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]

but it is not the main reason Americans aren't required to pay an income tax.

LOL, the main reason "most" American's aren't required to pay an income tax is because counting unemployed folks like children, retiree's, stay at home moms, and street people most American are under the threshold (personal exemption + standard deduction) to tax.

[mvpel]

If paragraph (a) defines the source, then why do the regulations say that "section 861 and following determine the sources of income for the purposes of THE income tax?"

[ancient_geezer]

Why do the regulations say that "Section 861 and following determine the sources of income for the purposes of the income tax?

Can't you read?

Section 861 unambiguously tells you that if compensation for labor of services is earned within the United States that must be included in the calculation of gross income as income from a source within the United States. Only nonresident aliens under specific circumstances are excepted under the section.

Sec. 861. Income from sources within the United States
(a) Gross income from sources(activities) within United States
The following items of gross income shall be treated as
income from sources(activities) within the United States:

(3) Personal services
Compensation for labor or personal services performed in the United States;

EXCEPT that compensation for labor or services
performed in the United States shall not be deemed to be income
from sources within the United States if -

(A) the labor or services are performed by a nonresident
alien individual temporarily present in the United States for a
period or periods not exceeding a total of 90 days during the
taxable year, ***

Furthermore, we know from the following:

26 USC 7805(a) Rules and regulations
(a) Authorization - … the Secretary [of the Treasury] shall prescribe all needful rules and regulations for the enforcement of this title [Title 26]…" [26 USC § 7805]

Thus under amplifying Treasury regulations for 26 USC 1, 26 CFR 1.1-1(a),(b)

Sec. 1.1-1 Income tax on individuals.

(a) General rule. (1) Section 1 of the Code imposes an income tax on the income of every individual who is a citizen or resident of the United States and, to the extent provided by section 871(b) or 877(b), on the income of a nonresident alien individual.

(b) Citizens or residents of the United States liable to tax. In general, all citizens of the United States, wherever resident, and all resident alien individuals are liable to the income taxes imposed by the Code whether the income is received from sources within or without the United States.

that United States Citizen are subject in a more absolute sense from section 1.

[PatrioticAmerican]

Regulations do not trump law, if you are talking about the IRS regulations versus the income tax law.

The law reads VERY CLEARLY that income from payment for labor services are taxable.

Of course, if the 16th WASN'T ratified as recent research seems to show, and if the lawmakers and courts are willing to enforce it using armed agents of the goobermint, we only have the choice of rebellion to thwart the income tax.

There, I said it: Rebellion as change seems impossible.

[SoDak]

You're absolutely correct.

[philman_36]

And "the expected", who I expect to see replying on threads such as these, showed up. There were a couple of folks I expected to see that didn't show though. Bummer...
This thread could've used several hundred more "cut and paste" insertions. /sarcasm

[mvpel]

Can't you read?

No need to resort to IRS tactics, I'm just engaging in a friendly discussion here.

Section 861 unambiguously tells you that if compensation for labor of services is earned within the United States that must be included in the calculation of gross income as income from a source within the United States. Only nonresident aliens under specific circumstances are excepted under the section.

Sec. 861. Income from sources within the United States
(a) Gross income from sources(activities) within United States The following items of gross income shall be treated as income from sources(activities) within the United States:

Okay, so bear with me here and parse this sentence with me:

The following items (what follows is a list of ITEMS, not a list of SOURCES) of gross income (what follows is a list of ITEMS of GROSS INCOME) shall be treated as income (NOT treated as taxable income, but as INCOME) from sources (activities) (What is a SOURCE or ACTIVITY? This paragraph does not say.) within the United States.

You have a list of items of gross income, which includes compensation for labor or personal services as an item of gross income. That is an item of income, not a source of income. If the labor was performed within the United States, then it is an item of gross income for which the source, whatever that may be, must be treated as though it is "within" the US. This says nothing about what the source is.

You are treating "income from sources" as if it were a single noun that defines the term "source," which it is not doing. Elsewhere in the regulations, there are references to specific sources.

And regardless, it is unwarranted to jump to the conclusion that all sources of income are automatically taxable. If the term "source" is defined in the code, which it is, saying "all sources" or "whatever source" is no different than when the code says "all firearms" in referring to sawed-off shotguns and landmines but not bolt-action rifles.

For example, if you were a Canadian, doing consulting work for the XYZ Canadian company within the US - say, doing a software installation for one of their US clients - and that company has no presence in the US other than you. You will receive an item of gross income in the form of the compensation for your labor, from the source of XYZ Canadian company. This paragraph states that the XYZ Canadian company, as the source, is considered to be WITHIN the US, even though it's a foreign corporation, since the labor was performed within the US.

Now, 26 CFR 1.861-8(a) states, "The rules contained in this section apply in determining taxable income of the taxpayer from specific sources and activities..."

Not any old source whatsoever, but SPECIFIC sources. In order to determine taxable income, you need to build "statutory groupings":

"[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 (See paragraph (f)(1) of this section.)" [26 CFR § 1.861-8(a)(4)]

So, in the example above, we have a statutory grouping of an item of gross income (compensation for labor) from a specific source (XYZ Corp) that is treated as "within" the United States (since the labor was performed in the US), involving a foreign corporation, XYZCorp in Canada.

"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." [26 CFR § 1.861-8(a)(1)]

Now, to determine taxable income, we go to the list of operative sections in paragraph (f)(1), as instructed in the regulations TWICE, in both 8(a)(1) and (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 to which this section is applicable include the sections described below.
(i) Overall limitation to the foreign tax credi...
(ii) [Reserved]
(iii) DISC and FSC taxable income… [international and foreign sales corporations]
(iv) Effectively connected taxable income. Nonresident alien individuals and foreign corporations engaged in trade or business within the United States...

So in our example, the source of the item of gross income (compensation for labor) was a foreign corporation (XYZCorp) engaged in business (consulting) within the United States, and is here falling under an operative section that requires determination of taxable income.

"The operative sections of the Code which require the determination of taxable income" do not list anything that is applicable to a US citizen living and working exclusively within the United States.

I know it's hard to follow this line of reasoning, it's probably deliberately hard, in fact.

[mvpel]

The law reads VERY CLEARLY that income from payment for labor services are taxable.

No, the law states that income from payment for labor is an ITEM of GROSS INCOME. Gross income != Taxable income.

[AppyPappy]

Judges have a personal vested interest in the income tax continuing

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

[ancient_geezer]

You have a list of items of gross income, which includes compensation for labor or personal services as an item of gross income. That is an item of income, not a source of income. If the labor was performed within the United States, then it is an item of gross income for which the source, whatever that may be, must be treated as though it is "within" the US. This says nothing about what the source is.

You missed the specific in your analysis:

Sec. 861. Income from sources within the United States
(a) Gross income from sources(activities) within United States
The following items of gross income shall be treated as
income from sources(activities) within the United States:

(3) Personal services
Compensation for labor or personal services performed in the United States;

• compensation = item of income
• in exchange for = source
• service = object of commerce.

A tax levied as an excise or duty on an activity of commerce.

KNOWLTON v. MOORE, 178 U.S. 41 (1900)

• 'indirect taxes are levied upon the happening of an event or an exchange.'

Tyler v. U.S. 281 U.S. 497, 502 (1930)

• An indirect tax is a tax laid upon the happening of an event,as distinguished from its tangible fruits.

PACIFIC INS. CO. v. SOULE, 74 U.S. 433 (1868),7 Wall. 433

• "Congress may prescribe the basis, fix the rates, and require payment as it may deem proper. Within the limits of the Constitution it is supreme in its action. No power of supervision or control is lodged in either of the other departments of the government."

 

Charles C. Stewart Machine Co. v. Davis (1937), 301 U.S. 548:

• The tax, which is described in the statute as an excise, is laid with uniformity throughout the United States as a duty, an impost, or an excise upon the relation of employment.

• "But natural rights, so called, are as much subject to taxation as rights of lesser importance. An excise is not limited to vocations or activities that may be prohibited altogether. It is not limited to those that are the outcome of a franchise. It extends to vocations or activities pursued as of common right."

• Employment is a business relation, if not itself a business. It is a relation without which business could seldom be carried on effectively. The power to tax the activities and relations that constitute a calling considered as a unit is the power to tax any of them. The whole includes the parts. Nashville, C. & St. L. Ry. Co. v. Wallace, 288 U.S. 249, 267 , 268 S., 53 S.Ct. 345, 349, 350, 87 A.L.R. 1191

Looks more than sufficiently specific in regards to the intent of Congress under authority granted by the Constitution which is the rule.

Constitution for the United States of America:

• Article VI: "This Constitution, and the laws of the United States which shall be made in pursuance thereof; and all treaties made, or which shall be made, under the authority of the United States, shall be the supreme law of the land; and the judges in every state shall be bound thereby, anything in the Constitution or laws of any State to the contrary notwithstanding."

• Article I Section 8: "The Congress shall have power to lay and collect taxes, duties, imposts and excises,
  to pay the debts and provide for the common defense and general welfare of the United States;
  but all duties, imposts and excises shall be uniform throughout the United States; "

• Article I Section 8: "To make all laws which shall be necessary and proper for carrying into execution the foregoing powers, and all other powers vested by this Constitution in the government of the United States, or in any department or officer thereof."

House Congressional Record, March 27, 1943, pg. 2580:

• "The income tax is, therefore, not a tax on income as such. It is an excise tax with respect to certain activities and privileges (the type 3 and 4 taxes) which is measured by reference to the income which they produce. The income is not the subject of the tax; it is the basis for determining the amount of tax."

FindLaw: RODGERS v. U S, 185 U.S. 83 (1902)
"The primary rule of statutory construction is, of course, to give effect to the intention of the legislature."

FindLaw: S.E.C v. C. M. JOINER LEASING CORP., 320 U.S. 344,351 (1943)

"... courts will construe the details of an act in conformity with its dominating general purpose, will read text in the light of context and will interpret the text so far as the meaning of the words fairly permits so as to carry out in particular cases the generally expressed legislative policy.

---

So your problem with the language is what? Seems totally clear to me.

[mvpel]

One more time: US residents do not use Section 861 or Subchapter N for determining their tax liability.

We use Subchapter B.

Then why are there so many references, in the index, the statutes, and the regulations, pointing one to Subchapter N to "determine the sources of income for the purposes of the income tax?" Note that it doesn't say "for the purposes of the income tax if you are a nonresident alien," but for the purposes of THE income tax, the whole thing.

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

No mention there of "ignore this if you are a US citizen."

Why does Section 61 of the code have this cross reference?

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

Again, no mention of "ignore this if you are a US citizen working in the US."

You're proceeding from a foregone conclusion here - "all income of US citizens MUST be taxable," your foregone conclusion, "and since Section 861 doesn't show the income of most US citizens to be taxable, Section 861 must not apply to most US citizens."

You're drawing a conclusion about the application of Section 861 based on your foregone conclusion that all income of US citizens is taxable income, instead of based on the law and regulations.

[ancient_geezer]

No, the law states that income from payment for labor is an ITEM of GROSS INCOME. Gross income != Taxable income.

Taxable income is stated to be GROSS INCOME less allowed exemptions and deductions.

You are merely begging the issue, and have no basis to stand on. Compensation for labor or services in the United States earned by United States citizens is not excepted from the inclusion in Gross income or calculation of "Taxable income". In fact it is expressly stated to be included into those calculations.

Your items/sources argument is a totally dead issue, as all income has sources and all sources unless expressly excluded by statute are subject to the income tax law.

[mvpel]

Let's try Title 26, Subtitle A, Chapter 1, Subchapter A, Part I, Section 1.

That imposes a tax based on the income of any US citizen or resident alien from whatever source derived.

Actually, it imposes a tax based on the taxable income, and the income must be derived from a source. And if the law defines a given term, it doesn't matter how many expansive modifiers are used in connection with it, it still means what the law says it means.

26 USC § 5841 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 this law has a far more limited application than this section by itself would seem to imply. In 26 USC § 5845(a) 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.

Just as "all" doesn't change the statutory definition of the term "firearm," the term "whatever" doesn't alter the broadness of the term "source" in the statutes.

In order to determine the taxable income of a taxpayer, the regulations state:

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. [26 CFR § 1.861-8(a)(1)]

To break down this terminology, the "other sections of the code," known as "operative sections," are those pertaining to "determining the taxable income of the taxpayer from specific sources and activities."

The list of "operative sections which require the determination of taxable income" as set forth in (f)(1), does not apply to most US citizens.

And an ancient canon of statutory construction states, "expressio unius est exclusio alterius" - expression of one thing is the exclusion of another.

Stating in law that "for the purposes of this code, the term 'holiday' includes New Year's Day, Labor Day, Thanksgiving, and Christmas" does not mean that the term "holiday" might also possibly include Veteran's Day.

The operative sections which require the determination of taxable income are listed in (f)(1), and under "expressio unius est exclusio alterius," these are the only operative sections which require the determination of taxable income.

[Poohbah]

Then why are there so many references, in the index, the statutes, and the regulations, pointing one to Subchapter N to "determine the sources of income for the purposes of the income tax?"

Because if you're in the sections where it refers to Subchapter N, Section 861, the presumption is that you are a nonresident alien. The only documents and regulations that refer to Subchapter N, Section 861 are those documents and regulations that a nonresident alien must use in order to determine and report his tax liability.

Why does Section 61 of the code have this cross reference?

Income from sources - Within the United States, see section 861 of this title Without the United States, see section 862 of this title Again, no mention of "ignore this if you are a US citizen working in the US."

The text you cited does not appear in Title26, Subtitle A, Chapter 1, Subchapter B, Part I, Section 61.

The totality of Section 61 is reprinted below:

Sec. 61. - Gross income defined

(a) General definition

Except as otherwise provided in this subtitle, gross income means all income from whatever source derived, including (but not limited to) the following items:

(1) Compensation for services, including fees, commissions, fringe benefits, and similar items;
(2) Gross income derived from business;
(3) Gains derived from dealings in property;
(4) Interest;
(5) Rents;
(6) Royalties;
(7) Dividends;
(8) Alimony and separate maintenance payments;
(9) Annuities;
(10) Income from life insurance and endowment contracts;
(11) Pensions;
(12) Income from discharge of indebtedness;
(13) Distributive share of partnership gross income;
(14) Income in respect of a decedent; and
(15) Income from an interest in an estate or trust.

(b) Cross references For items specifically included in gross income, see part II (sec. 71 and following). For items specifically excluded from gross income, see part III (sec. 101 and following)

Source for this citation

As you can see, Section 61 makes NO MENTION of Section 861 whatsoever. Either you are misinformed--and quite badly misinformed, at that--or you are LYING.

Pray tell which one it is.

[mvpel]

Your items/sources argument is a totally dead issue, as all income has sources and all sources unless expressly excluded by statute are subject to the income tax law.

See post 93 on the subject of "expressio unius est exclusio alterius," and the example of 26 USC §5841. It does not mean "all firearms unless expressly excluded by statute."

Taxable income is stated to be GROSS INCOME less allowed exemptions and deductions.

According to the regulations, you must first determine the source of the gross income, divide it into statutory groupings, and then use the operative sections which require determination of taxable income listed in 26 CFR § 1.861-8(f)(1) in determining taxable income.

Where is the operative section that requires determination of taxable income that applies to most US citizens?

[ancient_geezer]

Poohbah the note to which mvpel is referring is not part of Public Law enacted by Congress. It is an editor's reference supplied by West Publishing in their compilation of tax law. As such it has not force whatsoever.

The book "United States Code" is not the law, it is a compilation of the law. The actual law is that which resides in U.S. Statutes, the published acts of Congress by date of enactment. Notes, Titles, labels etc added by West publishing for purposes of indexing and reference are not law.

[mvpel]

Because if you're in the sections where it refers to Subchapter N, Section 861, the presumption is that you are a nonresident alien. The only documents and regulations that refer to Subchapter N, Section 861 are those documents and regulations that a nonresident alien must use in order to determine and report his tax liability.

Tell me where I can find that presumption in the statutes or regulations? Where does it say "ignore section 861 if you are not a nonresident alien?" What is your basis for that presumption?

Why does Section 61 of the code have this cross reference?

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

Again, no mention of "ignore this if you are a US citizen working in the US."

The text you cited does not appear in Title26, Subtitle A, Chapter 1, Subchapter B, Part I, Section 61.

That is becuase it is a cross-reference, as I stated, from the annotated United States Code, not part of the statute itself.

While a cross-reference annotation or the index of the US Code does not carry legal weight, it serves as an aid for understanding the relationships between code sections. The cross reference here shows that Section 61 is related to Section 861 when it comes to determining income from sources within the United States.

Try to understand - a source of income is distinct from an item of income. Section 61 lists items of income, not sources.

[Poohbah]

I see your problem. You are working extremely hard to be stupid. Have you used the Cheek defense before? If you already have, I have bad news for you--it only works ONCE.

[ancient_geezer]

of "expressio unius est exclusio alterius,"

Ah but compensation for services or labor is expressly included,

Sec. 861. Income from sources within the United States
(a) Gross income from sources(activities) within United States
The following items of gross income shall be treated as
income from sources(activities) within the United States:

(3) Personal services
Compensation for labor or personal services performed in the United States;

and the United States citizen is expressly stated to be subject to such taxes:

26 USC 7805(a) Rules and regulations
(a) Authorization - … the Secretary [of the Treasury] shall prescribe all needful rules and regulations for the enforcement of this title [Title 26]…" [26 USC § 7805]

Thus under amplifying Treasury regulations for 26 USC 1, 26 CFR 1.1-1(a),(b)

Sec. 1.1-1 Income tax on individuals.

(a) General rule. (1) Section 1 of the Code imposes an income tax on the income of every individual who is a citizen or resident of the United States and, to the extent provided by section 871(b) or 877(b), on the income of a nonresident alien individual.

(b) Citizens or residents of the United States liable to tax. In general, all citizens of the United States, wherever resident, and all resident alien individuals are liable to the income taxes imposed by the Code whether the income is received from sources within or without the United States.

Furthermore, the statutes themselves deny this usage of this maxim, which is merely a convention not a constitutional mandate.

26 USC 7701. Definitions

"(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."

FindLaw: S.E.C v. C. M. JOINER LEASING CORP., 320 U.S. 344 (1943)

"The maxim is not to be so applied as to narrow the words of the statute to the exclusion of cases, which those words, in their ordinary acceptation, or in that sense in which the legislature has obviously used them, would comprehend."United States v. Wiltberger, 5 US(Wheat), 76, 95.

"... but the words should be taken in such a sense, bent neither one way nor the other, as will best manifest the legislative intent.' The principle has been followed in United States v. Corbett, , 30 S.Ct. 81, 84; Donnelley v. United States, , 48 S.Ct. 400, 401; United States v. Giles, , 57 S.Ct. 340, 344, 81 S.Ct. 493."

[ancient_geezer]

Where is the operative section that requires determination of taxable income that applies to most US citizens?

 

United States v. Melton, No. 94-5535 (4th Cir. 1996)
ARGUED: Lowell Harrison Becraft, Jr.[one of Schulz & Co. legal beagles], Huntsville, Alabama, for Appellants.

The jury heard not only the United States's evidence against the Meltons, but also the brothers' defense that they believed they were not "persons liable" for federal income tax. The jury rejected the excuse, however, and convicted them on nearly all counts.

• [Subtitle A] "Section 1 of the Internal Revenue Code imposes a federal tax on the taxable income of every individual.
  26 U.S.C. s 1."

• [Subtitle A] "Section 63 defines "taxable income" as gross income minus allowable deductions.
  26 U.S.C. s 63.

• [Subtitle A] Section 61 states that "gross income means all income from whatever source derived," including compensation for services.
  26 U.S.C. s 61.
  
• [Subtitle F] Sections 6001 and 6011 provide that a person must keep records and file a tax return for any tax for which he is liable.
  26 U.S.C. ss 6001
  26 U.S.C. ss 6011.

• Finally, section 6012 provides that every individual having gross income that equals or exceeds the exemption amount in a taxable year shall file an income tax return.
  26 U.S.C. s 6012.

The duty to pay federal income taxes therefore is "manifest on the face of the statutes, without any resort to IRS rules, forms or regulations." United States v. Bowers, 920 F.2d 220, 222 (4th Cir.1990). The rarely recognized proposition that, "where the law is vague or highly debatable, a defendant--actually or imputedly--lacks the requisite intent to violate it," Mallas, 762 F.2d at 363 (quoting United States v. Critzer, 498 F.2d 1160, 1162 (4th Cir.1974)), simply does not apply here.

Each Melton brother had gross income in excess of the amount requiring the filing of a return in each of the years at issue. Therefore, each was a "person liable."