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Author Topic: US tax question about gains from sale of "software license"  (Read 694 times)
finder_keeper
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December 06, 2013, 09:59:12 AM
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Hello tax experts,

As I understand it, US tax law treats physical commodities, currencies and securities differently for the purpose of taxing realized and unrealized gains. The exact status is bitcoin remains unclear, so I'm trying to think of a somewhat analogous

Suppose I bought a perpetual, transferable license to some software (eg an online distributed massively multiplayer game) for $1000.

The game soars in popularity during the year, but I lose interest, so I sell my license to an interested party for $2000.

How is the $1000 profit taxed? The license is not a physical commodity because it's purely virtual. It is not a currency because it is not legal tender.

Could it be a security because it creates a liability on the behalf of the network (in the form of an obligation to accept my participation in the online game)?

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edmundedgar
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December 06, 2013, 02:31:00 PM
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I'm not an expert on US tax law but conventionally that sounds like a capital gain.
Ramhound
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December 07, 2013, 01:29:23 PM
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Hello tax experts,

As I understand it, US tax law treats physical commodities, currencies and securities differently for the purpose of taxing realized and unrealized gains. The exact status is bitcoin remains unclear, so I'm trying to think of a somewhat analogous

Suppose I bought a perpetual, transferable license to some software (eg an online distributed massively multiplayer game) for $1000.

The game soars in popularity during the year, but I lose interest, so I sell my license to an interested party for $2000.

How is the $1000 profit taxed? The license is not a physical commodity because it's purely virtual. It is not a currency because it is not legal tender.

Could it be a security because it creates a liability on the behalf of the network (in the form of an obligation to accept my participation in the online game)?


Ask a tax specialist, but since you were (likely)already taxed on 50% of the $2000 , you would likely only need to show the $1000 as a profit.  This assumption is that on Jan 1st purchase it and before midnight on Dec 31 sell it ( or whatever the tax year is )
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