Goodmorning America! Coming to you live. Here they are...the six questions the IRS refuse or can't answer honestly. The same goes for you tax-person. Cut and paste or go to "www.feartheirs.com" and download the questions there. Send them to your tax-person, Congress critter etc...Let me know what kind of responce you get...if any.
Questions Regarding Determining Taxable Income
1) Should I use the rules found in 26 USC § 861(b), and the related regulations beginning at 26 CFR § 1.861-8, to determine my taxable domestic income?
2) If some individuals—including myself—should not use those sections for determining their taxable domestic income, please show me where the regulations say who should or should not use those sections for that.
Reason for first two questions: The regulations under 26 USC § 861(b) (26 CFR § 1.861-8 and following) begin by stating that Sections 861(b) and 863(a) state in general terms “how to determine taxable income of a taxpayer from sources within the United States” after gross income from the U.S. has been determined. (The regulations then say that Sections 862(b) and 863(a) describe how to determine taxable income from outside of the U.S.) Section 1.861-1(a)(1) of the regulations confirms that “taxable income from sources within the United States” is to be determined in accordance with the rules of 26 USC § 861(b) and 26 CFR § 1.861-8. (See also 26 CFR §§ 1.862-1(b), 1.863-1(c).)
3) If a U.S. citizen lives and works exclusively within the 50 states, and receives all of his income from within the 50 states, do 26 USC § 861(b) and 26 CFR § 1.861-8 show such income to be taxable?
Reason for question: Section 217 of the Revenue Act of 1921, statutory predecessor of 26 USC § 861 and following, stated that income from within the U.S. was taxable for foreigners and for U.S. citizens and corporations deriving most of their income from federal possessions (but did not say the same about the domestic income of most Americans). The regulations under the equivalent section of the 1939 Code (e.g. §§ 29.119-1, 29.119-2, 29.119-9, 29.119-10 (1945)) showed the same thing. The current regulations at 1.861-8 still show income to be taxable only when derived from certain “specific sources and activities,” which, concerning domestic income, still relate only to foreigners and certain Americans receiving income from federal possessions (26 CFR §§ 1.861-8(a)(1), 1.861-8(a)(4), 1.861-8(f)(1)).
4) Should one refer to 26 CFR § 1.861-8T(d)(2) to determine whether the “items” of income he receives (such as compensation, interest, rents, dividends, etc.) are excluded for federal income tax purposes?
Reason for question: The regulations (26 CFR § 1.861-8(a)(3)) state that a “class of gross income” consists of the “items” of income listed in 26 USC § 61 (e.g. compensation, interest, etc.). The regulations (26 CFR §§ 1.861-8(b)(1)) then direct the reader to “paragraph (d)(2)” of the section, which provides that such “classes of gross income” may include some income which is excluded for federal income tax purposes.
5) What is the purpose of the list of non-exempt types of income found in 26 CFR § 1.861-8T(d)(2)(iii), and why is the income of the average American not on that list?
Reason for question: After defining “exempt income” to mean income which is exempt, eliminated, or excluded for federal income tax purposes (26 CFR § 1.861-8T(d)(2)(ii)), the regulations give a list of types of income which are not exempt (i.e. which are subject to tax), which includes the domestic income of foreigners, certain foreign income of Americans, income of certain possessions corporations, and income of international and foreign sales corporations, but which does not include the domestic income of the average American (26 CFR § 1.861-8T(d)(2)(iii)).
6) What types of income (if any) are not exempted from taxation by any statute, but are nonetheless “excluded by law” (not subject to the federal income tax) because they are, under the Constitution, not taxable by the federal government?
Reason for question: Older income tax regulations defining “gross income” and “net income” said that neither income exempted by statute “or fundamental law” were subject to the tax (§ 39.21-1 (1956)), and said that in addition to those types of income exempted by statute, other types of income were exempt because they were, “under the Constitution, not taxable by the Federal Government” (§ 39.22(b)-1 (1956)).
November 29, 2002
IRS / Jim South
Issue Specialist, Abusive Tax Promotions
1800 N Diamond Street, Suite 114
Mansfield, OH 44902
Dear Mr. South,
I understand you have been involved with planning the method that the IRS uses to respond to citizens who bring up what the IRS calls the “861 argument.” I am aware of the national database the IRS is building related to the issue, and the IRS’ program where any case involving 861 is to be labeled with Project Code 134, and handled separately from other returns by certain individuals (usually in Ogden, Utah). With all the time and effort that you at the IRS have devoted to dealing with those raising the “861 argument,” I noticed that one technique is conspicuously absent from your approach: having an open, honest discussion about the law.
Is there some reason that open communication with the public is not on your list of ideas?
You were sent a copy of the video “Theft By Deception” on 8/20/02. By now at least 10,000 people have seen that video, and at least five times that many have read written explanations of the issue. The letters you are receiving now represent a small sampling of those familiar with the issue. Sending out legally-irrelevant form letters, and threatening people with fines or prosecution, is not the way to convince people that they are wrong. You can say “frivolous” until you are blue in the face, but that will not persuade anyone who has taken the time to examine the law for himself.
The IRS’ standard line of response (claiming that the issue is “frivolous”) has no merit whatsoever. To be blunt, that is an asinine thing to say, and thousands of us know it. Various legally irrelevant form letters and notices by the IRS imply that most people should simply ignore Section 861 and its regulations. The problem is that this “pay-no-attention-to-the-section-behind-the-curtain” approach is a fabrication, without a shred of support in the law. Here is what the legally-binding regulations have to say:
“Sec. 1.861-1 Income from sources within the United States.
(a) Categories of income. Part I (section 861 and following), subchapter N, chapter 1 of the Code, and the regulations there under determine the sources of income for purposes of the income tax... The statute provides for the following three categories of income:
(1) Within the United States. The gross income from sources within the United States, consisting of the items of gross income specified in section 861(a) plus the items of gross income allocated or apportioned to such sources in accordance with section 863(a). See Secs. 1.861-2 to 1.861-7, inclusive, and Sec. 1.863-1. The taxable income from sources within the United States, in the case of such income, shall be determined by deducting there from, in accordance with sections 861(b) and 863(a), the [allowable deductions]. See Secs. 1.861-8 and 1.863-1
(2) Without the United States...
(3) Partly within and partly without the United States... [continued on next page]”
“(b) Taxable income from sources within the United States. The taxable income from sources within the United States shall consist of the taxable income described in paragraph (a)(1) of this section plus the taxable income allocated or apportioned to such sources, as indicated in paragraph (a)(3) of this section.” [26 CFR § 1.861-1]
Note that it refers us to Section 1.861-8, the regulations under 26 USC § 861(b) (“Taxable income from sources within United States”), which starts by saying this:
“Sec. 1.861-8 Computation of taxable income from sources within the United States and from other sources and activities.
(a) In general--(1) Scope. Sections 861(b) and 863(a) state in general terms how to determine taxable income of a taxpayer from sources within the United States after gross income from sources within the United States has been determined. Sections 862(b) and 863(a) state in general terms how to determine taxable income of a taxpayer from sources without the United States after gross income from sources without the United States has been determined.” [26 CFR § 1.861-8(a)(1)]
That first citation above (1.861-1) also directs us to Section 1.863-1, which says this:
“The taxpayer's taxable income from sources within or without the United States will be determined under the rules of Secs. 1.861-8 through 1.861-14T for determining taxable income from sources within the United States.” [26 CFR § 1.863-1(c)]
Where in there does it state that most people should ignore those sections? It doesn’t. Logic dictates that taxable income must either be from within the United States or from without (outside of) the United States, and as the above citations show, taxable domestic income is to be determined using the rules of 26 USC § 861(b) and 26 CFR § 1.861-8. To call that “frivolous” is a sign of either functional illiteracy or intentional dishonesty.
If you can find some actual citation that indicates that most of us should not refer to those sections to determine our taxable domestic income, then I’m sure you wouldn’t hesitate to cite it. But you can’t, which is why you spew that ridiculous “frivolous” accusation instead. Unfortunately, your misconduct does not end with misrepresenting the law and making false accusations. You are also instructing IRS agents across the country to impose penalties on people for obeying the regulations. That makes you an extortionist. You are directly involved in a nationwide scheme to slander, insult, threaten, and then rob citizens who are following your own regulations to the letter. A lot of people are not happy about it.
Your extortion racket goes from merely criminal to insane when IRS agents across the country are unable to say what their own position is on this point. While a few IRS form letters imply that most people should ignore Section 861, hundreds of citizens have found that when they directly ask the IRS whether they should use 861(b) and 1.861-8 to determine their taxable domestic income, the IRS, from the lowest paper-pusher all the way up to Chief Counsel, refuses to answer. What could be more bizarre than a tax administration agency which is unable to say how it thinks people should determine their taxable income? Either we should be using those sections, or we shouldn’t. There isn’t another choice. So which is it?
I could go on to demonstrate how if the average American does refer to 861(b) and 1.861-8, he will find that those sections do not show his income to be taxable. (That is clearly proven by decades of statutes and regulations, such as Section 217 of the Revenue Act of 1921, the regulations under Section 119 of the 1939 Code, as well as the current 26 CFR §§ 1.861-8(a)(1), 1.861-8(a)(4), 1.861-8(f)(1), 1.861-8T(d)(2), etc.) However, I want to make this painfully simple, to remove any excuse you may have had for not answering. I have only one point I want you to address:
Should I use 26 USC § 861(b) and the related regulations beginning at 26 CFR § 1.861-8 to determine my taxable domestic income? The above citations clearly indicate that I should, so if your answer is no, please provide me with citations of law (not baseless assertions and insults) which contradict the citations above and indicate that I should not refer to those sections.
If you have nothing to hide, then answer the question. If you cannot answer it yourself, find an IRS lawyer who can. If you cannot find one who can address it, then stop terrorizing Americans for doing exactly what your regulations tell them to do. What you are doing is criminal, and you are personally responsible for your actions. Don’t bother trying to claim that you are “just following orders.” You personally have just been shown what your own regulations say. If you now fail to abide by it, then you are a criminal, and you will be treated as such.
Sincerely,
Robert B. Graham Sr.
46 Lark Drive
Holland, Penna., 18966
cc: Taxpayer Advocacy Panel
Mail Stop 1006 MIL
310 West Wisconsin Ave
Milwaukee, WI 53203-2221.
Goodmorning America! Coming to you live. Here in the second letter for Ms. Olson
2/10/03
Pamela F. Olson
Assistant Secretary for Tax Policy
1500 Pennsylvania Ave NW, Room 1334
Washington, DC 20220
Dear Ms. Olson,
I understand that in the first week or so of November, several hundred individuals sent you letters requesting answers to six questions about how one should determine his taxable income for federal income tax purposes. (A copy of those questions is enclosed.) I have also heard that you have not sent out any answers to those questions (or given any indication that you intend to answer them), now almost three months since the questions were asked. You sent me a pamphlet with veiled threats but no answers.
You have admitted that the tax code is so complex that it is virtually impossible for someone to figure out what he actually owes, but when hundreds of citizens asked you a few basic questions about how they should determine their taxable income, you did not answer. Why is that? Your statements also show that you understand that threats and punishments are a weak tool for maximizing “compliance” if the people do not believe that they owe and are obligated to pay the tax. Yet when hundreds of Americans politely ask the IRS and the Treasury Department questions about how to determine what they owe, such as those enclosed with this letter, some receive threats and insults, but none receive answers (including from you). This is despite the fact that the IRS “mission statement” includes helping people understand their tax obligations.
As you know, despite “conventional wisdom” to the contrary, tens of thousands of Americans now believe that the federal income tax laws are being grossly misapplied, and that the income of most Americans is not subject to the tax. In late October you were sent a copy of the video “Theft By Deception,” which presents abundant evidence from the law itself (past and present) supporting that admittedly unusual claim. Dismissing the issue out of hand as “frivolous,” mischaracterizing it as a “tax protestor argument,” and refusing to answer perfectly reasonable questions about the issue is both an insult to the American people and an affront to the principles of due process. (It is also convincing those thousands of individuals more than ever that their conclusions are correct.)
How do your stated intentions of improving “customer service” fit with your failure to answer the questions of all those people? What do you expect these people to conclude when they ask logical questions, based on what your own regulations say, and receive no answers from you?
If you believe these people are being misled, or are misreading the law, why are you not shouting the correct answers from the rooftops? An offer still stands from the owner of one of the most prominent web sites questioning the conventional wisdom about the income tax (www.taxableincome.net) to publicly post on his site any response you can give to the enclosed questions. Why have you not responded? If these people are incorrect, why are you not accepting the offer of free publicity for your answers, targeted directly at those who now doubt the conventional wisdom?
It is imperative that any legitimate government be willing and able to answer questions about the correct application of its laws. Surely you know that. You hold the highest office that has direct dealings with the drafting and interpretation of federal income tax regulations. If you cannot or will not answer the questions, who will? Please supply me with written, direct answers to the enclosed questions at your earliest convenience.
Sincerely,
Robert B. Graham Sr.
46 Lark Drive
Holland, Pa., 18966
cc: Mr. John Stossel
c/o ABC News 20/20
147 Columbus Ave
New York, NY 10023
cc: Taxpayer Advocacy Panel
Mail Stop 1006 MIL
310 West Wisconsin Ave
Milwaukee, WI 53203-2221.
This is Bob Graham - This is Big Bob.
Goodmorning America! Coming to you live. Here is the first in a series of letters Pam Olson of the IRS.
Robert B. Graham Sr
46 Lark Drive
Holland, Pa. 18966
215-355-5660
November 01, 2002
Pamela F. Olson
Assistant Secretary for Tax Policy
1500 Pennsylvania Ave NW, Room 1334
Washington, DC 20220
Dear Ms. Olson,
From various comments you have made, I can see that you believe that the majority of Americans have a legal (and moral) obligation to surrender to the IRS
a portion of their income. Your comment below from a recent speech shows that you also understand that if the citizenry does not believe in such an obligation
to pay up, getting them to “comply” by threats and punishments is a difficult task. “Research by social scientists suggests that, when it comes to complying with the law, the belief that the laws are legitimate and ought to be complied with has a stronger motivating effect than the fear of being caught.” Of course, as some of your other comments also imply, maintaining a widespread feeling of obligation to obey is impossible if the public does not even know exactly what the law requires of them. (Thus, the IRS’ stated mission of helping citizens understand and comply with their tax obligations makes sense.) However, despite your glowing words about Commissioner Rossotti’s accomplishments in the field of “customer service,” many of us have seen the “other” side of the IRS: the one that lies, cheats, steals, threatens, evades, accuses, extorts, and blatantly ignores both procedural rules and rules for determining how much tax is owed. When government employees disregard the law, faith in an obligation to obey their commands of course diminishes.
In your acceptance speech, you mentioned a desire to focus more on those who “thumb their noses” at the IRS, and less on trivial nit-picking over the returns of the average filer. However, you seem unaware of the fact that many “nose-thumbers” started out by politely asking questions of the IRS, which the IRS refused to answer. Over and over again, the IRS has responded to perfectly reasonable questions, not with actual answers, but with threats of fines or imprisonment, or accusations that the ones asking questions are law-breakers. Often the IRS “responses” also include a statement saying that the IRS refuses to respond to further inquiries on the matter. Is it any wonder that many people are losing their belief that they have an obligation to obey the IRS?
Many thousands now believe, based on what the IRS’ own regulations say, that the income of the average American is not subject to the federal income tax, and that the law (while perfectly valid) is being grossly misapplied. Of course, this is contrary to conventional wisdom, but this is not a country of “rule-by-conventional-wisdom”; it is a country of rule-by-law. And what these people see written in the law books themselves, and what they see in the IRS’ Gestapo-like responses, gives them every reason to doubt conventional wisdom.
The number of those people is growing by the thousands, as your predecessors no doubt warned you. To be blunt, thuggery and threats cannot preserve “compliance” with IRS demands when tens of thousands of Americans believe they do not legally owe the IRS a dime. If you believe that most Americans legally owe federal income taxes, would it not be reasonable to have an open, honest discussion about the law itself, and answer a few perfectly reasonable questions?
Please supply me with written, direct answers to the enclosed questions. If you believe that an open discussion of the law will help improve “compliance,” then you will be happy to know that your answers will be publicly posted, in their entirety, on the internet at www.taxableincome.net, one of the primary web sites questioning the conventional wisdom about the income tax. In effect, you will be getting free publicity targeted directly at those who now believe that they are not required to file or pay.
Both for the sake of “compliance,” as well as for respect of the principles of due process and representative government, such requests should not be responded to with evasions, accusations, threats, and insults. The people deserve reasonable and honest answers to reasonable and honest questions. Thank you in advance for your assistance.
Sincerely,
Robert B. Graham Sr.
(P.S. I understand that on 10/30/02 you were sent a copy of the video, “Theft By Deception,” which should show you how ridiculous it is to try to dismiss the issue out of hand as being patently “frivolous” and without merit.)
cc: Mr. John Stossel
c/o ABC News 20/20
147 Columbus Ave
New York, NY 10023
