All Caps Nonsense

[John J. Bulten]

Correction regarding Bulten. His tax return showed withholdings on around $10,000 in income, which he DID NOT show on that tax return.

Nice try, but the IRS has ruled administratively and undisputedly that the withholding was not tax and the payments were not income: so you may not contravene that holding without further administrative or judicial process.

Try this one (which I trust is on point because you would all consider it appropriate to this thread's "all caps nonsense" category). 1) In 1913, work-for-pay did not derive income in itself (this can be disproven by showing any case from 1913 where work-for-pay was authoritatively held to derive income in itself). 2) The essential law has not changed since then: the alleged category of gross income has always been "income derived from compensation" (this can be disproven by showing any statutory change in the meaning of "income derived from compensation"). Therefore 3) WORK-FOR-PAY STILL DERIVES NO INCOME IN ITSELF.

Would anyone like to find one of those two counterexamples? Or will you try to unmake the facts and law with more bluster?

Ah, bedlamites.

[Famspear]

Yawwnn... Oh hello Mr. Bulten. Uh, let's see. You wrote:

----"Nice try, but the IRS has ruled administratively and undisputedly that the withholding was not tax and the payments were not income [ . . . "

Nice bluster, nice try, but no, the IRS has NOT ruled that "the withholding was not tax and the payments were not income."

Now, about this verbiage:

-----"In 1913, work-for-pay did not derive income in itself [ . . . "

Sorry, that's more legally meaningless tax protester rhetoric. The phrase "pay does not derive income," -- like the phrase "pay does derive income" -- is pretty much meaningless. In 1913, as in 2007, gross income includes all income from whatever source derived. The gross amount of you receive or constructively receive as compensation for services you perform is includible in your gross income for the year received or constructively received.

Now, this verbiage:

-----""WORK-FOR-PAY STILL DERIVES NO INCOME IN ITSELF"

Again, that verbiage is legally meaningless.

Here's the law:

-----"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, including fees, commissions, fringe benefits, and similar items [ . . . ]"

--from 26 USC 61(a).

There's nothing there about anything "deriving" anything else.

--Famspear

[Joey Smith]

The courts have consistently ruled that working for pay results in < gasp > income that is taxable. NO court would intimate otherwise; this is a dead-end argument for TPs.

Many TPs have tried many, many challenges to the definition of what constitutes "income", such as Irwin Schiff's long contention that he had no "income in the Constitutional sense". All such challenges have consistently lost.

[Cpt Banjo]

Try this one (which I trust is on point because you would all consider it appropriate to this thread's "all caps nonsense" category). 1) In 1913, work-for-pay did not derive income in itself (this can be disproven by showing any case from 1913 where work-for-pay was authoritatively held to derive income in itself). 2) The essential law has not changed since then: the alleged category of gross income has always been "income derived from compensation" (this can be disproven by showing any statutory change in the meaning of "income derived from compensation"). Therefore 3) WORK-FOR-PAY STILL DERIVES NO INCOME IN ITSELF.

One wonders why the 1913 act provided for tax withholding at the source with respect to wages if they weren't taxable.

[John J. Bulten]

No, the IRS has NOT ruled that "the withholding was not tax and the payments were not income."

These are the authoritative conclusions of a closed official administrative proceeding. What should I call them for short, if not a ruling?

The gross amount of you receive or constructively receive as compensation for services you perform is includible in your gross income for the year received or constructively received.

The remainder of your post claims my language is meaningless by responding with other language which I find meaningless. Do you mean that compensation is gross income? Or does the law mean (as I believe) that "income derived from compensation" is gross income?

In 1913, pay for work was not income in itself. To rephrase, my first request is for you to show any case from the 1910s where pay for work was authoritatively held to be income in itself.

(Banjo alludes to the law as using the word "wages"; but as I said I'm looking for early cases where that law demonstrably meant pay for work in itself. Joey alludes to a number of later cases which show that pay for work is income when some nexus like SS is attached; but as I said I'm looking for discussions of pay for work in itself, and I've already posted numerous cases on its nontaxability.)

Here's the law:

-----"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, including fees, commissions, fringe benefits, and similar items [ . . . ]"

--from 26 USC 61(a).

There's nothing there about anything "deriving" anything else.

Sources derive income: verbum sap. Now, my second request is for you to show any statutory change in the meaning of "income derived from compensation". Does the code no longer say the tax is imposed on income derived from compensation, as the statute did more clearly in 1913?

Either there was some laborer in the 1910s who made more than the exemption and paid the tax, or there wasn't. Either the meaning of the statute was changed by amendment, or it wasn't. These are two very simple concepts to understand and seek evidence for. But in both cases my thorough search has turned up no evidence. And until such counterexample appears, the conclusion remains unshakable that pay for work, in itself, is not income in 2007. The attempt to brush this conclusion away with evidence other than one of these two counterexamples is an attempt to admit and excuse an unenacted illegality.

[Nikki]

Why does it have to be a case from the early 1900's?

Wouldn't it make more sense to cite more current cases as indicative of the courts' views today?

[John J. Bulten]

Nikki, because for you to be right, if there is no evidence of tax on pay for work in itself in the 1910s, the law must have changed since then (for which there is no evidence). Or if the law has not changed, its application must have been evidenced at that time (ditto).

Maybe you can point me to the first Board of Tax Appeals case you can find which had to do with pay for work in itself. Courts' views today cannot change the law from what it was to what it wasn't. Nor did the changes in the law from 1935-1944 change the base category "income derived from compensation".

[grammarian44]

Nikki, because for you to be right, if there is no evidence of tax on pay for work in itself in the 1910s, the law must have changed since then (for which there is no evidence). Or if the law has not changed, its application must have been evidenced at that time (ditto).

Maybe you can point me to the first Board of Tax Appeals case you can find which had to do with pay for work in itself. Courts' views today cannot change the law from what it was to what it wasn't. Nor did the changes in the law from 1935-1944 change the base category "income derived from compensation".

Why the focus on the BTA? What would make you think that the BTA would be the only place to look for answers to your questions?

[Famspear]

Dear Mr. Bulten: You wrote:

-----"These are the authoritative conclusions of a closed official administrative proceeding."

No, they are not.

It would be correct to say that such and such an INDIVIDUAL "derived" income from salaries, wages, or compensation for personal service of whatever kind and in whatever form paid. It would not be correct to say:

-----"[. . . ] in 1913, work-for-pay did not derive income in itself"

That's a somewhat meaningless formulation.

To "derive" in this means "to get or receive (from a source)." Webster's New World Dictionary of the American Language, p.380 (2d Coll. Ed. 1978) (parenthetical phrase in the original). In this sense, income is "derived" in the sense that the income is "received."

Pay" cannot "derive" income -- that is, pay cannot "receive" income.

In 1913, the total amount derived BY A U.S. INDIVIDUAL from salaries, wages, or compensation for personal service of whatever kind and in whatever form paid was includible in the gross income of that individual for Federal income tax purposes. There was not then, and there is not now, any limitation in that rule about it being income earned by Federal government employees or whatever other tax protester gibberish you want to come up with.

Look, Mr. Bulten, all you have to do is find a court decision where a taxpayer made the argument you are making and THE COURT RULED THAT THE TAXPAYER WAS CORRECT. An impossible task? Yes.

You lose.--Famspear

[Quixote]

Famspear wrote:

No, the IRS has NOT ruled that "the withholding was not tax and the payments were not income."

These are the authoritative conclusions of a closed official administrative proceeding. What should I call them for short, if not a ruling?

What proceeding are you talking about? As usual, you are hiding behind the vagueness of your statements. If you're talking about the processing of your bogus return, there is no reason to believe that anyone arrived at any conclusions concerning the accuracy of your return. In fact, assuming the return was processed as filed, that alone supports the conclusion that no one gave your return any thought whatsoever.

[Famspear]

Dear Mr. Bulten:

By the way, the Federal income tax laws have been imposed on compensation for personal services pretty much continuously since 1913 as far as I know, and of course there were intermittent time periods prior to that as well.

If the law on taxatin of compensation for personal services (in the form of wages or whatever) really were as you argue it is, why can't YOU find a court case from the old days where some taxpayer said, "Hey, this isn't right?" Why is it that tax protester cases didn't start showing up in any appreciable numbers until the 1970s, about SIXTY YEARS after the first Form 1040 was promulgated (for the year 1913)???

Yes, there was Vivien Kellums in the late 1940s, and yes there was Mr. Porth from the early 1950s. But those were isolated instances. And Ms. Kellums, to the best of my knowledge, wasn't really arguing that the wages weren't taxable. She was just arguing that she, as an employer, shouldn't have to be burdened with withholding those taxes. (I could be wrong about her positions; I'm going from memory). And Mr. Porth as I recall argued (unsuccessfully) that the Sixteenth Amendment should itself be declared unconstitutional, under his theory that the income taxes under the Internal Revenue Code of 1939 imposed "involuntary servitude" under the 13th Amendment.

So, how come essentially nobody noticed for 60 or 70 years that the Federal income tax was being "applied incorrectly" (or, again, whatever words you want to use) to tax wages, etc.????? --Famspear

[Demosthenes]

Yes, there was Vivien Kellums in the late 1940s, and yes there was Mr. Porth from the early 1950s. But those were isolated instances. And Ms. Kellums, to the best of my knowledge, wasn't really arguing that the wages weren't taxable. She was just arguing that she, as an employer, shouldn't have to be burdened with withholding those taxes. (I could be wrong about her positions; I'm going from memory).

Your memory is accurate. She was also stinking mad at the government because they had read her personal love letters into the Congressional record. She made her millions as a US defense contractor during WWII while secretly having an affair with a Nazi officer.

[Quixote]

Nikki, because for you to be right, if there is no evidence of tax on pay for work in itself in the 1910s, the law must have changed since then (for which there is no evidence). Or if the law has not changed, its application must have been evidenced at that time (ditto).

But evidence of tax on pay for work is irrelevant to the real issue, which is if income derived from pay for work was taxed. The 1913 act taxed it expressly. No other evidence is necessary.

[Demosthenes]

She should count her blessings they did not try her for treason. She would have found the penalty far more onerous.

Nothing she said or did rose to that level.

[grixit]

[She made her millions as a US defense contractor during WWII while secretly having an affair with a Nazi officer.

That's the American Way!

[John J. Bulten]

"All you have to do is find a court decision where a taxpayer made the argument you are making and THE COURT RULED THAT THE TAXPAYER WAS CORRECT. An impossible task? Yes. You lose." To my knowledge taxpayers have made this argument in exactly 3 cases, and each time the court ruled that some other argument was incorrect (there may be more such cases). Now ordinarily, when a tax position in itself has not been ruled on by any court, this is not proof of some LPC claim like "You lose", but accepted as an untested challenge to be ruled on in due time.

"The Federal income tax laws have been imposed on compensation for personal services pretty much continuously since 1913." No, they were imposed on income (profit) derived from compensation.

"Why can't YOU find a court case from the old days where some taxpayer said, 'Hey, this isn't right?'" Until 1935, there was no taxation of pay for labor to object to! The first objection was the 1937 Davis cases, but the USSC permitted the tax: because it only applied (rightly or not) to pay which the worker elected voluntarily as covered SSA "wages". In 1943, federal withholding was applied to another similar definition of "wages" and was touted as a voluntary patriotic duty by Donald Duck, and no one dared take this tax to the same USSC during its short-lived wartime appearance. By the Baby Boom, most everyone was paying tax on pay for labor because they had become convinced it was "wages" under both of those laws. The "wages are not income" argument dates back to this period (what arguers really meant was "earnings are not necessarily income"), but the courts rightly held it's frivolous as stated; if you admit it's statutory "wages", it's income. But nobody stopped to develop the point that the definition of "income derived from compensation" had never changed, and by the time they did, the machinery was in place to retain the confusion.

So, either the definition DID change, or pay for work was NOT taxable afterward any more so than it was before. When the two "wage" taxes were enacted, they could only create surtaxes on statutory "wages" which (being "income") should already have been subject to the normal tax. It was impossible for the "wage" taxes to truly create the new class of taxpayer-laborers without changing the scope of "income derived from compensation".

"So, how come essentially nobody noticed for 60 or 70 years that the Federal income tax was being 'applied incorrectly'?" Because, as Jefferson said to Kercheval, we had to work for 16 hours, turn over the pay of 15 of those to the government (recall the 90% tax cap?), and in the 16th have no time to call the mismanagers to account.

Here's the key questions again, which you haven't answered. (You continued to harp on my wording, perhaps you didn't notice I changed it.) My first request is for you to show any case from the 1910s where pay for work was authoritatively held to be income in itself. (BTA is just one potential source for such proof.) My second request is for you to show any statutory change in the meaning of "income derived from compensation".

"In 1913, the total amount derived BY A U.S. INDIVIDUAL from salaries, wages, or compensation for personal service of whatever kind and in whatever form paid was includible in the gross income of that individual for Federal income tax purposes." Do you mean that compensation is gross income? Or does the law mean (as I believe) that "income derived from compensation" is gross income?

[grammarian44]

"The Federal income tax laws have been imposed on compensation for personal services pretty much continuously since 1913." No, they were imposed on income (profit) derived from compensation.

What is the citation for the court case that drew this distinction between income from personal services and profit derived from compensation?

[Cpt Banjo]

Now ordinarily, when a tax position in itself has not been ruled on by any court, this is not proof of some LPC claim like "You lose", but accepted as an untested challenge to be ruled on in due time.

Really? So if I come up with an inane theory that has never been ruled on then it's still an open issue? How about the argument that all persons with my exact name that were born at exactly the same time and in exactly the same place as I are exempt from the income tax. Is that merely an "untested challenge" or is it, like all of Bulten's irrationalities, pure crackpottery?

Do you mean that compensation is gross income? Or does the law mean (as I believe) that "income derived from compensation" is gross income?

So if gross income includes "income derived from dividends, rents, and interest" the dividends, rents, and interest themselves aren't taxable? Heck of a deal, sports fans.

[grammarian44]

My first request is for you to show any case from the 1910s where pay for work was authoritatively held to be income in itself. (BTA is just one potential source for such proof.)

Um, John, the reason I zeroed in on your BTA requirement is that the BTA did not exist in the 1910s. Duh.

[Famspear]

Dear Mr. Bulten: No, sorry.

Until 1935, there was "no taxation of pay for labor to object to"???? Patently false.

"Pay for labor" was taxed as income under the 1913 Act, etc., etc.

Rather than spouting your own nonsensical theories, why not just quote a statute or a court decision? Oh, sorry, I did it again. There are no such statutes or court decisions that support your argument.

For any U.S. citizen or resident (and that "includes" residents of the fifty states, John!), the gross amount of compensation for personal services is includible in gross income. Any exclusion or exception to that rule must be found in statute or case law.

Clue: As far as the old days (let's say, pre-1970s) are concerned, the reason there are no reported cases is that virtually NOBODY LITIGATED your silly nonsense theories. That just might be because nobody concocted these silly theories until about 60 years after the taxes were imposed. The fact that you have found no cases is still further indication that you arguments are nonsense.

--Famspear