Maybe you own a snazzy home in Second Life, or an imposing castle in Ultima Online, or maybe you found a Krol Blade while questing in World of Warcraft. Though the home, the castle and the Krol Blade are all virtual property, all can be (and routinely are) exchanged for money - both virtual in-game currency and cold, hard cash. To the extent, then, that these items have real value, does their acquisition or transfer create a taxable event? If you sell that Krol Blade in-game for 800 gold pieces, for example, or auction it off on e-Bay for $80, should you be forced to report that income?
Dan Miller, a senior economist with the U.S. Congress' Joint Economic Committee, suggests that it's a question of 'when"? and not 'if"? Congress and the IRS will start paying attention to the virtual economy. Miller's committee began examining issues surrounding the virtual economy in October of this year and, just recently, he attended a panel called 'Tax and Finance"? at the State of Play/Terra Nova symposium, a gathering at the New York Law School to discuss the issues surrounding virtual worlds. At that symposium, Miller suggested that there could be wider future congressional oversight and a revised IRS tax policy in respect of the virtual economy.