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When you play Everquest or Ultima Online and amass a small fortune in virtual chainmail and platinum pieces, you can, of course, go and sell it to another player for real-world cash. But what precisely are the tax implications of this? Have you created any value — and if so, how much of it do you owe to the IRS? What is it: Income? Capital gains? A gift?
Julian Dibbel, one of my favorite high-tech journalists, recently decided to find out. During the 2003-2004 tax year, he made $11,000 in real-world money by winning, buying and trading virtual items in Ultima Online. Then he tried to get the IRS to tell him precisely what part of the tax code would apply to virtual-world goods — and reported it as a story for Legal Affairs magazine. Much hilarity ensues, including this terrific exchange with John Knight, Dibbell’s local IRS official in South Bend, Ind.:
“O.K., so I got a fake jewel that’s worth 80 million points, gives me all kinds of invincibility,” said Knight, striving doggedly to nail down what I was talking about. “But I got two of them, or don’t want to play [anymore]. And I can go on eBay and sell my jewel to some other character?”
“Uh, yeah,” I confirmed.
Knight considered the facts and offered a nonbinding opinion: “That’s so weird.”
In the end, Dibbell doesn’t get a solid answer: The IRS suggests he pay a $650 fee to request a ruling on the issue, and he doesn’t really want to pay that fee. But eventually someone will, and it’ll make for a damn interesting ruling. With tens of millions of people now playing multiplayer games online, there’s a significant amount of tax revenue potentially locked up in these games.
(Thanks to Naureen for this one!)
I'm Clive Thompson, a writer on science, technology, and culture. This blog collects bits of offbeat research I'm running into, and musings thereon.
Currently, I'm a contributing writer for the New York Times Magazine and a columnist for Wired magazine. I also write for Fast Company and Wired magazine's web site, among other places. Email or AOL IM me (pomeranian99) to say hi or send in something strange!
The “Milky Way Transit Authority” map
Should automobile software be open-sourced?
My Bookforum review of Jaron Lanier’s “You Are Not A Gadget”
Molecular secrets of the “iron-plated snail”
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January 31, 2010 » 07:29 PM
V. A. To me death seems to be an evil.
M. What, to those who are already dead? or to those who must die?
A. To both.
M. It is a misery, then, because an evil?
A. Certainly.
M. Then those who have already died, and those who have still got to die, are both miserable?
A. So it appears to me.
M. Then all are miserable?
A. Every one.
January 24, 2010 » 03:22 PM
One of the more interesting trends is family, which came in at number five. Specifically, discussion about family, moms, dads, daughters, etc. jumped during 2009. With Facebook users getting older, this isn’t a big surprise. However, the fact that the mention of “kids” jumped by a factor of five this year is rather dramatic. It’s tough to know what this means, though. (via Facebook Unveils Most-Mentioned Topics of 2009
)
January 15, 2010 » 01:36 PM
BEYOND AWESOME. They are announcing a recall of the Plush Uterus “due to a potential choking hazard for children”. To apply for it, “Please send an email to the address below with the subject line, ‘UTERUS OPT OUT’”.
January 14, 2010 » 10:04 PM
“To order, please TYPE “YES” IN CHECKBOX BELOW TO AGREE YOU UNDERSTAND THIS PLUSH MUST BE KEPT AWAY FROM KIDS (it is a sex organ, after all). If it is not checked, WE WILL NOT SEND THE UTERUS.” (via @ibogost)
January 11, 2010 » 01:45 PM
I watched Space: 1999 back in the day, but I swear to god I do not remember this scene.
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