Gregg Kaminsky, the CEO of Atlanta-based Circlenet, was recently sentenced to four months in prison for failing to report his Swiss Bank account and other foreign holdings of cash in addition to failing to report certain sources of income, including $150,000 US from Second Life. Kaminsky told the court he thought "there truly was some confusion" over whether or not his income from a virtual world was taxable.The US attorney for the prosecution, Sally Yates, stated that the case was a clear statement that "U.S. taxpayers are required to report all of their taxable income to the IRS, whether that income is earned in the real world or in a virtual world."
Hamlet Au noted that although Linden Lab has been "cagey" about it's recent economics, in 2009 the Lab reported fifty users were making over $100,000 US dollars from activities on the Grid, mostly through virtual real estate. The top 25 accounts made a total of 12 million US dollars. He also noted that ten years ago, one writer in SL contacted the IRS about taxes from income on Second Life, and was told not to worry about it.
In 2011, Michael Prime, known in Second Life as zFire Xue, the maker of the infamous "Redzone," was sentenced to four months in prison. His logging on Second Life was against the terms of probation for an earlier conviction.
Sources: Atlanta Business Chronicle, New World Notes, Wall Street Journal, Reddit,
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