Needless to say, none of the cases cited have any statement in them that is anything like what is claimed (and what is claimed is pretty incomprehensible). All of the cited cases deal with the problem of determining the amount of gain realized when property is exchanged for property and there is uncertainty about the value of the property RECEIVED.legaltender wrote:Section 1012:
The basis of property shall be the cost of such property... .
The cost of property purchased under contract is its fair market value as evidenced by the contract itself. Willow Terrace Development Co. v. C.I.R., 345 F.2d 933 (5th Cir. 1965); Bankers Trust Co. v. U.S., 518 F.2d 1210 (Fed. Cir. 1975); Bar L. Ranch, Inc. v. Phinney, 426 F.2d 995 (5th Cir. 1970); Jack Daniel Distillery v. U.S., 379 F.2d 569 (U.S. Court of Claims 1967); In re Williams' Estate, 256 F.2d 217 (9th Cir. 1958).
The Willow Terrace decision might stand for the proposition that the value of the property received is the value that the parties themselves assigned to the property in the contract, but the other cases don't even have that much in common, but just seem like decisions on the issue of the fair market value of the property received.
So "legaltender" has come up with a new way to confuse value and basis.
However, "legaltender" at least recognizes that the courts have ruled against this issue, quoting and discussing both the Rowlee and Reading Tax Court decisions.
And why is the court's conclusion an absurdity? I don't know, and legaltender doesn't say.legaltender wrote:Rowlee v. Commissioner, 80 T.C. 1111, 1120 (1983), cites the following case:
The Rowlee Court has taken Section 1012: “The basis of property shall be the cost of such property...”, and asserted that since a person did not pay cash for his own labor, there is no cost for it, without consideration of the cost of time and labor spent which are both property, and therefore the basis is zero. The Court has stretched the basis concept to absurdity, and only proves that you actually can fit a square peg into a round hole, given a good enough hammer.Nevertheless, accepting the conclusion that some kind of “gain” must be realized for there to be income [this is a rare statement for any court], the flaw in petitioners' analogy of what they call the “cost of doing labor” to the “cost of goods sold” concept—essentially its failure to acknowledge the difference between people and property—may be shown. The “cost of goods sold” concept embraces expenditures necessary to acquire, construct or extract a physical product which is to be sold; the seller can have no gain until he recovers the economic investment that he has made directly in the actual item sold. Labor, on the other hand, is in the current context, behavior performed by human beings in exchange for compensation *** [Reading v. Commissioner, 70 T.C. 730, 733 (1978), affd. 614 F.2d 159 (8th Cir. 1980)]
Actually, Congress did. Section 61(a), which defines "gross income," refers to both "compensation for services" in (a)(1) and "gains derived from dealings in property" in (a)(3). The plain meaning of the statute is that the full amount of compensation for services is included in gross income, while only the *gain* (value received in excess of cost basis) from dealings in property is included in gross income.legaltender wrote:If Congress wanted to distinguish between labor and other forms of property it could have done so, as it did in numerous other cases such as stocks and bonds in Sec. 1016; Congress did not.
It doesn't get much plainer than that.
Yes, it does. And even if it didn't have a "foundation in law" before the court said it, it had a foundation in law *after* the court said it, because the court's statement became the foundation for future decisions. (Tax nuts are perfectly willing to take quotations from court decisions that they think support what they say without ever questioning whether the statement has any "foundation in law," but will immediately question any statement that they don't like.)legaltender wrote:The Reading Court, supra, at 734 stated: “But the sale of one's labor is not the same creature as the sale of property... .” This statement does not appear to have a foundation in law.
Legaltender apparently doesn't understand the meaning of "affd," because the Reading opinion that he is citing and discussing was affirmed in a published per curiam opinion by the 8th Circuit Court of Appeals:legaltender wrote:The fact that there is no Article III court to be found that has commented on the zero-basis of labor rule might indicate how lame the argument is, and discussion of it to be avoided.
Once again, it doesn't get much clearer than that.8th Circuit wrote:William H. READING and Beverly S. Reading, Petitioners-Appellants,
v.
COMMISSIONER OF INTERNAL REVENUE, Respondent-Appellee.
No. 79-1466.
United States Court of Appeals, Eighth Circuit.
Submitted January 10, 1980.
Decided January 21, 1980.
Rehearing Denied February 11, 1980.
William H. Reading, III, pro se.
M. Carr Ferguson, Asst. Atty. Gen., Gilbert E. Andrews, Wynette J. Hewett, and Stanley S. Shaw, Jr., Attys., Tax Div., Dept. of Justice, Washington, D.C., for respondent-appellee.
Before HEANEY, ROSS and HENLEY, Circuit Judges.
PER CURIAM.
Taxpayers brought suit in the United States Tax Court contesting a deficiency assessment of $2,486.45 by the Commissioner for their 1975 federal income taxes. The deficiency assessment was based on (1) disallowing itemized deductions for housing, food, schooling, and medical expenses (not otherwise deductible under 26 U.S.C. § 213) because those expenses were nondeductible personal living or family expenses under 26 U.S.C. § 262, and (2) a determination that taxpayers owed self-employment taxes on reported self-employment income.
Before the Tax Court taxpayers conceded the disallowed deductions were for living or family expenses but they contended that by disallowing deductions for those expenses Congress exceeded its authority to lay and collect income taxes under the sixteenth amendment, and that income means the gain or income received less the expense of living. The Tax Court rejected taxpayers' claims but redetermined the deficiency to be $2,468.29, and on January 25, 1979, the court entered its decision for the Commissioner. On appeal taxpayers claim they had no income, for income tax purposes, and on appeal they challenge the constitutionality of the tax laws and Tax Court.
The standard of review on appeal from the Tax Court is whether the Tax Court's factual findings are clearly erroneous (see, e. g., Commissioner v. Duberstein, 363 U.S. 278, 291, 80 S.Ct. 1190, 4 L.Ed.2d 1218 (1960); Smith v. Commissioner, 608 F.2d 321, at 322 (8th Cir. 1979)), and "findings of fact are not clearly erroneous unless the reviewing court on the entire evidence is left with the definite and firm conviction that a mistake has been committed." Smith v. Commissioner, supra, 608 F.2d 321, at 323, citing United States v. United States Gypsum Co., 333 U.S. 364, 394-95, 68 S.Ct. 525, 92 L.Ed. 746, rehearing denied, 333 U.S. 869, 68 S.Ct. 788, 92 L.Ed. 1147 (1948). The findings of the Tax Court that all except $78[1] of the claimed deductions were not expressly deductible under the 1954 Internal Revenue Code and were thus nondeductible under 26 U.S.C. § 262, and that taxpayers owed self-employment income tax on their self-employment income was correct. We have repeatedly rejected attacks on the constitutionality of the income tax laws; taxpayers claims of unconstitutionality are without merit, and thus we adopt the well reasoned decision of the Tax Court filed August 21, 1978.
It is so ordered.
[1] $78 for state gasoline tax was not otherwise claimed as a deduction and was held by the Tax Court to be deductible as a tax expense under 26 U.S.C. § 164.
