Ed and Elaine Brown have offered $1,000,000 to whoever can show them the law that requires them to pay taxes. That law is, of course, Section 1 of the tax code but Ed and Elaine will never admit that.
Instead, the challenge by Ed and Elaine Brown is totally illusory since they don't even have $1,000,000 to put up! They are offering their home and Elaine's office building, but these are going to be sold to pay their back tax liability anyway. This is like offering a "challenge" where the prize is a barn that is already on fire -- it is not worth anything.
But offering bogus challenges is exactly what convicted felon scumbags like Ed and Elaine Brown do!
Friday, February 23, 2007
http://www.irs.gov/taxpros/article/0,,id=159932,00.html#_Toc153765508
For federal income tax purposes, “gross income” means all income from whatever source derived and includes compensation for services. I.R.C. § 61. Any income, from whatever source, is presumed to be income under section 61, unless the taxpayer can establish that it is specifically exempted or excluded. In Reese v. United States, 24 F.3d 228, 231 (Fed. Cir. 1994), the court stated, “an abiding principle of federal tax law is that, absent an enumerated exception, gross income means all income from whatever source derived.”
Section 1341 and the cases interpreting it require taxpayers to return funds previously reported as income before they can claim a deduction under claim of right. To have the right to a deduction, the taxpayer should appear to have an unrestricted right to the income in question. See Dominion Resources, Inc. v. United States, 219 F.3d 359 (4th Cir. 2000). It is a frivolous argument to claim a section 1341 deduction when there has been no repayment by the taxpayer of an amount previously reported as income. The Internal Revenue Service issued Revenue Ruling 2004-29, 2004-1 C.B. 627, warning taxpayers of the consequences of making this frivolous argument.
The Sixteenth Amendment provides that Congress shall have the power to lay and collect taxes on income, from whatever source derived, without apportionment among the several states, and without regard to any census or enumeration. U.S. Const. amend. XVI. Furthermore, the U.S. Supreme Court upheld the constitutionality of the income tax laws enacted subsequent to ratification of the Sixteenth Amendment in Brushaber v. Union Pacific R.R., 240 U.S. 1 (1916). Since that time, the courts have consistently upheld the constitutionality of the federal income tax. For a further discussion of the constitutionality of the federal income tax laws, see section I.D. of this outline.
All compensation for personal services, no matter what the form of payment, must be included in gross income. This includes salary or wages paid in cash, as well as the value of property and other economic benefits received because of services performed, or to be performed in the future. Furthermore, criminal and civil penalties have been imposed against individuals relying upon this frivolous argument.
In November 2004, a federal district court in Ohio barred Michael A. Allamby from preparing federal tax returns and representing taxpayers before the IRS. Mr. Allamby erroneously interpreted the instructions to certain federal tax forms as requiring individuals to report their wages as income only if they invested the wages to earn income. See http://www.usdoj.gov/tax/txdv04733.htm; see also 2004 TNT 215-24 (Nov. 4, 2004). Also, in May 2005, a federal district court in Louisiana permanently barred Richard A. Fuselier and Richard J. Ortt and their organization, Compensation Consultants, from preparing tax returns and promoting tax schemes, such as the “not for profit” scheme, which was based on the premise that wages cannot be taxed. See http://www.usdoj.gov/opa/pr/2005/March/05_tax_085.htm; see also 2005 TNT 94-16 (May 16, 2005).
In January 2005, a federal district court in California permanently enjoined Joseph O. Saladino, founder of an organization known as the Freedom and Privacy Committee, from promoting two schemes: the “claim of right” program and the “corporation sole” scheme (discussed below in this outline). See http://www.usdoj.gov/tax/txdv05005.htm; see also 2005 TNT 15-22 (Jan. 24, 2005). Also, in January 2005, a federal district court in North Carolina permanently barred Frank D. Perkinson from selling the “claim of right” program and the “corporation sole” scheme. See http://www.usdoj.gov/opa/pr/2005/January/05_tax_005.htm; see also 2005 TNT 5-16 (Jan. 6, 2005).
In June 2006, Richard M. Blackstock was convicted on thirty-two counts of assisting in the preparation of fraudulent returns based on his involvement in filing various returns claiming deductions for wages, salaries and other compensation under the frivolous “claim of right” theory. See http://www.usdoj.gov/tax/usaopress/2006/txdv06Blackstock_USAO_OK.wpd; see also 2006 TNT129-31 (Jun. 23, 2006).
Relevant Case Law:
Commissioner v. Glenshaw Glass Co., 348 U.S. 426, 429-30 (1955) – referring to the statute’s words “income derived from any source whatever,” the Supreme Court stated, “this language was used by Congress to exert in this field ‘the full measure of its taxing power.’ . . . And the Court has given a liberal construction to this broad phraseology in recognition of the intention of Congress to tax all gains except those specifically exempted.”
Commissioner v. Kowalski, 434 U.S. 77 (1977) – the Supreme Court found that payments are considered income where the payments are undeniably accessions to wealth, clearly realized, and over which a taxpayer has complete dominion.
Cheek v. United States, 498 U.S. 192 (1991) – the Supreme Court reversed and remanded Cheek’s conviction of willfully failing to file federal income tax returns and willfully attempting to evade income taxes solely on the basis of erroneous jury instructions. The Court noted, however, that Cheek’s argument, that he should be acquitted because he believed in good faith that the income tax law is unconstitutional, “is unsound, not because Cheek’s constitutional arguments are not objectively reasonable or frivolous, which they surely are, but because the [law regarding willfulness in criminal cases] does not support such a position.” Id. (emphasis added). On remand, Cheek was convicted on all counts and sentenced to jail for a year and a day. Cheek v. United States, 3 F.3d 1057 (7th Cir. 1993), cert. denied, 510 U.S. 1112 (1994).
United States v. Becker, 965 F.2d 383, 389 (7th Cir. 1992) – the court found defendant’s contention that wages are not income to be “ridiculous.”
United States v. Sloan, 939 F.2d 499, 500 (7th Cir. 1991) – in rejecting defendant’s argument that the revenue laws of the United States do not impose a tax on income, the court recognized the “Internal Revenue Code imposes a tax on all income.”
United States v. Connor, 898 F.2d 942, 943-44 (3d Cir.), cert. denied, 497 U.S. 1029 (1990) – the court stated that “[e]very court which has ever considered the issue has unequivocally rejected the argument that wages are not income.”
Lonsdale v. Commissioner, 661 F.2d 71, 72 (5th Cir. 1981) – the court rejected as “meritless” the taxpayer’s contention that the “exchange of services for money is a zero-sum transaction . . . .”
Stelly v. Commissioner, 761 F. 2d 1113 (5th Cir. 1985) – the Fifth Circuit affirmed the Tax Court’s holding against the taxpayer’s argument that taxing wage and salary income is a violation of the constitution because compensation for labor is an exchange, not gain. The Fifth Circuit also fined the taxpayer for bringing a frivolous appeal.
United States v. White, 769 F. 2d 511 (8th Cir. 1985) – the court issued a permanent injunction to prevent the promotion of the argument that there is no tax imposed on an exchange of property (labor) in an equal exchange for property (wages).
United States v. Richards, 723 F.2d 646, 648 (8th Cir. 1983) – the court upheld conviction and fines imposed for willfully failing to file tax returns, stating that the taxpayer’s contention that wages and salaries are not income within the meaning of the Sixteenth Amendment is “totally lacking in merit.”
United States v. Romero, 640 F.2d 1014, 1016 (9th Cir. 1981) – the court affirmed Romero’s conviction for willfully failing to file tax returns, finding, in part, that “[t]he trial judge properly instructed the jury on the meaning of [‘income’ and ‘person’]. Romero’s proclaimed belief that he was not a ‘person’ and that the wages he earned as a carpenter were not ‘income’ is fatuous as well as obviously incorrect.”
Abdo v. United States, 234 F. Supp. 2d 553 (M.D. N.C. 2002), aff’d, 2003-1 U.S.T.C. (CCH) ¶ 50,483 (4th Cir. 2003) – the tax preparer prepared returns based on the argument that labor is an exchange for wages and not taxable. The court cited Connor, supra, when finding that the tax preparer misstated the law.
McCoy v. United States, 88 A.F.T.R.2d (RIA) 7116, 2001 U.S. Dist. LEXIS 18986 (N.D. Tex. Nov. 16, 2001) – the court rejected the taxpayer’s argument that wages received were not income and described this position as meritless.
Sumter v. United States, 61 Fed. Cl. 517, 523 (2004) – the court found the taxpayer’s “claim of right” argument as “devoid of any merit” and that section 1341 only applies to situations in which the claimant is compelled to return the taxed item because of a mistaken presumption that the right held was unrestricted and, thus, the item was previously reported, erroneously, as taxable income. Section 1341 was inapplicable to Ms. Sumter, because she had a continuing, unrestricted claim of right to her salary income and had not been compelled to repay that income in a later tax year.
Abrams v. Commissioner, 82 T.C. 403, 413 (1984) – the court rejected the argument that wages are not income, sustained the failure to file penalty, and awarded damages of $5,000 for pursuing a position that was “frivolous and groundless . . . and maintained primarily for delay.”
Reading v. Commissioner, 70 T.C. 730 (1978), aff’d, 614 F.2d 159 (8th Cir. 1980) – the court said the entire amount received from the sale of one’s services constitutes income within the meaning of the Sixteenth Amendment.
Cullinane v. Commissioner, T.C. Memo. 1999-2, 77 T.C.M. (CCH) 1192, 1193 (1999) – noting that “[c]ourts have consistently held that compensation for services rendered constitutes taxable income and that taxpayers have no tax basis in their labor,” the court found Cullinane liable for the failure to file penalty, stating that “[his] argument that he is not required to pay tax on compensation for services does not constitute reasonable cause.”
Wheelis v. Commissioner, T.C. Memo. 2002-102, 83 T.C.M. (CCH) 1543-45 (2002) – the court rejected the taxpayer’s frivolous argument that his wages were not taxable based on his belief that “[p]roperty (money) exchanged for property (labor not subject to tax)” is not subject to income taxation. The court stated that such claims have been “consistently and thoroughly rejected” by the courts and imposed a penalty against Wheelis in the amount of $10,000 for making frivolous arguments.
Carskadon v. Commissioner, T.C. Memo. 2003-237, 86 T.C.M. (CCH) 234, 236 – the court rejected the taxpayer’s frivolous argument that “wages are not taxable because the Code, which states what is taxable, does not specifically state that ‘time reimbursement transactions,’ a term of art coined by [taxpayers], are taxable.” The court imposed a $2,000 penalty against the taxpayers for raising “only frivolous arguments which can be characterized as tax protester rhetoric.”
For federal income tax purposes, “gross income” means all income from whatever source derived and includes compensation for services. I.R.C. § 61. Any income, from whatever source, is presumed to be income under section 61, unless the taxpayer can establish that it is specifically exempted or excluded. In Reese v. United States, 24 F.3d 228, 231 (Fed. Cir. 1994), the court stated, “an abiding principle of federal tax law is that, absent an enumerated exception, gross income means all income from whatever source derived.”
Section 1341 and the cases interpreting it require taxpayers to return funds previously reported as income before they can claim a deduction under claim of right. To have the right to a deduction, the taxpayer should appear to have an unrestricted right to the income in question. See Dominion Resources, Inc. v. United States, 219 F.3d 359 (4th Cir. 2000). It is a frivolous argument to claim a section 1341 deduction when there has been no repayment by the taxpayer of an amount previously reported as income. The Internal Revenue Service issued Revenue Ruling 2004-29, 2004-1 C.B. 627, warning taxpayers of the consequences of making this frivolous argument.
The Sixteenth Amendment provides that Congress shall have the power to lay and collect taxes on income, from whatever source derived, without apportionment among the several states, and without regard to any census or enumeration. U.S. Const. amend. XVI. Furthermore, the U.S. Supreme Court upheld the constitutionality of the income tax laws enacted subsequent to ratification of the Sixteenth Amendment in Brushaber v. Union Pacific R.R., 240 U.S. 1 (1916). Since that time, the courts have consistently upheld the constitutionality of the federal income tax. For a further discussion of the constitutionality of the federal income tax laws, see section I.D. of this outline.
All compensation for personal services, no matter what the form of payment, must be included in gross income. This includes salary or wages paid in cash, as well as the value of property and other economic benefits received because of services performed, or to be performed in the future. Furthermore, criminal and civil penalties have been imposed against individuals relying upon this frivolous argument.
In November 2004, a federal district court in Ohio barred Michael A. Allamby from preparing federal tax returns and representing taxpayers before the IRS. Mr. Allamby erroneously interpreted the instructions to certain federal tax forms as requiring individuals to report their wages as income only if they invested the wages to earn income. See http://www.usdoj.gov/tax/txdv04733.htm; see also 2004 TNT 215-24 (Nov. 4, 2004). Also, in May 2005, a federal district court in Louisiana permanently barred Richard A. Fuselier and Richard J. Ortt and their organization, Compensation Consultants, from preparing tax returns and promoting tax schemes, such as the “not for profit” scheme, which was based on the premise that wages cannot be taxed. See http://www.usdoj.gov/opa/pr/2005/March/05_tax_085.htm; see also 2005 TNT 94-16 (May 16, 2005).
In January 2005, a federal district court in California permanently enjoined Joseph O. Saladino, founder of an organization known as the Freedom and Privacy Committee, from promoting two schemes: the “claim of right” program and the “corporation sole” scheme (discussed below in this outline). See http://www.usdoj.gov/tax/txdv05005.htm; see also 2005 TNT 15-22 (Jan. 24, 2005). Also, in January 2005, a federal district court in North Carolina permanently barred Frank D. Perkinson from selling the “claim of right” program and the “corporation sole” scheme. See http://www.usdoj.gov/opa/pr/2005/January/05_tax_005.htm; see also 2005 TNT 5-16 (Jan. 6, 2005).
In June 2006, Richard M. Blackstock was convicted on thirty-two counts of assisting in the preparation of fraudulent returns based on his involvement in filing various returns claiming deductions for wages, salaries and other compensation under the frivolous “claim of right” theory. See http://www.usdoj.gov/tax/usaopress/2006/txdv06Blackstock_USAO_OK.wpd; see also 2006 TNT129-31 (Jun. 23, 2006).
Relevant Case Law:
Commissioner v. Glenshaw Glass Co., 348 U.S. 426, 429-30 (1955) – referring to the statute’s words “income derived from any source whatever,” the Supreme Court stated, “this language was used by Congress to exert in this field ‘the full measure of its taxing power.’ . . . And the Court has given a liberal construction to this broad phraseology in recognition of the intention of Congress to tax all gains except those specifically exempted.”
Commissioner v. Kowalski, 434 U.S. 77 (1977) – the Supreme Court found that payments are considered income where the payments are undeniably accessions to wealth, clearly realized, and over which a taxpayer has complete dominion.
Cheek v. United States, 498 U.S. 192 (1991) – the Supreme Court reversed and remanded Cheek’s conviction of willfully failing to file federal income tax returns and willfully attempting to evade income taxes solely on the basis of erroneous jury instructions. The Court noted, however, that Cheek’s argument, that he should be acquitted because he believed in good faith that the income tax law is unconstitutional, “is unsound, not because Cheek’s constitutional arguments are not objectively reasonable or frivolous, which they surely are, but because the [law regarding willfulness in criminal cases] does not support such a position.” Id. (emphasis added). On remand, Cheek was convicted on all counts and sentenced to jail for a year and a day. Cheek v. United States, 3 F.3d 1057 (7th Cir. 1993), cert. denied, 510 U.S. 1112 (1994).
United States v. Becker, 965 F.2d 383, 389 (7th Cir. 1992) – the court found defendant’s contention that wages are not income to be “ridiculous.”
United States v. Sloan, 939 F.2d 499, 500 (7th Cir. 1991) – in rejecting defendant’s argument that the revenue laws of the United States do not impose a tax on income, the court recognized the “Internal Revenue Code imposes a tax on all income.”
United States v. Connor, 898 F.2d 942, 943-44 (3d Cir.), cert. denied, 497 U.S. 1029 (1990) – the court stated that “[e]very court which has ever considered the issue has unequivocally rejected the argument that wages are not income.”
Lonsdale v. Commissioner, 661 F.2d 71, 72 (5th Cir. 1981) – the court rejected as “meritless” the taxpayer’s contention that the “exchange of services for money is a zero-sum transaction . . . .”
Stelly v. Commissioner, 761 F. 2d 1113 (5th Cir. 1985) – the Fifth Circuit affirmed the Tax Court’s holding against the taxpayer’s argument that taxing wage and salary income is a violation of the constitution because compensation for labor is an exchange, not gain. The Fifth Circuit also fined the taxpayer for bringing a frivolous appeal.
United States v. White, 769 F. 2d 511 (8th Cir. 1985) – the court issued a permanent injunction to prevent the promotion of the argument that there is no tax imposed on an exchange of property (labor) in an equal exchange for property (wages).
United States v. Richards, 723 F.2d 646, 648 (8th Cir. 1983) – the court upheld conviction and fines imposed for willfully failing to file tax returns, stating that the taxpayer’s contention that wages and salaries are not income within the meaning of the Sixteenth Amendment is “totally lacking in merit.”
United States v. Romero, 640 F.2d 1014, 1016 (9th Cir. 1981) – the court affirmed Romero’s conviction for willfully failing to file tax returns, finding, in part, that “[t]he trial judge properly instructed the jury on the meaning of [‘income’ and ‘person’]. Romero’s proclaimed belief that he was not a ‘person’ and that the wages he earned as a carpenter were not ‘income’ is fatuous as well as obviously incorrect.”
Abdo v. United States, 234 F. Supp. 2d 553 (M.D. N.C. 2002), aff’d, 2003-1 U.S.T.C. (CCH) ¶ 50,483 (4th Cir. 2003) – the tax preparer prepared returns based on the argument that labor is an exchange for wages and not taxable. The court cited Connor, supra, when finding that the tax preparer misstated the law.
McCoy v. United States, 88 A.F.T.R.2d (RIA) 7116, 2001 U.S. Dist. LEXIS 18986 (N.D. Tex. Nov. 16, 2001) – the court rejected the taxpayer’s argument that wages received were not income and described this position as meritless.
Sumter v. United States, 61 Fed. Cl. 517, 523 (2004) – the court found the taxpayer’s “claim of right” argument as “devoid of any merit” and that section 1341 only applies to situations in which the claimant is compelled to return the taxed item because of a mistaken presumption that the right held was unrestricted and, thus, the item was previously reported, erroneously, as taxable income. Section 1341 was inapplicable to Ms. Sumter, because she had a continuing, unrestricted claim of right to her salary income and had not been compelled to repay that income in a later tax year.
Abrams v. Commissioner, 82 T.C. 403, 413 (1984) – the court rejected the argument that wages are not income, sustained the failure to file penalty, and awarded damages of $5,000 for pursuing a position that was “frivolous and groundless . . . and maintained primarily for delay.”
Reading v. Commissioner, 70 T.C. 730 (1978), aff’d, 614 F.2d 159 (8th Cir. 1980) – the court said the entire amount received from the sale of one’s services constitutes income within the meaning of the Sixteenth Amendment.
Cullinane v. Commissioner, T.C. Memo. 1999-2, 77 T.C.M. (CCH) 1192, 1193 (1999) – noting that “[c]ourts have consistently held that compensation for services rendered constitutes taxable income and that taxpayers have no tax basis in their labor,” the court found Cullinane liable for the failure to file penalty, stating that “[his] argument that he is not required to pay tax on compensation for services does not constitute reasonable cause.”
Wheelis v. Commissioner, T.C. Memo. 2002-102, 83 T.C.M. (CCH) 1543-45 (2002) – the court rejected the taxpayer’s frivolous argument that his wages were not taxable based on his belief that “[p]roperty (money) exchanged for property (labor not subject to tax)” is not subject to income taxation. The court stated that such claims have been “consistently and thoroughly rejected” by the courts and imposed a penalty against Wheelis in the amount of $10,000 for making frivolous arguments.
Carskadon v. Commissioner, T.C. Memo. 2003-237, 86 T.C.M. (CCH) 234, 236 – the court rejected the taxpayer’s frivolous argument that “wages are not taxable because the Code, which states what is taxable, does not specifically state that ‘time reimbursement transactions,’ a term of art coined by [taxpayers], are taxable.” The court imposed a $2,000 penalty against the taxpayers for raising “only frivolous arguments which can be characterized as tax protester rhetoric.”
http://www.irs.gov/taxpros/article/0,,id=159932,00.html#_Toc153765504
The requirement to pay taxes is not voluntary and is clearly set forth in section 1 of the Internal Revenue Code, which imposes a tax on the taxable income of individuals, estates, and trusts as determined by the tables set forth in that section. (Section 11 imposes a tax on the taxable income of corporations.)
Furthermore, the obligation to pay tax is described in section 6151, which requires taxpayers to submit payment with their tax returns. Failure to pay taxes could subject the noncomplying individual to criminal penalties, including fines and imprisonment, as well as civil penalties.
In discussing section 6151, the Eighth Circuit Court of Appeals stated that “when a tax return is required to be filed, the person so required ‘shall’ pay such taxes to the internal revenue officer with whom the return is filed at the fixed time and place. The sections of the Internal Revenue Code imposed a duty on Drefke to file tax returns and pay the . . . tax, a duty which he chose to ignore.” United States v. Drefke, 707 F.2d 978, 981 (8th Cir. 1983).
In United States v. Kuglin, No. 03-20111 (W.D. Tenn. Aug. 8, 2003), Vernice B. Kuglin faced criminal charges for falsifying Forms W-4 and failing to pay taxes on $920,000 of income between 1996 and 2001, but was acquitted by a federal jury. According to newspaper accounts of the trial, jurors found persuasive the defendant’s argument that she attempted to obtain an explanation of the Service’s authority to collect taxes from her but her correspondence went unanswered. Government officials issued press releases making it clear that the outcome in Kuglin should be treated as an “aberration” and noting that persons acquitted of criminal tax violations are not relieved of their obligation to pay taxes due. See 2003 TNT 155-12 (Aug. 11, 2003); 2003 TNT 155-13 (Aug. 11, 2003); 2003 TNT 158-2 (Aug. 14, 2003).
The defendant in United States v. Brunet, No. 03-00057 (M.D. Tenn. March 12, 2004), argued he could not find any information that would lead him to conclude the Internal Revenue Code made him liable to file income tax returns or pay taxes. In stark contrast to Kuglin, the jury returned guilty verdicts against Brunet on four counts of tax evasion and the court sentenced him to serve 27 months in prison. See 2004 TNT 51-33 (March 12, 2004).
There have been no civil cases where the Service’s lack of response to a taxpayer’s inquiry has relieved the taxpayer of the duty to pay tax due under the law. Courts have in rare instances waived civil penalties because they have found that a taxpayer relied on a Service misstatement or wrongful misleading silence with respect to a factual matter. Such an estoppel argument does not, however, apply to a legal matter such as whether there is legal authority to collect taxes. See, e.g., McKay v. Commissioner, 102 T.C. 465 (1994), rev’d as to other issues, 84 F.3d 433 (5th Cir. 1996). Kuglin’s case, discussed above, did not prove to be the exception. Despite her acquittal of criminal charges, on September 12, 2004, Kuglin entered a settlement with the IRS in the Tax Court in which she agreed to pay more than half a million dollars in back taxes and penalties. Kuglin v. Commissioner, Docket No. 21743-03; see 2004 TNT 177-6 (Sept. 13, 2004).
In August 2004, an appellate court affirmed a federal district court preliminary injunction barring Irwin Schiff, Cynthia Neun, and Lawrence N. Cohen from selling a tax scheme that fraudulently claimed that payment of federal income tax is voluntary. United States v. Schiff, 379 F.3d 621 (9th Cir. 2004); see http://www.usdoj.gov/tax/txdv04551.htm. Also, in October 2005, the trio was convicted by a Las Vegas jury for various criminal charges relating to the federal income tax laws. See 2005 TNT 205-4 (Oct. 25, 2005). Schiff received a sentence of more than 12 years in prison and was ordered to pay more than $4.2 million in restitution to the IRS; Neun received a sentence of nearly 6 years and was ordered to pay $1.1 million in restitution to the IRS; and, Cohen received a sentence of nearly 3 years and was ordered to pay $480,000 in restitution to the IRS. See http://www.usdoj.gov/opa/pr/2006/February/06_tax_098.html; 2006 TNT 38-67 (Feb. 24, 2006); 2006 TNT 24-62 (Feb. 3, 2006).
Relevant Case Law:
United States v. Bressler, 772 F.2d 287, 291 (7th Cir. 1985) – the court upheld Bressler’s conviction for tax evasion, noting, “[he] has refused to file income tax returns and pay the amounts due not because he misunderstands the law, but because he disagrees with it . . . . [O]ne who refuses to file income tax returns and pay the tax owing is subject to prosecution, even though the tax protester believes the laws requiring the filing of income tax returns and the payment of income tax are unconstitutional.”
Wilcox v. Commissioner, 848 F.2d 1007, 1008 (9th Cir. 1988) – the court rejected Wilcox’s argument that payment of taxes is voluntary for American citizens, stating that “paying taxes is not voluntary” and imposing a $1,500 penalty against Wilcox for raising frivolous claims.
Schiff v. United States, 919 F.2d 830, 833 (2d Cir. 1990), cert. denied, 501 U.S. 1238 (1991) – the court rejected Schiff’s arguments as meritless and upheld imposition of the civil fraud penalty, stating “[t]he frivolous nature of this appeal is perhaps best illustrated by our conclusion that Schiff is precisely the sort of taxpayer upon whom a fraud penalty for failure to pay income taxes should be imposed.”
United States v. Gerads, 999 F.2d 1255, 1256 (8th Cir. 1993) – the court stated that “[taxpayers’] claim that payment of federal income tax is voluntary clearly lacks substance” and imposed sanctions in the amount of $1,500 “for bringing this frivolous appeal based on discredited, tax-protester arguments.”
Packard v. United States, 7 F. Supp. 2d 143, 145 (D. Conn. 1998) – the court dismissed Packard’s refund suit for recovery of penalties for failure to pay income tax and failure to pay estimated taxes where the taxpayer contested the obligation to pay taxes on religious grounds, noting that “the ability of the Government to function could be impaired if persons could refuse to pay taxes because they disagreed with the Government’s use of tax revenues.”
Horowitz v. Commissioner, T.C. Memo. 2006-91, 91 T.C.M. (CCH) 1120 – the court imposed sanctions in the amount of $10,000 in rejecting the taxpayer’s arguments, including the frivolous claim that he could find no statute or regulation making him liable for an income tax.
Bonaccorso v. Commissioner, T.C. Memo. 2005-278, 90 T.C.M. (CCH) 554 (2005) – the taxpayer filed zero returns based on the argument that he found no Code section that made him liable for any income tax. The court held that the taxpayer’s argument was frivolous citing to section 1 (imposes an income tax), section 63 (defines taxable income as gross income minus deductions), and section 61 (defines gross income). The court also imposed a $10,000 sanction against the taxpayer under section 6673 for making frivolous arguments.
The requirement to pay taxes is not voluntary and is clearly set forth in section 1 of the Internal Revenue Code, which imposes a tax on the taxable income of individuals, estates, and trusts as determined by the tables set forth in that section. (Section 11 imposes a tax on the taxable income of corporations.)
Furthermore, the obligation to pay tax is described in section 6151, which requires taxpayers to submit payment with their tax returns. Failure to pay taxes could subject the noncomplying individual to criminal penalties, including fines and imprisonment, as well as civil penalties.
In discussing section 6151, the Eighth Circuit Court of Appeals stated that “when a tax return is required to be filed, the person so required ‘shall’ pay such taxes to the internal revenue officer with whom the return is filed at the fixed time and place. The sections of the Internal Revenue Code imposed a duty on Drefke to file tax returns and pay the . . . tax, a duty which he chose to ignore.” United States v. Drefke, 707 F.2d 978, 981 (8th Cir. 1983).
In United States v. Kuglin, No. 03-20111 (W.D. Tenn. Aug. 8, 2003), Vernice B. Kuglin faced criminal charges for falsifying Forms W-4 and failing to pay taxes on $920,000 of income between 1996 and 2001, but was acquitted by a federal jury. According to newspaper accounts of the trial, jurors found persuasive the defendant’s argument that she attempted to obtain an explanation of the Service’s authority to collect taxes from her but her correspondence went unanswered. Government officials issued press releases making it clear that the outcome in Kuglin should be treated as an “aberration” and noting that persons acquitted of criminal tax violations are not relieved of their obligation to pay taxes due. See 2003 TNT 155-12 (Aug. 11, 2003); 2003 TNT 155-13 (Aug. 11, 2003); 2003 TNT 158-2 (Aug. 14, 2003).
The defendant in United States v. Brunet, No. 03-00057 (M.D. Tenn. March 12, 2004), argued he could not find any information that would lead him to conclude the Internal Revenue Code made him liable to file income tax returns or pay taxes. In stark contrast to Kuglin, the jury returned guilty verdicts against Brunet on four counts of tax evasion and the court sentenced him to serve 27 months in prison. See 2004 TNT 51-33 (March 12, 2004).
There have been no civil cases where the Service’s lack of response to a taxpayer’s inquiry has relieved the taxpayer of the duty to pay tax due under the law. Courts have in rare instances waived civil penalties because they have found that a taxpayer relied on a Service misstatement or wrongful misleading silence with respect to a factual matter. Such an estoppel argument does not, however, apply to a legal matter such as whether there is legal authority to collect taxes. See, e.g., McKay v. Commissioner, 102 T.C. 465 (1994), rev’d as to other issues, 84 F.3d 433 (5th Cir. 1996). Kuglin’s case, discussed above, did not prove to be the exception. Despite her acquittal of criminal charges, on September 12, 2004, Kuglin entered a settlement with the IRS in the Tax Court in which she agreed to pay more than half a million dollars in back taxes and penalties. Kuglin v. Commissioner, Docket No. 21743-03; see 2004 TNT 177-6 (Sept. 13, 2004).
In August 2004, an appellate court affirmed a federal district court preliminary injunction barring Irwin Schiff, Cynthia Neun, and Lawrence N. Cohen from selling a tax scheme that fraudulently claimed that payment of federal income tax is voluntary. United States v. Schiff, 379 F.3d 621 (9th Cir. 2004); see http://www.usdoj.gov/tax/txdv04551.htm. Also, in October 2005, the trio was convicted by a Las Vegas jury for various criminal charges relating to the federal income tax laws. See 2005 TNT 205-4 (Oct. 25, 2005). Schiff received a sentence of more than 12 years in prison and was ordered to pay more than $4.2 million in restitution to the IRS; Neun received a sentence of nearly 6 years and was ordered to pay $1.1 million in restitution to the IRS; and, Cohen received a sentence of nearly 3 years and was ordered to pay $480,000 in restitution to the IRS. See http://www.usdoj.gov/opa/pr/2006/February/06_tax_098.html; 2006 TNT 38-67 (Feb. 24, 2006); 2006 TNT 24-62 (Feb. 3, 2006).
Relevant Case Law:
United States v. Bressler, 772 F.2d 287, 291 (7th Cir. 1985) – the court upheld Bressler’s conviction for tax evasion, noting, “[he] has refused to file income tax returns and pay the amounts due not because he misunderstands the law, but because he disagrees with it . . . . [O]ne who refuses to file income tax returns and pay the tax owing is subject to prosecution, even though the tax protester believes the laws requiring the filing of income tax returns and the payment of income tax are unconstitutional.”
Wilcox v. Commissioner, 848 F.2d 1007, 1008 (9th Cir. 1988) – the court rejected Wilcox’s argument that payment of taxes is voluntary for American citizens, stating that “paying taxes is not voluntary” and imposing a $1,500 penalty against Wilcox for raising frivolous claims.
Schiff v. United States, 919 F.2d 830, 833 (2d Cir. 1990), cert. denied, 501 U.S. 1238 (1991) – the court rejected Schiff’s arguments as meritless and upheld imposition of the civil fraud penalty, stating “[t]he frivolous nature of this appeal is perhaps best illustrated by our conclusion that Schiff is precisely the sort of taxpayer upon whom a fraud penalty for failure to pay income taxes should be imposed.”
United States v. Gerads, 999 F.2d 1255, 1256 (8th Cir. 1993) – the court stated that “[taxpayers’] claim that payment of federal income tax is voluntary clearly lacks substance” and imposed sanctions in the amount of $1,500 “for bringing this frivolous appeal based on discredited, tax-protester arguments.”
Packard v. United States, 7 F. Supp. 2d 143, 145 (D. Conn. 1998) – the court dismissed Packard’s refund suit for recovery of penalties for failure to pay income tax and failure to pay estimated taxes where the taxpayer contested the obligation to pay taxes on religious grounds, noting that “the ability of the Government to function could be impaired if persons could refuse to pay taxes because they disagreed with the Government’s use of tax revenues.”
Horowitz v. Commissioner, T.C. Memo. 2006-91, 91 T.C.M. (CCH) 1120 – the court imposed sanctions in the amount of $10,000 in rejecting the taxpayer’s arguments, including the frivolous claim that he could find no statute or regulation making him liable for an income tax.
Bonaccorso v. Commissioner, T.C. Memo. 2005-278, 90 T.C.M. (CCH) 554 (2005) – the taxpayer filed zero returns based on the argument that he found no Code section that made him liable for any income tax. The court held that the taxpayer’s argument was frivolous citing to section 1 (imposes an income tax), section 63 (defines taxable income as gross income minus deductions), and section 61 (defines gross income). The court also imposed a $10,000 sanction against the taxpayer under section 6673 for making frivolous arguments.
Monday, February 19, 2007
HERE IS THE LAW!!!
26 U.S.C. section 1
Read it and weep!
Great explanation at http://evans-legal.com/dan/tpfaq.html#liable
Of course, the tax protestor scum likes to say that "There is no law . . ." while ignoring that there IS a law that imposes a tax on their income. Instead, they simply repeat over and over "There is no law . . ." as if repeating that lie may someday make it come true.
Very few tax protestors have ever researched the issue for themselves, but instead rely on snake-oil selling paytriots who tell them how to think (or, rather, not to think). Tax protestors are just cult-following sheeple who long ago forgot how to think for themselves. They are prisoners of their own stupidity.
Read it and weep!
Great explanation at http://evans-legal.com/dan/tpfaq.html#liable
Of course, the tax protestor scum likes to say that "There is no law . . ." while ignoring that there IS a law that imposes a tax on their income. Instead, they simply repeat over and over "There is no law . . ." as if repeating that lie may someday make it come true.
Very few tax protestors have ever researched the issue for themselves, but instead rely on snake-oil selling paytriots who tell them how to think (or, rather, not to think). Tax protestors are just cult-following sheeple who long ago forgot how to think for themselves. They are prisoners of their own stupidity.
Article I, Section 8.
The Congress shall have Power To lay and collect Taxes, Duties, Imposts and Excises . . . but all Duties, Imposts and Excises shall be uniform throughout the United States;
Comment: Article I, Section 8 gives Congress the “Power To law and collect Taxes” without further restriction in this Section. Note that the uniformity requirement only applies to “Duties, Imposts and Excises” and not to taxes. This means that “Taxes” are treated differently than “Excises” under the Constitution, since Taxes are not required to be uniform. Those who would equate “Taxes” and “Excises” are simply wrong, and demonstrably so.
Article I, Section 9.
No Capitation, or other direct, Tax shall be laid, unless in Proportion to the Census of Enumeration herein before directed to be taken.
Comment: Article I, Section 9, does not ban direct taxes, but merely says that such taxes must be “in Proportion to the Census of Enumeration”.
Amendment XVI.
The Congress shall have power to lay and collect taxes on incomes, from whatever source derived, without apportionment among the several States, and without regard to any census or enumeration.
Comment: Whether or not Article I, Section 9 applies to income taxes, its requirement that such taxes be “in Proportion to the Census of Enumeration” is eliminated.
At this point, it is clear that the plain text of the Constitution authorizes an income tax without regard to either apportionment or the census. It is thus totally irrelevant whether such taxes are “direct” or not – it simply makes no difference whatsoever from the plain text of the Constitution.
Finally, Congress passes the tax laws according to:
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.
Summary: It is crystal clear from a reading of the Constitution that Congress has the power to tax (I.8), that “Taxes” are not the same as “Excises” (I.8), and that income can be taxed without regard to either apportionment or a census (Am.16). Congress is also authorized to draft income tax legislation (I.8). The “direct” versus “indirect” argument is simply a red herring, and not found in the Constitution itself.
The bottom line is that challenges to the income tax based on the Constitution are bogus, and demonstrably so.
The Congress shall have Power To lay and collect Taxes, Duties, Imposts and Excises . . . but all Duties, Imposts and Excises shall be uniform throughout the United States;
Comment: Article I, Section 8 gives Congress the “Power To law and collect Taxes” without further restriction in this Section. Note that the uniformity requirement only applies to “Duties, Imposts and Excises” and not to taxes. This means that “Taxes” are treated differently than “Excises” under the Constitution, since Taxes are not required to be uniform. Those who would equate “Taxes” and “Excises” are simply wrong, and demonstrably so.
Article I, Section 9.
No Capitation, or other direct, Tax shall be laid, unless in Proportion to the Census of Enumeration herein before directed to be taken.
Comment: Article I, Section 9, does not ban direct taxes, but merely says that such taxes must be “in Proportion to the Census of Enumeration”.
Amendment XVI.
The Congress shall have power to lay and collect taxes on incomes, from whatever source derived, without apportionment among the several States, and without regard to any census or enumeration.
Comment: Whether or not Article I, Section 9 applies to income taxes, its requirement that such taxes be “in Proportion to the Census of Enumeration” is eliminated.
At this point, it is clear that the plain text of the Constitution authorizes an income tax without regard to either apportionment or the census. It is thus totally irrelevant whether such taxes are “direct” or not – it simply makes no difference whatsoever from the plain text of the Constitution.
Finally, Congress passes the tax laws according to:
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.
Summary: It is crystal clear from a reading of the Constitution that Congress has the power to tax (I.8), that “Taxes” are not the same as “Excises” (I.8), and that income can be taxed without regard to either apportionment or a census (Am.16). Congress is also authorized to draft income tax legislation (I.8). The “direct” versus “indirect” argument is simply a red herring, and not found in the Constitution itself.
The bottom line is that challenges to the income tax based on the Constitution are bogus, and demonstrably so.
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