If you make real world money off of virtual items, you should be taxed. This IRS document does not cover virtual assests....just virtual assets that you buy with RL money.

This covers any item in a place like SL (since there is a US dollar value for Linden whatevers) and in a microtransaction enviroment where there is a conversion rate for real vs virtual money. It does NOT cover items that have no RL value...such as items in World of Warcraft...because you do not pay cash for those items.

Subscriptions to Wow, Character transfers...those things however, things you pay cash for, definately can be taxed.