In April 2008 Sweden's tax office published a clarification to its tax laws which said that in-game transactions are taxable--in theory. I am sure Ben Franklin was referring to Linden dollars when he wrote, "In this world nothing can be said to be certain, except death and taxes."
The taxation subject seems to be more a case of what happens when virtual money turns into real money than it does a question about virtual transactions. Second Life markets itself as a place to make actual money, whereas World of Warcraft bans trades for real money.
I'm inclined to side with WoW that keeping real and virtual money separate is the right thing to do. And it's a bit hard to fathom that a digital asset does anything but diminish or have a relative value to that specific game.
Besides, what happens if the game company goes out of business? It's not like you get to take your special sword to the Sponge Bob game if WoW suddely disappears.
The transaction volume of digital "assets" reached 9.36 billion yuan ($1.37 billion) in 2007 and is expected to hit 11.12 billion yuan in 2008, according to 5173.com, one of China's major virtual-asset transaction platforms