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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:/

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).
- a9h74j 4y ago
  Does a git repository, when duplicated, qualify as a "cryptographically secured distributed ledger or any similar technology"?
  - dylan604 4y ago
    Does a git repo try to be a representation of value. If we're going to be pedantic, it can cut both ways
    - ShamelessC 4y ago
      I don't think the full text is at all unclear. It effects cryptocurrencies. Pretty simple. Loot boxes won't apply. Why? They are not based on technology derived from Bitcoin. No one is saying that loot boxes and what-have-you aren't problematic. But it is only mildly relevant.
      - dylan604 4y ago
        Yes, and I'm supporting that by calling the previous comment needlessly pedantic trying to make something confusing that was not confusing to start.
  - lmm 4y ago
    I guess the argument would be that it's not "secured"? It's certainly similar though.
- cmeacham98 4y ago
  V-Bucks are not a "representation of value", and if you don't understand that there's an FAQ that goes into even more painful detail: https://www.irs.gov/individuals/international-taxpayers/frequently-asked-questions-on-virtual-currency-transactions https://www.irs.gov/individuals/international-taxpayers/freq... > Virtual currency is a digital representation of value, other than a representation of the U.S. dollar or a foreign currency (“real currency”), that functions as a unit of account, a store of value, and a medium of exchange. Some virtual currencies are convertible, which means that they have an equivalent value in real currency or act as a substitute for real currency. The IRS uses the term “virtual currency” in these FAQs to describe the various types of convertible virtual currency that are used as a medium of exchange, such as digital currency and cryptocurrency. Video game currencies are (generally, if your game lets you convert the in-game currency to USD you might actually want to report it) NOT: 1. A store/representation of value 2. Convertible to a real currency 3. A medium of exchange
EGreg 4y ago
Why not? A database is similar technology. The similarity is a matter of degree. I would say that dollars recorded electronically are also a digital asset. The vast majority of the population should answer YES rather than risking perjury.
- jjeaff 4y ago
  Quite a bit of the tax code is vague like this. Until they decide to go after them and case law sets a precedent.
  - EGreg 4y ago
    I wouldn’t worry too much about it. Just assume all your transactions are taxable, as usual. Unless there is an exemption. What I am worried about is that the government can take a two-step approach to ban ANY inconvenient mechanism from being used by the public: 1) Force the developers to declare their mechanism as an X (money transmitter, or exchange, or communication platform) 2) Then regulate X by forcing all developers of X to require their users to provide Y. So this way they can for example ban encryption. In Monaco and Dubai, it is technically illegal to use end to end encrypted messengers except the ones with backdoors (eg BOTIM). If you think you can stay in some offshore jurisdiction, just remember that FATCA is global and pressures all countries to comply eventually. The only reason the public has any freedoms at all is because the makers of browsers and operating systems have not been pressured yet into banning every website that doesn’t register with the government. However, with HTTP3 we are going to see that, encryption certificates will be treated just as “official BIOS bootloaders” of OSes 10 years ago. See “the war on general purpose computing” by Cory Doctorow. It’s coming. Update: it’s already here in China: https://www.zdnet.com/article/china-is-now-blocking-all-encrypted-https-traffic-using-tls-1-3-and-esni/ https://www.zdnet.com/article/china-is-now-blocking-all-encr...
    - maxerickson 4y ago
      Why is the two step approach more of a concern than the one step approach where the government directly regulates the thing in question?
mudrockbestgirl 4y ago
I think the op may be asking the more general question of why it is defined like this. What makes a "digital representations of value that are recorded on a cryptographically secured distributed ledger" so fundamentally different from an MMO currency that it becomes taxable? The fact that it's distributed? Why should that matter? What even is the definition of distributed? And isn't an encrypted database cryptographically secured?
- beebmam 4y ago
  These are important questions that I think aren't super well defined currently. Cryptocurrencies are changing so fast that it's hard for the law to keep up. It will eventually. Seems like a great field of legal scholarship right now!
- dylan604 4y ago
  If you ask a congress critter, I'm sure they'd love to be able to tax v-bucks too if they were to be told of them. It at least has the ability to become things of lore like requiring a stamp-like fee for emails
- colechristensen 4y ago
  MMOs have to go to extensive lengths to prevent and punish trading in game currency in the real world because it would burden them with a long list of regulations. Your WoW gold or whatever it is is not money because it only works in game and despite black markets for it, it is not allowed to be used in free exchange with other currencies. Honestly everybody actually knows the difference, if you don’t hire a lawyer and go to court and add to caselaw to be sure.
hunter2_ 4y ago
I don't think a casual gamer would know if that is or isn't the case. I guess the same could be said about casual Robinhood users though; the onus is on the person to know what they're getting into.
meowkit 4y ago
> Obviously, V-Bucks are not a "representation of value" Second point, sure, but this one? I would disagree vehemently that its obvious. I've always thoughts "points" from credit cards, gift cards in shops, or virtual currencies in a game world that you can exchange directly for fiat/crypto, represent value. Its just that value is now no longer liquid and locked into some services ecosystem to make it psychologically easier for people to spend money. In my mind, (normative statement incoming) V-bucks and similar digital practices should not be legal. They should be required to have a tradable interface, and it should be possible to put them on a marketplace.
- dwaite 4y ago
  > I've always thoughts "points" from credit cards, gift cards in shops, or virtual currencies in a game world that you can exchange directly for fiat/crypto, represent value. It's just that value is now no longer liquid and locked into some services ecosystem to make it psychologically easier for people to spend money. AFAIK redeemed V-Bucks cannot be transferred, and thus cannot be exchanged for real money. A V-Bucks gift card has financial value, and (if the account is allowed to be transferred) you could say the account then has financial value. IANAA, but I would expect gains from sale of either to be taxable.
kiawe_fire 4y ago
Sure… I read that. The instructions do a great job of explaining a few cases of what is definitely a digital asset, and they explain what you and I both know are obviously included. The instructions “include” a few obvious things. They don’t “exclude” anything like V-bucks. So what constitutes a “representation of value”? I can buy and sell V-Bucks cards, can I not? It may sound like I’m being a bit obtuse, but there is nothing here that tells me whether my ultra rare skin that I received that I could sell my account for $100 on eBay applies or not. Many things are obviously a digital asset, but determining what isn’t is far trickier, especially once you move away from perhaps the easiest example of digital currency in Fortnite. Saying “obviously they’re targeting Bitcoin and the Charlie Bit My Finger NFT” tells me what I already know I should declare. Nothing tells me what I shouldn’t… almost like they can decide that whenever they want during an audit.
- joshuamorton 4y ago
  The IRS guidelines specifically exclude assets you purchased. And more generally the guidelines the require you to provide the capital gains or loses, I don't think there's a secondary market for such in game items to be redeemed for dollars or equivalents. (Now there is something funny here about MTGO and the set redemption mechanic, so you could argue that MTGO cards are digital assets, but MTGA cards aren't).
  - pdntspa 4y ago
    There is. Any game that allows trading has a potential to create a secondary market.
    - joshuamorton 4y ago
      > Any game that allows trading has a potential to create a secondary market. Even games without trading (or the ability to do lootboxes with real money) have the potential to create a secondary market, since you can always sell accounts. My OSRS party hat has some real world market value. I don't need to count it as income on my taxes.
pkilgore 4y ago
Ugh, stop giving legal advice on the internet.
- cmeacham98 4y ago
  My friend, you do know that everyone else can click on _your_ profile and see your previous two comments are ""giving legal advice on the internet""?
  - pkilgore 4y ago
    My last two comments are a statement of black letter income tax law quoting its source in the U.S.C. (not giving them advice about anything really) and some 4th amendment snark followed by advice to someone to talk to a lawyer about their interpretation of constitutional law. Do you not see how that is different from telling someone without qualification that something is legal/illegal?
semiquaver 4y ago
Interestingly enough, V-Bucks were _specifically_ included in the original wording you quoted [1]. The IRS said it was in error, but a spokesman was fairly evasive [2]: > Desmond demurred when asked to confirm that gamers wouldn’t need to mark > ‘yes’ to the new 1040 question, but said addressing gaming currencies in > the virtual currency context isn’t a major focus for the agency right now. > > “I am not even looking into that. So I’m not saying one way or another. > I think I’d be getting ahead of myself if I said anything,” Desmond said. > “Read the website. We posted a correction yesterday and I kind of leave it > at that.” The likely reason that they don't care is that these are mostly a scam that consumers aren't making money off of, but capital gains on property are taxable no matter the underlying asset, so if game currencies became a major source of tax evasion it wouldn't take long for the IRS to pay attention. [1] https://news.bloombergtax.com/daily-tax-report/irs-pulls-wording-subjecting-gamers-to-virtual-currency-question https://news.bloombergtax.com/daily-tax-report/irs-pulls-wor... [2] https://news.bloombergtax.com/daily-tax-report/calling-fortnite-cash-a-virtual-currency-was-an-irs-error https://news.bloombergtax.com/daily-tax-report/calling-fortn...
- cmeacham98 4y ago
  Yes, and as mentioned the IRS decided including V-Bucks/Robux as an example was wrong and posted a correction.
  - semiquaver 4y ago
    See my other comment here [1]. The IRS removed that part to avoid freaking people out and because they don't actually care about the trivial amount of money being made on game currencies, not because it was an incorrect interpretation of the law. If you make $100K arbitraging V-Bucks you have always needed to pay tax on that, same as any other capital gain. [1] https://news.ycombinator.com/item?id=34169522 https://news.ycombinator.com/item?id=34169522
    - cmeacham98 4y ago
      This has nothing to do with whether or not you pay tax. You pay tax on income even if it is not related to digital currencies. If you somehow made $100k off V-Bucks then you need to report that income, but you should say "No" to the question about digital currencies. (Disclaimer: I can't believe I have to say this, but if you are making significant money off of video game currencies you should talk to a professional rather than listening to an anonymous HN poster as your sole tax advice)

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).

a9h74j 4y ago
Does a git repository, when duplicated, qualify as a "cryptographically secured distributed ledger or any similar technology"?
- dylan604 4y ago
  Does a git repo try to be a representation of value. If we're going to be pedantic, it can cut both ways
  - ShamelessC 4y ago
    I don't think the full text is at all unclear. It effects cryptocurrencies. Pretty simple. Loot boxes won't apply. Why? They are not based on technology derived from Bitcoin. No one is saying that loot boxes and what-have-you aren't problematic. But it is only mildly relevant.
    - dylan604 4y ago
      Yes, and I'm supporting that by calling the previous comment needlessly pedantic trying to make something confusing that was not confusing to start.
- lmm 4y ago
  I guess the argument would be that it's not "secured"? It's certainly similar though.
cmeacham98 4y ago
V-Bucks are not a "representation of value", and if you don't understand that there's an FAQ that goes into even more painful detail: https://www.irs.gov/individuals/international-taxpayers/frequently-asked-questions-on-virtual-currency-transactions https://www.irs.gov/individuals/international-taxpayers/freq... > Virtual currency is a digital representation of value, other than a representation of the U.S. dollar or a foreign currency (“real currency”), that functions as a unit of account, a store of value, and a medium of exchange. Some virtual currencies are convertible, which means that they have an equivalent value in real currency or act as a substitute for real currency. The IRS uses the term “virtual currency” in these FAQs to describe the various types of convertible virtual currency that are used as a medium of exchange, such as digital currency and cryptocurrency. Video game currencies are (generally, if your game lets you convert the in-game currency to USD you might actually want to report it) NOT: 1. A store/representation of value 2. Convertible to a real currency 3. A medium of exchange

EGreg 4y ago

Why not? A database is similar technology. The similarity is a matter of degree. I would say that dollars recorded electronically are also a digital asset. The vast majority of the population should answer YES rather than risking perjury.

jjeaff 4y ago
Quite a bit of the tax code is vague like this. Until they decide to go after them and case law sets a precedent.
- EGreg 4y ago
  I wouldn’t worry too much about it. Just assume all your transactions are taxable, as usual. Unless there is an exemption. What I am worried about is that the government can take a two-step approach to ban ANY inconvenient mechanism from being used by the public: 1) Force the developers to declare their mechanism as an X (money transmitter, or exchange, or communication platform) 2) Then regulate X by forcing all developers of X to require their users to provide Y. So this way they can for example ban encryption. In Monaco and Dubai, it is technically illegal to use end to end encrypted messengers except the ones with backdoors (eg BOTIM). If you think you can stay in some offshore jurisdiction, just remember that FATCA is global and pressures all countries to comply eventually. The only reason the public has any freedoms at all is because the makers of browsers and operating systems have not been pressured yet into banning every website that doesn’t register with the government. However, with HTTP3 we are going to see that, encryption certificates will be treated just as “official BIOS bootloaders” of OSes 10 years ago. See “the war on general purpose computing” by Cory Doctorow. It’s coming. Update: it’s already here in China: https://www.zdnet.com/article/china-is-now-blocking-all-encrypted-https-traffic-using-tls-1-3-and-esni/ https://www.zdnet.com/article/china-is-now-blocking-all-encr...
  - maxerickson 4y ago
    Why is the two step approach more of a concern than the one step approach where the government directly regulates the thing in question?

mudrockbestgirl 4y ago

I think the op may be asking the more general question of why it is defined like this. What makes a "digital representations of value that are recorded on a cryptographically secured distributed ledger" so fundamentally different from an MMO currency that it becomes taxable? The fact that it's distributed? Why should that matter? What even is the definition of distributed? And isn't an encrypted database cryptographically secured?

beebmam 4y ago
These are important questions that I think aren't super well defined currently. Cryptocurrencies are changing so fast that it's hard for the law to keep up. It will eventually. Seems like a great field of legal scholarship right now!
dylan604 4y ago
If you ask a congress critter, I'm sure they'd love to be able to tax v-bucks too if they were to be told of them. It at least has the ability to become things of lore like requiring a stamp-like fee for emails
colechristensen 4y ago
MMOs have to go to extensive lengths to prevent and punish trading in game currency in the real world because it would burden them with a long list of regulations. Your WoW gold or whatever it is is not money because it only works in game and despite black markets for it, it is not allowed to be used in free exchange with other currencies. Honestly everybody actually knows the difference, if you don’t hire a lawyer and go to court and add to caselaw to be sure.

hunter2_ 4y ago

I don't think a casual gamer would know if that is or isn't the case. I guess the same could be said about casual Robinhood users though; the onus is on the person to know what they're getting into.

meowkit 4y ago

> Obviously, V-Bucks are not a "representation of value" Second point, sure, but this one? I would disagree vehemently that its obvious. I've always thoughts "points" from credit cards, gift cards in shops, or virtual currencies in a game world that you can exchange directly for fiat/crypto, represent value. Its just that value is now no longer liquid and locked into some services ecosystem to make it psychologically easier for people to spend money. In my mind, (normative statement incoming) V-bucks and similar digital practices should not be legal. They should be required to have a tradable interface, and it should be possible to put them on a marketplace.

dwaite 4y ago
> I've always thoughts "points" from credit cards, gift cards in shops, or virtual currencies in a game world that you can exchange directly for fiat/crypto, represent value. It's just that value is now no longer liquid and locked into some services ecosystem to make it psychologically easier for people to spend money. AFAIK redeemed V-Bucks cannot be transferred, and thus cannot be exchanged for real money. A V-Bucks gift card has financial value, and (if the account is allowed to be transferred) you could say the account then has financial value. IANAA, but I would expect gains from sale of either to be taxable.

kiawe_fire 4y ago

Sure… I read that. The instructions do a great job of explaining a few cases of what is definitely a digital asset, and they explain what you and I both know are obviously included. The instructions “include” a few obvious things. They don’t “exclude” anything like V-bucks. So what constitutes a “representation of value”? I can buy and sell V-Bucks cards, can I not? It may sound like I’m being a bit obtuse, but there is nothing here that tells me whether my ultra rare skin that I received that I could sell my account for $100 on eBay applies or not. Many things are obviously a digital asset, but determining what isn’t is far trickier, especially once you move away from perhaps the easiest example of digital currency in Fortnite. Saying “obviously they’re targeting Bitcoin and the Charlie Bit My Finger NFT” tells me what I already know I should declare. Nothing tells me what I shouldn’t… almost like they can decide that whenever they want during an audit.

joshuamorton 4y ago
The IRS guidelines specifically exclude assets you purchased. And more generally the guidelines the require you to provide the capital gains or loses, I don't think there's a secondary market for such in game items to be redeemed for dollars or equivalents. (Now there is something funny here about MTGO and the set redemption mechanic, so you could argue that MTGO cards are digital assets, but MTGA cards aren't).
- pdntspa 4y ago
  There is. Any game that allows trading has a potential to create a secondary market.
  - joshuamorton 4y ago
    > Any game that allows trading has a potential to create a secondary market. Even games without trading (or the ability to do lootboxes with real money) have the potential to create a secondary market, since you can always sell accounts. My OSRS party hat has some real world market value. I don't need to count it as income on my taxes.

pkilgore 4y ago

Ugh, stop giving legal advice on the internet.

cmeacham98 4y ago
My friend, you do know that everyone else can click on _your_ profile and see your previous two comments are ""giving legal advice on the internet""?
- pkilgore 4y ago
  My last two comments are a statement of black letter income tax law quoting its source in the U.S.C. (not giving them advice about anything really) and some 4th amendment snark followed by advice to someone to talk to a lawyer about their interpretation of constitutional law. Do you not see how that is different from telling someone without qualification that something is legal/illegal?

semiquaver 4y ago

Interestingly enough, V-Bucks were _specifically_ included in the original wording you quoted [1]. The IRS said it was in error, but a spokesman was fairly evasive [2]: > Desmond demurred when asked to confirm that gamers wouldn’t need to mark > ‘yes’ to the new 1040 question, but said addressing gaming currencies in > the virtual currency context isn’t a major focus for the agency right now. > > “I am not even looking into that. So I’m not saying one way or another. > I think I’d be getting ahead of myself if I said anything,” Desmond said. > “Read the website. We posted a correction yesterday and I kind of leave it > at that.” The likely reason that they don't care is that these are mostly a scam that consumers aren't making money off of, but capital gains on property are taxable no matter the underlying asset, so if game currencies became a major source of tax evasion it wouldn't take long for the IRS to pay attention. [1] https://news.bloombergtax.com/daily-tax-report/irs-pulls-wording-subjecting-gamers-to-virtual-currency-question https://news.bloombergtax.com/daily-tax-report/irs-pulls-wor... [2] https://news.bloombergtax.com/daily-tax-report/calling-fortnite-cash-a-virtual-currency-was-an-irs-error https://news.bloombergtax.com/daily-tax-report/calling-fortn...

cmeacham98 4y ago
Yes, and as mentioned the IRS decided including V-Bucks/Robux as an example was wrong and posted a correction.
- semiquaver 4y ago
  See my other comment here [1]. The IRS removed that part to avoid freaking people out and because they don't actually care about the trivial amount of money being made on game currencies, not because it was an incorrect interpretation of the law. If you make $100K arbitraging V-Bucks you have always needed to pay tax on that, same as any other capital gain. [1] https://news.ycombinator.com/item?id=34169522 https://news.ycombinator.com/item?id=34169522
  - cmeacham98 4y ago
    This has nothing to do with whether or not you pay tax. You pay tax on income even if it is not related to digital currencies. If you somehow made $100k off V-Bucks then you need to report that income, but you should say "No" to the question about digital currencies. (Disclaimer: I can't believe I have to say this, but if you are making significant money off of video game currencies you should talk to a professional rather than listening to an anonymous HN poster as your sole tax advice)