Another CtCer hits the brick wall hard

[Paul]

I for one sleep better at night knowing we have a naval base on the Great Lakes. You never know when those vile Canadians might try a sneak attack.

When I was at NAS Memphis 30+ years ago going through Navy aviation technical schools, it was the home base to exactly one squadron -- a reserve antisubmarine warfare outfit.

Do you mean Quatloos wages, or statutory wages, or case-law wages?

Actually, Section 61 doesn't use the term "wages". It says compensation for services, which would include "wages" under any of the "meanings" you mention, but includes a lot more. Nothing in the IRC says or even hints that the compensation must be from an "employer" for services rendered as an "employee" under any definition of those terms.

[Nikki]

It will be interesting, when John goes on trial, to see him refute all the information he was told here and how every single one of his arguments has been rebutted here.

Since he was kind enough to use his real name, whatever he posts will make very interesting reading for the US Attorney prosecuting him.

[gezco]

It will be interesting, when John goes on trial, to see him refute all the information he was told here and how every single one of his arguments has been rebutted here.

Since he was kind enough to use his real name, whatever he posts will make very interesting reading for the US Attorney prosecuting him.

We should start a pool on when the indictment will come. I'd like March 25 2009.

[Doktor Avalanche]

It will be interesting, when John goes on trial, to see him refute all the information he was told here and how every single one of his arguments has been rebutted here.

Since he was kind enough to use his real name, whatever he posts will make very interesting reading for the US Attorney prosecuting him.

We should start a pool on when the indictment will come. I'd like March 25 2009.

Wait a second...Bulten's getting indicted? Did I miss something?

[LPC]

(At risk of ruining some reliance defense:)

Don't worry. There's no risk.

[Famspear]

Dear Mr. Bulten: You are still deluding yourself. For purposes of section 61, the law does not distinguish among the concepts of “Quatloos wages,” or “statutory wages” or “case-law wages,” whatever those terms mean to you. I don’t know specifically what you have and have not read, but I suspect you have read plenty of case law, or at least summaries of case law by people here in Quatloos, to the effect that as an individual taxpayer using the cash receipts and disbursements method of accounting, the gross amount of compensation you earn for personal services you perform, by whatever name you wish to use (Quatloos wages, statutory wages, case law wages, etc.), is includible in your section 61 gross income for the year in which you receive or constructively receive the compensation. Unfortunately, you probably will not be allowed by the judge to try to persuade the jury that the Code and the cases mean what you believe they mean.

If the prosecution is able to present to the jury the fact that you have been an active participant in Quatloos and losthorizons.com -- if the prosecution is able to present to the jury the statements about your belief that you made above -- your statements could persuade the jury that you were willful – that you did not hold an actual good faith belief based on a misunderstanding of the Code.

I want to explain why, but before I do, I want to say that the following explanation consists of my own conjecture about how the Cheek Doctrine might be applied to your case. I am not presenting this explanation as my professional, formal legal opinion of the Doctrine, and I reserve the right to take a different tack when I do make such a presentation. This explanation is really for your benefit.

My reading of the Cheek case and of the poor track record for tax protesters in criminal tax cases leads me to suspect that with respect to the "willfulness" mens rea element, there are really at least two kinds of “belief” at play.

In your case, let’s refer to your extremely strong belief about “what the tax law is” as a “Bulten Belief.” And let’s refer to the “actual good faith belief based on a misunderstanding of the Internal Revenue Code” (the belief that negates willfulness) described in Cheek as an “AGF belief.” As explained below, these two kinds of belief may or may not be the same in your case.

Now, we assume that you hold your “Bulten Belief” very, very strongly. Let’s assume that you hold your “Bulten Belief” just as strongly as you hold the belief that you happen to be located on the Planet Earth. Let’s assume that you’re not trying to “con” anyone – that you really hold your belief.

Your Bulten Belief still might not satisfy the law, and it might not satisfy the jury.

Suppose the jury renders a guilty verdict, and you appeal the subsequent judgment of conviction. On appeal, the appeals court could properly hold that, as a matter of law, your strong, strong Bulten Belief simply is not the same as an AGF belief.

What I am saying is that in the Cheek case, the terms “actual” and “good faith” when used to refer to “belief” might be an example of something called intensive redundancy (also known as emphatic redundancy). The terms “actual” and “good faith” might really mean the same thing from a LEGAL standpoint. And the “belief” required for an acquittal in Cheek, while not required to be "rational," while not required to be “objectively reasonable,” can nevertheless properly be found INSUFFICIENT by a jury, under the Cheek doctrine, if the jury concludes that you had enough actual AWARENESS of the EXISTENCE of interpretations of the law that contradicted your belief to render your belief to be NOT IN GOOD FAITH and (in that sense) NOT ACTUAL. That is a separate concept of “belief” than the “Bulten Belief” you hold so strongly.

Under this interpretation of Cheek, your very participation in the Quatloos and losthorizons web site discussions could be enough to disqualify your strong, strong Bulten Belief as an AGF belief. (The key point in Cheek is that this disqualification is made by the trier of fact. In a jury trial, the trier of fact is the jury.)

I know this is hard to understand. The law contains many instances of the use of terms in ways that are different from our every day common sense use of the terms.

Fervently and really believing that your wages are not taxable – in the sense in which I readily assume you personally “believe” – is not necessarily the kind of belief required to avoid criminal liability. Under the law, you must have a belief that is sufficient to negate a jury finding, beyond a reasonable doubt, that you were AWARE of the existence of interpretations that contradicted your own interpretations. The fact that you believed that those interpretations were consonant with your own interpretations might not be enough to bring your belief up to the level of an AGF belief. Bulten Belief might not be enough.

Look at the Cheek list again: (1) awareness of the provisions of the Code or regs; (2) awareness of court decisions REJECTING your interpretation of the law; (3) awareness of authoritative rulings of the Internal Revenue Service; or (4) awareness of contents of tax forms and instructions stating that wages should be reported as income. Again, merely believing (in the “Bulten Belief” sense) that you have “read every case law presented and haven't found one that says I have such wages” does not necessarily negate the awareness of the law sufficient for a finding of WILLFULNESS.

As a practical matter (regardless of the burden of proof on the prosecution), once the prosecution has introduced enough persuasive evidence, you yourself may end up having to try to persuade the jury that your belief was held in good faith to avoid a conviction. Merely spouting tax protester rhetoric (like for instance the statement “I am aware of many IRS rulings, all of which uphold my position as valid and as not being a published frivolous position”) might not be enough.

You do, however, have a chance. Occasionally a tax protester, just like any other defendant, wins with the jury. (Tax protesters routinely falsely cite these acquittals as cases where the court ruled that the tax protester's wacky interpretation of the law was correct.) Although a verdict of acquittal is not a "judgment" (and therefore cannot be a legal judgment that the defendant was correct in his belief about the law), at least the defendant stays out of jail. You can take your chances, and you might come out OK. --Yours, Famspear

[Famspear]

Dear Mr. Bulten: Earlier, you wrote:

-----“See, that's just it. Do you mean Quatloos wages, or statutory wages, or case-law wages? You first need to recall that I believe I don't have statutory wages or case-law wages, and that I've read every case law presented and haven't found one that says I have such wages. I believed and believe that return to be true and correct as to every material matter.”

-----“I am aware of the Code and regs, which show my earnings are not statutory wages. I am aware of many court decisions, all of which uphold my interpretation. I am aware of many IRS rulings, all of which uphold my position as valid and as not being a published frivolous position. I am aware of forms and instructions and agree with them that wages should be reported as income.”

Statements like these could be among the ones that hang you with a jury. Here, you are admitting that you have read lots of statutes and cases, and that under your own interpretation of those statutes and cases, you haven’t found one that says you have wages. You may have a very difficult time persuading a jury that you really believe what you are saying. Indeed, a jury might take those statements as strong evidence of a LACK of a good faith belief. The jury might conclude that your strong belief is equivalent to a stubborn refusal to accept the official interpretation of what the law is – in short, a disagreement with the law, rather than an actual good faith misunderstanding.

My long, repetitive explanation posted last night was written while I was half asleep. Let me summarize:

1. Your strong Bulten Belief that you are right about the law might or might not be the same as an actual good faith belief based on a misunderstanding of the Internal Revenue Code. In a jury trial, the jury will consider that factual issue in reaching a conclusion about your "willfulness."

2. Your statements here in Quatloos could be particularly damaging to your defense.

3. In a jury trial, you probably will not be allowed to try to persuade the jury that your interpretation of the law is correct. Under the U.S. legal system, the judge instructs the jury on what the law is.

Yours, Famspear

[wserra]

2. Your statements here in Quatloos could be particularly damaging to your defense.

Shhh.

That's gonna cost you your Illuminati discount card, Famspear.

[Famspear]

Dear Mr. Bulten: Earlier, you stated:

-----"[ . . . ] let's say, arguendo, that there's a reg or case that I've seen once that says, contrary to my position, "All private-sector earnings in the 50 States are wages" (which there isn't). Are you saying that, once evidence is admitted that I've once read this case, my belief is no longer in good faith [ . . . ]"

First, there are plenty of court cases where tax protesters (1) had wages, (2) worked and lived in one of the fifty states, (3) earned the wages in the private sector (not working for the government, etc., etc.), and (4) argued that the wages were not taxable. In every case, the courts have ruled that such wages are taxable. I'm pretty confident you've either read the texts of some of those cases or at least you have read someone's references to some of those cases here in Quatloos. You're whistling past the cemetery on this one, Mr. Bulten.

You can say that once you have admitted that you are aware of even one of these cases, you have provided what the law calls "some evidence" of actual awareness of what the law is -- even though you fervently believe that none of these cases say what I just said the cases say.

Now, the jury is free to treat your statements as evidence of an actual good faith belief based on misunderstanding caused by the complexity of the Code. In that case, the conclusion would be: "not guilty."

Alternatively, the jury is free to treat your statements as "some evidence" that your strong belief is really a disagreement with the law -- as awareness of the official interpretations with which you disagree -- and as evidence of a lack of a good faith belief (potential result: guilty verdict).

This issue is not a legal issue. It's a factual issue to be decided by the jury. That means that the mere fact that you are aware of one case, or ten cases, or a hundred cases does not necessarily determine that you lack a good faith belief. That fact of your awareness of just one case, etc., is merely a piece of evidence that the jury can interpret -- as the jury sees fit.

Yours, Famspear

[Prof]

Captain wrote:

Its there because the US military found that until recently, the residents of southern states, especially Georgia were nothing more than badly inbred, low-grade morons, with the trainability and intelligence of a warm brick.

Which is why the Marines have their training facilities in South Carolina and Southern California?

[Prof]

Actually, there were many Army camp's during the WWII era -- and are still a few, which serve as training bases and do not have large permanent parties. See, e.g., Camp Bullis, here in SA.

The use of the term Fort is historical -- permanent installations to guard a particular place with hostiles around.

Having served (TDY) with the USMC at Camp Lejeune during the Vietnam Era, I can tell you one thing -- it is pretty permanent.

Also, Ron White was correct. (Obscure reference used to insult USMC; Go Army.)

[Quixote]

If Bulten were to be indicted, and uses the Cheek defense, the only defense that might work, the sophistry that works so well for him on LH would backfire when used on a jury. The jury is going to notice that he carefully avoids direct answers to direct questions. When he's on the stand, the jury will note the long pauses while he creates non-responsive replies to questions. The more clever his responses become, the more obvious it will be to the jury that he doesn't believe what he's pretending to believe.

[Kimokeo]

"First, there are plenty of court cases where tax protesters (1) had wages, (2) worked and lived in one of the fifty states, (3) earned the wages in the private sector (not working for the government, etc., etc.), and (4) argued that the wages were not taxable. In every case, the courts have ruled that such wages are taxable."

Famspear, question about this statement. Do you have a SCOTUS case that meets all four points? Losing lower court battles doesn't mean you're wrong, does it?

I ask because, as much as there are those that are delusional about winning a court case and can't find one, there are some who just keep fighting a losing battle. Sometimes, it takes a while before it sinks in.


http://www.toolkit.cch.com/columns/taxe ... eletax.asp

[LPC]

"First, there are plenty of court cases where tax protesters (1) had wages, (2) worked and lived in one of the fifty states, (3) earned the wages in the private sector (not working for the government, etc., etc.), and (4) argued that the wages were not taxable. In every case, the courts have ruled that such wages are taxable."

Famspear, question about this statement. Do you have a SCOTUS case that meets all four points? Losing lower court battles doesn't mean you're wrong, does it?

Yes, losing in *every* district court and *every* circuit court making an argument that is flatly contradicted by the statute means you're wrong.

So why would the Supreme Court ever hear such a case?

The closest you might get is Cheek v. United States, 498 U.S. 192 (1991), in which the Supreme Court stated that:

It was therefore error to instruct the jury to disregard evidence of Cheek's understanding that, within the meaning of the tax laws, he was not a person required to file a return or to pay income taxes and that wages are not taxable income, as incredible as such misunderstandings of and beliefs about the law might be.

[LPC]

I should add that decisions holding that "wages are income" are not going to persuade any Crackheads, because they deny receiving "wages." They receive only "pay for work," which they think is different.

Which illustrates a real problem for tax deniers, which is that they are running out of words to use to describe themselves and what they receive. They can't receive "wages" from an "employer," because that would suck them into the tax system, so they have to develop a very careful vocabulary of words that have not yet been used in any court decision. But sooner or later they are going to run out of synonyms, and then they will start having to make up new words, or use totally unrelated words.

[Famspear]

Dear Kimokeo: Well, LPC got to this before I could. We certainly do not need a U.S. Supreme Court ruling to know that under the U.S. Constitution and under IRC section 61, wages are taxable and always have been so.

Anyway, there does appear to be a misconception among some people that something isn't "really" the "law" until and unless the United States Supreme Court rules on it (I'm not picking on Kimokeo).

A related, more expansive misconception is the idea that somehow a rule of law isn't "really" the "law" until a court -- at least some lower court -- has ruled on it. Rod Borlase, JD, who used to teach at the University of Houston Law Center, has contended that even some law students may develop this misconception. See:

http://www.rodborlase.com/Guides/WallOfTheLaw.html

Anyway, Cheek is the closest thing we have to an understanding of how the U.S. Supreme Court has viewed and will always view the "wages are not income" arguments -- although Mr. Cheek apparently had already technically abandoned his argument on that by the time his case reached the Supreme Court (at least for purposes of the Supreme Court review of that case). Again, Justice Blackmun wrote (in dissent) in the 1991 Cheek case:

-----"It seems to me that we are concerned in this case not with "the complexity of the tax laws," [ . . . ] but with the income tax law in its most elementary and basic aspect: Is a wage earner a taxpayer and are wages income?

-----"The Court acknowledges that the conclusively established standard for willfulness under the applicable statutes is the "voluntary, intentional violation of a known legal duty." [citations omitted] That being so, it is incomprehensible to me how, in this day, more than 70 years after the institution of our present federal income tax system with the passage of the Revenue Act of 1913, 38 Stat. 166, any taxpayer of competent mentality can assert as his defense to charges of statutory willfulness the proposition that the wage he receives for his labor is not income, irrespective of a cult that says otherwise and advises the gullible to resist income tax collections. One might note in passing that this particular taxpayer, after all, was a licensed pilot for one of our major commercial airlines; he presumably was a person of at least minimum intellectual competence."

Because John Cheek was "appealing" on issues other than SPECIFICALLY whether wages were taxable, the Court in Cheek arguably did not rule on that specific issue (Justice Blackmun's language notwithstanding).

The key point is that Cheek HAD argued prior to trial (and maybe at trial itself, I don't recall) that wages were not taxable. He lost. At the Supreme Court, the case was remanded for a new trial on another issue. He lost again. He went through appeals again. This time, the Supreme Court refused to even hear his case. He served prison time.

We don't need a Supreme Court holding, a statement having stare decisis effect, to know what the law is on this point: Wages, salaries, other compensation for personal services, by whatever name, are taxable. --Famspear

[Kimokeo]

"Anyway, there does appear to be a misconception among some people that something isn't "really" the "law" until and unless the United States Supreme Court rules on it (I'm not picking on Kimokeo)."


From IRS.gov added... http://www.irs.gov/irm/part4/ch10s11.html

Do we wonder why someone would keep fighting in court knowing that others have all lost:

4.10.7.2.9.8 (01-01-2006)
Importance of Court Decisions
Decisions made at various levels of the court system are considered to be interpretations of tax laws and may be used by either examiners or taxpayers to support a position.

Certain court cases lend more weight to a position than others. A case decided by the U.S. Supreme Court becomes the law of the land and takes precedence over decisions of lower courts. The Internal Revenue Service must follow Supreme Court decisions. For examiners, Supreme Court decisions have the same weight as the Code.

Decisions made by lower courts, such as Tax Court, District Courts, or Claims Court, are binding on the Service only for the particular taxpayer and the years litigated. Adverse decisions of lower courts do not require the Service to alter its position for other taxpayers.

[Famspear]

Dear Kimokeo:

Yes, regarding this language:

-----"Decisions made by lower courts, such as Tax Court, District Courts, or Claims Court, are binding on the Service only for the particular taxpayer and the years litigated. Adverse decisions of lower courts do not require the Service to alter its position for other taxpayers."

My response: First, this is from the Internal Revenue Manual.

Second, these statements are fairly problematic, in my view.

Third, regardless of whether or not Internal Revenue Service personnel (such as Revenue Agents and Revenue Officers) have actually followed this verbiage to a substantial degree in examinations of tax returns and collections actions, I don't see that government lawyers are adhering to this kind of thing in litigation with taxpayers.

For example, if you are a government lawyer in the Fifth Circuit, and the Fifth Circuit Court of Appeals has already weighed in on a particular point of law in the past, I think you are usually stuck with that Fifth Circuit ruling in dealings with ALL taxpayers in that Circuit, not just the taxpayer in the precedent case (unless you can make a good faith argument for modification of the law, etc.).

Anybody have any thoughts on this? Do any government lawyers have a habit of ignoring all Circuit Court rulings they don't like?

I do agree that if a tax protester were to read that kind of language from the IRM, he or she could very well think "hey, if the government feels it doesn't have to follow these lower courts, why should I?" --Famspear

[Famspear]

Oh, in case anyone missed the import of my subtle reference regarding the Internal Revenue Manual:

----"[ . . . ] the defendant complied with all relevant statutes and regulations. Whether or not it also complied with the rules contained in the Internal Revenue Manual has no bearing on its validity. The provisions in the Manual are not codified in the Code of Federal Regulations. Even if they were codified, the provisions would not be "mandatory." See Rosenberg v. Commissioner, 450 F. 2d 529, 532-33 (10th Cir. 1971); Luhring v. Glotzbach, 304 F. 2d 560, 564-65 (4th Cir. 1962). Like the IRS's Statement of Procedural Rules, 26 C. F. R. §601.101 et seq. (1982), also cited in the defendant's appeal brief, "[t]heir purpose is to govern the internal affairs of the Internal Revenue Service. They do not have the force and effect of law." Einhorn v. DeWitt, 618 F. 2d 347, 350 (5th Cir. 1980)."

--from United States v. Horne, 714 F.2d 206 (1st Cir. 1983).

A detailed treatment of the legal effect of the IRM is beyond the scope of this posting. --Yours, Famspear

[LPC]

I do agree that if a tax protester were to read that kind of language from the IRM, he or she could very well think "hey, if the government feels it doesn't have to follow these lower courts, why should I?"

I have often thought that the language of the IRM is overly simplistic at best, and ill-conceived at worst.

Saying that "lower court rulings are not binding" is technically correct in most cases, but silly.

It is wrong to say that a Circuit Court opinion is not "binding" when (a) the taxpayer is in that circuit and (b) the opinion is indistinguishable from the taxpayer's circumstances. Yes, you *might* be able to convince a different panel to reach a different result, but that is not really very likely.

And to say that the IRS can ignore a "reviewed" Tax Court opinion is just plain silly. (There is a difference between "Memorandum" decisions that are issued by one judge and "T.C." opinions that are circulated to all of the judges and represent the views of the entire court.) The taxpayer has a right to petition the Tax Court and, unless there is a Circuit Court opinion reversing the Tax Court, the Tax Court is going to rule the same way again so, unless the IRS is planning to appeal to a circuit court, bucking the Tax Court is a mistake.

And, in my disputes with the IRS, I have found that the IRS has never been reluctant to cite and rely on Tax Court opinions that are favorable to its position.

So the IRM is arguably wrong and often irrelevant.