So I was looking into buying some virtual currencies, and the website I was using provided a income tax calculator, I was reading along and there was a link to the IRS website that details the taxation of virtual currencies... Here is the important part,
Quote:
The Internal Revenue Service (IRS) is aware that virtual currency may be used to pay
for goods or services, or held for investment. Virtual currency is a digital representation
of value that functions as a medium of exchange, a unit of account, and/or a store of
value. In some environments, it operates like real currency -- i.e., the coin and paper
money of the United States or of any other country that is designated as legal tender,
circulates, and is customarily used and accepted as a medium of exchange in the
country of issuance -- but it does not have legal tender status in any jurisdiction.
Virtual currency that has an equivalent value in real currency, or that acts as a
substitute for real currency, is referred to as convertible virtual currency. Bitcoin is one
example of a convertible virtual currency. Bitcoin can be digitally traded between users
and can be purchased for, or exchanged into, U.S. dollars, Euros, and other real or
virtual currencies. For a more comprehensive description of convertible virtual
currencies to date, see Financial Crimes Enforcement Network (FinCEN) Guidance on
the Application of FinCENs Regulations to Persons Administering, Exchanging, or
Using Virtual Currencies (FIN-2013-G001, March 18, 2013).
In general, the sale or exchange of convertible virtual currency, or the use of convertible
virtual currency to pay for goods or services in a real-world economy transaction, has
tax consequences that may result in a tax liability. This notice addresses only the U.S.
federal tax consequences of transactions in, or transactions that use, convertible virtual
currency, and the term virtual currency as used in Section 4 refers only to convertible
virtual currency. No inference should be drawn with respect to virtual currencies not
described in this notice.
Does this mean I now have record all my PED for filing a tax return at the end of the year?
If yes, then,
If I buy a bunch of CLDs and collect dividends, what kind of tax is that subject to? Long-Term Capital gains, or ordinary income tax?
If I am crafting, is that considered a business, and can I consider all material used as deductible?
If I a huge HoF, is that subject to the 39.6% Lottery tax?
What kind of tax is virtual real-estate subject to?
Do I only have to pay taxes when I cash out, or if I turn 1,000 PED into 1,000,000 PED without any deposits or withdrawals do I have to pay income tax on the 999,000 Ped?
Everything is technically owned by MindArk, are items considered as taxable assets/property?
Since items are owned by MindArk and are not a currency, are items counted as a net loss?
And if items are able to be taxed in some way, are they taxed based on their TT value or the Market Value?
Can I use entropia as a way to create a 'loss' to deduct to increase my tax return by dumping money in game?
I got dozens more questions, but i think its best i wait till i get some of these answered before I go on further...
My head is spinning, because the way you can gain and lose money in this game in such quick timeframes is ridiculous from a tax perspective...