ME AND DAVID CLAY........
Just last night, I received an email from David Cay Johsnton of the New York Times titled "try reading section 861." I have included his email in full at the bottom of this message and have isolated statements made by him so that I can provide a direct response. His comments are preceded by his initials....DCJ....
My purpose is to provide the world with the closest thing to a public debate that I can accomplish, since I have already taken this issue to court and both the DOJ and the federal courts HAVE REFUSED TO ADDRESS IT (this will be discussed further below).
DCJ: " Below is IRS Section 861, which just as I wrote specifies that wages earned inside the US are included in gross income, which means they are taxable. I have put the relevant language in bold, but in case your email does not show formatting see section (a), followed by (3). It says plainly that wages earned in the US are includable in gross income sources from within the United States. "
Wrong. Section 861 clearly shows that 'compensation for services' (not wages) is an 'item' of income. These 'items' of income may or may not be taxable dending on who is receiving it. The STATUTES themselves clarify when someone's 'compensation for services' are taxable in the 'operative sections' of the code like 26 USC 871 OR 26 USC 911 (a LIST of these section is found in the regulations under Section 861).
According to your frivolous argument ALL 'compensation for services' are taxable no matter who recieves it. This would incorrectly mean that Section 861 would show that the 'compensation for services' recieved by an Argentinian living in Argentina to be taxable by the United States government. Any idiot knows that that is not the case.
Even though you misstate Larken as saying the regulations "overrule" or as Kathy Spaulding claimed "supercede" the statute, that is NOT the case. We've had this discussion before and you know full well, that the regulations CLARIFY the statutes especially when they use broad language. They can't and don't overrule them.
I know you know this.
The scope and purpose of Section 861 is for the most part the same as it was back in 1925 when it was Section 217. Congress has admitted this and you know full well, that the predecessor STATUTE to Section 861, namely Section 217 said quite clearly:
"In the case of a non-resident alien individual and in the case of a citizen entitled to the benefits of Section 262 (majority of income from possessions), the following ITEMS of income shall be treated as income from within the United States."
But, when this statute became Section 119 of the 1939 code the phrase making clear TO WHOM it applied was surreptiously REMOVED.....even though the regulations still to this day make clear WHO can receive 'income from sources within the United States.'
I KNOW YOU KNOW THIS, but you are delibertately claiming the opposite.
Section 861 most certainly says that "compensation for services" (NOT wages, as you also know 'wages' is a term defined in Subtitle C of the IRC) is an ITEM of income and that those ITEMS of income are NOT always taxable. See 26 CFR § 1.861-8(b)(1) which provides that “[P]aragraph (d)(2) of this section... provides that a class of gross income may include excluded income.”
DCJ: " Gross income less exemptions and deductions results in taxable income. There is no code section that says you can deduct wages from gross income. So, again, what I wrote is correct."
Your first two sentences are correct (generally). Your last sentence is provably wrong.
There are three classes of gross income, "Gross income from sources within the United States," "Gross income from sources without the United States," and "Gross income from partly within and partly without the United States."
ANY individual or corporation MUST receive income from one of the three classes of income and that income must NOT be 'excluded by law' in order for their income to be taxable.
In order to determine ANY of the three different classes of 'gross income' one MUST refer to Part 1, of Subchapter N, of Chapter 1, of Subtitle A of the Internal Revenue Code (which includes Section 861). 'Wages' is a term specifically defined in other sections of the IRC and should NOT be used synonymously with 'compensation for services.' They are NOT the same thing. I notice you do this regularly.
DCJ: " By the way, is one were to follow Section 861 in preparing a tax return and one had only wage and other income from within the US then you would get the exact same result as if you ignored it. Your wages would be taxed."
WRONG !!!!!........ What follows is an explanation of WHY you are wrong WITH the corresponding law that SHOWS you are wrong.....
"(ii) Relationship of sections 861, 862, 863(a), and 863(b). Sections 861, 862, 863(a),and 863(b) are the four provisions applicable in determining taxable income from specific sources.” [26 CFR § 1.861-8(f)(3)(ii)]
“The rules contained in this section 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)]
THIS IS WHERE THE PROPER SCOPE OF SECTION 861 IS PROVIDED.......the operative sections listed in paragraph (f)(1) INCLUDE the Statute Section 871 which says "a non-resident alien engaged in a trade or business within the United States shall be taxable under Section 1." The operative sections also INCLUDE the statute Section 911 which shows the FOREIGN income of Americans to be taxable (if it meets the minimum requirements)
These 'operative sections' are the EXPLICIT STATUTORY command showing those individuals or businessess to be taxable.
There is NO OPERATIVE SECTION that shows "if a U.S. citizen is engaged in a trade or business within the United States ... etc." IT DOES NOT EXIST.
THIS MAKES PERFECTLY CLEAR that when those in government make the erroneous claim that Tax Honest Advocates argue that "only foreign income is taxable" IS COMPLETELY BOGUS. The law itself shows that SOMETIMES domestic income is taxable DEPENDING ON WHO IS RECEIVING IT.....and other times foreign income is taxable....DEPENDING ON WHO IS RECEIVING IT
I KNOW YOU KNOW ALL OF THIS.....YET YOU CONTINUE TO LIE TO THE AMERICAN PEOPLE.....!!!!
DCJ: " Significantly, Mr. Rose's claim is based on the REGULATIONS that implement Section 861. He has acknowledged that the statute itself is not the issue, the regulations are (at least in his mind)."
ANY claim (including Larken's) as to what constitutes 'gross income' or 'taxable income' must correctly be based on the statutes AND the regulations AND any relevant Supreme Court decisions. As Larken pointed out during the trial, ALL THREE of these are considered by the IRS to be BINDING on the service. The IRS is REQUIRED to follow what the regulations say along with the statutes & S Ct decisions.
DCJ: " A regulation cannot change a statute. Since the code section says wages are includable in income then the regulation cannot exclude them. "
No shit Sherlock. Larken NEVER claimed that a regulations could change a statute. But, they can and very often do CLARIFY a broadly worded statute. I KNOW YOU KNOW THIS and you are deliberately misstating what Larken has said.
DCJ: " Further, these particular regulations were written by IRS lawyers. If you really believe, Ken, that IRS lawyers wrote regulations that mean Mr. Rose's income and mine and yours are exempt from taxes then I want to interest you in buying a bridge to Brooklyn... What a preposterous and silly thought, that the IRS took it upon itself to make wages earned from domestic employers not subject to tax. "
You truly are a master of propaganda. Claim your opponent is stating the OPPOSITE of what they are actually saying and then call your newly created argument silly. I'm sure I've said this before, but Goebbels would be VERY PROUD of you.
These IRS lawyers tried to do the EXACT OPPOSITE of what you are saying....they tried to make it APPEAR (as you keep claiming), as if the earnings of the average American ARE TAXABLE...while the words of the regulations AND the statutory history show that the opposite is true.
Let's make something PERFECTLY CLEAR HERE.....the regulations under Section 861 DO NOT "CREATE" ANY EXEMPTION. These regulations spell out exactly when income IS TAXABLE. The exemption is created by the limitations on the taxing authority of the federal government under the Constitution. This is made very clear by examining the statutory and regulatory history which mentions income exempt by statute and EXEMPT BY FUNDAMENTAL LAW.
You, David Cay Johnston, KNOW THIS and are deliberately trying to muddy the waters by creating 'straw man' arguments.
The IRS lawyers that promulgated these regulations are some of the greatest ENEMIES to the American people. The lawyers who wrote the specifics of this issue are, IMO, the 'domestic enemies' to whom are referred in the "Oath of Office" taken by most federal employees.
DCJ: " Read the published opinions of judges who chapter-and-verse dissect the argument to show why it is nonsensical. "
This is absolute and utter B.S and I notice that you did not mention one single decision. Please feel free to cite any case and then we can publicly discuss the merits of that case for everyone to see. Every court decision I have ever read that mentions 861 does the same thing Mr. Johnston just did....it creates a straw man argument and then debunks that.
However, IMHO, the SINGLE BEST INSTANCE OF the federal courts dealing with Section 861 is MY refund lawsuit for the years 2000 and 2001. The case was presided over by Federal Judge Charles Weiner and handled by the DOJ by Atty. Jon Carroll.
IF EVER THERE WERE AN OPPORTUNITY FOR A JUDGE OR THE DOJ TO PROVIDE CLARITY AS TO ANY ALLEGED FALLACY OF THE 861 EVIDENCE, THIS WAS IT...........
My Motion for Summary Judgment was based almost entirely on the proper application of Section 861. Yet, the DOJ DID NOT RESPOND TO MY MOTION FOR SUMMARY JUDGMENT......my motion can be read here:http://www.reasons2vote.com/briefsummaryjudgment.html
But, it gets worse.............I also filed Interrogatories that gave the DOJ THE PERFECT OPPORTUNITY to provide their response in the proper legal forum.....all they had to do was answer them, BUT THEY COULD NOT AND DID NOT........my Interrogatories can be read here:http://www.reasons2vote.com/interrogatories.html
BUT STILL IT GETS WORSE..........during a hearing for oral arguments held in the same building as Larken's trial on August 22, 2003, Federal Judge Charles Weiner THREE SEPARATE TIMES instructed DOJ Attorney to answer my Interrogatories...and still NOTHING from the DOJ.....
But STILL IT GETS EVEN WORSE............
During that same hearing, I filed a Motion to Compel answers to my Interrogatories. I gave copies to the court and to the DOJ attorney right there IN THE COURTROOM.....The Judge said, "I'll take care of that today."
YET, MY MOTION DISAPPEARED! IT NEVER SHOWED UP ON THE COURT DOCKET...............and of course, it was then ultimately never ruled on......
In the end, did Judge Weiner explain how 861 "was enacted only to elimate double taxation?" ABSOLUTELY NOT.......NOT ONLY DID JUDGE WEINER COMPLETELY REFUSE TO MENTION 861, he had to FABRICATE AN ARGUMENT THAT I SPECIFICALLY CONTRADICTED IN COURT.......
You can read his PATHETIC opinion here:http://www.reasons2vote.com/show_case_doc.pdf
He pulled the same old bullshit............"You're arguing that your wages aren't income." When I argued NO SUCH THING. I explained to his face that I DID NOT RECEIVE WAGES.........
THAT is how the government responds to this issue. I challenge you, David Cay Johsnton, to provide my any specific quotation from any statute or regulation that supports YOUR FRIVOLOUS claim that Section 861 was enacted to eliminate 'double taxation.'
DCJ: " Read the published opinions of judges who chapter-and-verse dissect the argument to show why it is nonsensical. There are opinions going back to 1966. The one on Thurston Bell is very clear and specific in showing how the 861 position (and remember Mr. Rose said he learned of this from Mr. Bell) is nonsense.
Wishing that the 861 position was true does not make it true. It just makes its believers into fools. "
Once again, you make the frivolous claim....."the courts have ruled......the courts have said why its nonsensical." But, you don't cite one case or provide ANY quotations from those decisions.
Please cite for me any case so that we can then discuss the specifics. And what I find so very telling..........is that you admit that MANY people (in your words) 'BELIEVE' the 861 Evidence. That very fact alone indicates that, were YOU on the jury, YOU would have been required to find Larken NOT GUILTY.
"A good-faith misunderstanding of the law OR A GOOD FAITH BELIEF THAT ONE IS NOT VIOLATING THE LAW negates willfulness, whether or not the claimed belief or misunderstanding is objectively reasonable. " CHEEK v. UNITED STATES, 498 U.S. 192 (1991) (emphais added)
----- Original Message -----
Sent: Saturday, August 13, 2005 8:31 PM
Subject: try reading section 861
Below is IRS Section 861, which just as I wrote specifies that wages earned inside the US are included in gross income, which means they are taxable.
I have put the relevant language in bold, but in case your email does not show formatting see section (a), followed by (3). It says plainly that wages earned in the US are includable in gross income sources from within the United States.
Gross income less exemptions and deductions results in taxable income. There is no code section that says you can deduct wages from gross income. So, again, what I wrote is correct.
You will note that there are some exceptions to wages being included in gross income. They are very minor. For example, the 90-day rule means that college kids from Eastern Europe who come to Jersey Shore resorts to work for the summer are not subject to tax. The exceptions taker a lot of words but in dollars and numbers of people affected they are not even a drop in the proverbial bucket.
You will also see in Sections (1) and (2) that they deal primarily with multinational companies. Section 8961 was enacted to prevent double taxation of income by a foreign government and the US government and was necessary because the US government taxes both citizens and entities like corporations on their world-wide income. There are plenty of published cases brought by large corporations (and a Canadian hockey player who joined the Pittsburgh NHL team) that make this clear.
By the way, is one were to follow Section 861 in preparing a tax return and one had only wage and other income from within the US then you would get the exact same result as if you ignored it. Your wages would be taxed.
Significantly, Mr. Rose's claim is based on the REGULATIONS that implement Section 861. He has acknowledged that the statute itself is not the issue, the regulations are (at least in his mind).
A regulation cannot change a statute. Since the code section says wages are includable in income then the regulation cannot exclude them.
Further, these particular regulations were written by IRS lawyers.
If you really believe, Ken, that IRS lawyers wrote regulations that mean Mr. Rose's income and mine and yours are exempt from taxes then I want to interest you in buying a bridge to Brooklyn...
What a preposterous and silly thought, that the IRS took it upon itself to make wages earned from domestic employers not subject to tax.
Indeed, I marvel that so many people could be taken in by such a stupid claim -- but then how many people have actually read the statute without wearing Rose-colored glasses?
Forget the fact that as a matter of law Mr. Rose's claims cannot be true because a regulation cannot change a statute -- just consider the silliness of the idea that IRS lawyers are the best friend the working taxpayer ever had. That's not a baseball bat the IRS wields, its down comforter. Pardon me while I stop to laugh out loud.....
(And even if Mr. Rose was right the government could just change the regulation. His citing of case law that a hoary regulation takes on the force of law is a red herring.)
What I find amazing is how many people believe such a patently stupid claim. And I do mean stupid. Really really really stupid. Heck, Irwin Schiff makes more sense than this and Irwin has put into the court record papers showing he is delusional.
Read the published opinions of judges who chapter-and-verse dissect the argument to show why it is nonsensical. There are opinions going back to 1966. The one on Thurston Bell is very clear and specific in showing how the 861 position (and remember Mr. Rose said he learned of this from Mr. Bell) is nonsense.
Wishing that the 861 position was true does not make it true. It just makes its believers into fools.
(And by the way, please do try to spell my name accurately all of the time, not just now and then.)
Section 861. Income from sources within the United States (a) Gross income from sources within United States
The following items of gross income shall be treated as income
from sources within the United States:
Interest from the United States or the District of Columbia,
and interest on bonds, notes, or other interest-bearing
obligations of noncorporate residents or domestic corporations
not including -
(A) interest from a resident alien individual or domestic
corporation, if such individual or corporation meets the
80-percent foreign business requirements of subsection (c)(1),
(B) interest -
(i) on deposits with a foreign branch of a domestic
corporation or a domestic partnership if such branch is
engaged in the commercial banking business, and
(ii) on amounts satisfying the requirements of subparagraph
(B) of section 871(i)(3) which are paid by a foreign branch
of a domestic corporation or a domestic partnership.
The amount received as dividends -
(A) from a domestic corporation other than a corporation
which has an election in effect under section 936, or
(B) from a foreign corporation unless less than 25 percent of
the gross income from all sources of such foreign corporation
for the 3-year period ending with the close of its taxable year
preceding the declaration of such dividends (or for such part
of such period as the corporation has been in existence) was
effectively connected (or treated as effectively connected
other than income described in section 884(d)(2)) with the
conduct of a trade or business within the United States; but
only in an amount which bears the same ratio to such dividends
as the gross income of the corporation for such period which
was effectively connected (or treated as effectively connected
other than income described in section 884(d)(2)) with the
conduct of a trade or business within the United States bears
to its gross income from all sources; but dividends (other than
dividends for which a deduction is allowable under section
245(b)) from a foreign corporation shall, for purposes of
subpart A of part III (relating to foreign tax credit), be
treated as income from sources without the United States to the
extent (and only to the extent) exceeding the amount which is
100/70th of the amount of the deduction allowable under section
245 in respect of such dividends, or
(C) from a foreign corporation to the extent that such amount
is required by section 243(e) (relating to certain dividends
from foreign corporations) to be treated as dividends from a
domestic corporation which is subject to taxation under this
chapter, and to such extent subparagraph (B) shall not apply to
such amount, or
(D) from a DISC or former DISC (as defined in section 992(a))
except to the extent attributable (as determined under
regulations prescribed by the Secretary) to qualified export
receipts described in section 993(a)(1) (other than interest
and gains described in section 995(b)(1)).
In the case of any dividend from a 20-percent owned corporation
(as defined in section 243(c)(2)), subparagraph (B) shall be
applied by substituting ''100/80th'' for ''100/70th''.
(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
(B) such compensation does not exceed $3,000 in the
(C) the compensation is for labor or services performed as an
employee of or under a contract with -
(i) a nonresident alien, foreign partnership, or foreign
corporation, not engaged in trade or business within the
United States, or
(ii) an individual who is a citizen or resident of the
United States, a domestic partnership, or a domestic
corporation, if such labor or services are performed for an
office or place of business maintained in a foreign country
or in a possession of the United States by such individual,
partnership, or corporation.
In addition, compensation for labor or services performed in the
United States shall not be deemed to be income from sources
within the United States if the labor or services are performed
by a nonresident alien individual in connection with the
individual's temporary presence in the United States as a regular
member of the crew of a foreign vessel engaged in transportation
between the United States and a foreign country or a possession
of the United States.
(4) Rentals and royalties.....
David Cay JohnstonReporterThe New York Times
When you look into the eyes of others you acknowledge their humanity