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If I buy more linden dollars than I sell in a year, do I even have to worry about taxes on it?


Trey Mason
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Edit: I do not own a business. Even if I buy lindens and cash them right out I have to pay taxes on them? This year I have spend a few thousand dollars (USD) buying lindens. I have cashed out around $1000 (USD) worth of lindens. Linden lab asked me for my I.D. which I just provided them for a $400 (USD) cash out. My question is during tax season, do I have to claim that as income, then show that I spent more than I earned? Or just not have to worry about it because I know for a fact that I did not make any real earnings on it? I have already looked at my transactions for this year through second life, and can see that I have bought more Lindens than I have sold back to real USD. I buy my lindens on the linden lab website and sell on the linden lab website. The only difference is that I buy with my debit card, and cash out through PayPal.
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Those are really questions for your tax accountant.  The answers will depend on who you are paying taxes to (country, state, local).  In general, in the United States, you are required to report income from any source.  That includes money that you receive from Linden Lab, regardless of how you "earned" it from LL. If you intend to claim that the earnings were offset by money that you sent to LL during the year, you might assert that your payments were business expenses, in which case you would be expected to submit a Schedule C report with your federal tax return and you would be expected to back it up with detailed receipts and records if you were ever audited.  Your accountant will be able to show you how to do that.  Be sure to let your accountant know if Linden Lab has required you to submit a form W-9, since that triggers an automatic report (1099-K) to the feds to let them know how much you have cashed out.  See https://community.secondlife.com/t5/Commerce/Required-Tax-Documentation/ba-p/2336109

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