"What's next? A 10% tax on your monopoly money income?"
"
I'd prefer the IRS treat the SL avatar as a foreign citizen and the income as a foreign-earned and only tax the transfer of funds from the foreign entity to the US tax-paying entity, if they want to handle this under the federal scheme. I think it's best handled under a state tax scheme though."
Another user points out that virtual money is more like capital gains than income
