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Maybe a dumb question, but how does or doesn’t this apply if you have played virtually any modern multiplayer video game in which you receive digital assets fro

Maybe a dumb question, but how does or doesn’t this apply if you have played virtually any modern multiplayer video game in which you receive digital assets from loot boxes, or from buying cosmetics? “Digital asset” seems like a VERY broad term just looking for perjury. Not that the entire concept of how one files taxes in the US isn’t one big perjury trap already, it just seems less and less subtle about it with each iteration.

deleted 4y ago
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ocdtrekkie 4y ago
They appear to specifically have guidance indicating that this refers to cryptocurrency and NFTs. However, I would also point out, stuff you buy in a video game is never actually an asset: It's just an entry in that company's database that your account has an item. You never really control it in the way you theoretically control a crypto asset.
- mudrockbestgirl 4y ago
  That argument doesn't make much sense. You don't control your bank balance, which are just IOUs, either. It's just an entry in some centralized company's database.
  - jakelazaroff 4y ago
    That’s not how bank account balances work. My balance is an entry in a database, sure, but it’s not “just” an entry. If a video game company decides my points are now worth half as much, or that they’ve expired, that’s their prerogative — and if I don’t like it that’s too bad. If a bank tried to do that, they’d get hit with a ton of lawsuits that they’d definitely lose.
    - mudrockbestgirl 4y ago
      That's only true in good economic times and non-war periods and places. What you're saying is true in America right now, but not in many other countries [0], and it's also not true across time. Even in America, eventually a time will come where you can't get your money out of a bank account exactly because it's just an entry in a centralized database and because it will be in the best interest of people in power to prevent you from doing so. This, and similar restrictions, have happened several times throughout history. The point I'm trying to make is that it's not fundamentally as different from an in-game currency as you think it is. The cycles just happen much less frequently over longer periods of time (companies go bankrupt and change faster than wars happens) so you may never see it in your lifetime if you're lucky. [0] https://www.timesofisrael.com/lebanese-cafe-owner-hailed-for-robbing-bank-to-get-his-own-money/ https://www.timesofisrael.com/lebanese-cafe-owner-hailed-for...
- MBCook 4y ago
  If you can resell it, and I know that’s an option in some games (or was), what’s the practical difference?
  - ocdtrekkie 4y ago
    Fair point, but in most games you cannot sell out stuff you acquire back to real money.
    - MBCook 4y ago
      And I agree those are not assets as they have no practical value.
    - EGreg 4y ago
      As long as you can transfer it to someone, you can sell it. Like on localbitcoins site, people met up to make the trade.
      - colechristensen 4y ago
        Game terms of service will explicitly ban selling in game items specifically to avoid appearing to be trading in things which act like money.
  - Gigachad 4y ago
    You don’t own it, it’s not an asset, it’s a license to use something for an undetermined time. You almost always can’t sell it officially.
dboreham 4y ago
ianaa but I think the key concept is "easily convertible to real money". So Starbucks stars, United miles, etc don't count.
- hunter2_ 4y ago
  So, "liquid"? But NFTs aren't liquid, and they count...
  - colechristensen 4y ago
    Not “liquid” just, free to exchange for money. If you made a bunch of money buying and selling NFTs but the ones you have left nobody wants to buy, you still have to pay your taxes.
sbelskie 4y ago
The irs provides a non-exhaustive definition of digital asset which I think seems to provide the needed narrowing of definition. https://www.irs.gov/businesses/small-businesses-self-employed/digital-assets https://www.irs.gov/businesses/small-businesses-self-employe...
- EGreg 4y ago
  A non-exhaustive list does nothing to narrow a definition. A bank account representing dollars in the account is by definition storing your digital assets. Did you receive dollars in an electronic account?
  - woodruffw 4y ago
    Per the link: > Digital assets are not real currency (also known as “fiat”) because they are not the coin and paper money of the United States or a foreign country and are not digitally issued by a government’s central bank.
    - EGreg 4y ago
      Correct. Your local bank’s balance is none of those, either. Neither is your Venmo balance or your VISA / Mastercard balance from the issuing bank.
      - woodruffw 4y ago
        I don't know why you think that. The Fed's term for commercial balances is "Commercial Bank Money," and it is absolutely issued by the central bank. The fact that it's tracked on digital ledgers rather than paper ledgers and cotton bills does not change that.
        EGreg 4y ago
        I think that because it’s actually true. Most assets in circulation that we use as money are not fiat! The central bank issues money to banks. The treasury may mint coins or print paper money (the greenback). Those are legal tender (which btw the Supreme Court of the United States struck down the Legal Tender Act as unconstitutional, but President Grant stuffed the court with two justices and they reversed this ruling in their very next session). If your federal government issues a CBDC or mails checks to you drawn on the treasury, that is fiat. If your local bank employe an underwriter to review your business and approve a LOAN to you, they just create a balance within the bank. The existence of the FDIC and Federal Reserve does NOT make this money fiat. Anyway, your credit card balance is NOT legal tender. No one has to accept it as payment of a debt. The only reason it is accepted is that merchants are willing to contract with Mastercard and your issuing bank. But they don’t have to. Many merchants decline the payments. Same with Venmo and all those other systems. Sorry but it’s NOT fiat. You may deposit fiat into a bank, and it will give you a balance. Their terms probably state that they can lend out your money and not have an obligation convert it all back to actual fiat currency (eg cash and coins). The bank may use the Automated Clearing House system (ACH) run by the Federal Reserve to send money to, say, Venmo or PayPal or another bank. Those companies then give you a balance. But that isn’t fiat, either. Bitcoin is just a decentralized PayPal. And the internal credits are a floating exchange rate instead of maintaining a peg. You buy some amount of a digital asset — whether denominated in dollars or bitcoins — and it is stored on a ledger. That’s all. Whether the ledger is inside PayPal or on a public blockchain is irrelevant. If you received a payment inside Venmo, you received some amount of a digital asset. You would owe income taxes same as if you received an in-kind payment in spaghetti!
cmeacham98 4y ago
You see how it says "See instructions"? So let's go see what the instructions say: https://www.irs.gov/instructions/i1040gi#en_US_2022_publink1000111717 https://www.irs.gov/instructions/i1040gi#en_US_2022_publink1... > Digital assets are any digital representations of value that are recorded on a cryptographically secured distributed ledger or any similar technology. For example, digital assets include non-fungible tokens (NFTs) and virtual currencies, such as cryptocurrencies and stablecoins. Obviously, V-Bucks are not a "representation of value" and are not "recorded on a cryptographically secured distributed ledger or any similar technology".
- xu_ituairo 4y ago
  A bit of an unkind and patronising response
  - haimez 4y ago
    I disagree, citing obvious sources for information should be a reminder that you can often actually find whatever information you’re looking for if you just to search for it.
    - jacquesm 4y ago
      That may be so but the degree of authority is inappropriate, as is the assumption that OP had not read that document, which leaves a lot of ambiguity. The problem with tax rules is that they are open to interpretation and if the taxman interprets them differently then you have a real problem. The better answer would have been to ask a tax lawyer if the op is genuinely concerned about this (which they may well be, for instance because they have a substantial amount of value stored that way).
- lmm 4y ago
  > Obviously, V-Bucks are not a "representation of value" and are not "recorded on a cryptographically secured distributed ledger or any similar technology". Neither of those things are at all obvious. They are very much a "representation of value", and for all I know Epic might record them in a cryptographically secured distributed ledger (indeed that seems like a pretty good idea for resilience).
deleted 4y ago
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altairprime 4y ago
Digital assets purchased in video games typically have a value of $0 as nearly all major video games implement a one-way “currency to item” pipeline and strictly prohibit “item to currency” in return (specifically, for example: Hearthstone, Diablo, Eve Online, FarmVille, and so on). One could argue that exchanging in-game currency for game time is a taxable benefit of, say, $15/mo to the player; which then falls below the US 1099 reporting threshold of $600/year due to its irrelevance for taxation purposes. If you can construct a case that an item purchased in a game can then be sold for value, and that you can then receive benefits of $600 USD or more within a single calendar year in return for your purchased item, then you have identified a possible taxation loophole that should be corrected; please do share! (I am not your lawyer, this is not legal advice.)
pavlov 4y ago
Can you trade the assets from those loot boxes for real dollars? Then report it.
woodruffw 4y ago
I don't know why people think the IRS is looking to establish perjury cases against taxpayers. That's really not what they're doing (or how perjury is qualified statutorily for the tax code[1]): they'd much rather get your back taxes from you than actually go through a trial process. In other words: the standard for perjury on your tax forms is very high, much higher than the unintentional mistakes that the IRS is aware millions of people make each year. [1]: https://www.law.cornell.edu/uscode/text/26/7206 https://www.law.cornell.edu/uscode/text/26/7206
maxerickson 4y ago
Perjury requires intent.
cbhl 4y ago
Looks like this isn't a new requirement, just a UX change given the increasing popularity of Crypto -- using Form 8949 for Crypto transactions has been the guidance since 2014 ( Notice 2014-21, 2014-16 I.R.B. 938 ). https://www.irs.gov/individuals/international-taxpayers/frequently-asked-questions-on-virtual-currency-transactions https://www.irs.gov/individuals/international-taxpayers/freq... Coinbase directs its US users to CoinTracker, which you can then import into (say) TurboTax.
Yizahi 4y ago
Sure, why not, e.g. buy ISK in EVE for price 1X, then sell them same year for price 1.1X. Declare profits and pay taxes. It's just that the scope of token insanity is so much larger than any MMO can imagine, and price swings are so much bigger. MMO currencies and trades going on there are not even a rounding error, they probably won't even fit in the float variable precision when calculating money in the digital assets in the world.

deleted 4y ago

[deleted]

ocdtrekkie 4y ago

They appear to specifically have guidance indicating that this refers to cryptocurrency and NFTs. However, I would also point out, stuff you buy in a video game is never actually an asset: It's just an entry in that company's database that your account has an item. You never really control it in the way you theoretically control a crypto asset.

mudrockbestgirl 4y ago
That argument doesn't make much sense. You don't control your bank balance, which are just IOUs, either. It's just an entry in some centralized company's database.
- jakelazaroff 4y ago
  That’s not how bank account balances work. My balance is an entry in a database, sure, but it’s not “just” an entry. If a video game company decides my points are now worth half as much, or that they’ve expired, that’s their prerogative — and if I don’t like it that’s too bad. If a bank tried to do that, they’d get hit with a ton of lawsuits that they’d definitely lose.
  - mudrockbestgirl 4y ago
    That's only true in good economic times and non-war periods and places. What you're saying is true in America right now, but not in many other countries [0], and it's also not true across time. Even in America, eventually a time will come where you can't get your money out of a bank account exactly because it's just an entry in a centralized database and because it will be in the best interest of people in power to prevent you from doing so. This, and similar restrictions, have happened several times throughout history. The point I'm trying to make is that it's not fundamentally as different from an in-game currency as you think it is. The cycles just happen much less frequently over longer periods of time (companies go bankrupt and change faster than wars happens) so you may never see it in your lifetime if you're lucky. [0] https://www.timesofisrael.com/lebanese-cafe-owner-hailed-for-robbing-bank-to-get-his-own-money/ https://www.timesofisrael.com/lebanese-cafe-owner-hailed-for...
MBCook 4y ago
If you can resell it, and I know that’s an option in some games (or was), what’s the practical difference?
- ocdtrekkie 4y ago
  Fair point, but in most games you cannot sell out stuff you acquire back to real money.
  - MBCook 4y ago
    And I agree those are not assets as they have no practical value.
  - EGreg 4y ago
    As long as you can transfer it to someone, you can sell it. Like on localbitcoins site, people met up to make the trade.
    - colechristensen 4y ago
      Game terms of service will explicitly ban selling in game items specifically to avoid appearing to be trading in things which act like money.
- Gigachad 4y ago
  You don’t own it, it’s not an asset, it’s a license to use something for an undetermined time. You almost always can’t sell it officially.

dboreham 4y ago

ianaa but I think the key concept is "easily convertible to real money". So Starbucks stars, United miles, etc don't count.

hunter2_ 4y ago
So, "liquid"? But NFTs aren't liquid, and they count...
- colechristensen 4y ago
  Not “liquid” just, free to exchange for money. If you made a bunch of money buying and selling NFTs but the ones you have left nobody wants to buy, you still have to pay your taxes.

sbelskie 4y ago

The irs provides a non-exhaustive definition of digital asset which I think seems to provide the needed narrowing of definition. https://www.irs.gov/businesses/small-businesses-self-employed/digital-assets https://www.irs.gov/businesses/small-businesses-self-employe...

EGreg 4y ago
A non-exhaustive list does nothing to narrow a definition. A bank account representing dollars in the account is by definition storing your digital assets. Did you receive dollars in an electronic account?
- woodruffw 4y ago
  Per the link: > Digital assets are not real currency (also known as “fiat”) because they are not the coin and paper money of the United States or a foreign country and are not digitally issued by a government’s central bank.
  - EGreg 4y ago
    Correct. Your local bank’s balance is none of those, either. Neither is your Venmo balance or your VISA / Mastercard balance from the issuing bank.
    - woodruffw 4y ago
      I don't know why you think that. The Fed's term for commercial balances is "Commercial Bank Money," and it is absolutely issued by the central bank. The fact that it's tracked on digital ledgers rather than paper ledgers and cotton bills does not change that.
      - EGreg 4y ago
        I think that because it’s actually true. Most assets in circulation that we use as money are not fiat! The central bank issues money to banks. The treasury may mint coins or print paper money (the greenback). Those are legal tender (which btw the Supreme Court of the United States struck down the Legal Tender Act as unconstitutional, but President Grant stuffed the court with two justices and they reversed this ruling in their very next session). If your federal government issues a CBDC or mails checks to you drawn on the treasury, that is fiat. If your local bank employe an underwriter to review your business and approve a LOAN to you, they just create a balance within the bank. The existence of the FDIC and Federal Reserve does NOT make this money fiat. Anyway, your credit card balance is NOT legal tender. No one has to accept it as payment of a debt. The only reason it is accepted is that merchants are willing to contract with Mastercard and your issuing bank. But they don’t have to. Many merchants decline the payments. Same with Venmo and all those other systems. Sorry but it’s NOT fiat. You may deposit fiat into a bank, and it will give you a balance. Their terms probably state that they can lend out your money and not have an obligation convert it all back to actual fiat currency (eg cash and coins). The bank may use the Automated Clearing House system (ACH) run by the Federal Reserve to send money to, say, Venmo or PayPal or another bank. Those companies then give you a balance. But that isn’t fiat, either. Bitcoin is just a decentralized PayPal. And the internal credits are a floating exchange rate instead of maintaining a peg. You buy some amount of a digital asset — whether denominated in dollars or bitcoins — and it is stored on a ledger. That’s all. Whether the ledger is inside PayPal or on a public blockchain is irrelevant. If you received a payment inside Venmo, you received some amount of a digital asset. You would owe income taxes same as if you received an in-kind payment in spaghetti!

cmeacham98 4y ago

You see how it says "See instructions"? So let's go see what the instructions say: https://www.irs.gov/instructions/i1040gi#en_US_2022_publink1000111717 https://www.irs.gov/instructions/i1040gi#en_US_2022_publink1... > Digital assets are any digital representations of value that are recorded on a cryptographically secured distributed ledger or any similar technology. For example, digital assets include non-fungible tokens (NFTs) and virtual currencies, such as cryptocurrencies and stablecoins. Obviously, V-Bucks are not a "representation of value" and are not "recorded on a cryptographically secured distributed ledger or any similar technology".

xu_ituairo 4y ago
A bit of an unkind and patronising response
- haimez 4y ago
  I disagree, citing obvious sources for information should be a reminder that you can often actually find whatever information you’re looking for if you just to search for it.
  - jacquesm 4y ago
    That may be so but the degree of authority is inappropriate, as is the assumption that OP had not read that document, which leaves a lot of ambiguity. The problem with tax rules is that they are open to interpretation and if the taxman interprets them differently then you have a real problem. The better answer would have been to ask a tax lawyer if the op is genuinely concerned about this (which they may well be, for instance because they have a substantial amount of value stored that way).
lmm 4y ago
> Obviously, V-Bucks are not a "representation of value" and are not "recorded on a cryptographically secured distributed ledger or any similar technology". Neither of those things are at all obvious. They are very much a "representation of value", and for all I know Epic might record them in a cryptographically secured distributed ledger (indeed that seems like a pretty good idea for resilience).

deleted 4y ago

[deleted]

deleted 4y ago

[deleted]

altairprime 4y ago

Digital assets purchased in video games typically have a value of $0 as nearly all major video games implement a one-way “currency to item” pipeline and strictly prohibit “item to currency” in return (specifically, for example: Hearthstone, Diablo, Eve Online, FarmVille, and so on). One could argue that exchanging in-game currency for game time is a taxable benefit of, say, $15/mo to the player; which then falls below the US 1099 reporting threshold of $600/year due to its irrelevance for taxation purposes. If you can construct a case that an item purchased in a game can then be sold for value, and that you can then receive benefits of $600 USD or more within a single calendar year in return for your purchased item, then you have identified a possible taxation loophole that should be corrected; please do share! (I am not your lawyer, this is not legal advice.)

pavlov 4y ago

Can you trade the assets from those loot boxes for real dollars? Then report it.

woodruffw 4y ago

I don't know why people think the IRS is looking to establish perjury cases against taxpayers. That's really not what they're doing (or how perjury is qualified statutorily for the tax code[1]): they'd much rather get your back taxes from you than actually go through a trial process. In other words: the standard for perjury on your tax forms is very high, much higher than the unintentional mistakes that the IRS is aware millions of people make each year. [1]: https://www.law.cornell.edu/uscode/text/26/7206 https://www.law.cornell.edu/uscode/text/26/7206

maxerickson 4y ago

Perjury requires intent.

cbhl 4y ago

Looks like this isn't a new requirement, just a UX change given the increasing popularity of Crypto -- using Form 8949 for Crypto transactions has been the guidance since 2014 ( Notice 2014-21, 2014-16 I.R.B. 938 ). https://www.irs.gov/individuals/international-taxpayers/frequently-asked-questions-on-virtual-currency-transactions https://www.irs.gov/individuals/international-taxpayers/freq... Coinbase directs its US users to CoinTracker, which you can then import into (say) TurboTax.

Yizahi 4y ago

Sure, why not, e.g. buy ISK in EVE for price 1X, then sell them same year for price 1.1X. Declare profits and pay taxes. It's just that the scope of token insanity is so much larger than any MMO can imagine, and price swings are so much bigger. MMO currencies and trades going on there are not even a rounding error, they probably won't even fit in the float variable precision when calculating money in the digital assets in the world.