My friend John showed me this page about getting taxed on virtual items in MMORPG games.

It's not yet the case but think about it. Even if you never intended to sell stuff for real world money the stuff in the game is worth real money. People are making a living buying and selling ingame items for real money so even if you personally just want to play, those items you earn, being worth real money, are possibly taxable.

The IRS wouldn't care if you turned those items into real money or not. Just like in the real world, if someone gives you a car or a house you have to pay taxes on it. If you go to a casino and win or the win the lottery or prizes from a game show you have to pay taxes on the winnings. In fact that's probably the best analogy, the items are prizes. Even if you don't sell them, because they have real money value they are income and would most likely be taxable.