PS: Dear Patriotdiscussions:
Perhaps if you had spent more time learning the law, you would have known better than to cite the
Merchants' Loan case.
This web site is populated by attorneys, CPAs and others who have been studying tax protester arguments for many years. We've seen it all. Tax protesters have cited that case over and over and over and over and over and over again -- and they're always wrong.
Since you don't say why you're citing the case, let me go into a little background on what 99% of all tax protesters who cite this case are doing.
Usually, tax protesters cite the case for the hilarious argument that "income" means only "corporate profit" or "corporate gain."
They can't figure out what the term "income" means in the
Merchants' Loan case, and they can't figure out what the word "income" meant in the Corporation Excise Tax Act of 1909. Further, they can't figure out the holding -- the actual ruling by the Supreme Court -- in the
Merchants' Loan case.
Hint: In the 1909 Act, the term income did not mean "corporate profit" or "corporate gain".
Again, from something I wrote in "another place":
The Court in Merchants' Loan was specifically interpreting a 1916 statute imposing income taxes on individuals and estates (among other kinds of entities), and not the 1909 corporate tax statute. The taxpayer in Merchants' Loan was not a corporation but was the "Estate of Arthur Ryerson, Deceased". The Court was not presented with (and did not decide) any issue involving the taxability of "corporate profits" or "corporate gains" or any other kind of income except the gain on the sale of the stock by the "Estate of Arthur Ryerson, Deceased". The terms "corporate profit" and "corporate gain" are not found in the text of the Court’s decision in Merchants’ Loan. In Merchants' Loan, the Supreme Court ruled that under the Sixteenth Amendment to the United States Constitution and the 1916 tax statute applicable at the time, a gain on a sale of stock by the estate of a deceased person is included in the income of that estate, and is therefore taxable to that estate for federal income tax purposes.
The Merchants' Loan argument has been litigated by tax protesters several times, and the courts have uniformly rejected the argument that income consists only of corporate profits. See, for example:
1. Cameron v. Internal Revenue Serv., 593 F. Supp. 1540, 84-2 U.S. Tax Cas. (CCH) paragr. 9845 (N.D. Ind. 1984), aff’d, 773 F.2d 126, 85-2 U.S. Tax Cas. (CCH) paragr. 9661 (7th Cir. 1985).
2. Stoewer v. Commissioner, 84 T.C.M. (CCH) 13, T.C. Memo 2002-167, CCH Dec. 54,805(M) (2002).
3. Reinhart v. United States, 2003-2 U.S. Tax Cas. (CCH) paragr. 50,658 (W.D. Tex. 2003).
4. Fink v. Commissioner, 85 T.C.M. (CCH) 976, T.C. Memo 2003-61, CCH Dec. 55,068(M) (2003).
5. Flathers v. Commissioner, 85 T.C.M. (CCH) 969, T.C. Memo 2003-60, CCH Dec. 55,067(M) (2003).
6. Schroeder v. Commissioner, 84 T.C.M. (CCH) 220, T.C. Memo 2002-211, CCH Dec. 54,851(M) (2002), aff’d, 2003-1 U.S. Tax Cas. (CCH) paragr. 50,511 (9th Cir. 2003), cert. denied, 540 U.S. 1220 (2004).
7. Sherwood v. Commissioner, T.C. Memo 2005-268, CCH Dec. 56,200(M) (2005).
8. Ho v. Commissioner, T.C. Memo 2006-41, CCH Dec. 56,447(M) (2006).
Tax protesters -- who have lost every case using Merchants' Loan for the theory that only "corporate profits" could be taxable -- are citing a case where the U.S. Supreme Court ruled that the income of a non-corporate taxpayer is taxable. Neither the United States Supreme Court nor any other federal court has ever ruled that under the Internal Revenue Code the term "income" means only the income of a corporation for federal income tax purposes.
(some formatting changed for readability; emphasis added).
"My greatest fear is that the audience will beat me to the punch line." -- David Mamet
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