Virtual Property and the Law

Nikto said:

If you will withdraw, most likely you should pay income tax (depends on country though, but bank could report arrival of money to tax authorities).

If you don't plan to withdraw money, I don't see any reasons how any taxes could apply here (maybe depends on country as well, but I didn't seen any laws, that set taxes on ingame property and ingame operations with it yet). If you could point me to any of them, it would be really interesting to read it (country doesn't matter, I just wondering if there is any "legal field" exist already).

Hard question
There is a lot of games around, where "black market" of items exist and according to news ingame items could be as much expensive as Entropia ones (don't want to call any names of these games). But I never heard anything, about reporting them as your foreign bank account or foreign property.

Actually really interesting topic you bring here, maybe even worth open separate thread with

Click to expand...

Start with this from Boston University:

DEFINING AND ADDRESSING VIRTUAL PROPERTY IN
INTERNATIONAL TREATIES

Generally courts are defining "virtual property" as real property. Not like a house but like a brand (Coca Cola) or patent (registered idea). If you damage Coca Cola's brand by smearing their name, they can sue you and wind damages. If you violate a patent, Microsoft or whoever owns the patent can sue you as well.

Theft of virtual items is just like stealing a car at least in China:

3 Years in Jail

I don't plan to withdraw the interest on my savings account, but I have to report it as income and pay taxes on it. And I don't plan on withdrawing the dividends I receive on my stocks. But I still have to report it as income and pay taxes on it....even if it's a stock of a oil company that only has operations in Brazil.

I think the income question is clear.....I have to report my CLD income.

Do I have to pay taxes on all the stuff I craft over a year if I make a profit. I don't know. Sooner or later the IRS will argue it's a business.

If I lose money crafting over a year, can I take that off my taxes as business losses? Hell no, the IRS will just call it entertainment and playing videos games is just entertainment, right?

In order to be clear on these, you might incorporate your avatar. Is it worth it for the average player? Not likely. But what about Buzz Lightyear or others who large land areas?

So to answer your question a bit. Virtual property is property in the eyes of most courts. Theft is theft. Fraud is fraud. The problem gets to be who's laws are enforced? Player B from Country B steals property from Player A in Country A but the company is locates in Country C with servers in Countries D, E and F.

But the courts are just starting to deal with how to handle disputes in virtual worlds.

Here's one from SL:

Second Live Virtual Property Suit

Does MA really think that making you accept their ToS every time you login insulates them. You have to agree to login...or you lose access to your property....

What does that make MA? An RCE when the are marketing. Jan called EU a "virtual universe" when asked directly....which legally is conveniently undefined term. Not gambling like online Poker as it would be illegal in the U.S. He just stuck to an undefined term.

I really doubt that MA will try to send reports about withdrawn money to other country finansial institutions about income.

Since this is very unlikely to happen (mayby if someone is withdrawing like 100k $ yearly or more) - this makes it grey area: a place where only really honest or really stupid people will report income to pay taxes for it .

About theft made ingame - i guess it is possible to prove something in law court but it needs help from MA and police in all three coutnries (MA, victim and scamer country). This seems possible but quite hard to do and in some cases in my opinion - impossible (i will not state what cases not to make any ideas).

Falagor

Falagor said:

I really doubt that MA will try to send reports about withdrawn money to other country finansial institutions about income.

Click to expand...

Then the U.S. just outlaws EU. There goes that market.

Internet poker is illegal in the U.S. So is online sports betting. And the U.S. will take action, see what happened to the CEO of BetOnSports when he changed planes in Houston on his way from GB where BoS was domiciled and Costa Rica where the servers were located. He got arrested for not taking reasonable steps to exclude U.S. players. I think BoS wound up paying a $40 million fine.

Falagor said:

Since this is very unlikely to happen (mayby if someone is withdrawing like 100k $ yearly or more) - this makes it grey area: a place where only really honest or really stupid people will report income to pay taxes for it .

Click to expand...

It's really honest or really stupid until u get caught. i.e. then the fines and penalties add up in a hurry and can wind up costing much more than u owe in taxes. And the U.S. is taking very aggressive actions to collect taxes overseas hidden accounts. There's a lot of money out there and look at the U.S. deficit.

I doubt anyone in the U.S. playing EU has anything to worry about if talking about small amounts....but do you really think that MINDARK incoming wire transfers won't be noticed if there gets to be real money in EU?

Falagor said:

About theft made ingame - i guess it is possible to prove something in law court but it needs help from MA and police in all three coutnries (MA, victim and scamer country). This seems possible but quite hard to do and in some cases in my opinion - impossible (i will not state what cases not to make any ideas).

Falagor

Click to expand...

The law will catch up sooner or later...it's a hot topic of discussion now that virtual worlds with real money are growing. Once the amounts get big, u can be sure treaties will be signed.

Strangelove said:

Then the U.S. just outlaws EU. There goes that market.

Internet poker is illegal in the U.S. So is online sports betting. And the U.S. will take action, see what happened to the CEO of BetOnSports when he changed planes in Houston on his way from GB where BoS was domiciled and Costa Rica where the servers were located. He got arrested for not taking reasonable steps to exclude U.S. players. I think BoS wound up paying a $40 million fine.



It's really honest or really stupid until u get caught. i.e. then the fines and penalties add up in a hurry and can wind up costing much more than u owe in taxes. And the U.S. is taking very aggressive actions to collect taxes overseas hidden accounts. There's a lot of money out there and look at the U.S. deficit.

I doubt anyone in the U.S. playing EU has anything to worry about if talking about small amounts....but do you really think that MINDARK incoming wire transfers won't be noticed if there gets to be real money in EU?
(...)

Click to expand...

You are probably right - and to be honest - i am really happy i do not live in U.S. then . My anarchist nature would feel in prison there.

I think making too much laws - only makes it worse: the clever ones will find a way to pass around the laws anyway and it will only limit everyones freedom not making any good.

So far Poland has quite destructive politics in many cases too (too much restriction laws) but politicans here are probably underestimating online virtual earnings so far (or are making big bucks themselves on it) and have opinion more like "online virtual buisness - meh that can't be worth much." For now they focus on triple taxing us on the roads and highways .

And to be honest: unless, like i said, if it is not +100k $ suddenly appearing on my acount from Sweden - i doubt anyone will try and check that here.

Falagor

I can only speak about taxes in the U.S.A., but there are a couple issues.

First, we have a 'voluntary' tax system in that, legally, you are required to supply the information yourself to the taxing authority. Just because MindArk doesn't send you or your government the information, you have no reduction in liability.

Second, "Income" is basically defined as any source of economic enrichment unless specifically excluded by statute. If you find a one dollar bill on the ground you are legally obligated to report that as income - granted it's such a nominal amount that no sane person will take the time to do it but still... Another example, given by the IRS, is if you steal something from another person, and do not intend to return it within the year, you are legally obligated to report it as income.

To muddy the waters, "reportable" income is usually limited to realized (Turned into cash) income. This is why, for the normal person (though not some companies), just because the value of your stock goes up you do not need to report the income until you sell it. This gives a good reason why you wouldn't need to list in-game revenue as income on your return.

One area of the Code that would probably relate very well to EU are the 'hobby loss' rules. Basically, you can offset the income your hobby produces by the expenses that it's cost you. So if you've deposited $1,000, and played around, and then close your account while withdrawing the $800 you have left you probably wouldn't need to report that as income... or be allowed to report the $200 difference as an expense. It "should" be possible to get out of the hobby loss rules and claim your EU expenses as a business expense, but you'd have to prove that you actually operated with a profit motive, and intent to profit, while meeting a number of other criteria. (There's no need to incorporate, form a LLC, ect to be "In business")

Clear as mud? Good!

(I'm not a C.P.A. or a lawyer, if you have issues that may be relevant consult your accountant)

I've paid taxes on EU for 6 years now. The total I've taken out in that time is likely around $200-300k. I don't think it is a TON of money by any means but it is enough to raise a few questions given the fact that I'm getting money from Sweden for no apparent reason as a middle aged Armenian American (Close to the Middle East). I'd guess given the fact that the USA and that region typically have had issues, I'd rather keep myself free and clear of any investigations that could arise later.

Perhaps it is indeed foolish, I admit, I hate paying taxes for something I'm unsure about. I do feel like I could get away with not paying, but now that I've started I don't think I could stop. I did always wonder whether or not the USA would eventually deem this to be gambling. For now I think we're all safe in this grey area.

I do agree with the Hobby loss btw, but you can't claim a hobby loss when you are always earning and have no other source of income. If you do have another source of income and have deposited, you likely won't have to worry about putting any of this on your taxes.

I should have made the 'hobby loss' rules more clear, you generally don't want it be a "Hobby loss", but instead "Business (Or self-employment, where applicable) Expense." Hobby losses limit the amount of your deductible expenses up to the amount of your hobby income

For example, Star since you'd probably be considered a self-employed cash basis tax payer you 'may' be able to deduct your computer(s), a portion of your electricity, your internet connection, EU related travel expenses, ect. Having proven that you're in this for the income you could probably even amend your taxes from the early years, before you started to withdraw, and claim those for a delayed refund - presuming you did have 'some' taxable income in those years & presuming you're not past the statute of limitations regarding amended returns. Also, if for some reason you get a another income in 2014 and don't withdraw, but still participate as actively, you could still deduct the EU expenses (New computer) from your other income since, for you it would be a business expense. Most people couldn't do that since for them it's 'only' a hobby.

But yeah, there's no doubt in my mind that Withdrawals minus Deposits is taxable income, the only real question is if PED Card minus deposits is taxable income.

Personally, if/when I ever withdraw I'll report it on my taxes.

Colbey Kal said:

I should have made the 'hobby loss' rules more clear, you generally don't want it be a "Hobby loss", but instead "Business (Or self-employment, where applicable) Expense." Hobby losses limit the amount of your deductible expenses up to the amount of your hobby income

For example, Star since you'd probably be considered a self-employed cash basis tax payer you 'may' be able to deduct your computer(s), a portion of your electricity, your internet connection, EU related travel expenses, ect. Having proven that you're in this for the income you could probably even amend your taxes from the early years, before you started to withdraw, and claim those for a delayed refund - presuming you did have 'some' taxable income in those years & presuming you're not past the statute of limitations regarding amended returns. Also, if for some reason you get a another income in 2014 and don't withdraw, but still participate as actively, you could still deduct the EU expenses (New computer) from your other income since, for you it would be a business expense. Most people couldn't do that since for them it's 'only' a hobby.

But yeah, there's no doubt in my mind that Withdrawals minus Deposits is taxable income, the only real question is if PED Card minus deposits is taxable income.

Personally, if/when I ever withdraw I'll report it on my taxes.

Click to expand...

There is another "mudy" situation here too - the difference between $ conversion value when you deposit and withdraw. Obviously you can deposit 1k $ and half year later withdraw 1k $ and be on plus . I will be really laughing watching all the politicans trying to tax the virtual earnings industry .

Btw since there is this "fashion" for opening new buisness and geting donation from European Union - mayby i should open one (of course then i would have ot pay taxes obviously but getting free 4-5k euros seems tempting ). I guess i would need just good buissness plan and i think i just want to do this to see the look on the face of EU official.

Falagor

Good input so far.

I am aware that if you steal or find a dollar, you need to report it. But who does? And I know enough about hobby losses to be dangerous. If it gets into that, I will ask my accountant?

What interests me is what happens when your ped card goes over 100k ped or 10k USD? Do you have to report your account as a foreign bank account? Does the value live in Sweden or on my computer which is in the U.S.? Another question for the accountant. That's not been settled as far as I know unless it falls under some laws I am not aware of.

If you do loot a Mod Fap, does that count as income or a foreign asset? More questions for the accountant.

As for what I pull out above what I depoed, I will report it as income.

How does CLD income fit into the picture? Is like stock dividends or do you report it only if you withdraw?

The nightmare scenario would be if a profitable mining run is considered income but bad runs are losses. I really doubt it will go that far.

What I sure of is that this will get settled sooner or later as virtual worlds are growing rapidly. And where there is money, the law follows.

Strangelove said:

(...)
What I sure of is that this will get settled sooner or later as virtual worlds are growing rapidly. And where there is money, the law follows.

Click to expand...

Worst case - country will block comunication with Entropia . And i bet few countries with lazy politicans with really strict politics will do that.

Want more ideas:

• what about exchanging peds for bitcoins
• then buying stuff for bitcoins

How tax-colectors can track that .

I mean i know first step is against eula but still few people might try it anyway. I love the anarchy and freedom area that internet provides.

Falagor

Falagor said:

Worst case - country will block comunication with Entropia . And i bet few countries with lazy politicans with really strict politics will do that.

Want more ideas:

• what about exchanging peds for bitcoins
• then buying stuff for bitcoins

How tax-colectors can track that .

I mean i know first step is against eula but still few people might try it anyway. I love the anarchy and freedom area that internet provides.

Falagor

Click to expand...

What's the point of exchanging ped for BitCoins? Great, now I can buy heroin on the Internet but not much else.

BTW, all U.S. based avatars are officially prohibited from trading with Hamas avatars....

The money laundering aspect is interesting. But so far the amounts you can move in EU are way too small for large launderers. What happens when it gets bigger. The U.S. banks have not been stellar in this regard.

Strangelove said:

What's the point of exchanging ped for BitCoins? Great, now I can buy heroin on the Internet but not much else.
(...)

Click to expand...

So far there are 12 shops accepting bitcoins in Poland. There are actually 3 of them usefull (computer store, belgian beer store , and some toy store).

I really belive that in future this will be more common curency and not only for illegal stuff (like mentioned heroin).

Strangelove said:

(...)
BTW, all U.S. based avatars are officially prohibited from trading with Hamas avatars....
(...)

Click to expand...

I wonder "how" this can be prohibited and in case when actually "proved" - what penalty may be executed?

Should i make jokes now and trade my friends from US and then after trade is done tell them: "oh and btw i am from Hamas - you broke law in your contry" ? This is just silly.

Falagor

interesting thread.

One question.

Player A invested 30.000 Euro's in 2009 and takes out 25.000 over the next three years, would he need to pay taxes on it. The way I see it I haven't made a profit here (at least not for the taxman) so nothing to be taxed, right?

Whatever I hold within EU is irrelevant (even if I have 10.000 CLD's as this has, next to the tt value, no value to it, plus how on earth would the tax man know?)

Angel

Falagor said:

So far there are 12 shops accepting bitcoins in Poland. There are actually 3 of them usefull (computer store, belgian beer store , and some toy store).

I really belive that in future this will be more common curency and not only for illegal stuff (like mentioned heroin).



I wonder "how" this can be prohibited and in case when actually "proved" - what penalty may be executed?

Should i make jokes now and trade my friends from US and then after trade is done tell them: "oh and btw i am from Hamas - you broke law in your contry" ? This is just silly.

Falagor

Click to expand...

Well, if BitCoins tickles your anarchist funny bone, go for it.

To me, BitCoins is a joke. It's been hacked twice, has password stealing malware and nobody here that I want to deal with uses it.

As for me, I had my bank card compromised somehow last year. My big, evil U.S. tax payer bailed out bank called me within an hour and asked me if I had purchased gas in Florida. No, I hadn't. They cancelled my card and I had a new one in my name but a different number at a local branch the next day. What does BitCoins provide? I'll stick with the evil tax payer bailed out banks for now.

As for the Hamas crack, it's a bit more serious. The U.S. prohibits donations to certain Islamic charities and other organizations it feels support terrorism. And it's a topic U.S. regulators take very seriously. If large amounts of wind up in those hands, the U.S. could ban Americans from EU.

Here's something to consider. MA has applied for a banking license in Sweden but did not get it due to lack of the proper funding. Who cares, right.

We'll the U.S. has had an oil embargo against Iran for quite some time. Oil is fungible as they say. U.S. embargoes Iran, Iran sells oil to Poland and the U.S. buys the oil from Saudi Arabia that Poland was buying. Not much effect on the Iranians as intended. Then the U.S. banned U.S. banks from doing business with Iran. Yawn. Lastly, the U.S.banned banks doing business with Iran from doing business in the U.S. Guess who the banks sided with. The embargo is starting to bite.

My point being is that the U.S. has a habit of throwing it's weight around when it comes to what other countries do. If the U.S. is against banking with Iran, your bank won't be able to do business with Iran....if you want to business in the U.S. And the U.S. market is big enough that most businesses want to do business here which gives them leverage over what others can and can't do.

None of this is relevant until virtual economies grow large but my bet is that they will and that they will want to do business with Americans.

In Love With said:

interesting thread.

One question.

Player A invested 30.000 Euro's in 2009 and takes out 25.000 over the next three years, would he need to pay taxes on it. The way I see it I haven't made a profit here (at least not for the taxman) so nothing to be taxed, right?

Whatever I hold within EU is irrelevant (even if I have 10.000 CLD's as this has, next to the tt value, no value to it, plus how on earth would the tax man know?)

Angel

Click to expand...

If you have put in 30k and taken out 25k, your still 5k in the clear assuming you have no assets totaling over 5k in EU. 25k plus 5k = 30k. No gain, no loss.

But the question in this thread is how do you value your CLDs. TT, mark to market, what you paid for them? And what about the ped you get each week? Income when you receive it like a stock dividend? I have to pay taxes on my stock dividends every year in my non-retirement accounts even if I don't sell the stock or withdraw the income from my broker. I don't pay taxed on the gain in value of the underlying stock if it goes from30 to 50 that year but the dividends are taxable.

How will the tax man know? You did provide your bank account info and correct address, no? If not, then the tax man likely won't. But what if your country decides that EU must provide a report of people with accounts living in your country to your government. If MA declines, that country just blocks funds going into and our of EU. If they do, your country now has your EU account information. If deposits and assets are provided by EU, your on the hook for taxes, if applicable, and penalties and interest if that's what the tax man decides. At least in the U.S., I am required to report income whether or not I have tax documents from the company that paid me.

That's why how people value their EU accounts is important. If it's a few k ped, who cares. If it's a few hundred k ped, it matters.

Not sure how it works in other countries, but here we have non-taxable minimum income. It's like 3750€ a year.
If I understand it right, you don't have to pay taxes if you make less than that amount.
Ofc if you are employeed and make 5k / year and you withdraw 3k / year from entropia, you will have to pay taxes... or at least should pay if you don't want troubles.

You should search though poker forums, there are people who are making insane amount of money.

In Love With said:

interesting thread.

One question.

Player A invested 30.000 Euro's in 2009 and takes out 25.000 over the next three years, would he need to pay taxes on it. The way I see it I haven't made a profit here (at least not for the taxman) so nothing to be taxed, right?

Whatever I hold within EU is irrelevant (even if I have 10.000 CLD's as this has, next to the tt value, no value to it, plus how on earth would the tax man know?)

Angel

Click to expand...

in germany, so for you:
- As long as you are got less back than deposited --> loss, hobby, not taxable
- You made occasional several K $ with your hobby? Still a hobby, but taxable income
- You made several K $ with your hobby again, again and regular? You need a to sign a commercial now
- Whatever you hold? Irrelevant, true - at the end everything is just, "thin air" "numbers on paper" which are not an income until you cashed them out. Like with stock earnings they cant taxed the gains before you sold/got them in your "hands"

Strangelove said:

(...)
Well, if BitCoins tickles your anarchist funny bone, go for it.

To me, BitCoins is a joke. It's been hacked twice, has password stealing malware and nobody here that I want to deal with uses it.

As for me, I had my bank card compromised somehow last year. My big, evil U.S. tax payer bailed out bank called me within an hour and asked me if I had purchased gas in Florida. No, I hadn't. They cancelled my card and I had a new one in my name but a different number at a local branch the next day. What does BitCoins provide? I'll stick with the evil tax payer bailed out banks for now.
(...)

Click to expand...

As BitCoins beeing hacked - you mean two different buy/sell stocks were hacked. It could have happen to any other high rollign $ site even eBay. The whole system just can't be hacked .

As for the credit card system - this is something i actually do not understand totaly. Only thing person needs to know to pay is: your name and credit card number - something you have to provide to pay. So basicly the whole system is fucked up from start and yet whole world relies on it. I can't understand to this day - how? Btw i do not own credit card and never will (i own debit card that when i pay i need to put code in and when making net transaction i need to put sms sent code).

Strangelove said:

(...)
As for the Hamas crack, it's a bit more serious. The U.S. prohibits donations to certain Islamic charities and other organizations it feels support terrorism. And it's a topic U.S. regulators take very seriously. If large amounts of wind up in those hands, the U.S. could ban Americans from EU.
(...)

Click to expand...

To be honest - i am really open for other religions (i am catholic) and stuff but recently i am seeing just too much with islamic radicals all over the world and indeed this seems to look like serious problem.
However you can't fight that with law restrictions - thats just silly aproach. Imho - first we would need to knwo why radicals are so agressive and then try to think and understand their way. Mayby then we would be able to predict their agresive actions. Making a law and hopeing it will be enough to prevent something is just stupid.

Strangelove said:

(...)
Here's something to consider. MA has applied for a banking license in Sweden but did not get it due to lack of the proper funding. Who cares, right.

We'll the U.S. has had an oil embargo against Iran for quite some time. Oil is fungible as they say. U.S. embargoes Iran, Iran sells oil to Poland and the U.S. buys the oil from Saudi Arabia that Poland was buying. Not much effect on the Iranians as intended. Then the U.S. banned U.S. banks from doing business with Iran. Yawn. Lastly, the U.S.banned banks doing business with Iran from doing business in the U.S. Guess who the banks sided with. The embargo is starting to bite.

My point being is that the U.S. has a habit of throwing it's weight around when it comes to what other countries do. If the U.S. is against banking with Iran, your bank won't be able to do business with Iran....if you want to business in the U.S. And the U.S. market is big enough that most businesses want to do business here which gives them leverage over what others can and can't do.

None of this is relevant until virtual economies grow large but my bet is that they will and that they will want to do business with Americans.

Click to expand...

I am not sure if i understand this 100%. Seems to me like some political strategy to block some actions - reason why i am kind of anarchist to be honest.

And the bolded part can be definetly a reason for a war . I know it is not just that simple and i am glad that decisions about making war between coutnries does not depends directly only on my decision (probably there would be WW3 soon enough if it would).
I really dream of a world that there is absolutly no political games and when it comes to politics there is always true intentions. Probably this will never come true but hey: everyone can have a dream .

On topic:
i am seeing with my sister today - she is a lawyer so if i remember i will ask her about paying Entropia taxes .

Falagor

By guess is that in Sweden, and in most countries, they would not tax the ped income, but will tax your withdrawals from the game. It would be a bit strange to tax a virtually currency income in my opinion. So they would probably tax the withdrawals - deposits. A second problem is the VAT. If you have a big enough income from the game they could also call it a "business" and force you to pay VAT, at that would be really complicated. But as long as you pay income tax on any profit from the game it probably okey. My biggest fear is that they would treat it as online gambling.

In Love With said:

interesting thread.

One question.

Player A invested 30.000 Euro's in 2009 and takes out 25.000 over the next three years, would he need to pay taxes on it. The way I see it I haven't made a profit here (at least not for the taxman) so nothing to be taxed, right?
Angel

Click to expand...

In Sweden i think it a "five year rule", you can deduct the loss from your hobby for the last five years from you hobby profit.

Thank you for new thread.
I decide to quote some more original posts, to make start of that discussion a bit more clear.

Strangelove said:

I guess it depends on whether those ped "live" on servers in Sweden or on your computer.

Click to expand...

Also I forgot to add, what today it's near impossible to determine where your PED's "live" "physically".
Even if you connecting to servers, located in Sweden, you don't know internal network architecture of MA's servers. Maybe they use someones or they own cloud service to replicate DB's over world (like they use Amazon S3 to host files for downloading). So it could be anywhere around the world, if they want that.

Will read whole discussion as soon as I can.



---- ---- ---- ---- ---- ---- ---- ---- ---- ---- ---- ---- ---- ---- ---- ----


Post1:

Vigi said:

So op gonna sue som1 for stealing 1 cent? Afaik 42 clds got a real value of 42 pec....
Gl with getting it sorted but im afraid u r screwed...

Click to expand...

Nikto said:

A bit strange statement IMHO

1) TT Value of 1 CLD = 0.001 PEC (1 PEC/1000)
2) For example, if someone will steal 10000 USD from you in RL, will you sue him just for 7 USD? (since that's estimated cost of printing them for BEP). Not talking about "real value" of your money on bank account, since it's "just 0 and 1" in the bank DB. Same with any RL stocks. Even for "material" RL items cost price way different from selling price.

IMHO "real value" of something is not it's cost price (how much it's cost to produce), it's how much others willing to pay for it - market value.

Click to expand...

Post2:

Strangelove said:

Will your opinion of the "real value" change if your government decides to charge a 10% property tax every year on those CLDs? If your making 20% a year in CLD income, they just cut your income in half. Or will you argue that the "real value" is now tt value because there's no guarantee you can get the present market value if you decide to sell? i.e. MA goes bankrupt.

Also, if live in the U.S. and have a bank account or equivalent worth over $10,000 in a foreign country, you need to report it to the IRS. Say you have 101,000 on your ped card. Do you need to report it? I guess it depends on whether those ped "live" on servers in Sweden or on your computer.

"Real value" is a very complex question. So I guess it depends on what's in one's best interest at the time they are computing the "real value".

That's just the tip of the iceberg....

Click to expand...

Post3:

Strangelove said:

Will your opinion of the "real value" change if your government decides to charge a 10% property tax every year on those CLDs? If your making 20% a year in CLD income, they just cut your income in half. Or will you argue that the "real value" is now tt value because there's no guarantee you can get the present market value if you decide to sell? i.e. MA goes bankrupt.

Click to expand...

Nikto said:

If you will withdraw, most likely you should pay income tax (depends on country though, but bank could report arrival of money to tax authorities).

If you don't plan to withdraw money, I don't see any reasons how any taxes could apply here (maybe depends on country as well, but I didn't seen any laws, that set taxes on ingame property and ingame operations with it yet). If you could point me to any of them, it would be really interesting to read it (country doesn't matter, I just wondering if there is any "legal field" exist already).

Click to expand...

Strangelove said:

Also, if live in the U.S. and have a bank account or equivalent worth over $10,000 in a foreign country, you need to report it to the IRS. Say you have 101,000 on your ped card. Do you need to report it? I guess it depends on whether those ped "live" on servers in Sweden or on your computer.

"Real value" is a very complex question. So I guess it depends on what's in one's best interest at the time they are computing the "real value".

That's just the tip of the iceberg....

Click to expand...

Nikto said:

Hard question
There is a lot of games around, where "black market" of items exist and according to news ingame items could be as much expensive as Entropia ones (don't want to call any names of these games). But I never heard anything, about reporting them as your foreign bank account or foreign property.

Actually really interesting topic you bring here, maybe even worth open separate thread with

Click to expand...

Here are a few points that interest me. I am not talking about sweaters having to "mark to market" or ppl with a few hundred dollars of assets or "unrealized gains". What interests me is large accounts.

ATM, I treat EU like has been suggested. Money in is entertainment. If I withdraw over what I put in, I pay taxes on it. Sounds reasonable. I won't deduct my losses.

But what intrigues me is how the U.S. will look at my account if I build up more than $10,000 USD in the account. Foreign bank accounts of over 10k USD have to be reported by me.

If I keep 15k USD in a "US bank" and the money lives on a server in Italy, I don't have to report it. But if I open an account with an Italian bank in Italy and they store the value on servers in the U.S., I have to report it since they are regulated in Italy. If the Italian bank has a branch in the U.S., that bank is regulated by U.S. authorities so they report my account to the IRS just like any U.S. bank. I don't have to report it.

So where does the value in my EU account live? Presumably in Sweden since that is where they are regulated ATM. Or does the value live on my computer because I live in the U.S. Again, it's not an issue for small accounts but will be as accounts grow larger.

A second issue is that if I have a brokerage account, deposits and withdrawals are not reportable unless you are using say a retirement account which has tax implications. Some accounts you deposit up a limit and you get tax an upfront tax deduction. Like an IRA. You pay taxes on the "back end".

With my Roth IRA, I pay taxes up front but my I can withdraw my earnings tax free.

With a standard brokerage account, interest and dividends are taxable income. I pay taxes on them every year. If my stocks change in value compared to my purchase price, I have "unrealized" gains or losses. I don't report gains or losses until I actually sell my stock and "realize" the gain or loss. It becomes taxable at that point.

So what is EU? A brokerage account holding stocks with unrealized gains and losses? Or are increases in value considered income?

MA must have some position on this since they had stock terminals back in the day but pulled them. If you sell stocks in the U.S., you have to register with every state. Also, MA stated that their announced IPO would exclude the U.S., presumably due to financial regulations.

What about CLDs? Are they passive taxable income like a dividend?

What about LAs? In the U.S., the local county tax assessor assigns a value to the land every two years (in my area) based on similar sales of similar properties. I pay property tax based on their assessment. I can't buy a piece of property for $1 USD and pay taxes based on that amount. If the assessor decides my property has increased in value by 12% over the previous assessment 2 years earlier, I pay tax based on the new value.

ATM, MA is assigning a value of almost zero to property deeds such as MS deeds, CLD deeds and LA deeds. Will that fly when the amount of money tied up in "virtual" property becomes material?

It's a serious question. Second Life was sued by players who argued their "virtual" property was "real" property and as property owners, they had rights. Lindon Labs could not just change the ToS and force owners to accept those terms by clicking "I agree" when logging in.

In this instance, Lindon Labs is a U.S. company and the players were U.S. based. U.S. laws apply, at least to the class who filed this particular suit. But the question gets interesting when the "owners" are in one country and the company is in another.

Virtual Property Class Action Against SL

A number of paying users (or "residents") of virtual world Second Life have filed a class-action lawsuit against the company and its founder, Philip Rosedale. Their complaint: The terms of virtual property ownership have changed, and residents were forced to agree to a new terms of service that eroded their ownership rights to virtual property and goods. In fact, the suit filed on April 15 claims, the promises of "ownership" were empty in the first place.

Through extensive marketing, Second Life parent company Linden Lab, with Rosedale as its spokesman, "lured consumers across the United States to invest real money into (Second Life) by promising those users that they would own the virtual land and property they purchased as well as the content they created," the terms of the suit allege.

"Then unilaterally, without the consumer owner's consent, knowledge, or permission, changed the terms of the service agreement to state that these land and property owners did not own what they had created, bought and paid for, and that these consumers had no choice but to click on a new terms of service agreement or they could not have access to their property," the terms of the suit continue.

Click to expand...

And it gets real interesting when the value of all those lands becomes large. Who says you can't create more land? And why would I want to buy physical land with all the hassles, regulations and taxes when I can buy virtual land which is unregulated, untaxed and not subject to disasters? The RoI on my CLDs greatly outpaces anything I can hope to buy where I live. This assumes MA does not go bk or regulations change drastically.

Anyway, just food for thought. I am interested in ppl's thoughts on the issues. Don't worry too much about being OT as long as it's somewhat relevant.

CO

peds are essentially EU's version of monopoly money. As far as taxes, etc. go, you shouldn't have to worry about it much until you are ready to withdraw. If by some very rare chance you earned a hell of a profit, talk to an accountant and maybe a tax lawyer before you withdraw. Otherwise, spend, spend spend because profits in game can easily become losses extremely quickly.

Side note - whatever happened the entropialaw website?...

Second side note - interesting little reading:

mastermesh said:

peds are essentially EU's version of monopoly money. As far as taxes, etc. go, you shouldn't have to worry about it much until you are ready to withdraw. If by some very rare chance you earned a hell of a profit, talk to an accountant and maybe a tax lawyer before you withdraw. Otherwise, spend, spend spend because profits in game can easily become losses extremely quickly.

Side note - whatever happened the entropialaw website?...

Second side note - interesting little reading:

Click to expand...

And Federal Reserve notes, we call them U.S. dollars, are just monopoly money printed by a U.S. chartered entity. It's just worthless paper with ink and numbers. What gives them value is that people will accept them in exchange for goods and services. You can't eat them, sleep with them, talk to them or anything else "real". Although you might be able to sew them together into a blanket to keep you warm.

The hard money advocates, gold bugs, argue that you can't just print money because you can print an infinite amount and that ruins the value stored in currency. Look at Argentina and other countries that have had hyper inflation.

By digging gold out of the ground, you inherently limit the money supply. On the downside, you limit economic growth. On the upside, governments can't just inflate themselves out of a mess as is tempting. Or so the arguments go. What the gold bugs don't care to admit is that their preferred currency has all the same intrinsic characteristics a paper money. You can't eat it, sleep with it, talk to it and it's too soft to make a useful weapon from. Although I suppose you could hit someone over the head with it but it would make a lousy shelter.

Paper money advocates say the USD is backed by the industrial productivity of the U.S. Gold advocates say their preferred means of exchange is "real".

Both gold and USD have value because ppl covet them and ppl covet them because they have value. It's a circular argument in each case. What's different with PED or BitCoins? Salt used to be used as currency and one island in the Pacific, people stored their wealth in large flat stones with holes in the center of them.....in their yards.

So "money" is just an efficient way to store wealth. Does it matter if it's salt, gold, large flat stones, paper currency, bits on a computer representing paper currency, BitCoins or PED?

I can't take my Monopoly money and legally exchange it for goods and services on a wide scale. If you have found a way to do so, please PM me the details ASAP so I can go buy all the Monopoly sets before they run out.

I can take a $20 gold coin and pay for a gallon of milk at the grocery store but I am sure some lucky individual would slip a $20 bill in the till and pocket the gold coin.

I can take gold, USD & PED and exchange them. I might have to convert my PED to USD before spending it but I still can spend the PED IRL.

CO

I'd choose (not claiming expertise or previously known): it's a brokerage, as it is only usable in the game domain until converted at point of withdrawal, with the minimum withdrawal limit and fee attached.

To quote what OP has already said "unrealised gains", your toon is still worth whatever you can get for it's skills on ESI and it's items / assets, where market value is an average of sales history price.

Btw @OP I found a resemblance between your chosen tact and your forum avatar pic, gz!

BB Global said:

Btw @OP I found a resemblance between your chosen tact and your forum avatar pic, gz!

Click to expand...

I'm glad u found it....that makes one of us.

My p.o.v of it...
If the EULA and ToU are in MAs favour from a legal p.o.v, we the playerbase doesn't own
anything within EU.
We just borrow avatar, we are allowed to use MAs service as it fits them for free, and we
are allowed to increase a ingame value MA owns with RL money.
We don't really buy a PEDvalue, we pay a fee to increase a ingame value, that in its own
doesn't have a RL value...

MindArk visited US Congress some years ago.

A meeting within the US Congress
In August MindArk were invited to a meeting with representatives from the Joint
Economic Committee of the US Congress in order to discuss a range of
legislative and legal issues regarding virtual worlds.
The meeting took place in Washington DC and MindArk sent two executive
officers to attend. In its invitation the US Congress pointed out MindArk’s vast
experience, an experience the Congress want to utilize in its ambition to learn
more about virtual worlds and what might be their most appropriate policy
response to this growing economic sphere.

http://www.slate.com/blogs/future_t...ling_amulet_and_shield_in_virtual_world_.html

Last week, the Dutch Supreme Court made a curious ruling: It convicted a teenage gamer of stealing something that doesn't exist. The defendant stole two virtual items while playing RuneScape, a free massively multiplayer online video game. According to the Associated Press, the defendant’s attorney argued that the stolen amulet and shield “were neither tangible nor material and, unlike for example electricity, had no economic value.” The court, however, disagreed, ruling that the time the 13-year-old victim spent in the game trying to earn the objects gave them value.

Click to expand...

this supreme court ruling is interesting.
the defense argued/appealed on the basis that virtual goods had no value and were not tangible, the court ruled that just the time spent aquiring them gave them value. this goes further than just claiming a virtual item has value because money was spent on it.
many people seem to think that the dutch are very liberal but they are quite strict when it comes to property.
ofcourse this ruling is not universally binding but it is a supreme court ruling from a EU member state.

FallenAngel said:

http://www.slate.com/blogs/future_t...ling_amulet_and_shield_in_virtual_world_.html



this supreme court ruling is interesting.
the defense argued/appealed on the basis that virtual goods had no value and were not tangible, the court ruled that just the time spent aquiring them gave them value. this goes further than just claiming a virtual item has value because money was spent on it.
many people seem to think that the dutch are very liberal but they are quite strict when it comes to property.
ofcourse this ruling is not universally binding but it is a supreme court ruling from a EU member state.

Click to expand...

It's arguable that in the case of MA holding assets of y/ours, that their ingame commodities have the same value as the exchange of ingame assets to $$'s would bring. Therefore having a real and tangible value, as well as the market value.

Ok after visiting my sister (lawyer) i have got the most obvious answer that was mentioned here already: you should pay tax only on withdrawing profit. If the profit came either from:

• optimal gameplay.
• dividends (from CLD)
• income made on gain of PED vs $ exchange on time.
• any other possible source of income based on game.

it does not matter. You should pay taxes from profit only. To be honest i reallydid not expect anything else here .

I really like the explanation from Strangelove what money represents: that money is actually a instrument for exchanging goods and services in easy manner. Basicly it is how i see money personally.

I would follow that thought and try to think what "tax" is in similar thinking way.
With my clumsy way of defining it this way i would say that tax is something that some group of people (society) decides to donate some part of their work for common good.

I really have no idea how this way of thinking could combine all of thsoe factors:

• playing and getting money from another country.
• contributing part of the "job" for society person lives in.
• all the crazy laws that are in U.S. that Strangelove mentioned (about reporting of assets holding in banks in another coutnries etc).

Simplest solution seems that part of the earned profit should be handed as "tax" to the society. But obviously the 3rd point just does not want to fit in.

Imho... problem is with all the crazy laws not with the taxes in here. This should be plain and simple not "blury". Thats my conclusion. Just trash all the crazy laws and you will have no problems. Pay part of what you earn.


Just my personal thinking/question:
how to change my nationality if Poland decides to actually force similar crazy laws?

Falagor