Question: New law by IRS.. Is Entropia now required on my tax return???

Xanato Xan Kaso

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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,

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 FinCEN’s 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...
 
More importantly, if you lose ped, can that be classed as a writeoff in tax?
Could be a benefit to alot of players if so :)
 
i guess it should be similar as with cryptocurrencies. meaning as long as you hold it (leave the peds inside the system) then nothing happens but when you trade em back you need to classify that. how is dependant on the country though
 
i guess it should be similar as with cryptocurrencies. meaning as long as you hold it (leave the peds inside the system) then nothing happens but when you trade em back you need to classify that. how is dependant on the country though

Right, but with real money you are taxed when you purchase assets and when you sell stuff and realize a profit or a loss...

With PED, MindArk only guarantees the TT value of items if your account was to be forcibly closed. And they technically own EVERYTHING. So as soon as I take my 1k ped and buy a set of armor with 150 tt, I technically realized a loss of 850 PED because the armor is not a currency therefore not subject to a tax, and it is ALSO not owned by me, therefore it is not my asset but MindArk's asset.

So shit gets confusing...

And when you factor that all DEEDS have a value of 0.01 PED, That $190 you just spent on a CLD just went POOF in terms of taxation. Even though I hold it, MindArk OWNS it.
 
I guess the key part is "the use of convertible virtual currency to pay for goods or services in a real-world economy transaction". As long as you don't try to pay at Starbucks with ped, you should be fine :)
 
Guys PED is not a real currency. As much as MA would like it to be, and it WAS closer than most 'virtual currencies' a decade ago...

But really they're house chips.

You don't own them, and you're not allowed to leave with them. No once but MA accepts them and they won't take them for purchases outside of the game, which is fine since you can't take them out.


If you are making a living out of EU you need to report your income on your taxes, just as any other form of income.

If you ATH and withdraw you probably need to look under windfall or contest winnings to determine whether the amount you've taken is taxable.

If you are legit reporting EU as income due to LA, estate, grindings earning you that much money, you could probably list your losses but in most cases it will be seen as hobby spending and it's not an issue.

In the US and IANAL but still ...
 
I guess the key part is "the use of convertible virtual currency to pay for goods or services in a real-world economy transaction". As long as you don't try to pay at Starbucks with ped, you should be fine :)

That sounds like the main thing to me too, and it's really no different from before... withdrawal of ped into real world currency can have tax implications. Although... if you pay someone for a service like healing... is that a virtual service or a real-world service? They are after all, sitting somewhere in the real world doing something for you.
 
If you make a profit, you need to pay taxes once your realize gains (convert ped into USD, convert items into USD, let's not pretend it doesn't happen...)

Basically, if you pay 50k usd into game but manage to withdraw 60k in usd, you'll pay taxes on the 10k usd. If it stays as peds you don't have to worry about it, it is only when it gets sold/converted to USD.

Zho
 
That sounds like the main thing to me too, and it's really no different from before... withdrawal of ped into real world currency can have tax implications. Although... if you pay someone for a service like healing... is that a virtual service or a real-world service? They are after all, sitting somewhere in the real world doing something for you.

I'm pretty sure that unless you want to call yourself a professional if both parties are subject to US tax law it's going to get worked under this:

https://www.irs.gov/newsroom/five-things-to-remember-about-hobby-income-and-expenses

If you really want to put it in your taxes there's a way we don't honestly need any new laws for bitcoin either but it helps people to think it's "different" in ways that it's really not while ignoring the larger implications of the thing.

I mean, if it weren't for millions (hundreds of thousands?) of people trying to say "well it's not money..." and still use it as money we could all just get on with our business. Humans have been exchanging value for at least a couple hundred thousand years by any scientific reckoning. We do have laws for most of the ways that one human frequently tries to screw over another as well.

It just helps it to all feel new and damn, people love that.
 
More importantly, if you lose ped, can that be classed as a writeoff in tax?
Could be a benefit to alot of players if so :)

I had a discussion with an IRS representative about this a few years ago (before the crypto boom). My argument was that if my earnings on Entropia are taxable, then my losses should be deductible. What we concluded is that I can either report my withdrawals on a 1099-MISC, or I can do a final tally of all my deposits and withdrawals, and pay long term capital gains tax on any excess when I quit and cash out (if that ever happens), minus any revenue I already paid taxes on via 1099-MISC.
For the time being, my strategy is to withdraw and report via 1099-MISC when I am in a time of life when my overall tax liability is fairly low (for example, I am a student right now so my tax liability is very low).

Right, but with real money you are taxed when you purchase assets and when you sell stuff and realize a profit or a loss...

With PED, MindArk only guarantees the TT value of items if your account was to be forcibly closed. And they technically own EVERYTHING. So as soon as I take my 1k ped and buy a set of armor with 150 tt, I technically realized a loss of 850 PED because the armor is not a currency therefore not subject to a tax, and it is ALSO not owned by me, therefore it is not my asset but MindArk's asset.

So shit gets confusing...

And when you factor that all DEEDS have a value of 0.01 PED, That $190 you just spent on a CLD just went POOF in terms of taxation. Even though I hold it, MindArk OWNS it.


You don't pay taxes on it until you withdraw it.
 
Mindark is or at least was classified as a toy company. Technically we own nothing, so there is no implied ownership of anything in or for this matter out of game. They are all Mindark assets, until they convert to cash....which in reality is just a refund of whatever you already spent (unless you made zero deposits, then I think you would have to self declare an income).

According to the IRS:
Virtual currency has an equivalent value in real currency.

PED does not have this mechanism. There is no real life ownership of anything implied.

While not an IRS agent, I assume that as long as your withdrawals are not greater than the deposits, then it could only be classified as a refund from a toy company, and those as far as I am aware are not taxable.

According to the IRS:

A refund from the IRS is not considered income and is not taxed;

I would assume the same applies for every other refund.
 
Does mindark report LA, shop, etc. 'taxes' in game to anyone?

Nope.

Should they start? Hmm... perhaps we'll see it re-worded as they reworded item info on deeds a long time ago to not imply 'ownership'... call it something else?

....
Too bad we can't get Doctor Letters of Medical Necessity to allow us to play the game using Flexible spending, Health Savings Accounts, etc. to get a tax break on playing. :)
 
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According to the IRS:
Virtual currency has an equivalent value in real currency.

PED does not have this mechanism. There is no real life ownership of anything implied.

PED Does have a real cash value, 10 PED equals 1 USD. In the terms of service, Mindark guarantees you the ped and the TT value of any items on your account if it were to be closed for any reason.(As long as it is above the withdrawal minimum of 1000PED/$100) If they close your account they will pay to you the PED and TT value of any items you own. They even state on their website that 10 PED is equivalent to 1 USD the whole point of the game was to have a 'Real-Cash Economy' to where everything in game has a real life value attached to it. They blast "REAL CASH ECONOMY" in giant letter on main page. Which creates the expectation and implies that our money is convertible to the virtual currency and back again.

Here is a piece from their support page on if you get scammed.

I've been scammed, what should I do?
Immediately Contact Support in a Support Case. Please give us the complete name of the avatar that scammed you, the date and time the scam took place, the full name of the items lost and a short description of what has happened.

Since items in the Entropia Universe have a real value you should also consider filing an official police report about your lost items. If the local police contact us, we will cooperate with them and submit all available logs we have

Look at what they say in the second paragraph. ' ITEMS IN ENTROPIA UNIVERSE HAVE A REAL VALUE'

So even though Mindark OWNS the IP, there is still the agreement of when I convert my money into PED, the PED will maintain its real cash value, along with anything I purchase.

But Mindark only promises the TT value and the PED, any market value above that is artificially created by the players. But everything still maintains its real cash TT value of 10 PED : 1 USD.
 
even if MA counts as a tox company, it means we are buying toys and then selling them for profit which also would need to be taxed. id like to know if the big ubers here who frequently withdraw pay taxes for it. cos if not, in germany its possible to go to jail for that
 
Depends on the Tax Laws of each country.
Are you operating your MA activities as a business or a hobby?

I would be betting that overwhelmingly people are playing as a game, a hobby.
So any income would not be taxable.
But if by any stretch of the imagination the Tax Office did consider that a players activities were a business & income taxable - then the costs of earning that income could be offset against it. (Power, depreciation of computer, internet access costs, Antivirus subs etc etc)\
That is Australia - I would imagine US Tax laws somewhat similar
 
taxman is fckn rude imo. this is what "developed" countries do for you. fck them and their pale horse they rode in on.
 
taxman is fckn rude imo. this is what "developed" countries do for you. fck them and their pale horse they rode in on.

i do like clean water and electricity tho
 
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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,




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...

Not unless Mindark starts reporting to the IRS.

Which they will never ever fucking do.

Because if they ever do report to the IRS, their scammy little online casino would get shut down for anti-consumer practices faster than a gun-control proposal in Texas.
 
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i do like clean water and electricity tho

Medicine is nice too... so are roads and other public utilities...

Also, you know... not having to be jailed/executed for silly things like religion, sexual preference/orientation, having an opinion about your government, or just having an opinion at all i guess...

But you know... herp derp muh tuxus durrrrr hurr
 
Any income is taxable.
Hence the name income tax.
 
I feel I have to share your private comment CHOPPER

~CHOPPER~ said:
You're a fucking dumbass if you think it's fake news.

Stupid fucking pussy

Do you even know what you are talking about?
Well I do because I am a Tax Accountant & it is my job to know.

So save your childish comments & negative reps for something you may have some experience in.
 
Personally, I've kept a spread sheet with deposits and withdrawals listed since day 1, including MA transaction numbers.

A few years ago, my total withdrawals surpassed my total deposits and I started reporting the excess as income.

Each year I report my net withdrawals as income on my tax return.

Outside of allowed tax free income and/or gifts, Americans are required to pay taxes on withdrawal greater than deposits, in my view.

IANAL, I am not an accountant, I don't work for the IRS.

CO

The interesting question is whether in game assets are considered a "foreign bank account" which is reportable. Do the assets live on my computer? In Sweden where MA is headquartered? Or in the country their colo servers are located?
 
Yes Taxes in the US of A I would have no idea
 
i guess it should be similar as with cryptocurrencies. meaning as long as you hold it (leave the peds inside the system) then nothing happens but when you trade em back you need to classify that. how is dependant on the country though

I think this is the only way to look at it that makes sense.
See the whole EU experience as speculation. You put x in. and after some time you redraw y.
The difference between x and y is capital gains or loss.

So you need to record all deposits.

Now the bigger question is; what about costs? Do you deduct the cost of your computer purchase, part of the electricity bill and internet bill?
Since the making of the profit was not possible without those expenses and initial deposits.

The IRS on the other hand will be quick to say that your venture in EU is a hobby. Meaning you cannot claim negative income (loss). Since EU is a long term thing, and not resolvable in the time-span of a book-year this creates a bit of trouble when writing of costs.

In the end it all boils down to you tracking all costs over time and all income. If you see, at a certain point that the cash you redrew is outways the deposits+costs; then you made a profit which is subject to taxes.
There is a minimum profit you must have made before you have file it for taxes.

The most important thing is to track the costs/income/profit. And if you ever get an audit, you can show the figures. You might run the risk of doing it wrongly, but without bad intent. If so you might have to pay more taxes. But most likely not a fine.
 
I feel I have to share your private comment CHOPPER



Do you even know what you are talking about?
Well I do because I am a Tax Accountant & it is my job to know.

So save your childish comments & negative reps for something you may have some experience in.

All income is taxable in the US.
Period.

I'm glad that you're not my accountant.

Idiot.
 
What if you don't live in the US?

You do know that there are other countries in the world, with different laws even.

Donald Trump really needs to build that wall. Not to keep other people out, but to keep people like you in
 
What if you don't live in the US?

You do know that there are other countries in the world, with different laws even.

I'm talking about the US, and I don't care about other nations tax laws.
You gave me a neg rep saying my post was "fake news"
That's why I responded the way I did.

You're obviously ignorant of tax law in the US.
Dumbass.
 
Generally I like US people and despite differences Australia & the US are very similar in most things.

But Chopper please don't play "The Ugly American" on an international forum - it reflects no credit on anybody.

You are correct I know little about US tax laws. Hey I do know this though, there are ALWAYS exceptions.

So go do a Google search on US Tax Laws; taxable income; exceptions to.

Sorry about derailing this thread, but I will need to say this - it is sad that the wages of US troops in war zones are taxable. In Australia they are not.

This thread is interesting and there can be tax implications.
 
The odd way I look at it is that under EU you are just transferring money into the game and any profits you may make over your total deposit then yes you will need to declare it. So if you ever do withdraw but that value is under your total deposit then you wouldn't need to declare it.
 
You are correct I know little about US tax laws.
.

Looks like you shouldn't have neg repped my comment with a "Fake news" comment.
Use your brain before making a fool of yourself next time.
 
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