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Great Debates
61

Seeing how this thread seems to be going in the direction of “why does wink believe what he does” I have an experience to relay.

In the course of performing tax services for one of my clients it came to my attention that a rather large sum of money had been paid to an individual for business consulting services. This individual was also a close friend of the clients.

I asked the client if he had issued the required form 1099 for the amounts. and The client responded that he had not and that he had promised his friend that he would not. Having a professional duty to inform my client of the risk he was taking as well as concerning for my own professional risk I push for more details concerning the transaction. The client beat around the bush a little until I told him that I didn’t think that I wanted to provide him with professional services anymore. Two days later I get a phone call form his friend inviting to lunch. At lunch this fellow started telling all the reason why it was illegal for the federal government to levy tax and that I had an obligation to inform my clients of what the truth was. He told me that many people in the country do not have taxes withheld form their pay and on and on. His position was that he was not going to file a return and that receiving a form 1099 would force him to do so.

My response was if you feel so strongly about your position and know that you would prevail in court, why do you care if my client issues you a 1099? Why do you not just file the return, report the income and argue the position in court for truth and the well being of the American people? To this he had not answer. In fact he got up and left.

So here is my analysis. It’s not about legal v illegal, right or wrong, good or bad. It is about him keeping his money. It’s about greed.

Being in business and making money is not easy. The business world is very competitive. The tax rate in this country is roughly about a third of income. An individual that does not pay taxes has a huge advantage. So my sweeping generalization of tax protestors is that they are self centered and greedy. Greed has a way of rationalizing the most absurd of arguments.

An interesting side note is that this same individual had moved most of his assets off shore to evade federal income tax. Somehow that assets disappeared. He is still trying to get the money back. So there really is no free lunch.

62

Tracer, Astro beat you to that detective work. The Taxable income report is authored by Larken Rose and is downloadable at taxableincome.net . I simply narrated a portion of it for people to lazy to read it.

“Quoting some of your own handy work”, Whatever I said in my own words I think I managed to slip just a couple of binding citations of law in this thread somewhere.

Wick

63

Guyblond. It’s fair enough to point out that if one could avoid paying taxes it would be such an advantage that there would be motivation to do it, like greed.

It’s also fair to point out that one who experiences financial gain from the current understanding of our tax system has equal motivation to keep such an understanding in place, like greed.

If the current tax system were overturned it would apply to everybody giving nobody an advantage. I would be short sighted to think that I would be richer if such an event happened. My purchasing power would remain relative to every one else who abruptly had more money.

If I just wanted to keep my money I’d need to draw less attention to myself than I am.

The tax rate is pretty high, here are two generally related articles released by IPI.org

http://www.achadwick.com/documents/Hiddentax.pdf

http://www.achadwick.com/documents/irsvslaw.pdf

Those are PDF.

Wick

64

You misunderstand the importance of whether a court ruling becomes case law. Tax court doesn’t set a far-reaching precedent, but that only means that you can bring an identical case, make the same arguments, and get the same ruling again based on the same legal principles.

They might not be able to turn you away at the door by saying “We ruled on that last week”, but that doesn’t mean their reasoning is incorrect. You can go to tax court, make the same case as all the other 861 protestors, and get the same ruling. Your interpretation of the law is wrong, not just because some specific court has said it was wrong in the past, but because it contradicts the reasonable interpretation that any court will use.

65

:rolleyes: Learn to read.

“From whatever source derived” means just that – from whatever source derived. Gross income is gross income regardless of where it came from. You don’t need to “seek to determine sources of income” in determining gross income, because gross income is by definition income from any and all sources.

The source of income only becomes relevant when dealing with certain relatively narrow tax exemptions available to foriegn corporations and nonresident foriegn individuals, or when dealing with certain other very specialized exemptions (such as the legal services plans I used in my earlier example).

To repeat: the source of income is, outside of some very narrow exceptions, wholly irrelevant to the determination of gross income for U.S. taxpayers.

66

Wick, I’m sorry, I wasn’t really implying that your were greedy. I was just relaying one of my experiences with a tax protestor. I should have been more clear about that. But still I wonder if there is not a deeper reason that you pursue this issue… After all Dewey has made a very strong and articulate argument of why you are wrong. If this was a switch blade fight, you would be a bloody mess. So what gives? Why are you still in here getting beat up? Maybe you didn’t have any toys as a child or something like that?

67

Legalese….

Dewey - “From whatever source derived” means just that – from whatever source derived. Gross income is gross income regardless of where it came from. You don’t need to “seek to determine sources of income” in determining gross income, because gross income is by definition income from any and all sources.

“Rules are prescribed for determination of gross income and taxable income derived from sources within and without the United States, and for the allocation of income derived partly from sources within the United States and partly without the United States or within United States possessions. §§ 1.861-1 through 1.864. (Secs. 861-864; ’54 Code.)” [T.D. 6258]

How can you state what you just said and tell me to learn how to read? You keep saying gross income is from whatever source derived and somehow the legal term source as defined in the code isn’t connected to gross income. Next will you say the ‘source’ and ‘source’ are two different terms?

To say that the term source can’t be defined elsewhere in the code because of the word whatever is a basic reading error. Maybe folks on this thread could by us both a phonics book, and get me some toys that missed out on as a kid (Guyblond, lol. The incredible hulk big wheel please)

If 861 determines sources of income why in the world is it crazy to believe that from ‘whatever source’ doesn’t specifically refer to 861?

“Income tax
Sources of income
Determination, 26 § 861 et seq…
Within the U.S., 26 § 861” [the index of the U.S. code]
Here’s an example of the law using very general terms at first seemingly including everything, and then narrowing it down with definitions later on.

26 USC § 5841

http://uscode.house.gov/uscode-cgi/fastweb.exe?getdoc+uscview+t26t28+1784+1++(5841%20)%20%20AND%20((26)%20ADJ%20USC)%3ACITE%20%20%20%20%20%20%20%20%20

states that “[t]he Secretary [of the Treasury] shall maintain a
central registry of all firearms in the United States which are not in the possession or under the control of the United States.”

But if you allow yourself to read further the term all ‘firearms’ gets widdled down significantly.

In 26 USC § 5845(a)

http://uscode.house.gov/uscode-cgi/fastweb.exe?getdoc+uscview+t26t28+1788+2++(5845)%20%20AND%20((26)%20ADJ%20USC)%3ACITE%20%20%20%20%20%20%20%20%20

it is made clear that the term “firearm” in these sections does not include the majority of rifles and handguns (while the term “firearm” in basic English obviously would), but does include poison gas, silencers and land mines.

So this happens in the law over and over yet when it comes to ‘sources’ Dewey claims it cannot be.

If this were a switchblade fight we’d all be dancing, snapping our fingers and singing like the Westside story because it’s all drama with you guys!

Wick

68

If you take the space out of The IRS, it spells Theirs. Coincidence? I think not.

69

Mr 2001 you’re the first person to bring the importance of tax court back to the realm of reality. I would much rather you disagreed with me based on actual points of law, which you should state, rather than tax court.

Wick

70

Now that said, here in Canada we have the same type of group who says it’s against the law to pay income tax. Our system is nowhere near as convoluted as the states, but I can tell you anyone who does not pay taxes based on this premise is in for a surprise. But it turned out the people going around promoting this “Pay no taxes” but were actually paying their own tax on the income they made doing these conferences. You may be able to fight for tax planning, or you may win on some law that is vague, but the fact that you are playing a team that is also the ref and owns the field does give you a disadvantage.

71

Good point SVT, it’s not likely that any idea challenging the current system will get a fair hearing here or in Canada, though I know nothing about Canadian law and could be mistaken.

Just to be clear, I advocate political activism, not taking it up on your personal tax return.

Wick

72

Because your posts, including this last one, indicates an extreme lack of reading comprehension skills on your part. **

I fail utterly to see why you find this confusing. Here it is again: source is irrelevant for determining gross income; however, source is relevant for certain exceptions in the code.

Gross income is income “from whatever source derived.” In short, gross income is any income you receive regardless of where it came from. It does not matter for determination of gross income purposes whether the income came from U.S. sources or from non-U.S. sources.

So why do we have these source rules in Section 861? Because source is relevant for certain exceptions in the tax code. In determining whether a certain exception applies, it is sometimes necessary to determine the geographic source of the income in question. Section 861 and its related regulations provide the rules for making that determination. **

I didn’t say that the existence of the word “whatever” meant that source couldn’t be defined in the Code; I said that the word “whatever” in Section 61 indicates that source is not relevant to the determination of gross income (i.e., the subject of Section 61).

Clearly, source is relevant for certain exceptions, and for purposes of evaluating the applicability of those exceptions source must be determined. Hence the source rules in Section 861. **

Try thinking about it this way: Section 61 is basically saying that gross income is all of your income, regardless of where Section 861 says that income comes from. That’s what the “from whatever source derived” language means.

At any rate, I’m done. I’ve given this pathetically silly argument more attention that it deserves, mostly because I don’t want others reading this thread to be led into ignorance because a stupid argument went uncontested. I think that goal is accomplished, and I don’t see any purpose to more tire-spinning. If wick is intent on wilfully remaining ignorant, there’s nothing I can do to stop him.

I’d leave wick with one simple question: does this scheme of yours make sense from a legislative point of view? Wick isn’t contesting the power of Congress to tax incomes; he’s just saying there’s a great big gaping loophole. One then has to ask: if the loophole is valid, why wouldn’t Congress close it? Why would they instead elect to leave it in place but maintain the charade that it doesn’t exist? Clearly, Congress intends to tax the incomes of U.S. citizens; if the law reads as you claim it does, why would they have written it that way? Why would they deliberately sabotage their own stated purpose?

Think about your argument from a “big picture” perspective. It just doesn’t make any sense at all.

73

I’m not a lawyer - Dewey and his ilk are covering the points of law quite nicely.

But I think you missed my point, and tax court is more relevant than you think, because the folks in tax court make their living by interpreting the law.

If you want to see the actual points of law that make the 861 excuse irrelevant, look at an 861 case decided by a tax court. Even though their ruling might not be binding precedent, their interpretation of the tax code is still more likely to be correct than some crank trying to sell videos about tax loopholes. What’s important is not which court decided the case, but how they decided it.

74

Hey Allan, I’ve read Larken’s argument on his website, and I would very much appreciate if you would clear up a few questions I have.

Could you explain why Larken would ignore a bunch of CFR sections in his analysis? Why does Larken ignore 1.861-8(a), 1.861-8T(d)(2)(i) and 1.861-8T (d)(2)(iii)? I honestly would like you to explain why these sections are ignored in order to arrive at the conclusion that most americans are exempt from paying an income tax. I have a discussion pasted below with an 861 supporter. All the “quotes” are from the 861 supporter, and my comments follow.

In addition to the ignored CFR sections, the exchange highlights the fact that larken refuses to address the list in 1.861-8(f) as a list of “operative sections”, as he insists they are a list of “sections or activities” from which we should match up our items if gross income to determine if it is from one of those taxable sources. If you ask Larken about this, he will reply, “that person didnt read” or “its not my fault the regulation writers messed it up.” As evidenced from the exchange below, 1.861-8(f) is clearly a list of operative sections, and operative sections are not the same as “sources” or “activities.” Operative sections require looking at certain sources or activities in order to determine your tax liability - yet Larken refuses to admit this. Please browse the debate below for the details. Thanks.

Quote:
I’ve already explained in sections 1.861-8(a)(4), where it says, emphatically that “For purposes of this section, the term “statutory grouping of gross income” or “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.”

Thanks for explaining. By the way, I noticed you left out the very next sentence, which tells us to look at 1.861-8(f) for the list of operative sections. Coincidence? Also note: we are required to look at sources or activities “under” an operative section. It doesnt say: “from which specific source or activity, also known as operative sections.”

Let me also add that if you were to continue to read further, you would find the following:

In some instances, where the operative section so requires, the statutory grouping or the residual grouping may include, or consist entirely of, excluded income. See paragraph (d)(2) of this section with respect to the allocation and apportionment of deductions to excluded income.

I want you to just tuck this nugget of information away for now, we’ll come back to it later.
Quote:
You decided to quibble and try to make the word “under” mean something other than what it means.

Scroll up. You found it necessary to paste a defintion from the dictionary regarding the word “under.” I told you “operative sections” are not “sources” and you pasted the defintion of “under.”
Quote:
Then you refuse to believe that when section 1.861-8(f)(1) says “The operative sections of the Code which require the determination of taxable income of the taxpayer from specific sources or activities and which give rise to statutory groupings to which this section is applicable include the sections described below,” it is referring to a list of sources and activities, which are called OPERATIVE SECTIONS, even though it says EXACTLY THAT in plain English. (English is the language that you use, isn’t it?)

No, actually, I think it says operative sections require looking at various sources or activities which give rise to statutory groupings, and among the operative sections are the ones listed below…
Quote:
Now this one is just too easy for me to pass up.

I would imagine that passing things up is much easier when your eyes are severely crossed.
Quote:
The Taxman wrote:
Nowhere does it say anything about, “sources that are non-exempt from taxation are identified.”

Thats the first accurate statement you’ve made, unfortunately, it was mine. So youre still batting .000.
Quote:
In section 1.861-8T, the title of paragraph (d) is “Excess of deductions and excluded and eliminated items of income.”

1.861-8T(d)(2)(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.

Just curious…is there any reason your eyes skipped right over 1.861-8T(d)(2)(i)? Let’s take a gander at that provision to see what it says, just for shyts and giggles. I’m not saying you purposefully skipped this section, but I’m going to paste it anways. OK:

1.861-8T(d)(2)(i):
In the case of taxable years beginning after December 31, 1986, except to the extent otherwise permitted by 1.861-13T, the following rules shall apply to take account of income that is exempt or excluded, or assets generating such income, with respect to allocation and apportionment of deductions.

OK, keep this underlined portion in mind, because it tells us about the following rules.
Quote:
Down further in paragraph 1.861-8T(d)(2)(iii), it says:
(iii) Income that is not considered tax exempt. The following items are not considered to be exempt, eliminated, or excluded income and, thus, may have expenses, losses, or other deductions allocated and apportioned to them: (A) In the case of a foreign taxpayer…
(B) In computing the combined taxable income of a DISC or FSC…
© For all purposes under subchapter N of the Code, including the
computation of combined taxable income of a possessions corporation…
(D) Foreign earned income as defined in section 911…

OK, I see you can paste selected provisions of the law. Again, please look at the text in bold. It’s telling us, as if we didnt get it by now, that we are discussing whether deductions can be allocated and apportioned. Now let’s get to your analysis.
Quote:
You will not find the income of the average American citizen or resident in that list (just as you won’t find it in the list under section 1.861-8(f)(1)).

Why would most Americans be looking for their items of gross income from this list dealing with the allocation and apportionment of deductions or the list of operative sections in 1.861-8(f)?
Quote:
Now, I know you are probably ready to jump up and down and yell “AHA, SEE I TOLD YOU IT IS ONLY FOR ALLOCATION OR APPORTIONMENT!”

Funny, but I don’t need to jump up and down to tell you this. Remember that little nugget of information we found in 1.861-8(a)(4)? Remember that pesky little 1.861-8T(d)(2)(i)? Remember what it says right above that list in 1.861-8T(d)(2)(iii)? 1.861-8T(d)(2)(i) leads off by saying the following rules shall apply to take account of income that is exempt or excluded, or assets generating such income, with respect to allocation and apportionment of deductions.

I knew there was a reason you hopped and skipped all around these sections. To read the law in its entirety would completely destroy your argument.

Quote:
But seeing that you are another one of these hot-shot lawyers who never was able to pass basic math, I am convinced that you don’t understand the elementary concept that ALL VARIABLES in an equation must be identified before the equation can be solved.

I’m one of those hot-shot lawyers that understands the elementary concept of reading the law, in its entirety, instead of picking and choosing selected provisions to fit my agenda. Your analysis is terrible. It involves ignoring certain regulations in order to arrive at your conclusion.
Quote:
So let me ask you this, Mr. Know-It-All, exactly what is it that deductions are being apportioned to? (Remember: taxable income equals gross income minus allowable deductions.) If you subtract allowable deductions from zero, what do you get?

Mr. Know It All? I prefer “Mr. Read It All Without Ignoring 1.861-8T(d)(2)(i), Etc.” At any rate, the dedutions are being allocated or apportioned to classes of gross income - even though it could very well be that no income is actually realized within that class since the income is either nonexistant in the taxable year or the income realized is less than the deductions allocated to the class of income. You can verify this by visiting another section you innocently skipped, namely, 1.861-8(d)(1).

1.861-8(d)(1): Each deduction which bears a definte relationship to a class of gross income shall be allocated to that class in accordance with paragraph (b)(1) of this section, even though, for the taxable year, no gross income in such class is received or accrued of such class of gross income.

So it’s no “foul” for one to allocate and apportion to classes of gross income when the deductions outweigh the income, or income is non-existant.
Quote:
If you subtract allowable deductions from zero, what do you get?

Was there some kind of point to this question?

Gross income - 0
Minus certain deductions - 5,000

Adjusted Gross Income 0
Minus Personal exemptions 0
Minus either Std or Item. 0

Taxable Income 0
x tax rate = tent. tax
tent tax - tax credits = tax due or refund.

I thought I’d give you a little chart so your eyes can follow along. If I have above the line deductions from no gross income, then my adjusted gross income is zero. In an extremely simplified example (like the one you gave) barring any additional facts, your taxable income would be zero.
Quote:
Now, what you are going to do next is continue to try dig your way out of this hole you dug.

No, I’m not in a hole. You refused to read certain sections of the Code in your analysis. You need to (1) take a introductory course in basic federal income tax, and (2) visit the eye doctor, and (3) try making this argument without skipping over code sections.

Just for fun - why not read Section 482 and ask yourself which should be done first - 482 adjustments by the IRS or allocation and apportionment of deductions under 1.861-8. Maybe you should first repeat 100 times that operative sections are not sources or activities. Then repeat 100 times that those temporary regs deal with allocation and apportionment of deductions.

75

Friends, at this point, if not long ago, it is obvious that we are dealing with a true believer who is not going to shift his position when confronted by fact, law or logic. The sun rises in the west, says our friend. Look, we all say, there is the sun rising. It rises in the east. Our friend squints into the dawn and announces that the round red thing pasted in the sky like an orange wafer isn’t the sun and that if it is then that direction isn’t the east.

Give it up. This has gone on long enough. Any reader must recognize that following our friend’s view of the problem is an invitation for a summons and complaint for, if you are lucky, tax evasion, with the very real possibility of a visit from the revenue agents with badges and side arms. Everyone who has posted in response to our friend (excepting a couple of drive by whoops of resentment) concludes that our friend’s reading of the tax code is dangerously wrong. Acting on it will cause real trouble with fines, interests and penalties and forfeitures and maybe time in a federal institution of reeducation and deprivation of personal liberty.

This is futile. You have tried to guide our friend away from the path of error. He likes the path of error. Let him go. Just hope that no one chooses to follow him. Just remember that the more greed, stupidity and lust we have around the better chance for the rest of us to earn a living.

76

Dewey, I understand you feel like you’ve debunked the position and we both have the right be ignorant if we so desire.

You make a baseless assertion without citation of law by saying the term source is not important in determining gross income. You would have a really kick ass post if you cited some words in the law that said “from whatever source derived means the definition of source doesn’t matter” [CITE: 26USCdelusional] Especially since that is not the position of the treasury by their own records.

“Rules are prescribed for determination of gross income and taxable income derived from sources within and without the United States, and for the allocation of income derived partly from sources within the United States and partly without the United States or within United States possessions. §§ 1.861-1 through 1.864. (Secs. 861-864; ’54 Code.)” [T.D. 6258]

“(g) Gross income from sources within and without United States -
For computation of gross income from sources within and without the United States, see Section 119 [predecessor to 26 USC 861 and following]” [1939 Code, § 22(g)]

"(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)]

“Income taxes
Income from sources inside or outside U.S., determination of sources of income, 26 CFR 1 (1.861-1–1.864-8T).” [Index, Code of Federal Regulations]

Maybe you find it easy but maybe some readers won’t find it easy to believe that the word ‘whatever’ discounts the legal definition of whatever comes after it.

It would be nice if you could show any example of any law that mirrored your claim that a term like whatever x is disconnected with the later definition of x.

As for the big picture, If you had to write a law that would get a lot of money from the income of U.S. citizens working and living within U.S. but you thought that the constitution didn’t give the U.S. Legislature that power because it was not interstate commerce or commerce with foreign nations you might just end up with a tax code resembling our very own. Or maybe it exists for the same brilliant reasons these laws exist.
http://www.dumblaws.com/states/states.php?State=Illinois
http://www.dumblaws.com/states/states.php?State=Massachusetts

Thanks for participating; I have gained a better understanding of both sides of the argument with your help.

Taxlaw I’m working on yours I just noticed it. It looks specific and exciting.

Wick

77

Not on this board, you don’t.

78

This is simply a lie. I have cited directly to each section of the code to which I refer. In my first post, I even provided links to the text of the relevant code sections.

The citation for the above proposition is Section 61. The words “from whatever source derived” indicates that source is unimportant in determining gross income. **

The only cite I need beyond Section 61 is “I can fucking read the English language.” Section 61 is perfectly clear on its own. **

This is a crock of shit. None of the treasury regs you’ve cited – NONE – alter the meaning of Section 61 as I’ve described it, nor do they support your half-assed legal theory.

Congratulations, though: you dragged me back into this stupid discussion after I had made up my mind to leave. You are a class-A creature-under-the-bridge.

This bit is new, though: **

Again, bullshit. The 16th amendment clearly makes the income tax constitutional. You haven’t contested the power of the federal government to impose an income tax on its citizens. So again I ask: why does this interpretation of yours, if valid, make sense legislatively? Do you really think that Congress intended the conclusion you’re reaching to be the correct application of the law?

79

I say again, walk away from this thread. The point is made. The arguments are completed. The matter is submitted. If our friend persists in this course, sooner or later he will be posting from a federal institution for the restraint of liberty, assuming that he will be allowed internet access from the cell block.

All have tried their utmost to divert our friend from the path of error. He likes the path of error. So, remind him of the federal sentencing guidelines and let him go.

80

Dewey I would be angry too if I was trying to convince people that the phrase ‘whatever source’ meant that the term source doesn’t matter and some body kept raking my argument over the actual words in the law and claims by the treasury making me look foolish. “Source doesn’t mean source”, we understand what you are saying and I trust people to make up their own mind on this.

In any case loosing your cool certainly doesn’t convince people, if anything it tips people off on how frustrating it must be to claim that words don’t mean what they say in order to be right.

Spavined Gelding, Dewey has made a gallant mindful effort compared to you. You could set an example for what you propose. Tell me what are the federal sentencing guidelines for posting on the dope forum these days? Is there a secret clause in the Patriot Act? Eric Hoffer has some great qotes about true believers.
“Rudeness is the weak man’s imitation of strength. “
Eric Hoffer
“You can discover what your enemy fears most by observing the means he uses to frighten you.”
“Language was invented to ask questions. Answers may be given by grunts and gestures, but questions must be spoken. Humanness came of age when man asked the first question. Social stagnation results not from a lack of answers but from the absence of the impulse to ask questions.”

Wick.