(originally launched into cyberspace on 01/26/2008)
There are countless 861-bashing articles coming from the mainstream
media recently. Because of the Wesley Snipes trial, they really
need to keep people from looking at it, so they say "frivolous"
over and over and over again, and stress the nasty things which
happen to anyone who says "861." And getting the facts right
doesn't seem to be a high priority for them--insulting, demonizing,
and threatening non-conformists is their only goal. The following
link gives an example: a "story" (hit piece) written by "Enrolled
Agent" (meaning she has IRS permission to represent people) Eva
Rosenberg. It was posted on MSN's "money central," as well as the
"FoxBusiness" web site.http://tinyurl.com/yq3ft9
Here are a few things the author got dead wrong:
1) The article claims that Wesley Snipes "was indicted on eight
counts of tax evasion." There are NO counts of tax evasion (26 USC
7201) against Mr. Snipes. There are two charges relating to filing
claims for refund, and six charges of misdemeanor willful failure
to file tax returns.
2) The article calls me a "tax protestor," quoting Steven H.
Kassel, another "Enrolled Agent" who has been demonstrating
profound ignorance of the law for years on online discussion
boards. A tax protestor is (obviously) someone who protests a tax,
which I'm not doing.
3) The article says I maintained a web site "challenging Section
861 and the constitutionality of the income tax." Both, of course,
are dead wrong. I don't "challenge" ANY section of the tax code,
and I've been saying the tax is perfectly constitutional for almost
(Amazingly, the article says that for the details of my trial, one
can go to the "Quatloos" web site, as if that substance-free
slander-fest is accurate or reliable. If you want the details of my
trial, stand by for a book which QUOTES what happened.)
4 & 5) The article includes this: "Do tax protesters lose every
single case? Have they no victories whatsoever? Well, there is one.
Tommy K. Cryer was acquitted of tax evasion in U.S. District Court
in Louisiana on July 1, 2007." Two more glaring errors (not
including the continuing misuse of the term "tax protestor"). First
of all, Mr. Cryer wasn't tried for tax evasion. More importantly,
there is "one" victory? What about Lloyd Long? What about Vernice
Kuglin? What about Joseph banister? What about the 17 defendants in
the huge case in California that were all acquitted? (The case name
eludes me at the moment.)
(The article then tries to downplay Mr. Cryer's acquittal, by
saying that when you "read further," you "learn that he was only
acquitted of misdemeanor charges for willfully failing to file his
2000 and 2001 tax returns." That's all he was TRIED for! So he was
"only" acquitted of the ONLY charges against him.)
6 & 7) Speaking of Mr. Cryer's acquittal, the article says this:
"Once again, a court case didn't touch on the constitutionality of
income taxes. All it did was settle a civil matter of willfulness."
Two more blunders in one sentence: Mr. Cryer wasn't challenging the
constitutionality of the tax, and the issue of willfulness is
entirely a CRIMINAL, not a "civil" matter.
The question is, are such "reporters" so incompetent that they
don't KNOW how many things they're getting wrong? Or do they not
care whether they're telling the truth, as long as the message
serves their agenda? Well, it doesn't usually take long to find
out. I just sent the author of the article the following e-mail.
I'll let you know how she responds, if she responds at all.
Regarding the 861 Issue
I wanted you to know that your recent "story" was full of blatant
errors, though some of them were no doubt simply repeating the
errors and/or lies of Mr. Steven Kassel--a former IRS Revenue
Officer who is still buddies with the IRS establishment. Below you
can find the text of a message I sent to my e-mail list, pointing
out some of the blatant untruths found in your column.
However, the real point of this note is not to complain about your
demonization of anyone who holds unorthodox tax-related beliefs,
nor your gloating over the incarceration and denial of due process
for such people. Instead, I am hoping that, as a service to the
public, you will take the time to provide specific answers to the
following six questions, regarding the proper way to determine
one's taxable income.
1) Should I use the rules found in 26 USC § 861(b) and 26 CFR §
1.861-8 (in addition to any other pertinent sections) to determine
my taxable domestic income?
2) If some people should not use those sections to determine their
taxable domestic income, please show where the law says who should
or should not use those sections for that.
3) If a U.S. citizen receives all his income from working within
the 50 states, do 26 USC § 861(b) and 26 CFR § 1.861-8 show his
income to be taxable?
4) Should one use 26 CFR § 1.861-8T(d)(2) to determine whether his
"items" of income (e.g. compensation, interest, rents, dividends,
etc.) are 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?
6) What types of income (if any) are not exempted from taxation by
any statute, but are nonetheless "excluded by law" (i.e. not
subject to the income tax) because they are, under the
Constitution, not taxable by the federal government?
Please note, I will be sharing your response, or your failure to
respond, with my e-mail list of several thousand interested
observers. If you think I am mistaken in my conclusions, this would
be a prime opportunity to enlighten those paying attention to the
P.S. Below is a brief explanation, along with supporting citations,
for why the above questions are being asked.
Reasons questions 1 & 2: The regulations at 26 CFR § 1.861-8 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. Section 1.861-1(a)(1) 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 §§ 1.861-1(b), 1.862-1(b), 1.863-1(c)). Cross-
references under 26 USCS § 61, as well as entries in the USC Index
under the heading "Income Tax," also refer to Section 861 regarding
income ("gross" and "taxable") from "sources within U.S."
Reason for question 3: Section 217 of the Revenue Act of 1921,
predecessor of 26 USC § 861 and following, stated that income from
the U.S. was taxable for nonresident foreigners, and for U.S.
corporations and citizens deriving most of their income from
federal possessions, but did not say the same about the domestic
income of other Americans. The regulations under 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 still relate only to certain types of
international trade (see 26 CFR §§ 1.861-8(a)(1), 1.861-8(a)(4),
Reason for question 4: 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, rents,
dividends, etc.). The regulations (26 CFR § 1.861-8(b)(1)) then
direct the reader to 26 CFR § 1.861-8(d)(2) which provides that
such "classes of gross income" may include some income which is
excluded for federal income tax purposes. (Section 1.861-8(d)(2)
merely redirects the reader to 1.861-8T(d)(2).)
Reason for question 5: After defining "exempt income" to mean
income which is excluded for federal income tax purposes, the
regulations (26 CFR § 1.861-8T(d)(2)(iii)) list types of income
which are not exempt (i.e. which are subject to tax), including the
domestic income of nonresident foreigners, certain foreign income
of U.S. citizens and residents, income of certain possessions
corporations, and income of international and foreign sales
corporations; but the list does not include the domestic income of
the average American.
Reason for question 6: 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 the types of income exempted
by statute, other types of income were excluded because they were,
"under the Constitution, not taxable by the Federal Government" (§
39.22(b)-1 (1956)). (This is also reflected in the current 26 CFR §