Dissection 861

(originally launched into cyberspace on 04/02/2003)
---

Dear List Subscriber,

The 861 evidence can be simplified (perhaps slightly over-simplified) into
two steps:

1) 26 USC § 861(b) and 26 CFR 1.861-8 describe when DOMESTIC income is
taxable, and;

2) Those sections do NOT show the domestic income of the average American to
be taxable.

Conversely, there are two basic steps to the status quo proponents'
arguments AGAINST the evidence:

1) You shouldn't look at 861!

2) 861 shows your income to taxable anyway!

These are the two "hills" to overcome on the propaganda battlefield. While
both claims are untrue, I'm happy to say that many defenders of the
(incorrect) conventional wisdom are now abandoning the first one. Perhaps
this is because it borders on insane to claim that people should NOT use
861(b) and 1.861-8 to determine their "taxable income from sources within
the United States," in light of what the regulations actually say. Again,
here is where you can look them up, and some citations to read:

http://www.access.gpo.gov/nara/cfr/waisidx_02/26cfr1v9_02.html

1.861-1(a)(1) and 1.861-1(b)
1.861-8(a)(1)
1.863-1(c)
1.862-1(b)

Treasury Decision 6258--one of the first official statements by the Treasury
Department concerning Section 861--also makes it rather looney to claim that
most people should IGNORE the sections. Here is a scan of that Decision:

http://www.taxableincome.net/exhibits/td6258.html

You can probably see why many tax "experts" are now giving up their attempts
to argue that you shouldn't look at 861. Instead, they are backed into Step
#2: claiming that 861 DOES show your income to be taxable.

(Interestingly, to my knowledge IRS Chief Counsel has NEVER made such an
argument, because they know the history of the law, and how doomed they
would be if they AGREED that 861 and its regs are where you should look.
More ignorant government bureaucrats, like Evan Davis at the DOJ, boldly and
cluelessly blunder into #2.)

It is that second step that I want to address in this message. Thanks to
some sleight-of-hand by government lawyers over the last 80 years, Section
861 by itself gives the impression that ALL domestic income is taxable.
(The Tax Division of the DOJ is ignorant enough that they have been arguing
just that in court.) But further investigation shows that is not the case.

---------------------------------------

26 USC § 861(a)(3) and 26 CFR § 1.861-4

Let's use a common example, to keep this as simple as possible. Suppose you
are a U.S. citizen, and you do work in the 50 states and get paid for it.
(I expect that is true of most of you on this list.) Some status quo
proponents will point to the following, and claim that they mean that your
compensation IS taxable.

"(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:...
(3) Personal services
Compensation for labor or personal services performed in the United
States; except... [exception for nonresidents temporarily in the country]
(b) Taxable income from sources within United States
From the items of gross income specified in subsection (a) as being income
from sources within the United States there shall be deducted the [allowable
deductions]. The remainder, if any, shall be included in full as taxable
income from sources within the United States." [26 USC § 861]

"Sec. 1.861-4 Compensation for labor or personal services.
(a) In general. (1) Gross income from sources within the United States
includes compensation for labor or personal services performed in the United
States irrespective of the residence of the payer, the place in which the
contract for service was made, or the place or time of payment; except...
[exception for aliens temporarily in the U.S.]" [26 CFR 1.861-4]

If that's all you look at, it sure LOOKS like all domestic "compensation for
services" is taxable, doesn't it? (Again, IRS Chief Counsel does NOT argue
this, because they know better than to step into that trap.)

--------------------------------------

To get to the truth, we must dissect Section 861, and find out what it's for
and how it works. A good way to do that--and the way that courts often use
to decide what CURRENT law means--is to go back in time and see what the
OLDER statutes and regulations said. Here is the statutory predecessor of
Section 861:

"(a) In the case of a nonresident alien individual or of a citizen entitled
to the benefits of section 262, the following items of gross income shall be
treated as income from sources within the United States:...
(3) Compensation for labor or personal services performed in the United
States;...
(b) From the items of gross income specified in subdivision (a) there shall
be deducted the [allowable deductions]. The remainder, if any, shall be
included in full as net income from sources within the United States."
[Section 217 Revenue Act of 1925]

Huh?!?! As you can see, it's very similar to what the current Section says
861, except that first phrase. What happened to "In the case of a
nonresident alien individual or of a citizen entitled to the benefits of
section 262..."?!?! Why isn't it still there?

Back then, one was only "entitled to the benefits of section 262" if "80 per
centum or more of the gross income of such citizen... was derived from
sources within a POSSESSION of the United States" (Section 262, Revenue Act
of 1925). Therefore, I doubt anyone would want to argue that Section 217
was saying that compensation for services performed in the U.S. is taxable
for ALL U.S. citizens. People can theorize about what some OTHER section
might have said, but Section 217 obviously was NOT talking about YOUR
domestic compensation (unless you get most of your income from federal
possessions, such as Guam or Puerto Rico).

So where did that first phrase go? Has ALL domestic compensation become
taxable since 1925? To understand, we must see how all the pieces fit
together.

--------------------------------------

There are a couple different things that Section 861 and following (and
related regulations) do. First, Section 861 and following give the
so-called "source rules," which tell which kinds of income are considered
DOMESTIC income, and which are considered FOREIGN income. Here is a
breakdown of the relevant sections:

Section 861 - Income from WITHIN the U.S.
subsection 861(a) - Domestic "gross income"
subsection 861(b) - Domestic "taxable income"
Section 862 - Income from WITHOUT the U.S.
subsection 862(a) - Foreign "gross income"
subsection 862(b) - Foreign "taxable income"
Section 863 - Combination income (partly within & partly without)

Under these "source rules" ALL income--whether taxable or not--is
categorized as either DOMESTIC income ("income from sources within the
United States") or FOREIGN income ("income from sources without the United
States"). Section 861 "allocates" certain types of income as being domestic
income, and Section 862 "allocates" certain types of income as being foreign
income. In the case of combination income, Section 863 and related
regulations give various rules about how to segregate "combination" income
into "within" and "without."

Again, it's important to note that ALL OF THE INCOME ON THE PLANET is
categorized by these rules as either domestic or foreign. The IRS loves to
say that the "source rules" do not exempt the domestic income of citizens.
True. They don't exempt ANY income for ANYONE. That doesn't mean all
income is TAXABLE, of course.

For example, some will point to 861(a)(3) (and 1.861-4) shown above, which
talks about compensation for services performed in the U.S. Those people
then conclude that ALL such domestic compensation must be TAXABLE. Trouble
is, if they looked at 862(a)(3) as well, that would see that all
compensation for services performed OUTSIDE of the U.S. is included there.
The same is true of 861(a)(1) and 862(a)(1), regarding domestic and foreign
INTEREST. ALL "interest" is either one or the other. Again, ALL income is
either included as DOMESTIC income, or as FOREIGN income (including income
for which the convoluted "allocation and apportionment" rules of Section 863
apply).

Is all income--domestic and foreign--taxable for everyone? Of course not,
and every tax professionals know it. The purpose of the "source rules" is
NOT to exempt ANYTHING from taxation, but merely to distinguish between what
is domestic income and what is foreign income.

The NEXT step is what the "conventional wisdom" crowd refuses to
acknowledge.

After determining what income counts as domestic, and what counts as
foreign, the next step is to find out what domestic income is TAXABLE, and
what foreign income is TAXABLE. What 26 CFR § 1.861-4 (above) means is that
compensation for services performed in the U.S. is considered DOMESTIC
income (regardless of where the employer is, where the check comes from,
etc). But then one must go to 26 CFR § 1.861-8 to find out what domestic
income is actually TAXABLE.

(Note: Even the "general rules" of 861(b) and 862(b), concerning taxable
income from within the U.S., and taxable income from outside of the U.S.,
don't exempt ANY income for ANYONE. They basically just reflect the general
definition of "taxable income" (26 USC § 63), by saying that from the "gross
income" (domestic or foreign), appropriate deductions are to be subtracted,
and what's left over is "taxable income" (domestic or foreign). If these
"general rules" were all that is needed to determine taxable income, then
ALL THE INCOME ON THE PLANET would show up as being taxable, which obviously
is not the case. The REGULATIONS under 861(b) (namely, 1.861-8)
describe--though in a rather mangled way--how all the pieces fit together,
and describe when domestic income and foreign income are actually TAXABLE.)

In the 1925 statute (Section 217 shown above), it was painfully obvious who
could actually have taxable domestic income. In the current maze, it's not
nearly so easy. (Those who have seen Step Six of "Theft By Deception" know
how it came to be so hard to follow; it was no accident.) There is quiet a
collection of "legalese" phrases which were DESIGNED to be confusing--almost
nonsensical--such as "operative sections," "specific sources," "classes of
gross income," "statutory groupings," etc. Here is my attempt to simplify
the mess, without making this message too enormous (which it already is):

1) An "operative section" is a section of the statutes which describes a
certain type of commerce, and gives the rules about the taxability of such
commerce, and any special applicable rules. For example, Section 871(b) is
an "operative section," and it says that nonresident aliens doing business
in the U.S. "shall be taxable" under Section 1. It also says that
nonresident aliens are taxed ONLY on income they receive which is connected
to doing business in the U.S. (Section 871(a) deals with other U.S.-source
income of nonresident aliens, but I don't need to address that here.)

2) When the regulations talk about a "specific source or activity," they
mean a type of commerce addressed in an "operative section." So, for
example, a nonresident alien doing business in the U.S. is the "specific
source or activity" described in Section 871(b).

3) A "class of gross income" consists of the "items" of income listed in
Section 61, such as compensation, interest, rents, dividends, etc. These
may or may not be TAXABLE (see 1.861-8(a)(3) and 1.861-8(b)(1)), depending
on the type of commerce from which the "items" derive.

4) A "statutory grouping" means the gross income from one of those specific
types of commerce (a "specific source or activity"), such as the income
nonresident aliens receive from engaging in business in the U.S.

To jump to the punchline, if you don't have a "statutory grouping" of gross
income, meaning income from one of the "specific sources" described in the
"operative sections" listed in 1.861-8(f)(1), then SECTION 1.861-8 DOES NOT
SHOW YOUR INCOME TO BE TAXABLE.

Again, Section 217 from 1925 (shown above) doesn't use ANY of the above
"legalese" terms. It just say that for CERTAIN people, certain kinds of
income are considered domestic income, and are to be included as TAXABLE
domestic income (after deductions). Tracing the law forward, we can see
that the application of the law did not change, but it has become more and
more difficult to understand what it actually means.

------------------------------------

This message is already overgrown, so I'm just going to stop there. When
I'm more awake, I may take another shot at explaining this. It's not easy,
since it was DESIGNED to confuse people. But here is a sort of synopsis of
points to remember:

1) The geographical "source rules" do not exempt ANY income from taxation;
instead, they categorize ALL income as either domestic or foreign.

2) The next step is to determine when domestic income (or foreign income) is
actually TAXABLE, and for that, one must look to the regulations (primarily
26 CFR § 1.861-8), and to the other statutes of Subchapter N, which describe
which "specific sources and activities" actually produce TAXABLE income.

3) The domestic income of most Americans is not included in any "specific
source or activity," or any taxable type of commerce described in Subchapter
N, because it is NOT TAXABLE.

I hope that cleared something up for someone, and I hope it didn't trigger
too many migraines.

Sincerely,



Larken Rose
This email address is being protected from spambots. You need JavaScript enabled to view it.
http://www.theft-by-deception.com

Secret Law

(originally launched into cyberspace on 03/31/2003)
---

Dear List Subscribers,

This list is constantly growing (now at 2500 members), so the following may
be somewhat of a rerun for a bunch of you, but hopefully with enough of a
new twist to be interesting.

When this country was formed, there were a few basic principles underlying
the new system. All in all, they were pretty radical ideas, which caused a
lot of the world to laugh at the silly belief that it could actually work.
(Some time since then they stopped laughing.) This new country was supposed
to be heavy on individual liberty and light on government control. It was
also supposed to have the "government" as the SERVANT, and have a system of
rule by law, not by men. A huge part of that was that the law had to be
KNOWABLE, and that the law was ABOVE those enforcing it (meaning they were
bound by it as much as everyone else).

Well, I have some bad news. When it comes to the federal tax laws, none of
those things apply any more. Unfortunately, people have become so
accustomed to the Gestapo tactics of the IRS that they don't even notice
what a complete abomination the "Service" is to EVERYTHING the Founders
wanted this country to be. I'm sure you've heard horror stories about how
the IRS has destroyed people financially, emotionally, etc., but that's not
even what I'm talking about here. I'm talking about something worse.

As far as the IRS, and Congress, and the courts are concerned, NONE of the
basic Constitutional principals apply to the tax laws. Think I'm
exaggerating? Decide for yourself...

1) There you are, a mere mortal reading this e-mail. You probably are not a
lawyer, and you've probably spent little or no time in a law library. (I
can think of a billion more worthwhile things to do, myself.) The most
basic principle of "due process" is that YOU should be able to find out (and
understand) what the law requires of you. Granted, you'd probably rather
hire someone else to do it, but if you WANTED to figure it out yourself, you
should be able to do so. Some time, just for fun, go look at the books
containing the tax statutes and regulations. You don't even have to OPEN
them to know that NO ONE ON EARTH could possibly know what all the tax laws
require. NO ONE has ever read the whole tax Code. How insane is it to
think that YOU PERSONALLY are REQUIRED to know exactly what TENS OF
THOUSANDS of pages of tax laws require of you? Think the Founders
envisioned THAT for this country?

2) Okay, so the tax laws are ridiculously voluminous. If you open to a
random page in the tax code, you will see they are also ridiculously
convoluted and twisted. Not only is it many thousands of pages; it is many
thousands of pages of what TOP GOVERNMENT OFFICIALS refer to as "gibberish."
Nifty. And guess what... YOU PERSONALLY are REQUIRED to know what ALL of
the tax laws require of you.

3) So now we're at a couple levels of insanity. Most people are aware
of--and put up with--those two levels. But now we come to something far
worse. Ya know those thousands of pages of legalese? There's a slight
problem with them: according to the IRS, and Congress, and the courts, they
DON'T MEAN WHAT THEY SAY. Yep, you're required to understand thousands of
pages of gibberish, which mean something DIRECTLY CONTRARY to what they
actually say (according to ALL THREE branches of the federal government).
Okay, now I MUST be exaggerating, right? Well, let’s see...

Example: The income tax regulations say that 26 USC § 861(b) and 26 CFR §
1.861-8 give the rules for determining one’s "taxable income from sources
within the United States." (Section 862 then deals with foreign-source
income.) The regulations even state it in plain English... at least as
plain as the government lawyers ever write anything. If you don’t believe
me, go to the following link, and look up the citations shown below it.

http://www.access.gpo.gov/nara/cfr/waisidx_02/26cfr1v9_02.html

1.861-1(a)(1)
1.861-1(b)
1.861-8(a)(1)
1.862-1(b)
1.863-1(c )

Notice that the regulations do NOT say that only certain people should look
there. So why do so many IRS employees and tax professionals insist that
you should NOT look there to determine your taxable domestic income? Do
they have any CITATIONS supporting such a claim? Does anything in the
actual law books support their "opinion"? Nope.

Silly you, did you really think the law was KNOWABLE? Did you really think
the law books mean what they SAY? No, no. The law means whatever a
bureaucrat or accountant SAYS that it means. The law itself has become
obsolete. You stupid peasants shouldn't think that YOU are capable of
reading and understanding the law. We don't need written laws anymore; they
have been replaced by the arbitrary rule by the baseless assertions of
ignorant bureaucrats... EXACTLY what the Founders feared most, and tried
hardest to PREVENT. Oops.

(To try to keep this message less than a billion pages long, I’ll use
another message to show that 861(b) and 1.861-8 do NOT show the domestic
income of the average American to be taxable. You’ll also see how
bureaucrats baselessly assert otherwise on that point too. There are other
parallel issues I’ll also skip here for brevity.)

4) So you're required to know what the law requires of you... the law that
is tens of thousands of pages of gibberish, which don't mean what they say.
But wait, it gets better. It is a CRIME to BELIEVE what the laws actually
say, it is a crime to TELL OTHER PEOPLE what the laws actually say, and
Congress is working on making it a crime to ASK THE GOVERNMENT what the law
requires. Okay, NOW I've definitely lost it, right? You decide...

On at least a DOZEN occasions (probably way more than that), people have
sent letters to IRS examiners in preparation for an audit, saying that at
the meeting they wanted the IRS agents to say: 1) whether one should use 26
USC § 861(b) and 26 CFR § 1.861-8 to determine his taxable domestic income,
and; 2) whether those sections show the domestic income of a U.S. citizen
(who lives and works exclusively in the 50 states) to be taxable.
(Citations above show how abundantly reasonable these questions are.) The
IRS examiners not only would not (or could not) say what THEIR OWN POSITION
was on these fundamental points, but on several occasions admitted that the
IRS attorneys had told them in advance NOT TO SEND THE QUESTIONS TO THEM
(the IRS attorneys). Nothing suspicious there, huh?

Next, if you file a return MENTIONING a certain section of THEIR OWN law
books (861), chances are the IRS will try to penalize you $500 for filing a
"frivolous return," without telling you WHY it is "frivolous," or even where
it is wrong. (If the return shows a refund due, they will then "lose" it,
denying you all due process.) If you BELIEVE the citations shown above (and
I didn’t write them; the IRS attorneys did) you will be PENALIZED for doing
what their own regulations TELL you to do. Yes, it’s now ILLEGAL to obey
the law.

If you tell others what the IRS’ own regulations say, and tell people what
forms they can file, what meetings they can request, etc., to try to get a
little due process, you will be SILENCED BY FORCE (via court injunction).
Ask Doug Rosile, Dave Bosset, Thurston Bell, etc. (some of those the DOJ has
already censored for doing it). Actually, if you do ask those people about
it, they might not answer for fear of GOING TO JAIL for talking about what
THE LAW BOOKS THEMSELVES say.

Believe it or not, it gets worse. Congress is now trying (for the third
time, I believe) to pass a law that would penalize you up to $5000, not just
for filing a so-called "frivolous return," but for REQUESTING A MEETING
based on what their OWN law books say. Yes, asking for the chance to
DISCUSS THE LAW will become a crime if that law passes. Welcome to the land
of the free.

--------------------------------------------------

A lot of you probably haven’t yet done in-depth researched of the 861
evidence, which is understandable. But even if I was dead wrong in my
conclusions, is the situation described above okay with you? If you’re not
SURE what the law requires, shouldn’t the feds be willing to explain it to
you, and answer any reasonable questions you have? Try it. See how they
respond.

If you find that the law books seem to show your income to be EXEMPT for
federal income tax purposes, and no one seems to be able to point out where
in the law you are wrong (though plenty will assert that you are), should
you be punished for doing exactly what you think the law requires? Try it.
See how they respond.

Here are a few transcripts showing what passes for "due process" these days:
http://www.taxableincome.net/extortion/thugs/transcript.html
http://www.taxableincome.net/extortion/case4/transcript.html
http://www.taxableincome.net/extortion/case1/transcript1.html
http://www.taxableincome.net/extortion/case6/transcript.html
http://www.taxableincome.net/extortion/case3/transcript1.html

(Incidentally, the Appeals Division of the IRS now REFUSES to let anyone
record meetings with them, in direct violation of 26 USC § 7521—-which also
doesn’t mean what it says, apparently—-and won’t even allow people to bring
a WITNESS to those meetings. The reason given was that publicizing of
recordings makes the IRS look bad, and hurts "public confidence" in the
system. And making the meetings SECRET doesn’t?!?)

Here is how Congress responds to the questions:
http://www.taxableincome.net/takestand/honestinquiry/responseindex.html

Welcome to the land of secret law, where the law is unknowable, questioning
the government is a crime, and "due process" consists entirely of
propaganda, threats and harassments, courtesy of your "public servants." If
you think that’s just fine, raise your hand... yeah, your right hand... arm
and fingers extended, slightly higher than horizontal. Like this:

http://www.pbs.org/wgbh/nova/holocaust/time1936sans.html#

Sincerely,

Larken Rose
This email address is being protected from spambots. You need JavaScript enabled to view it.
http://www.theft-by-deception.com

Desperate Elements of a Doomed Regime

(originally launched into cyberspace on 03/27/2003)
---

Dear List Subscriber,

I heard the Prez make some very appropriate comments yesterday... not so
much appropriate to what he was talking about, but appropriate to the effort
to end the "income tax" deception. It went something like this:

"I want to thank all of you for your committment and sacrifice in this fight
for peace and freedom. There is much left to do, as we combat the last
desperate elements of a doomed regime."

Of course, the Prez meant Iraq, but I mean the IRS. They are doomed, and
some of them know it. Because they are backed into a corner, they will get
more and more vicious (as they already are). For example, after a few
hundred letters, it seems that Pam Olson has transformed from an open,
honest public servant into an evasive, dishonest, threatening thug.
(Trouble is, continuing to be honest would have put her in deep trouble.)

I predicted before that by April 15th, 2004, the "income tax" deception and
the IRS will be crumbled beyond the point of no repair (though many will
probably still be filing and paying). I still believe that. We're coming
up on the one-year mark, and there are several projects in the works to
speed things up.

Someone was kind enough to donate a rather significant (i.e. otherwise
really expensive) conference call service, so with any luck we'll start
having a free (for you) weekly conference call, both to get new people
interested, to let you know what things are in the works, etc. I'll let you
know when the first will happen.

A few people have chastised me for not giving permission for everyone to
copy the video (though I do give permission to publicly show or broadcast
it). I'm still not going to, though I won't get into all the reasons right
now. HOWEVER, I think one of the most crucial projects now in the works is
something that CAN be distributed for free, that will serve as a lot better
introduction/crash course in the 861 evidence than any web site, or the
video, for that matter.

We're also about ready to send a flood of letter to someone who admits to
being one of the top Treasury attorneys who is supposed to understand 861
and its regulations. Details to follow.

Things my be fairly quiet at the moment, but that's not because nothing is
going on. As always, stay tuned.

Sincerely,

Larken Rose
This email address is being protected from spambots. You need JavaScript enabled to view it.
http://www.theft-by-deception.com

Ogden Party CANCELLED

(originally launched into cyberspace on 03/23/2003)
---

Dear List Subscriber,

Due to various circumstances (unforeseen and otherwise), I've decided to
CANCEL the Ogden party scheduled for April 15th. One thing after another
made it less and less worthwhile. Again, if you already ordered tickets to
get there, and there's a cancellation fee, let me know as soon as possible,
and we'll try to help you out.

It could have been fun if it had worked out, but the complications kept
piling up until it wasn't worth the time, money and effort. (If you've let
anyone know about the event, please let them know it's CANCELLED.) There is
a lot of other stuff going on regarding ending the "income tax" fraud, so
don't think this is us giving up. Far from it. This is just a minor
regrouping to spend time and effort in more effective efforts.

Sincerely,

Larken Rose
This email address is being protected from spambots. You need JavaScript enabled to view it.
http://www.theft-by-deception.com

[ June 23, 2003, 07:09 AM: Message edited by: 3rdEar ]

To Odgen, or not to Ogden

(originally launched into cyberspace on 03/21/2003)
---

Dear List Subscriber,

After some initial recon about the Ogden party, and based on the level of
response, I'm not sure it's worth doing. First, if any of you have already
bought a plane ticket, let me know. I don't want anyone to get messed up by
calling it off AFTER they paid for travel or lodging.

As for transportation, you're pretty much on your own (if the event does
happen). Not enough people wanted to plan bus chartering, etc., so that's
out. There were a couple volunteers, and if the thing is still on, I'll let
you know who they are. But most of you are on your own.

Second, the location is a bit of a challenge. There doesn't seem to be a
decent meeting place outside the building. More importantly, it looks
unlikely that we'd be allowed in. The mainly unmarked building is fenced by
barbed wire, with a guard house at the front gate. I'm guessing we wouldn't
be allowed to just stroll in to ask a few inconvenient questions.

I'm still on the fence about whether this particular endeavor would be worth
it. (If not, there will certainly be other opportunities.) Again, if
you've already reserved something, let me know, as that may influence the
decision of whether to go ahead with it or not.

Sincerely,

Larken Rose
This email address is being protected from spambots. You need JavaScript enabled to view it.
http://www.theft-by-deception.com