Organize against the IRS, attention Lawyers and CPAs test your knowledge

Here is the first anti IRS thread. It can get ridiculous so let’s be nice and keep our arguments to provable facts. My main focus is the promotion of something known as the 861 source position. The courts have just begun to deal with this, but it is not without controversy. Do not mess with the IRS!!! Discuss this and maybe we can write some letters.

Most of the information can be found at .

I really want to debate CPAs and Attorneys on the 861 position.


You should probably go more into what it is then.

I serioiusly doubt this is the first anti IRS thread.

What’s the debate?

I’m a CPA that does lots of tax work… but the 861 position? Never heard of it. Doesn’t seem to follow any of the numbering conventions that I see in code section, regs, sop (statement of position) or court cases. Give me a hint. I’ll look it up.

Here’s what I think the OP is talking about.

I see. I went and took a look at the site. Appears to be another group that claims that the federal income tax is unlawful. Based on my quick look it seems that their angle is that the law only allows taxation of certain types of foreign and international commerce. So Congress wrote the law in such a way so that it could easily be miss interrupted to include taxation of other income. Code section 861 deals with what kind of income is treated as income form sources from within the US. So they say. I’m sure that they can make believable case that federal tax is illegal.

I’m all for paying the least amount of tax. I think that the tax code is ridicules. I spent too much time helping my clients avoid taxes and not enough time advising them on how to make their businesses more efficient and profitable.

I bet the question here is… are they right? Because I have not studied it, I’m not going to address the validity of this particular position. But I have seen a lot of “federal tax is illegal” arguments over the years that have no basis. It is usually brought to me by a client that has read it somewhere or has been approach by a vender selling some kind of investment product. Remember the fellow that wrote “The Federal Mafia”, Irwin Schiff? I believe that he is still in jail.

IMO there is always a trade off in risk with an aggressive tax position. So my question to the client is “how much risk do you want to take?” I can usually call one of the tax attorneys that I work with and determine that position fails in tax court.

Greed is a great motivator in finding new and effective ways to pay less tax. When a new tax avoiding techniques that has acceptable amount of risk is developed, word gets around pretty fast. If I can’t dig up the dirt on a new tax avoiding strategy, them it’s a good bet that it hasn’t been tested and therefore way too risky for any of my clients.

Federal taxation is upheld in court time and time again.

I guess I avoided the question. But believe me, you could spend all you time running down these scams. Folks want to believe in them. Next best thing to god I guess.

Good link Joe… Just what I thought. The sad truth is that sometimes good folks who have little to lose get sucked into believing this stuff and end up losing their stuff. The IRS has lots of attorneys… lots of them.

And all it takes to realize that this can’t be true is to stop and think: “If this were legit, the idea would have spread like wildfire, and no one in the US would be paying taxes.”

That’s the truth. And attorneys aren’t swayed the “but so-and-so said it was perfectly legal” defense.

861 section of the tax protester faq

A nice summary with many case cites and additional links.

My favorite is the couple who had time added to their prison sentence (for conspiracy to defraud the IRS and other charges) after they made a Section 861 argument at sentencing.

Great site Zoltar, I going to use it in my practice.

How can we debate anything if you have presented no position to debate? Ok, I’ll play along: I think your position is totally unfounded and bogus and does not pass the least scrutiny. There you are. See if you can rebutt that.

Hey I’m glad to see the discussion moving. I agree with people who say don’t mess with the IRS because they win. I agree that they win, but I don’t think they win for just and lawful reasons.

The 861 argument does propose that most people don’t owe federal income tax. This argument does not address state and local taxation, so it does not threaten the system by which your trash gets hauled to the local dump.

CPA’s hello, thanks for even being willing to discuss the issues.

John Mace, I’ll bet your right, I wasn’t able to do a proper search on the forum because there is a four letter requirement per word to do a search, not very efficient.

Yes the Uncle fed tax board is a good place for information. I think that Dan Evens, a tax attorney has attempted the most detailed refutation of the 861 position. His sight is located at . I am in the middle of posting a point-by-point debate on his paper but Larken Rose does it at…

Many more arguments can be found at

Guyblond thanks for looking into it. The above and below links and citations should help a lot.

So Let’s start with the questions. One of the big issues is weather or not A person who lives and works within the U.S. and earns all of his money within the U.S. is supposed to use 26USC861 and following to determine their taxable income.

Here are some citations of law that seem to say that yes we should use that section, later we’ll get to whether or not that section either includes or excludes most people’s income.

The regulations at 26 CFR § 1.861-8 begin by stating that Sections 861(b) and 863(a) state in general terms “how to determine taxable income of a taxpayer from sources within the United States” after gross income from the U.S. has been determined. Section 1.861-1(a)(1) confirms that “taxable income from sources within the United States” is to be determined in accordance with the rules of 26 USC § 861(b) and 26 CFR § 1.861-8 (see also 26 CFR §§ 1.862-1(b), 1.863-1©). Cross-references under 26 USCS § 61, as well as entries in the USC Index under the heading “Income Tax,” also refer to Section 861 regarding income (“gross” and “taxable”) from “sources within U.S.”

I cut and paste this from , it’s a letter about a thousand people have sent to the IRS.

Looking forward to more specific lively debate!

P.S. Does anybody else think this is the slowest running forum on the web? I have fast cox internet and page loads are running like 15 seconds, whew.

Also for all you good folk that would get sucked into this, I’ll make it easier. Don’t mess with the IRS. Just organize and right some letters if you’re so inclined. I’ll be the first one right along with guyblond to tell people that the IRS is very powerful.

Don’t throw yourself on the barbed wire fence surrounding the Ogden IRS facility, just do what is perfectly legal and acceptable, question what your not sure about.

Many are afraid that they will end up on a ‘list’ and be harassed. I’ll bet straight dope people aren’t afraid to look at facts and be heard.


Do you understand, wick, that in the United States the legislature creates the laws, and the courts interpret the laws?

Do you understand that the courts have ruled consistently that the “861 argument” doesn’t hold water?

What else do you need to know?

That’s an understandable question. My answer is that the courts don’t make law and they don’t write law. At most they make case law. Besides if you want to judge this evidence on whether it can save you money, save your time, it’s about the truth. It works just as good as claiming your from outer space as far as the IRS is concerned. What would you expect?

If you actually look at the courts that have ruled on this the cases DO NOT represent the 861 source position as promoted by Larken Rose and/or they are a tax court. According to the IRS manual… “Decisions made by lower courts, such as Tax Court, District Courts, or Claims Court, are binding on the Service ONLY for the particular taxpayer and the years litigated. Adverse decisions of lower courts do not require the Service to alter its position for other taxpayers.” [4.2] (05-14-1999) Importance of Court Decisions.

So even if Tax court ruled in favor of the 861 position which I don’t think they would ever do for obvious reasons, they wouldn’t even have to honor that decision for anything other than that case during that year! Most of the cases barely touch the full scope of the 861 evidence and mix it up with lots of debunked arguments. is a good read on this.

If that’s not enough here’s what one of those same tax court judges had to say about section 861 in another case….

“Sections 861 through 864 determine the sources of income for purposes
of the income tax. Sections 861(a) and 862(a) explicitly allocate
certain important items of gross income to sources within or without the
United States, as the case may be. Sections 861(b) and 862(b) state in
general terms how to determine taxable income of a taxpayer from sources
within or without the United States after gross income from such sources
has been determined. The language pertaining to the allocation of
expenses, losses, and deductions to gross income that is found in
sections 861(b) and 862(b) has remained substantially unchanged for over
80 years. See sec. 217(b) and (d), respectively, of the Revenue Act of
1921.” Tax Court Judge Halpern, in 1995.
Those cases do make good sound bites that are supposed to scare you from investigation the claims. Take a closer look, it’s a pain I know but you have to actually understand the 861 position to know if it has case history. As for now the Code of Federal Regulations really does matter!!

Well, the Supreme Court makes law - it’s decisions are binding on everyone.

From Commissioner v. Kowalski, 434 U.S. 77, 83 (1977). A Supreme Court case.


Again you’re in the ballpark as far as anti IRS arguments go but you are obviously not familiar with the 861 source position to lump them together. To finish your point you would have to explain why the ‘861 source position’ is the same as ‘wages aren’t income’ argument.

Dan Evens also separates these arguments.

Larken deals with that one here.

So you cruising down the path here and I think it’s time to question what data you base your beliefs on. Again I agree that it is unlikely that courts will support this argument. The Code of Federal Regulations really does matter and it says to look to 26USC861 to determine taxable income.

One contention that Larken makes is that the code was purposely written to confuse the living hell out people. I think this is easy for all sides to concede.

What is really interesting is to listen to professional tax experts fail to answer the question of whether we are supposed to look to 861 to determine taxable income. If you read Dan Evens he goes on and on why we don’t look there and then he folds and says even if we do look there it shows our income to be taxable.

Keep going the better your arguments are against 861 the more people learn and see a good debate. Let’s get to the words in the law.


If you contend that the tax code is hideously complex and confusing, then indeed few people would disagree with you. But it’s a bit silly to say it was “purposely written to confuse the living hell out of people.” Such a statement basically ignores the realities of the legislative process.

The tax code is a mess because it is an artificact of politics, not because it was designed that way. Legislators add provisions granting exceptions to favored groups; then later legislatures decide those exceptions were too broad, but rather than repealing the exceptions, add additional provisions designed to reach their desired result. Lather, rinse, repeat.

Your statement presupposes a well-thought-out, pre-planned tax code crafted by legislators and regulators holding a singular vision of what the final product should be. That is laughably at odds with reality. The reason the tax code is so complex is precisely because it isn’t a master-planned document, but rather a hodgepodge of ad-hoc provisions tacked on during each legislative session.

As for the rest: the Dan Evans FAQ is still gospel on this subject. Larken’s “rebuttal” is pathetic.

Bottom line: Section 61 imposes tax liability “from whatever source derived,” unless there is an exception. There are some source-based exceptions existing for certain nonresident foriegn taxpayers in certain situations (e.g., nonresident aliens, foriegn corporations), and in those situations the 861 source rules come into play. Those exceptions do not apply to U.S. citizens or residents. Ergo, U.S. citizens and residents retain tax liability for income “from whatever source derived.” For most U.S. taxpayers, source is irrelevant in determining their tax liability.

Dewey, it looks like you are at least reading both sides. I say that larken makes that assertion that they purposely made it confusing and I’m okay to disagree with you, but read the use of a double negative, do they really need to use double negatives to make the law clear? This assertion does not discount the complicated lawmaking practice and is based on the history of the code all the way back to 1925.

Be more specific about what points you think Larken loosed on that Dan Evens makes… I’ll try to fill in any gaps.

As a point of law, are you saying that a U.S. citizen should not look to 26USC861 to determine his taxable income??? This is very important as even Dan Evens backtracks on this. The claim that your income isn’t listed therefore the section doesn’t apply to you is not good logic. Where is the citation of law that says I’m not supposed to look there? That is Dan Evens naked assertion. I gave citations of law that says we are to look there, is that not worth anything?

“(ii) Exempt income and exempt asset defined–(A) In general. For purposes of this section, the term exempt income means any income that is, in whole or in part, exempt, excluded, or eliminated for federal income tax purposes.” [26 CFR § 1.861-8T(d)(2)(ii)]

“For purposes of this section, the gross income to which a specific deduction is definitely related is referred to as a ‘class of gross income’ and may consist of one or more items of gross income… See… paragraph (d)(2) of this section which provides that a class of gross income may include excluded income.” [26 CFR § 1.861-8(b)(1)]

“(3) Class of gross income. For purposes of this section, the gross income to which a specific deduction is definitely related is referred to as a ‘class of gross income’ and may consist of one or more items (or subdivisions of these items) of gross income enumerated in section 61, namely:
(i) Compensation for services, including fees, commissions, and similar items;
(ii) Gross income derived from business;
(iii) Gains derived from dealings in property;
(iv) Interest;
(v) Rents;
(vi) Royalties;
(vii) Dividends;… [other “items” listed]” [26 CFR § 1.861-8(a)(3)]
I didn’t harp on ‘whatever source derived’ enough. The word source is defined elsewhere in the code. If it wasn’t standard English would apply, but the code defines sources and sources do matter. The law says so!!

“(ii) Relationship of sections 861, 862, 863(a), and 863(b). Sections 861, 862, 863(a), and 863(b) are the four provisions applicable in determining taxable income from specific sources.” [26 CFR § 1.861-8(f)(3)(ii)]

“The rules contained in this section [1.861-8] apply in determining taxable income of the taxpayer from specific sources and activities under other sections of the Code, referred to in this section as operative sections. See paragraph (f)(1) of this section for a list and description of operative sections.” [26 CFR § 1.861-8(a)(1)]

“[T]he term ‘statutory grouping’ means the gross income from a specific source or activity which must first be determined in order to arrive at ‘taxable income’ from which specific source or activity under an operative section. (See paragraph (f)(1) of this section.)” [26 CFR § 1.861-8(a)(4)]

“The operative sections of the Code which require the determination of taxable income of the taxpayer from specific sources or activities and which gives rise to statutory groupings [see prior citation] to which this section [1.861-8] is applicable [1.861-8] is applicable include the sections described below…” [26 CFR § 1.861-8(f)(1)]

" § 861. Income from sources within the United States
§ 862. Income from sources without the United States
§ 863. Items not specified in section 861 or 862
§ 864. Definitions
These sections, which are identical with sections 861-864 of the House bill, correspond to section 119 of the 1939 Code. No substantive change is made, except that section 861(a)(3) would extend the existing 90-day $3,000 rule…" [Senate Report, 1954 Code]