Virtual Dosh: A Taxing Question

Here's the latest contribution to the (academic) debate about whether and in what circumstances virtual dosh should be taxed:

Although it seems intuitively the case that the person who auctions virtual property online for a living should be taxed on his or her earnings, or even that the player who occasionally sells a valuable item for real money should be taxed on the profits of those sales, what of the player who only accumulates items or virtual currency within a virtual world? Should the person whose avatar7 discovers or wins an item of value be taxed on the value of that item? And should a person who trades an item in-game with another player (for an item or virtual currency) be taxed on any increase in value of the item relinquished?

(Via Terra Nova.)