value."

Thats only if its part of a real Life Corporation tho..especially in Florida. How do you file for a Corporation "S" if its not real?

I dunno..Florida is so Whacked. What makes it worse is the Various Counties you do Biz in Too..:P

[Marco|MindArk]

Well, wish me luck. I am in Washington DC atm to have a meeting with the Joint Economic Committee, the IRS and other parties. We will see what the outcome will be.

It is hot and humid here! And it felt humbling actually seeing the White House in real life for the first time.

[Dino]

Well, wish me luck. I am in Washington DC atm to have a meeting with the Joint Economic Committee, the IRS and other parties. We will see what the outcome will be.

It is hot and humid here! And it felt humbling actually seeing the White House in real life for the first time.

Good luck Marco.

And yeah, it's easy and fun to make fun of the 'merican government but when you actually stand there it is pretty intimidating isn't it? (IMG:http://virtualmindhive.com/forum/style_emoticons/default/lol2.gif)

If you get a chance and time, spend time walking around the mall there. Unbelievable experience even if you aren't 'merican.

[Erasmus]

Thats only if its part of a real Life Corporation tho..especially in Florida. How do you file for a Corporation "S" if its not real?

I dunno..Florida is so Whacked. What makes it worse is the Various Counties you do Biz in Too..:P

Intangible is now gone in Florida. It did apply to individuals with over 1M$ of intangible assets. Tangible remains, mainly for businesses, but also on things like appliances in rental properties, even for individuals who do not operate under a corp or LLC. The S Corp is not the test. (off-hand reference from my wife watching TV. If I call her tomorrow during business hours, she might charge me! LOL).

The core of the problem is that legislators have little or no understanding of the issues and rely pretty much on what the lobbyists are feeding them. The IRS is more pragmatic, and actually more knowledgeable. They don't want to get in a situation where enforcing and auditing is more costly than the potential collection.

So, I don't think in-world transactions will ever be taxed. The real issue is the recognition that business operate within virtual worlds and are likely to manage virtual assets across several worlds which could be devised as a tax deferal scheme.

What we don't have yet is a case of a real world corporation with significant virtual assets to test the different tax theories.

This post has been edited by Erasmus: Aug 8 2007, 03:53 AM

[Fade]

Hey Marco... you may recall, that I am one of the ones that loves to gripe about MA (when I think it is legit to do so)....so it is only fair that I take my hat off to you guys when you deserve it.

As one of the folks that always suggests that MA might have a dark, fly under the radar approach...let me say Great Job getting out in the front on this issue, and starting to interface with the political types. I don't know the details of your meetings (and don't need to know), but I think it is great to hear you and MA are on the front of this issue.

And good luck...hopefully, you can help those political types (who are typically technophobic) make better decisions regarding their relationship to RCEs.

MA's organization and integrity just went up a notch with me.....oh wait.... you weren't subpoenaed were you? (JUST kidding).

Though, I am still sure you guys are still dark in some ways....sinister even (IMG:http://virtualmindhive.com/forum/style_emoticons/default/aikido.gif)

;)

Don't forget to visit Abe.

[Epictetus]

Well, wish me luck. I am in Washington DC atm to have a meeting with the Joint Economic Committee, the IRS and other parties. We will see what the outcome will be.

It is hot and humid here! And it felt humbling actually seeing the White House in real life for the first time.

Wow! You need to announce this stuff in advance so we can meet you and buy you a beer. :)

Let us know if you get any impressions from the Joint Economic Committee on which way they might take this taxation issue. We Entropia Universe colonists in the U.S. are a little worried about what might happen. We saw the unfortunate events related to the online poker sites. :(

[Sirhc]

Well, wish me luck. I am in Washington DC atm to have a meeting with the Joint Economic Committee, the IRS and other parties. We will see what the outcome will be.

It is hot and humid here! And it felt humbling actually seeing the White House in real life for the first time.

Good luck with the meeting(s) Marco.

I hope the outcome will be a favorable one. If you get some free time enjoy the sights.

On a side note if there is ever anything the US participants can do, like sending letters to official representatives, please keep us informed of where we could make the most impact. Next year is an election year here in the US and when you start talking votes politicians will listen.

again good luck,

Chris

[Administrator]

Indeed. We (mindhive) would of course be willing to provide any information and foster discussions aswell. In private or public. I have noticed the "White House" coming here in the last six months or so. Open exchange and understanding can only lead to a better system in our opinion.

[Darkscorp]

I have noticed the "White House" coming here in the last six months or so.

O.o

They have?

utoh.....

BTW..Good Luck Marco!

[Dino]

MA's organization and integrity just went up a notch with me.....oh wait.... you weren't subpoenaed were you? (JUST kidding).

bahhh... Are you kidding? This president would just utilize the (misnamed) Patriot Act to exercise Extraordinary Rendition and hold him in a Turkish Prison or something.

[cK Vap0r]

Cool that MA is getting out in front of it and yes, SHAME on you Marco for not letting us know in advance! Imagine the leverage I could gain if I paid your bail to get out of the American jails lol. Enjoy Washington!

[AlphaGeek]

Good luck, Marco, and get thee to Old Glory in Georgetown for a good overview of American regional Barbecue cuisine! (Or check out the National Air & Space Museum to see some REAL spaceships! )

[Dino]

That won't work. It's not "realized" income until you withdraw it. Otherwise they can't tax it as income, they will have to tax it as a capitol gain or something. Erasmus, check wifey on this but I'm pretty sure I'm right.
Will do! I recall something about a case about "like kind exchange" that did not involve real estate property (there is a specific tax law about like-kind exchange of real estate). I am thinking now that it might have been a state tax case in a state that taxes tangible and/or intagible assets .... yeah, another way to get taxed! That Mod FAP is theoretically taxable in some US states for its asset value.

Any word from Wifey about the concept of "realized income"?

Interestingly I heard something yesterday that the guy who caught Barry Bond's 756th home run is thinking about keeping it but some people think the government is going to try and collect taxes on the "assumed value". Unfortunately I have no references where this information came from but I find it hard to believe it's true. But if it is, it would have relevance to VR "assets".

I do think that after this all settles out through many different permutations eventually all VR "items" with a relatively set market price will be viewed as "assets" and taxed accordingly. But that's just my guess and could easily be wrong since everything in VR is essentially Intellectual Property.

[Erasmus]

Any word from Wifey about the concept of "realized income"?

Yes! It is a misconception that tax is only due when income is "realized". She went on with a never ending list of examples (IMG:http://virtualmindhive.com/forum/style_emoticons/default/shok.gif)

The Barry Bond example is not a good one to compare with in this instance. Capital gain tax is due on that ball, sold or not. It is like winning a raffle or a lottery, even if no purchase was made or ticket paid. Some contests actually account for that and add some cash to the prize to allow for the tax witheld (Example: There is a Marlboro contest right now giving away a Dodge Charger WITH a $5000 check)

The ball cannot be defined as "found property" because it was never lost in the first place (IMG:http://virtualmindhive.com/forum/style_emoticons/default/lol2.gif)

The tax code does allow under specific conditions for postponing tax on like-kind exchange of tangible, accountants refer to this as 1031 exchanges. If the conditions are met, a collectible can be exchanged for another. But it gets confusingly complicated accounting for value difference and cost basis implications.

She does not expect any new rules to be created for virtual property. More likely that it will be treated into an exisiting classification and then that someone, or the IRS, will argue it in tax court and those ruling will then become the reference basis ... meaning that it may take 3-5 years until the dust clears up! On the other hand, for businesses operating in virtual worlds, like say Neverdie, it is pretty much straight forward income-expenses like any other real world activity. Although, some expenses or deductions are likely to be tested.

[cK Vap0r]

I can not wait to hear the outcome from the joint committee (if that information is shared) In the case of EU, I would think its going to be hard to tax realized income when you have no actual rights to that property, no do you get a receipt saying at the end of the year, you looted 356,000 worth of realized profit. Maybe im missing something here but I do hope that Marco shares a bit!

[Dino]

Yes! It is a misconception that tax is only due when income is "realized". She went on with a never ending list of examples (IMG:http://virtualmindhive.com/forum/style_emoticons/default/shok.gif)

Sorry, I should have known that was going to happen and warned you! (IMG:http://virtualmindhive.com/forum/style_emoticons/default/lol2.gif)
(Remember, my education is Finance, not Accounting and while it may seem like similar things there are only a few similarities)

I do wonder about one other thing though. What about art? If I create something from scratch at home and sell it obviously I have to pay taxes on the profit. But what if I don't sell it? And what if I become a famous artist and therefor it becomes possible to anticipate with relative accuracy what new creations on my part would be worth. Could they then tax my creations?