unusual income

Arizona

I don't know if anyone here is familior with gold games, but the idea is, you send someone money through e-gold (an online currency) and overtime they send the money back with some amount of gain. Most are scams, so it is difficult to truly gain money this way, but a gain of one percent per day is doable. Non-scam sites seem to invest in the forex market.

How should one report the income from such ventures. If an account with a gold game site compounds, so that I do not have actual possesion of the money, do I report the income when the money reaches the account, or when I take the money out as cash? Both the site in question and e-gold are based in the U.S.

Thoughts, anybody?

You must report the income when you have the right to receive it -- when you could withdraw it if you wanted to. You also have to designate how much of what's deposited in your account is return of investment & how much is interest or dividends. Your site should have info on tax reporting & how they report your income to the IRS.

In general, these sites do not take any personal information at all, and most of them are gone within a couple of weeks. You have to make money quickly and get out. The ones that stay around don't give any feedback about taxes. I fear I'm doing a poor job of discribing them. If you would like, several can be observed at www.goldgames.org. Perhaps these will show what I mean. It is not at all like investing in an official bank.

Also, I am not sure what you mean by returns versus intrest and dividends.

return of investment = paying yourself back the money you originally invested.
interest = regular payments for loaned money.
dividends = payments you receive from a company in which you own stock, OR short term capital gains earned by a mutual fund in which you own shares.
capital gains/losses = profit/loss from the sale of property held for investment, such as stocks, mutual funds, foreign currency, art, land, Maine Coon cats, etc.

Most likely, your profits & losses would be reported on Schedule D as short term capital gains.

Thank you, Abezon. That makes sense.