My pal Andrew Leonard of Salon notes the latest U.S. Government Accountability Office's report to the Senate's Finance committee on the tax implications of virtual currencies, which not only mentions Second Life by name, but lays out an accurate scenario in which an SL content creator would probably have to pay US income taxes (if they're based in the US). Here's the key infographic from the report:

Read the full .pdf of the report right here. As Andrew notes, the real target of the report doesn't seem to be Second Life's Linden Dollars or World of Warcraft's gold coins (also mentioned), but Bitcoin:

The specter of the IRS casting a shadow over Bitcoin, which the GAO concludes is “the most widely circulated virtual currency available,” is the meat of the report. Just the fact that the U.S. government is starting to pay serious attention to the cryptocurrency surely has libertarians getting nervous.

Emphasis mine. Two things: The IRS has already recommended that people pay taxes on virtual currency earnings in Second Life, like four years ago. More key: This report is totally wrong about Bitcoin's circulation: