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Finora Kuncoro
Impish Stoic
Join date: 11 Dec 2006
Posts: 213
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07-29-2007 15:14
Kidd set it out verywell but just to reiterate the point: From: Ciaran Laval No this is very much the point. Again, the L$ has no value, it is not taxable, the US dollar does have value, the US dollar therefore is taxable. When you cash out your US dollars, then you have taxable income. Whilst they are in L$ format, you don't have taxable income. Who says they have no value?. L$ have value if you can buy or barter them for other things of value. Since I can clearly exchange them for $US at the present time they have value. If LL were to go bankrupt, then likely they would loose value or maybe become worthless, but currently this is not the case. From: CyFishy Traveler I'm not entirely sure if that's true, though. I'm not an IRS person (are you?) but I'm assuming that Lindens only become taxable when they are actually converted to cash, since they don't have any actual 'value' outside of the SL world until such conversion happens. The sections of the TOS that have been quoted seem to confirm this. I can't talk about the IRS rules for companies because I'm not familiar with them. However for individuals, it does not matter what form the income is in (be it $, Yen or rough diamonds). For example a few years back I worked in Switzerland and received part of my income from my US based company, and another part from the Swiss based part of that company. I had income made up of both US$ and CHF. The IRS looked at my total income. They didn't care that part of it was not in US$. You have to state an assumed exchange rate for the year and calculate the equivalent value of the non US$ portion. Since L$ have value, the IRS will expect their cut. If my SL business actually made any money I would have to declare it on my tax return.
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Colette Meiji
Registered User
Join date: 25 Mar 2005
Posts: 15,556
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07-29-2007 18:45
From: Kidd Krasner Myths and more myths:
1. The terms of service claim that Linden's aren't currency: FALSE
The terms of service describe Lindens as a fictional currency. By itself, that says nothing about whether or not Lindens can be considered a private, alternative currency. That's a legal question, not addressed by the terms of service (and which I'm not qualified to answer).
Wikipedia has useful articles on private currency and alternative currency.
2. LL claims Lindens have no value: FALSE
LL says that they will not redeem Lindens for monetary value. That says nothing about whether or not they have value. All it says is that LL has no obligation to buy Lindens from anyone under the TOS.
Something has value if there are other people who want it, and willing to exchange other things of value for it. LL has no control over that.
3. If they're not currency, you don't have to pay taxes on them (under US tax law). FALSE
US law generally considers profits from barter to be taxable income. If I buy Apple stock, it goes up in value, and then I exchange my Apple stock for a car, using the new stock price, that's a taxable event. The fact that no money was involved is irrelevant. I've taken an unrealized capital gain (the Apple stock) and realized it with that trade, making the increase in value taxable.
4. The stipend is taxable if Lindens are currency. FALSE
The stipends are like a rebate. They're something you get in exchange for the fee you pay LL, and hence they're not profit, not income.
5. The US internet gambling law only applies to US dollars. FALSE
It applies to anything of value. It was Ginsu Linden - who was the LL lawyer at the time that said the Linden had no value. And thus they had no reason to ban gambling. This must have been 4-6 months ago. Other than that I suppose you may be right - It could be me hearing it has no value was just second hand information from in world conversations ant the forums. I honestly cant remember any other first hand source than the Ginsu Linden comemnt off the top of my head and dont feel like playing TOS lawyer tonight. |