Although no court will ever provide the exact words that "All money received, 'income' or not, for any activities all, is taxable" there is sufficient statement by the Supreme Court about what is and is not gross income for purposes of the income tax.
From COMMISSIONER v. GLENSHAW GLASS CO., 348 U.S. 426 (1955)
at
http://caselaw.lp.findlaw.com/scripts/g ... 8&page=426 ...
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.
For those having difficulty seeing the relevant phrases in the excerpt from the decision:
1. The sweeping scope of the controverted statute is readily apparent
2. This Court has frequently stated that this language was used by Congress to exert in this field "the full measure of its taxing power."
3. But Congress applied no limitations as to the source of taxable receipts, nor restrictive labels as to their nature.
4. 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.
5. 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."
To most readers it would be quite clear that the Court's description of the sweeping scope of the full measure of Congress' taxing power with no limitations as to the source of taxable receipts, nor restrictive labels as to their nature, (which 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) in the catchall provision is sufficent to show that there is not an iota of legal correctness in Hendrickson's Cracking the Code and the claim that only income from certain activities or privileges are included in gross income for purposes of the income tax.
For others, the fact that the income was payment extracted from the wrongdoers as punishment for unlawful conduct (that cannot detract from their character as taxable income to the recipients) would put to rest any claim that a federal privilege must exist for an item to be included as gross income subject to the income tax .
Although not quite "All money received, 'income' or not, for any activities all, is taxable" the statement that all gains except those specifically exempted are intended by Congress and recognized by the Court to be included in gross income subject to the income tax is clear and comprehensive.
Of course, clarity is not possible for the willfully blind.
“Where there is an income tax, the just man will pay more and the unjust less on the same amount of income.” — Plato
