Saturday, February 11, 2006

Massive online games may have a new monster: the IRS

I heard (on NPR) an interview with Julian Dibbell, author of Play Money and this article. I don't know if I have this exactly right, and I don't care enough to check. You can if you want. I just thought it was funny, especially if it actually happens.

Here's the deal.

MMORPG's have become very popular. Some people are so obsessed that they pay real money for powerful items, or even characters.

Once real mony changes hands, the item in question now has fair market value (FMV), and FMV could be determined for all other items, based on their relative values in the game. This is where the IRS comes in. I'm pretty sure the IRS believes that no exchange of money should ever happen unless they get a piece of the action.

But that isn't all. The IRS has barter laws. Whenever items or services with FMV are traded, the IRS is supposed to get a cut. (I don't think this is strictly enforced, if at all)

So every time items are traded online, the trade is taxable, and the company running the game should issue a 1099 to both players. Every time.

The IRS also has laws covering prizes. So when a player gets an item for defeating some monster, guess what? 1099 time!

I wonder if selling items at shops could also be taxable.

I think the IRS should run with this, it would be a big new source of income for the US government.

Good thing I don't play MMORPG's. Have fun with that, Tim, Caleb, and Paul.

Later,

UPDATE: I read the above article. I do have it right. Cool!

Later,

6 people have spouted off:

phil said...

Yeah Tim, What are you going to do now, huh?

Braddock said...

I think it will cost the IRS too much in enforcing this plan for them to go through with it. I mean they can't even identify the beneficial owners of stock without at least some disclosure given by the beneficial owners themselves or the trust service providers.

John said...
Yeah, but it would be really funny.
2/12/06, 6:21 PM
Braddock said...

Yea I'll grant you that. I'm sure Bush is saving it for a media decoy when he's reving up to invade Iran.

Tim said...

Since when do I play those types of games??

John said...
Tim, you kicked the habit! Good for you!
2/14/06, 5:30 PM