Let’s be clear on the much-awaited Asian deal that Yahoo and its Asian partners have been working on: While it is certainly still moving forward, once signed, it will not actually officially close until next year.

Yes, that’s right — 2013!

Still, what everyone and his investor is waiting for is the splashy announcement of the agreement, which involves the Silicon Valley Internet giant, China’s Alibaba Group and SoftBank, a large shareholder in Yahoo Japan.

Yahoo leadership has been hoping that could happen before Feb. 24, an important date after which activist shareholder Daniel Loeb could begin to mount a proxy fight against the current board.

And while the definitive agreement — involving the sale of Yahoo’s 33 percent stake in Alibaba and 35 percent stake in Yahoo Japan — has been moving back and forth among the dealmakers, one source said its completion might take a little longer than that, perhaps even into mid-March.

“It is one of the most complicated cross-border transactions in a long time,” said one person close to the situation. “It’s three different languages, three time zones and three companies that have not always seen eye to eye.”

It’s not that the companies don’t have the top talent on the effort. For Yahoo, it is CFO Tim Morse (who most recently also warmed the CEO seat, until Scott Thompson’s recent appointment); for Alibaba, it’s CEO Jack Ma and CFO Joe Tsai; and, for SoftBank, it is top man Masa Son and his top man Ron Fisher.

To make things even more complex, at the same time as the negotiating is going on, the trio also has to pay mind to how the Internal Revenue Service in the U.S. is going to view the whole deal.

As you can see here from a Wall Street Journal chart, it’s a pretty complicated “cash-rich split-off” to avoid taxes.

While the IRS cannot take an application for a “private letter ruling” until it has an actual agreement in hand, and will not issue one on a hypothetical transaction, the agreement still must be crafted so it is most likely to pass muster.

And only then can anyone move on to the many billions of dollars that Yahoo will instruct Alibaba and SoftBank to pay or contribute in kind for the asset part of the arrangement.

As the Journal noted, in more clarity than I ever could: “A key part of satisfying tax-code requirements is that the company shedding its shares get assets, not just cash, in exchange for them. Cash can’t account for more than two-thirds of the transferred value, tax rules say. This restriction was adopted in 2005 to limit misuse of the provision.”

While Yahoo’s execs have met about the various possibilities, it is more considering now than anything else.

And although a lot of names have been bandied about — Weather Channel, WebMD, as well as Glam Media and even Digg — the more likely direction Yahoo will go in will be different, according to many sources.

First, said sources, the key criteria for the purchase will be to diversify revenue streams, a theme Thompson sounded in his first earnings report recently. That could mean more online commerce, perhaps, rather than advertising or media assets.

Second, said sources, international properties might be more valuable to Yahoo than owning more U.S.-based ones, which opens up a range of interesting possibilities.

This could even include some already held by Alibaba, for example, such as garnering a big stake in its publicly-traded Alibaba.com. Technically, via Alibaba, Yahoo already owns some of the e-commerce giant, but not directly. Another possibility is to get back the Yahoo China business, also now owned by Alibaba.

Third, U.S. companies that Yahoo might look at could be unusual and even bold. Two names brought up in recent internal meetings, for example, were Netflix (before its stock revived) and Yelp (which is prepping for an IPO, and which Yahoo once tried to buy already).

And if things were not already needlessly complex in fixing its Asia problem, expect a change in the Yahoo board composition, too, as early as this week.

As I previously reported, at least four directors are expected to move on. More to the point, there will also be replacements announced at the same time.

To stave off Loeb and even give him a perceptible win, sources said the company is considering announcing the changes sooner than later, with the hope that fresh new members will placate other shareholders.

Lastly, with Thompson starting to take the reins after a month there, I would also expect he’ll weigh in on some significant restructuring (his word, not mine!) at Yahoo soon enough, too.

Complicated? Sure is! Perplexing even? And how! But until Asian and board resolutions, the real work of fixing Yahoo can’t really begin.

He thinks SecondMarket–best known for its facilitation of trading of private tech company stock–is a way to bring back a human touch. SecondMarket doesn’t necessarily replace an IPO.

But for companies like Facebook, LinkedIn and eSolar, SecondMarket trading slots into a pre-IPO dead zone driven by the longer average time to a public offering–now something like 8.8 years.

“Private to public in the past was like a light switch,” Silbert said at a Startup2Startup dinner in Palo Alto, Calif., last night. “It should be more of a dial.”

So, SecondMarket has facilitated $261 million worth of shares exchanged this year for 40 companies, compared to $96 million for all of last year driven primarily by Facebook, Zynga and LinkedIn.

SecondMarket works directly with these companies to set the terms of their own market on its system: For example, who can buy shares and when, if and when they can resell them, and whether insider trading is prohibited.

While outside investors obviously don’t have the same level of financial insight into a company as they would in the public markets, SecondMarket’s inventory consists of closely watched companies. Plus, it’s set up to attract very interested and agreeable investors, Silbert claimed. SecondMarket’s fees are quite high: Two to four percent of a transaction, with an average of $1 million to $1.5 million spent per deal.

As SecondMarket is evolving alongside the companies in its marketplace, here are some trends Silbert said he is seeing:

• Some participating companies use SecondMarket to reduce their number of shareholders so they have the breathing room to award more common stock to new people without triggering the SEC’s reporting obligations for companies with 500 shareholders.
• Rather than adopting conventional trading hours, some companies are setting specific time periods when their shares can be sold. SecondMarket is encouraging companies to set up a Dutch auction, where everybody who participates clears the same price.
• Silbert said that as a rule of thumb, the 40 companies currently trading on SecondMarket have raised Series C funding, have a valuation of at least $150 million, have more than 50 shareholders and have high growth. He said he sees an opportunity for investors to create funds to invest across the board. “Of the 40 companies, every single one of them has gone up in a pretty significant way. There’s a lot of money to be made here. Right now it’s just for accredited investors, but this is where the returns are.”
• Some companies are offering employees “hypothecation” plans: Funding loans to exercise options so employees can set themselves up to pay long-term capital gains instead of regular income. Silbert jokingly described this as a way to “basically screw the IRS.”

Read the rest of this post on the original site

The American Customer Satisfaction Index, developed by the University of Michigan’s Business School, included Facebook in its regular survey of consumer satisfaction with companies.

The result: Facebook came out with one of the lowest ranks of any company measured by the Index – a 64 out of 100. That puts Facebook in the bottom 5 percent of all private sector companies, and in the same range as the IRS tax e-filing system, airlines and cable companies.

Among social websites, Wikipedia led the survey with a 77, followed by YouTube at 73. Historically, performance in the Index has tracked fairly closely to a company’s earnings and stock returns relative to competitors.

Read the rest of this post on the original site

The Mountain View, Calif., software maker said it delivered more than 20 million copies of its software for preparing federal tax returns, a figure which includes a version that consumers can use for free on Intuit’s Web site and another free version that it makes available through the IRS for lower-income people.

Surprisingly, Intuit has managed to increase revenue despite adopting a sales strategy that attracts people to TurboTax by offering its use for free. The number of people who use the free version grows every year, says Dan Maurer, senior vice president of Intuit’s consumer group. Intuit’s revenue per return and profits margins for TurboTax have either climbed or remained flat each year.

Read the rest of this post on the original site

The startup, eCert, confirms that an email is from the company it says it’s from. The company maintains a list of every server that participating organizations send emails from and shares the information with Google (GOOG) and Yahoo (YHOO), which operate popular email services. If a server isn’t on the list, messages from it don’t get through. The company also has other ways of testing an email’s authenticity, as well.

“We can now verify that a message came from a domain,” says Kelly Wanser, eCert’s CEO.

Read the rest of this post on the original site

The Internal Revenue Service recently unveiled their YouTube channel, irsvideos. The 12 videos have information about claiming recovery rebate credits and other tax tips.

“It’s another way for us to get information out to taxpayers,” says Terry Lemons, a spokesperson for the IRS.

The videos are produced in-house and feature actual IRS employees. Mostly, they direct people to IRS.gov, which doesn’t currently host video. The aim is to make taxpayers aware of existing tax credits and direct them toward more information about those credits, Lemons says. They’re also available in Spanish and American Sign Language.

Read the rest of this post on the original site

Now that MySpace has finished its acquisition of iLike, what it’s going to do with it? Don’t think music, MySpace CEO Owen Van Natta stressed in a press conference today, think about “socialization of content.”

What does that mean? Pretty vague, which, I gather, is Van Natta’s intention.

But in short, what Van Natta is saying is that he has bought a 26-person company–for $19.5 million–because it has engineering talent that is good at building stuff that 1) helps users find content and share it with one other, and that 2) works on multiple platforms.

Van Natta did make a point of downplaying iLike’s ability to help MySpace build out its music offering, though. Which makes sense, because MySpace already has a music platform that it owns in a separate joint venture with the big music labels.

And because while iLike is known as a music platform, it really isn’t. It doesn’t have deals with the music labels that let users listen to full songs, and it only recently launched a way for users to buy songs. What it does do is recommend music based on stuff you like, and lets you share your likes and recommendations with friends.

You can see how the people who built the iLike platform–primarily on the back of Facebook, where Van Natta was formerly COO–could be useful for MySpace, which is in the midst of a drastic overhaul.

Van Natta was brought in to run the once-hot social network at the behest of corporate owner News Corp. (NWS) earlier this year, and has been busily hiring and firing since then.

The iLike deal is Van Natta’s first major acquisition since he came on, but it is essentially a hiring move, too. The plan is to keep all of the company’s key talent, including CEO Ali Partovi, President Hadi Partovi and CTO Nat Brown. (All three are in the picture at the top of this post, along with Van Natta and MySpace COO Mike Jones. From left to right: Ali Partovi, Jones, Van Natta, Brown and Hadi Partovi.)

Speaking of that talent: Asked about All Things Digital’s report about tax issues slowing the last stages of deal, Van Natta declared that “this was actually one of the smoother sailing deals that I’ve been involved in.”

Which may be true, but it doesn’t mean there weren’t tax problems for the company he was acquiring, as well as a delay.

In one email to the entire iLike board on Monday afternoon, titled “late-breaking tax issues with iLike/MySpace merger,” Co-founder Hadi Partovi wrote, referring to his brother and also Co-founder Ali:

“Ali & I recently learned about a potential tax liability that could be significantly disadvantageous to us as a result of the merger.

“We don’t have definitive info yet, and we’re just as disappointed as anybody to learn this at the 11th hour.”

Then, Hadi Partovi sent yet another email to Gregg Winiarski, GC at IAC (IACI) yesterday, titled “potentially significant tax risks for iLike common shareholder (esp Partovis).”

Before IAC had spun off Ticketmaster Entertainment (TKTM) last year, which was one of iLike’s big investors, Winiarski had apparently been involved in some iLike issues around compensation.

So Hadi asked him: “gregg, do you have any thoughts on this? since the structure of moving into common-stock (to avoid income tax) was your idea, I was hoping you [would weigh in].”

Winiarski–in several exchanges, in which Hadi’s brother and also Co-founder Ali Partovi even asked if IAC and Ticketmaster might indemnify them if problems arose–politely declined to weigh in, presumably since IAC was no longer an investor in iLike.

Ali Partovi intently asked for a call “TODAY,” but Winiarski did not bite on that or the indemnification request.

In the end, Ali Partovi wrote: “We’re moving forward with the deal, mainly because Hadi and I are not the types to hold up a deal over this. But I’d appreciate if you’d be open to a discussion about the risk exposure we’re sustaining here.”

Apparently it did not hold up the deal.

Maybe someone can ask Van Natta about that in the all-company meeting MySpace has scheduled for next week, which he mentions in this internal memo announcing the deal:

Hi everyone,

I’m pleased to announce this morning that MySpace has entered into an agreement to acquire iLike.

iLike is a social music discovery service that in just two years has become the largest, most comprehensive music application across all social networks. With 55 million users and 1.5 billion monthly impressions, their growth speaks directly to the usability of the product, the technology behind it, and the great team that built it.

One of the great things about MySpace is that its openness enables discovery–we’re going to take that strategy one step forward by also allowing users to experience content on the distributed Web.

On MySpace, users connect with the content they love in a centralized and social environment. On iLike, users can access the content they love in a highly distributed environment across their favorite websites. This shared vision around content distribution is a key component to the future of MySpace.

What the iLike team has done with music is applicable to all of the areas that are important to MySpace users today such as entertainment, video, and games. Because we view the opportunities of this acquisition beyond the music category, MySpace Inc. will be making this acquisition separate and apart from the MySpace Music joint venture.

The company’s current management–CEO Ali Partovi, President Hadi Partovi, and CTO Nat Brown–will continue to lead iLike’s future. I’ve known Hadi and Ali for almost 10 years and the two of them, along with Nat are talented entrepreneurs with a strong track record for building world class product.

Just to give you a sense of their history and professional achievements:

· Ali established himself as an entrepreneur by co-founding LinkExchange, which started as the web’s first and largest banner-advertising network and grew to become the web’s largest small-business portal before being acquired by Microsoft in 1998. In 2002, Ali became CEO of Garageband.com and then iLike.

· Hadi co-founded Tellme Networks, a leading provider of voice/telephone technology and services, where he ran product and technology, and later spearheaded the company’s shift from consumer services to enterprise call-center automation for AT&T, FedEx, and E*TRADE. Tellme Networks was acquired by Microsoft in 2007. Both acquisitions (LinkExchange and TellMe) rank as two of Microsoft’s biggest deals to date. Hadi was also an original group program manager for Internet Explorer, a general manager of MSN.com, and he incubated Start.com (now Live.com).

· Nat has a deep and respected history as an early architect at Microsoft. He rapidly earned a reputation as one of Microsoft’s foremost technical minds by creating and evangelizing the ActiveX/COM object model in the early 90s. He went on to play a seminal role in the creation of XML, DHTML, and as a primary architect of the first XBox. After retiring from Microsoft, he served briefly as CTO at CAC Media and has informally advised numerous startups.

In addition to this great management team, iLike has 26 employees in various technical and business functions including a market leading development team that will join MySpace. iLike will remain headquartered in Seattle but our teams will be working very closely. I’m excited to see the great things that come out of the collaboration between our management teams, employees, and cultures.

We have an all-company meeting next week and I look forward to seeing everyone and answering any questions you might have.

Please join me in welcoming Ali, Hadi, Nat and everyone at iLike to MySpace.

The board of iLike planned a meeting earlier tonight to go over a buyout offer by MySpace, several sources close to the situation said. But it was suddenly canceled because of some thorny tax implications related to the talent-retention part of the deal to purchase the social music start-up.

This does not mean the pending acquisition is in jeopardy, sources said, and it could be on track to be signed as early as today, barring any more complications.

That is what both iLike and MySpace execs are hoping, said sources, one of whom described the outstanding issues as a “technicality.”

What’s also been unclear is the actual price the social networking giant is paying for iLike, which has been reported as about $20 million.

In fact, only $13.5 million will be paid upfront in cash, with about $8 million of that money likely going to one of its major shareholders, Ticketmaster Entertainment (TKTM), due to its preferred shares.

Another $6 million has been promised by MySpace in forward payments to retain some key employees–including iLike co-founders and twin brothers Ali and Hadi Partovi.

Although those employees can remain in Seattle, where iLike has its HQ, they must stay employed at Beverly Hills, Calif.-based MySpace for two and a half years to get their money.

It’s that talent part of the deal that caused the Partovis to cancel the iLike board meeting, which they explained to key investors was necessary due to some confusion over how the money paid to these employees would be taxed.

A person briefed on the issue said that if it was taxed as compensation, it would have a much higher tax rate than if it were considered long-term capital gains.

The Partovis said in the email that they were working on the problem with their advisers on the sale, Allen & Co., as well as with lawyers and accountants.

Tax snafus in the middle of a sale are not exactly the way the entrepreneurial Partovis envisioned it was going to go for iLike (see my various video interview related to iLike below) when they created the compelling music sharing and recommendation service in 2006.

After only a few years, the innovative start-up claims it has 50 million registered users overall.

A lot of that growth was due to iLike quickly becoming one of the most popular widgets on social networking sites like Facebook, where it has also been the top music application, with 10 million active monthly users.

The Partovis–who once were close with execs at Facebook (see my party video below), particularly founder and CEO Mark Zuckerberg–placed great faith in its growth lifting all Web 2.0 boats.

It did not turn out that way, though, especially from the important financial point of view, and iLike scrambled to diversify.

The iLike service recently began offering a music downloading service, for example, as well as other such features, all of which would be attractive to the music-centric focus at MySpace.

Once an Internet sensation, MySpace has been struggling to restructure itself after losing momentum and buzz in recent years, as well as a huge advertising revenue drop in its most recent quarter.

Its owner, News Corp. (NWS), replaced its founders with new management four months ago, including former Facebook exec Owen Van Natta as CEO.

After making major staff layoffs and rejiggering management, Van Natta and his new team have been working on an overhaul of the MySpace product and seem to be refocusing it to become a global music and entertainment service.

MySpace also has a joint venture with major music labels, MySpace Music, which has been trying to attract consumers and build a viable business. Sources said MySpace Music could also buy into the iLike deal or simply license its technology to improve its features.

Thus, purchasing iLike would fit in well with MySpace’s overall plans.

And iLike has also been in need of a fix itself.

For all its popularity, especially on Facebook, it has moved slowly toward profitabilty, and its $17 million in funding has been dwindling, as has its viability as a standalone company.

Back in more frothy Web 2.0 days, iLike’s generous funding gave it a valuation of more than $50 million, which has also lost steam over time and as the economy has worsened.

In the last quarter of fiscal 2008, for example, Ticketmaster wrote down its $13 million investment by $6 million.

Tensions between its execs and iLike have gotten worse over time, although some thought at one time that Ticketmaster would buy iLike.

No longer, which is why the founders turned to Allen & Co., as MediaMemo reported as far back as November, to find another big investor or buyer.

Wrote Peter Kafka: “Delivering free music on the Web has so far proven to be a high-cost, low-revenue endeavor…”

So, the New York deal-making firm ginned up a small group of suitors, which included Facebook, Activision Blizzard (ATVI) and Microsoft (MSFT), as well as MySpace.

Of the three, Activision was most serious, with interest in integrating iLike’s community and technology tools with its Guitar Hero franchise.

But Activision never actually made a formal bid, said sources.

Both Microsoft and Facebook also considered the purchase, but sources said they would only offer stock in a deal. But iLike wanted cash in the deal.

The Partovis were also was wary about working at either place.

Both Partovis, for example, had worked at Microsoft (Ali after selling it LinkExchange in 1998 for $265 million; Hadi several times, once following Microsoft’s acquisition of Tellme Networks, which he co-founded).

As it has turned out, in its short life, iLike’s last, best alternative is apparently MySpace.

“Look, iLike has been shopped around for a while, and while the team and technology are great, it only has one choice and that’s to be sold,” said one person involved in the various scenarios. “The question for the buyer then is whether it was worth it to pay up or just move on and do it ourselves.”

So until the bean counters settle this IRS nightmare, here is my video interview with Hadi Partovi about a year ago at iLike’s HQ in the Capitol Hill section of Seattle, when times were a little more hopeful:

And here is a very dark and very shaky video I did when iLike threw a fete in Silicon Valley to celebrate its start-up two years ago and to send some appreciation in Facebook’s direction–it is so dated that Facebook COO Sheryl Sandberg, who is in the video, is still at Google (GOOG).

(Full Disclosure: News Corp. also owns Dow Jones, which owns this site.)

]]> http://allthingsd.com/20090817/sale-of-ilike-to-myspace-135-million-in-cash-6-million-for-talent-retention-delayed-over-tax-issues-reallyplus-the-list-of-other-suitors/feed/ 4 http://allthingsd.com/20090612/youtubes-white-house-clips-now-100-snoop-free/ http://allthingsd.com/20090612/youtubes-white-house-clips-now-100-snoop-free/#comments Fri, 12 Jun 2009 12:15:18 +0000 Peter Kafka http://mediamemo.allthingsd.com/?p=8147 President Barack Obama gets pretty high marks from the tech set for his embrace of all things Webby. Except when they’re giving him grief: After overhauling the official White House Web site to make it, you know, interactive and stuff, the administration caught flak from privacy advocates because of the way Google’s YouTube used tracking cookies on the site.

But after making an initial concession earlier this year, Google (GOOG) and the White House are going further. The Electronic Frontier Foundation explains: “Ordinarily, YouTube maintains a record of every YouTube video you’ve ever viewed, associated with your YouTube account, through use of the YouTube cookie. Now, they’ve agreed to exempt videos embedded on Whitehouse.gov from this logging.”

Will that be good enough to satisfy hard-to-please critics like the EFF? Amazingly, it does! Though of course, they’d like to see more. Here’s Cindy Cohn, the EFF’s legal director:

This is a good step and we commend YouTube and the Government for taking it. It shows that they recognize that tracking the government videos that Americans view is creepy and wrong. It also shows that Google/YouTube technologists can build and offer clever, useful privacy-protective modifications to their standard software.

Now we’d like to see them turn that cleverness to other places, not just the White House. Google/YouTube should offer this same “tracking-free” viewing to others. Human rights videos, politically sensitive videos, or even ordinary videos where viewers may want privacy should all be available without tracking…

In addition, the government should adopt “tracking-free” videos across the board for all government websites. Viewers of videos from the Internal Revenue Service, the Federal Bureau of Investigation, your member of Congress and other governmental entities deserve the same privacy protection that viewers of the President’s speeches.

The IRS has videos? Who knew? In the meantime, feel free to watch clips like this one, of Obama’s April victory over the UConn women’s basketball team in a game of “P-I-G” without worrying that the government is watching you watch.

]]> http://allthingsd.com/20090612/youtubes-white-house-clips-now-100-snoop-free/feed/ 0 http://allthingsd.com/20081120/what-was-that-you-were-saying-about-mozilla-not-being-an-arm-of-google/ http://allthingsd.com/20081120/what-was-that-you-were-saying-about-mozilla-not-being-an-arm-of-google/#comments Thu, 20 Nov 2008 14:06:43 +0000 John Paczkowski http://digitaldaily.allthingsd.com/?p=8732 Mozilla renewed its search deal with Google (GOOG) last August, signing a three-year contract that ends in November 2011. Good thing too; the agreement was set to expire this month and if it had, Mozilla would have been forced to look elsewhere for the bulk of its income.

According to the organization’s latest audited financial statement, its revenue for 2007 totaled $75.1 million, up 13 percent from 2006′s $66.8 million. And 88 percent of that came came directly from Google, which pays Mozilla to be the default search engine in it Firefox browser.

So of Mozilla’s $75.1 million in 2007 revenue, $66 million was paid it by Google. That’s quite a sum. Large enough to pique the interest of the Internal Revenue Service, which is reviewing Mozilla’s nonprofit status and “challenging certain deductions,” according to Mozilla Foundation chairperson Mitchell Baker.

An interesting turn of events for Mozilla, which this time last year was claiming it would walk away from Google if that’s what it took to remain independent. “We’ve spent a lot of time and energy making sure that Google understands that it cannot turn us into an arm of Google,” Baker said at the time. “The things that make Mozilla and Firefox a success [are] the product, and the community that cares about it. First and foremost, we would protect those things,” Baker said. “If the protection of those things would come into conflict with Google, or any of our search partners, we would opt for the community who built Firefox and love Firefox…. There are other ways to make money from a browser.”

Good to know. Because you may need to pursue them when the IRS is through with you…

]]> http://allthingsd.com/20081120/what-was-that-you-were-saying-about-mozilla-not-being-an-arm-of-google/feed/ 1 http://allthingsd.com/20070625/ddv20070625/ http://allthingsd.com/20070625/ddv20070625/#comments Mon, 25 Jun 2007 17:18:03 +0000 John Paczkowski http://digitaldaily.allthingsd.com/20070625/ddv20070625/

[ See post to watch video ]

]]> http://allthingsd.com/20070625/ddv20070625/feed/ 3 http://allthingsd.com/20070625/death-virtual-taxes/ http://allthingsd.com/20070625/death-virtual-taxes/#comments Mon, 25 Jun 2007 08:39:54 +0000 John Paczkowski http://digitaldaily.allthingsd.com/20070625/death-virtual-taxes/ With millions of dollars in virtual currency changing hands each month in simulated worlds like EverQuest and Second Life, there are increasing reports of virtual-world moguls amassing real-world riches and scholars warning that these online worlds could be the “21st century’s equivalent of hiding funds offshore.” So it may be only a matter of time before tax authorities open a virtual office or two. And in the not-too-distant future, they may.

Congress’ Joint Economic Committee is expected to issue a report on the potential taxation of virtual goods by the end of July. No word yet on what it might say, although a JEC director has suggested that “as long as virtual activity stays within the virtual economy, it shouldn’t be taxable.” So is that to say that there are tax consequences for activity that extends beyond it? Sounds like it. “Any time someone wins a tangible prize or award, the value is reportable as taxable income,” an Internal Revenue Service rep told CNN earlier this year. “An accumulation of ‘points’ would not result in tax consequences, but redeeming or selling them for money, goods, or services would.”

]]> http://allthingsd.com/20070625/death-virtual-taxes/feed/ 0 http://allthingsd.com/20070625/death-virtual-taxes-2/ http://allthingsd.com/20070625/death-virtual-taxes-2/#comments Mon, 25 Jun 2007 08:39:54 +0000 John Paczkowski http://digitaldaily.allthingsd.com/20070625/death-virtual-taxes/ With millions of dollars in virtual currency changing hands each month in simulated worlds like EverQuest and Second Life, there are increasing reports of virtual-world moguls amassing real-world riches and scholars warning that these online worlds could be the “21st century’s equivalent of hiding funds offshore.” So it may be only a matter of time before tax authorities open a virtual office or two. And in the not-too-distant future, they may.

Congress’ Joint Economic Committee is expected to issue a report on the potential taxation of virtual goods by the end of July. No word yet on what it might say, although a JEC director has suggested that “as long as virtual activity stays within the virtual economy, it shouldn’t be taxable.” So is that to say that there are tax consequences for activity that extends beyond it? Sounds like it. “Any time someone wins a tangible prize or award, the value is reportable as taxable income,” an Internal Revenue Service rep told CNN earlier this year. “An accumulation of ‘points’ would not result in tax consequences, but redeeming or selling them for money, goods, or services would.”

]]> http://allthingsd.com/20070625/death-virtual-taxes-2/feed/ 0