Tax Season - SL Linden exchange to USD?

D'OH!

Got me on a misquote!

The RIAA stuff is really an interesting question - they're using the court system to extort money from their hapless victims, and the media's full of them losing these cases and not winning very many, if any. But most of these are failing on established points of law before they ever even get to the question of what's actually being stolen. If what you're stealing is the license to use a recording at your personal whim, then yep, you're probably stealing. But is the downloading the stealing part? Or the binary image on the disk? And if you're in Philadelphia, and you downloaded the song from some place in Sweden, where did the crime take place? Philadelphia? Or Sweden? Who's jurisdiction would this crime fall under?

The issue of whether virtual property can actually be said to belong to one person or another and what that means in real terms is simply not being addressed at all. The underlying implication that virtual objects and currencies could eventually have the same legal standing under the law as real objects and currencies could completely destroy the world economy - it would be like having a license to mint money just by telling your computer to make a few hundred thousand copies of the currency you already have. Instant devaluation of all currencies would ensue, if virtual currencies were declared to be the same as real ones for the purposes of law - this distinction is apparently not obvious to at least a few people in our society, and should be made a matter of direct legal precedent, not just a tacit agreement.

For folks who think that privately managed counters can't be currency, please take a look at the Ithica Hours web site. In particular, the very first FAQ says that they are taxable.

You should also look at the Wikipedia article on Private Currency, for a brief introduction to the concept of currency being issued by private parties.

In comparing Linden Dollars to Ithica Hours, the fact that Ithica Hours, Inc prints physical notes is unlikely to be a deciding factor, unless there's something specific in the statutory law requiring this. The biggest difference is actually that Ithica Hours, inc. wants Ithica Hours to be treated as currency, while Linden Research, Inc. is not promoting Linden Dollars that way. Again, it's possible that something in the statutory law, or for this case, the case law, makes that a deciding factor, but I wouldn't bet on it.

Also, something just popped into my head. People keep referring to Linden Dollars as game tokens. True, for many participants, it's just a game. There are, however, many others who are conducting themselves as a business, trying to make a profit. At some point, the duck test comes into play over this point: If it walks like a business, and quacks like a business, it's a business. This, of course, only directly affects the people operating in this manner, but it could conceivably influence any court decision over the status of Linden Dollars.

Huh? MA doesn't apply the sales tax to services in general, so I don't see what tax they'd be charging. MA might have special taxes for telecommunications services or some other aspect; I'm not familiar with those.

[Aside: This has been an annoying problem with some mail-order businesses that have either incompetent accountants or programmers, as they erroneously charge tax on the shipping and handling charges for products sent to MA. MA doesn't charge sales tax on S&H, as long as they're realistic.]

Could all the people who think that Lindens have no value please pay me whatever Lindens they happen to have in the game? After all, if they're worthless, you shouldn't mind.

I promise to convert all of those Lindens into US $ and give the dollars to a local food bank - so it's all for a good cause, and there isn't any reason not to.

Thanks,

Before I even saw this today, somehow the thought of food and tax just kinda got mixed together with my normal workflow.

Food has value. Hmmm... If it doesn't, we can say you will not worry about it , and you will have no use for it. Since food has no value at that point, you do not have to worry about any tax on your food when you give your food away.

Well, the thinking continued in that style for a little bit. Then, a visual picture of someone who ate food and who paid tax on every nibble also was mixed in with the thoughts.

Luckily... it was just a daydream...

...back to reality.

See? You have to convert them to USD before you can do anything with them. They're valueless by themselves.

See? You have to convert Lindens into USD before you can do anything with them. Lindens are valueless outside SL, and can't be used to buy anything in the real world without being converted to real currency first. They have no intrinsic value, and since they're virtual, they can never have intrinsic value. See preceding posts. In fact, eBay is busy yanking listings for virtual objects on their service for all online games as fast as they can, because they don't want to be accused of facilitating the perpetration of fraud upon their users. Virtual objects can be replicated ad infinitum, and any object in infinite supply is worthless by definition.

Now, having proved that Lindens cannot have intrinsic value because they exist only in virtual reality, let's throw that fact away and pretend that they're actually worth something. Can they be money?

The answer to that is a sound "no", because while it's perfectly legal to make substitute currencies, so long as they have a fixed value compared to a dollar and have an assigned value of at least one dollar per unit, the Linden fails both of these legal requirements and so cannot be currency by law.

So Lindens fail both tests: they must have intrinsic value, and they must meet the governments requirements for the creation of substitute currency in order to be considered to be legal tender. Since the Linden meets neither of these requirements, it is not now and can never be money.

This isn't to say that they don't have value within the context of the virtual world as a means of keeping score, but then so would any kind of game token, and there's nothing unique or special about that. You could use rocks, or beans.

Don't be deceived by the illusion of reality - there are a lot of businesses in SL, it's true, but at the end of the day they're counting their earnings in dollars, not Lindens - it's the dollars the government concerns itself with, and it's what you take home with you at the end of the day if you take anything out of SL. Even the enthusiastic theorists have to deal with it in those terms, despite energetic hypothetical arguments to the contrary.

The "Duck Test", as you put it, does not apply. That's a subscription to the "truthiness" of an apparent fact, rather than to its true nature. Simple resemblance does not make it so. That's why we make the distinction and call it virtual reality. It's got many of the properties of being real - but we all agree that it's not real by definition.

Which bodily orifice did you pull this "definition" out of? Or have you actually got a reference other than "Kalel" to support it? This puerile fantasy is beginning to look too much like this.

Dr. Cohen appears to know what he's talking about, futhermore, his peers think so too. Sorry to introduce something other than armchair navel gazing here.

http://www.irs.gov/businesses/small/article/0,,id=130524,00.html
http://www.ratical.org/many_worlds/cc/localmoney.html

And while Dr. Cohen certainly and obviously understands the ramifications of virtual economies, he also addresses the fact that there is a trust issue with such virtual economies - pocket economies, as he notes, are inherently untrustworthy, due to their transient nature and the unrealizable nature of the virtual "currencies" they support. He discusses the societal ramifications of the potential emergence of virtual economies as viable constructs, but identifies none as having met this basic bar of trust.

If you had actually read the article you posted the link to, you'd have seen this. Hasty thought and action yields suboptimal results.

I do my research carefully, Malachi. You would be wise to choose your opponents, and make your statements, as carefully.

If you would like to introduce something other than attempts to discredit the facts by simply insulting their spokesperson, we're all waiting to see it.

The first line is of your citation is:Nothing else has anything to do with your claims.

The IRS rule applies to the interpretation of alternate methods of keeping count of one's finances, and applies to the interpretation of community or local currencies as well. This should be clear to anyone - except, apparently, you. You asked for my sources, and I have given them - moreover, they are statements of fact. Your counter post references the hypothetical speculation of a well-qualified professor of economics, but it sums to mere speculation, not fact.

The vehemence of your insults did cause me to pause and wonder if I'd gotten my facts right - I had stated that in order to be accept as currency, a local currency had to have a fixed value expressed in dollars, and that the smallest measure must be worth at least one dollar, so I went back and double-checked it to make sure I was right.

I was.

But that's what direct attacks on the speaker rather than the unassailable logic of the argument are designed to do - to create doubt, not only within the minds of those listening to the argument, but in the mind of the opponent as well, so as to draw attention away from the fact that the attacker's arguments and reasoning has failed them. And to your credit, for a brief moment, I waivered.

If you wish to identify what you believe is a flaw at any point in my argument, I will be happy to demonstrate why the indicated point is irrefutable. If, however, you wish to proceed on the basis that reason and facts have no bearing, then by all means, proceed with your ridicule.