The concept that you only have income when you have a gain or profit was rejected in COMMISSIONER v. GLENSHAW GLASS CO., 348 U.S. 426 (1955)Weston White wrote:You see that is not what it says though (the law that is), so that is what the problem is… because the FAQ is suppose to be based upon and in support of the law.derive - To obtain or receive from a source.
- The American Heritage® Dictionary of the English Language, Fourth Edition
There is no discernible difference between the phrases 'income from labor', in the context that it is used within the FAQ and this thread, and 'income derived from labor.' Regardless of whatever word games you want to try and play, the simple fact is that the income tax is legal and constitutional. When you perform work for someone else and they pay you in exchange for that work, you have income. The source of that income is your labor, or it can be said that the source is the person that paid you.
61(a) General definition
Except as otherwise provided in this subtitle, gross income means all income from whatever source derived, including (but not limited to) the following items:
(1) Compensation for services, …;
…
Though to debate your view point:
‘Income from labor’ – Would mean, ‘income’ was received through the performance of my labor, without any other consideration. Such as being employed in the stock market or insurance, mining, or railroad professions or being a broker or investor or whatever.
* Ergo, I gained ‘income’ as a result of my particular designation of labor. The source of my ‘income’ was attributed to the direct and special consideration of my particular profession, so stipulated within the IRC itself.
‘Income derived from labor’ – Would mean, ‘income’ was attributed through the performance of labor. Such as working at Taco Bell saving up that money earned through that process of labor in an interest bearing account and realizing a gain of more than $10.00 within a given year.
* Ergo, I gained ‘income’, which derived from my performing labor. The source of my ‘income’ was the money I had earned during the act of carrying out the task of common work.
LABOR.
“Labor,” “business,” and “work” are not synonyms. Labor may be business, but it is not necessarily so; and business is not always labor. Labor implies toll; exertion producing weariness; manual exertion of a toll some nature.
BLACK’S LAW DICTIONARY - 3rd EDITION
Now if what you are claiming were remotely true they would not need to make any reference or mention of the source, just as your own example or that within the FAQ has done, because it would already be accounted for consideration within the use of 'income', it would simply read as:
"Except as otherwise provided in this subtitle, gross income means all income, [including (but not limited to) the following items:"
Amendment XVI would read:
The Congress shall have power to lay and collect taxes on incomes, without apportionment among the several states, and without regard to any census or enumeration.I am not claiming that now am I? Only that it is being grossly misapplied.Regardless of whatever word games you want to try and play, the simple fact is that the income tax is legal and constitutional.
No you receive revenue. You only have income once you have realized a gain or profit from that revenue.When you perform work for someone else and they pay you in exchange for that work, you have income.
True, but only when you have realized an ‘income’, compensation is not ‘income’.The source of that income is your labor, or it can be said that the source is the person that paid you.
<snip for brevity>.
The full case is at http://caselaw.lp.findlaw.com/scripts/g ... 8&page=426
Please note the proposition that statutory gross income is "all-inclusive," and that Congress applied no limitations as to the source of taxable receipts, nor restrictive labels as to their nature. 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.It is conceded by the respondents that there is no constitutional barrier to the imposition of a tax on punitive damages. Our question is one of statutory construction: are these payments comprehended by 22 (a)?
The sweeping scope of the controverted statute is readily apparent:
"SEC. 22. GROSS INCOME.
"(a) GENERAL DEFINITION. - `Gross income' includes gains, profits, and income derived from salaries, wages, or compensation for personal service . . . of whatever kind and in whatever form paid, or from professions, vocations, trades, businesses, commerce, or sales, or dealings in property, whether real or personal, growing out of the ownership or use of or interest in such property; also from interest, rent, dividends, securities, or the transaction of any business carried on for gain or profit, or gains or profits and income derived from any source whatever. . . ." (Emphasis added.) 4
This Court has frequently stated that this language was used by Congress to exert in this field "the full measure of its taxing power." Helvering v. Clifford, 309 U.S. 331, 334 ; Helvering v. Midland Mutual Life Ins. Co., 300 U.S. 216, 223 ; Douglas v. Willcuts, 296 U.S. 1, 9 ; Irwin v. Gavit, 268 U.S. 161, 166 . Respondents contend that punitive damages, characterized as "windfalls" flowing from the culpable conduct of third parties, are not within the scope of the section. But Congress applied no limitations as to the source of taxable receipts, nor restrictive [348 U.S. 426, 430] labels as to their nature. 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. Jacobson, 336 U.S. 28, 49 ; Helvering v. Stockholms Enskilda Bank, 293 U.S. 84, 87 -91. Thus, the fortuitous gain accruing to a lessor by reason of the forfeiture of a lessee's improvements on the rented property was taxed in Helvering v. Bruun, 309 U.S. 461 . Cf. Robertson v. United States, 343 U.S. 711 ; Rutkin v. United States, 343 U.S. 130 ; United States v. Kirby Lumber Co., 284 U.S. 1 . Such decisions demonstrate that we cannot but ascribe content to the catchall provision of 22 (a), "gains or profits and income derived from any source whatever." The importance of that phrase has been too frequently recognized since its first appearance in the Revenue Act of 1913 5 to say now that it adds nothing to the meaning of "gross income."
Nor can we accept respondent's contention that a narrower reading of 22 (a) is required by the Court's characterization of income in Eisner v. Macomber, 252 U.S. 189, 207 , as "the gain derived from capital, from labor, or from both combined." 6 The Court was there endeavoring to determine whether the distribution of a corporate stock dividend constituted a realized gain to the shareholder, or changed "only the form, not the essence," of [348 U.S. 426, 431] his capital investment. Id., at 210. It was held that the taxpayer had "received nothing out of the company's assets for his separate use and benefit." Id., at 211. The distribution, therefore, was held not a taxable event. In that context - distinguishing gain from capital - the definition served a useful purpose. But it was not meant to provide a touchstone to all future gross income questions. Helvering v. Bruun, supra, at 468-469; United States v. Kirby Lumber Co., supra, at 3.
Here we have instances of undeniable accessions to wealth, clearly realized, and over which the taxpayers have complete dominion. The mere fact that the payments were extracted from the wrongdoers as punishment for unlawful conduct cannot detract from their character as taxable income to the recipients. Respondents concede, as they must, that the recoveries are taxable to the extent that they compensate for damages actually incurred. It would be an anomaly that could not be justified in the absence of clear congressional intent to say that a recovery for actual damages is taxable but not the additional amount extracted as punishment for the same conduct which caused the injury. And we find no such evidence of intent to exempt these payments.
It is urged that re-enactment of 22 (a) without change since the Board of Tax Appeals held punitive damages nontaxable in Highland Farms Corp., 42 B. T. A. 1314, indicates congressional satisfaction with that holding. Re-enactment - particularly without the slightest affirmative indication that Congress ever had the Highland Farms decision before it - is an unreliable indicium at best. Helvering v. Wilshire Oil Co., 308 U.S. 90, 100 -101; Koshland v. Helvering, 298 U.S. 441, 447 . Moreover, the Commissioner promptly published his nonacquiescence in this portion of the Highland Farms holding 7 and has, [348 U.S. 426, 432] before and since, consistently maintained the position that these receipts are taxable. 8 It therefore cannot be said with certitude that Congress intended to carve an exception out of 22 (a)'s pervasive coverage. Nor does the 1954 Code's 9 legislative history, with its reiteration of the proposition that statutory gross income is "all-inclusive," 10 give support to respondent's position. The definition of gross income has been simplified, but no effect upon its present broad scope was intended. 11 Certainly punitive damages cannot reasonably be classified as gifts, cf. Commissioner v. Jacobson, 336 U.S. 28, 47 -52, nor do they come under any other exemption provision in the Code. We would do violence to the plain meaning of the statute and restrict a clear legislative attempt to [348 U.S. 426, 433] bring the taxing power to bear upon all receipts constitutionally taxable were we to say that the payments in question here are not gross income. See Helvering v. Midland Mutual Life Ins. Co., supra, at 223.
Also note that the Court's characterization of income in Eisner v. Macomber, 252 U.S. 189, 207 , as "the gain derived from capital, from labor, or from both combined." is rejected as the test for all gross income questions.
Income is not only profit; but it is an accession to wealth that is clearly realized.
It is correct to say that my labor (or even my wages, interest, dividends, etc.) is not income. We will, of course, encounter lazy language, even in court decisions, that say wages are income and such; but that is not what the statute says.
The increase of wealth that is derived from an item is income and is included in gross income except as otherwise provided in the statutes (or actually that subtitle of the statute).
As there is no provision in the statute that exempts or excludes compensation from labor from the definition of income there is indeed no difference between compensation for services or compensation for labor (or for work or for business or for time served or for production or for pounds hauled, etc.)
As to the idea that "derived from" implies only the earnings in addition to the payment for compensation (or any other item) one need only realize that interest is one of the items specifically listed as an item from which income can be derived in section 61 and attempt to apply that interpretation to the receipt of interest.
If, indeed, the law says only earnings on the item are to be included in income it is not possible that interest would be such an item as it would mean that the interest itself is not an item of income but only the earnings on that interest; but that interest is an item from which only the earnings are to be included so only the interest on that interest would be included as only the earnings on the item are income from what ever source derived so only the interest on that interest would be included in gross income and so on in an endless loop that reveals the impossibility of such a meaning of "derived from whatever source".
The statute in section 61 might be paraphrased to say that "gross income means all increases to wealth realized from whatever source derived, including (but not limited to) the following items <snip list>". From whatever source derived means that the source is not important in determining that the amount is part of gross income except to the extent that particular sources of increased wealth are otherwise provided in the law as not to be included in gross income subject to the income tax.
Please do not strain so hard to grasp this as to hurt yourself,or others, (though to most readers the language of the statute in section 61 is plain and clear)
