Tax Protester Told to Stop Giving Advice

Associated Press ^ | Mon, Jan. 13, 2003 | MARC LEVY

[heyhey]

HARRISBURG, Pa. - A tax protester who allegedly promotes a bogus legal loophole to convince people they owe no taxes was ordered by a federal judge to stop the practice and turn over his clients' records.

The order came Friday in the government's effort to force Thurston Bell of Hanover to stop giving clients allegedly false tax advice and charging large fees for filing tax returns.

[ancient_geezer]

So, what does America do?

Change the law.

John Linder (R Texas) offers a comprehensive bill to kill all income and payroll taxes outright, and provide a replacement:

H.R.2525
SPONSOR: Rep Linder, John (introduced 07/17/2001)
A bill to promote freedom, fairness, and economic opportunity by repealing the income tax and other taxes, abolishing the Internal Revenue Service, and enacting a national retail sales tax to be administered primarily by the States.
Refer: http://www.fairtax.org & http://www.salestax.org

Other bills, moving in the proper direction are:

To get the ball rolling and focus Congress Critter's attention:

H.R.2714
Sponsor: Rep Largent, Steve(introduced 8/2/2001)
Title: To terminate the Internal Revenue Code of 1986.
A bill to prohibit he imposition of any tax by the Internal Revenue Code: (1) for any taxable year beginning after December 31, 2005.

To sunset some agencies we don't need and rein in their expenditures:

H.R.2373
Sponsor: Rep Brady, Kevin(introduced 6/28/2001)
Title: To provide for the periodic review of the efficiency and public need for Federal agencies, to establish a Commission for the purpose of reviewing the efficiency and public need of such agencies, and to provide for the abolishment of agencies for which a public need does not exist.

Modification then enact and ratify:

H.J.RES.45
Sponsor: (introduced 4/25/2001)
Latest Major Action: 5/9/2001 Referred to House subcommitte.
Title: Proposing an amendment to the Constitution of the United States relative to abolishing personal income, estate, and gift taxes and prohibiting the Untied States Government from engaging in the business in competition with its citizens.

(Modified to prohibit all income, payroll, gift estate taxes as HR2525 calls for, or we will see European VAT style hidden taxes along with payroll excises to take over in the place of the of the current individual income tax(i.e. personal income tax) that Ron Paul amendment prohibits.)

And to keep em reminded that there is indeed a Constitution to pay attention to:

H.R.175
Sponsor: (introduced 1/3/2001)
Latest Major Action: 2/12/2001 Referred to House subcommittee
Title: To require Congress to specify the source of authority under the United States Constitution for the enactment of laws, and for other purposes.

[William Terrell]

The "sources" or "items" of income are not taxed. The income ITSELF is taxed.

"Source" and "items" are two different things. "Items" are specific types of income from money-getting behavior. "Sources" are the areas of money-getting mined for the "items". The income itself is composed of the specific items.

At the bottom line work behavior is what is taxed. The items of income are just a measure for that taxation.

This is the analogy given in the treatise:

The following analogy may help to clarify the matter of "items" of income and "sources" of income.

Suppose that there was a law imposing a tax on "Zonkos," and that the law defined "Zonkos" as "all toys from whatever toy store derived, including the following toys: plastic cars, dolls, yoyos," etc.

Then the law stated that another section "determines the toy stores for purposes of the Zonko tax," and that section listed "Bob’s Toys," "Toy City," and "ToyWorld" as "toy stores."

In this example, there would be two distinct aspects of the term "Zonko": whether an item is a taxable "toy," and whether it comes from a taxable "toy store."

Both criteria would have to be met for it to legally constitute a "Zonko." For example, a baby bottle bought at ToyWorld would not be a "Zonko" (even though it came from a toy store), if baby bottles are not within the legal definition of "toys."

Also, a doll bought from "Chuck’s Bargain Basement" also would not be a "Zonko" (even though it is a toy), as it did not come from something within the legal meaning of "toy store." A yoyo from Toyworld would be a "Zonko" as it is both a "toy" and comes from a "toy store."

[Poohbah]

No, I'm not a "complete idiot." I'm not the one singing the praises of a system of taxation that is an obvious a failure, either.

I'm not praising it--I'm merely pointing out that the tax code, as written, IS constitutional.

The Constitution imposes no test on any law for wisdom--that's the part that's up to us, through our elected representatives.

Since you're so smart what exactly is your plan?

Work to get the Internal Revenue Code repealed.

You say that you think the current system is bad, but you're paralyzed with fear when it comes to trying something else?

No, I'm not. Please learn to read and comprehend English before replying to my posts.

So, what does America do?

Same thing I'm doing.

[William Terrell]

It's also interesting that taxgate.com, which does the same thing as Bell, hasn't been touched.

[mvpel]

Please provide contextual citations for ALL references to Section 861 in the Internal Revenue Service regulations.

Let's start with the cross references, titles, and index from the various US Government Printing Office editions of the Annotated United States Code. While they're not probative, they are illuminating.

The title of Section 861 is "Income from sources within the United States."

In the annotated code, Section 61 has a cross reference as follows:

Income from sources -
Within the United States, see section 861 of this title.
Without the United States, see section 862 of this title.

The index of the code has something along the following lines:

Income tax -
Sources of income-
Determination, 26 § 861 et seq...
Within the U.S., 26 § 861

Now, digging in to the statutes, we have the following references to Section 861 that bolster the case that it is to be used to determine income from sources within the United States:

26 USC 79 - Group-term life insurance purchased for employees
(d) Nondiscrimination requirements
(3) Nondiscriminatory eligibility classification -
(B) Exclusion of certain employees -
For purposes of subparagraph (A), there may be excluded from consideration -
(iv) employees who are nonresident aliens and who receive no earned income (within the meaning of section 911(d)(2)) from the employer which constitutes income from sources within the United States (within the meaning of section 861(a)(3)).

26 USC 105- Amounts received under accident and health plans
(h) Amount paid to highly compensated individuals under a discriminatory self-insured medical expense reimbursement plan -
(3) Nondiscriminatory eligibility classifications -
(B) Exclusion of certain employees -
For purposes of subparagraph (A), there may be excluded from consideration -
(iv) employees who are nonresident aliens and who receive no earned income (within the meaning of section 911(d)(2)) from the employer which constitutes income from sources within the United States (within the meaning of section 861(a)(3)).

26 USC 306 - Dispositions of certain stock
(f) Source of gain -
The amount treated under subsection (a)(1)(A) as ordinary income shall, for purposes of part I of subchapter N (sec. 861 and following, relating to determination of sources of income), be treated as derived from the same source as would have been the source if money had been received from the corporation as a dividend at the time of the distribution of such stock. If under the preceding sentence such amount is determined to be derived from sources within the United States, such amount shall be considered to be fixed or determinable annual or periodical gains, profits, and income within the meaning of section 871(a) or section 881(a), as the case may be.

26 USC 410 - Minimum participation standards -
(b) Minimum coverage requirements -
(3) Exclusion of certain employees -
For purposes of this subsection, there shall be excluded from consideration -
(C) employees who are nonresident aliens and who receive no earned income (within the meaning of section 911(d)(2)) from the employer which constitutes income from sources within the United States (within the meaning of section 861(a)(3)).

26 USC 414 - Definitions and special rules -
(q) Highly compensated employee -
(8) Special rule for nonresident aliens -
For purposes of this subsection and subsection (r), employees who are nonresident aliens and who receive no earned income (within the meaning of section 911(d)(2)) from the employer which constitutes income from sources within the United States (within the meaning of section 861(a)(3)) shall not be treated as employees.

26 USC 505 - Additional requirements for organizations described in paragraph 9, 17, or 20 of section 501c -
(b) Nondiscrimination requirements -
(2) Exclusion of certain employees -
For purposes of paragraph (1), there may be excluded from consideration -
(E) employees who are nonresident aliens and who receive no earned income (within the meaning of section 911(d)(2)) from the employer which constitutes income from sources within the United States (within the meaning of section 861(a)(3)).

So as you can see, the statutes themselves repeatedly refer to Section 861 for determining income from sources within the United States.

Turning our attention to the regulations, again consulting the index first, you will find that under the term "Income taxes," there is an entry that reads "Income from sources inside or outside U.S., determination of sources of income, 26 CFR 1 (1.861-1--1.864-8T)." This is the only entry in the index relating to income from sources within the United States.

Under the CFR index term "determination of sources of income," and "income from sources inside or outside U.S.," the reader is again referred to 26 CFR § 1.861-1 and following, which are the regulations corresponding to Section 861 of the statutes.

Now, within the regulations themselves, we find that they begin as follows:

26 CFR 1.861-1 - Income from sources within the United States.
(a) Categories of income.
Part I (section 861 and following), subchapter N, chapter 1 of the Code, and the regulations thereunder determine the sources of income for purposes of the income tax. [...]

The income tax is imposed on "taxable income" from "whatever source derived," and Section 861 and following "determine the sources of income for the purposes of the income tax." The use of the word "whatever" does not change the fact that "Part I (section 861 and following), subchapter N, chapter 1 of the Code, and the regulations thereunder determine the sources of income for purposes of the income tax."

With respect to income from sources within the United States, the regulations say:

26 CFR 1.861-1 (a) ...The statute provides for the following three categories of income:
(1) Within the United States. The gross income from sources within the United States [...] See Secs. 1.861-2 to 1.861-7, inclusive, and Sec. 1.863-1. The taxable income from sources within the United States... shall be determined by deducting therefrom, in accordance with sections 861(b) and 863(a), [allowable deductions]. See Secs. 1.861-8 and 1.863-1."

The regulations refer to the section 861 regulations for determining gross income from sources within the United States.

Now, 26 CFR 1.861-8 is entitled, "Computation of taxable income from sources within the United States and from other sources and activities," and begins,

26 CFR 1.861-8 - Computation of taxable income from sources within the United States and from other sources and activities.
(a) In general--
(1) Scope. 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 sources within the United States has been determined.

Another piece of these regulations further emphasizes that 861 and its regulations are to be used for determining taxable income:

26 CFR 863-1 (c) The taxpayer's taxable income from sources within or without the United States will be determined under the rules of Secs. 1.861-8 through 1.861-14T for determining taxable income from sources within the United States.

Note that it does not say "the nonresident alien," but rather, "the taxpayer."

If it didn't matter what source the income was derived from, then there would be no need for Section 861 and following, to "determine the sources of income for the purposes of the income tax." As for determining the sources, we find the following regulation:

26 CFR 1.861-8(a)(1) The rules contained in this section 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.

And in paragraph (f)(1), we find the list of operative sections which require determination of taxable income:

26 CFR 1.861-8(f) Miscellaneous matters--
(1) Operative sections. 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.

And none of the "sections described below" apply to a US citizen residing and earning income within the US.

Now, as the Geezer pointed out, 26 USC 7701(c) states:

(c) Includes and including -
The terms "includes" and "including" when used in a definition contained in this title shall not be deemed to exclude other things otherwise within the meaning of the term defined.

This is an explicit exception to the canon of statutory construction which states "inclusio unius est exclusio alterius," "inclusion of one thing is the exclusion of others," but it is only applicable when the other things are otherwise within the meaning of the defined term.

The term "operative sections" does not have any other things otherwise within its meaning aside from those listed in (f)(1), unlike the various other definitions, such as for "corporation" in 7701(a)(3) (The term "corporation" includes associations, joint-stock companies, and insurance companies.)

Therefore, the only operative sections which require determination of taxable income of the taxpayer from specific sources or activities are those listed in (f)(1).

[ancient_geezer]

Therefore, the only operative sections which require determination of taxable income of the taxpayer from specific sources or activities are those listed in (f)(1).

I notice you look only at the regulation which can neither add to or take from the statute, while you do all you can to avoid the statutes from which regulations derive their authority.

Sorry that does not fly, for it is totally insufficient from the Court's point of view and the intention of Congress to which the courts are bound.

U S v. FISHER, 6 U.S. 358 (1805)

• "It is undoubtedly a well established principle in the exposition of statutes, that every part is to be considered, and the intention of the legislature to be extracted from the whole."

United States v. Condo, 741 F.2d 238 (9th Cir. 1984)
Argued that the Sixteenth Amendment only allows taxing income from "sources," not persons, and that the word "includes" is a term of limitation, not expansion.

You would have us ignore Sections 1, 61, 63 etc. in your single minded desire for us to accept what is a very weak argument that cannot serve as defense in the courtroom.

Sorry, I don't buy your scam and neither should anyone else who has any interest in preserving their freedom and property from the ravages of a tax case.

[Destructor]

Well, it seems that you have a better grasp of this situation, than I originally thought. That being the case, I'll cease for now, and spare you a verbal thrashing the like of which you've never seen! Count yourself lucky.

[Poohbah]

Let's quote a paragraph here:

For purposes of subparagraph (A), there may be excluded from consideration -

(iv) employees who are nonresident aliens and who receive no earned income (within the meaning of section 911(d)(2)) from the employer which constitutes income from sources within the United States (within the meaning of section 861(a)(3)).

Congratulations, you just proved my point right there.

[Poohbah]

That being the case, I'll cease for now, and spare you a verbal thrashing the like of which you've never seen!

Oh, f*** off, you non-hacking candy-a$$ civilian.

[MosesKnows]

you statement is incorrect.

I agree, my statement was incorrect.

[Mike4Freedom]

So all judges are part of the conspiracy. How convenient.

Not part of any conspiracy-they just have a personal financial interest in the outcome that leads to an appearance of impropriety.

No salaried judge should sit on a tax case. They should recuse themselves and yield to a special master (maybe a retired state judge) without the personal financial interest in the success of the income tax.

[ATOMIC_PUNK]

Frivolous filing position based on section 861 IRS NOTICE of Mass Deception 6.12.2001

[Poohbah]

Not part of any conspiracy-they just have a personal financial interest in the outcome that leads to an appearance of impropriety.

Actually, the judges have a financial interest in declaring the income tax unconstitutional. They pay taxes on their salary; declaring the income tax unconstitutional would result in an increase of their takehome pay. They are immune from the downside because their compensation cannot be reduced under any circumstances, and they have lifetime appointments. Congress would just have to suck it up and pay them from some other means of raising revenue.

No salaried judge should sit on a tax case. They should recuse themselves and yield to a special master (maybe a retired state judge) without the personal financial interest in the success of the income tax.

In order to have someone in charge of the case who has no interest in the outcome of the case, you'd have to select someone whose tax burden is precisely ZERO--i.e., they pay no income taxes, and do not get the EITC.

Retired state judges do not meet this criterion.

[AppyPappy]

maybe a retired state judge

Couldn't you just add him to the conspiracy? He could have government retirement benefits.

[Mike4Freedom]

Couldn't you just add him to the conspiracy? He could have government retirement benefits.

To avoid the appearance of conflict of interest they would have to find someone with no interest in the case. That is just a requirement of justice. Maybe we could get someone from outside the country.

In any case, all the decisions cited in this and related threads came from judges with a conflict of interest.

[Mad Dawgg]

Whether this guy is legit or not does not matter to the I.R.S. they must not let any movement that would result in taxpayers refusing to pay to get a foothold in the public conscience. If a majority of the Taxpayers refuse to pay the I.R.S. can do little about it.

I mean if 70 million taxpayers one day say enough is enough what are they gonna do... arrest everybody?

So the government lawyers will work to crush any movement that has even the slightest chance of succeeding!

[Poohbah]

Maybe we could get someone from outside the country.

OK, so you'd be happy with an Islamofascist sharia judge.

Thank you for your input.

[Poohbah]

I mean if 70 million taxpayers one day say enough is enough what are they gonna do... arrest everybody?

No, they'll just seize 70 million people's property and auction it off, along with all their cash so they can't buy it back. 70 million homeless taxpayers. 70 million people suddenly dependent on government largesse to have a roof over their heads. The Democrats would KILL to have that kind of voting bloc.

[ancient_geezer]

No salaried judge should sit on a tax case. They should recuse themselves and yield to a special master (maybe a retired state judge) without the personal financial interest in the success of the income tax.

No judge has a personal financial interest in the success of the income tax. They get paid before anyone else in the government and regardless of what kind of tax system exists by constitutional mandate.

Constitution, Article III. Section. 1.

• The judicial Power of the United States shall be vested in one supreme Court, and in such inferior Courts as the Congress may from time to time ordain and establish. The Judges, both of the supreme and inferior Courts, shall hold their Offices during good Behaviour, and shall, at stated Times, receive for their Services a Compensation, which shall not be diminished during their Continuance in Office.

[ancient_geezer]

70 million people suddenly dependent on government largesse to have a roof over their heads. The Democrats would KILL to have that kind of voting bloc.

Lets see http://www.cbo.gov/showdoc.cfm?index=1545&from=4&sequence=0:

Table 1. Preliminary Estimates of Effective Tax Rates by Income Category, 1977-1995 and Projected for 1999
Income Category	1977	1979	1981	1983	1985	1987	1989	1991	1993	1995	Projected 1999
Effective Individual Federal Income Tax Rate (In percent of gross income)
Lowest Quintile	-0.6	-0.8	-0.2	-0.5	-0.2	-1.3	-1.9	-2.9	-3.4	-5.6	-6.8
Second Quintile	3.6	3.9	4.6	3.5	3.9	3.2	3.3	2.7	1.8	1.8	0.9
Middle Quintile	7.1	7.5	8.3	6.8	6.8	6.1	6.5	6.3	5.9	6.1	5.4
Fourth Quintile	9.7	10.4	11.3	9.5	9.3	8.7	8.9	8.7	8.5	8.7	8.4
Highest Quintile	15.8	16.3	17.1	14.5	14.3	15.1	15.1	14.8	15.5	16.2	16.1
All Families	11.1	11.6	12.6	10.7	10.7	10.8	10.9	10.5	10.9	11.3	11.1
Top 10 Percent	17.6	18.0	18.7	15.9	15.6	16.9	16.6	16.3	17.4	18.2	18.0
Top 5 Percent	19.3	19.7	20.0	17.1	16.8	18.5	18.0	17.6	19.3	20.0	19.6
Top 1 Percent	23.1	22.6	22.0	19.3	18.7	20.9	19.7	19.9	22.8	23.4	22.2

30% of 270 million people = 81 million folks

---

70% of the public clamors for more from government looking for the top 40% of income earners/producers to foot the bill.

Walter Williams, World Net Daily, 10-25-2000

According to the most recent U.S. Treasury Department figures, in 1997 the top 1 percent of income-earners (those with income of $250,000 and higher) paid 33 percent of all federal income taxes. The top 5 percent of income-earners ($108,000 and over) paid 52 percent, and the top 50 percent ($36,000 and over) paid 96 percent of income taxes. Guess what the bottom 50 percent of income earners paid?

If you're among those who pay little or no federal income taxes, what do you care about tax cuts? Moreover, if you think tax cuts pose a threat to government handout programs, you might be openly hostile and support Al Gore's silly "risky scheme" talk. So many Americans paying little or no federal taxes makes for a natural spending constituency. It's like me in the restaurant: What do I care about extravagance if you're footing the bill?

---

 

Kind of looks like they might have that lil ole constituency in the bag already!