Daniel Terdiman over at Cnet News.com reports the IRS will likely start taxing in game assets, Quote:
"NEW YORK--If you are a hard-core player of virtual worlds like World of Warcraft, Second Life, EverQuest or There, IRS form 1099 may someday soon take on a new meaning for you."
"That's because game publishers may well in the not too distant future have to send the forms--which individuals receive when earning nonemployee income from companies or institutions--to virtual world players engaging in transactions for valuable items like Ultima Online castles, EverQuest weapons or Second Life currency, even when those players don't convert the assets into cash."
I would think, unless you make real world money from the said assets, they should not be taxed. If I go out and defeat a bunch of NPCs(Non Player Characters) or players to get their equipment and it comes up worth $50,000 in game money that is worth maybe $500 real world dollars, I should not be taxed on that money unless I convert it to real world dollars. Then again, I am no analyst, tax accountant, nor law maker. Anyhow, go check out the full article, then take the time to write your Congressman and let them know you in no way support taxing virtual assets unless you transfer it to real world money. Tell them you do not want a tax on potential income, taxes should only be applied to actual real world income.
Source: Cnet News.com - IRS taxation of online game virtual assets inevitable