CtC Victories in Court

[LPC]

We know that for Hendrickson and the crackheads, every refund fraudulently obtained is a "victory," but I've found that Hendrickson is claiming two victories in court.

In a somewhat recent page/article/whatever, "Regarding Trolleries," Hendrickson makes the usual nonsense claims, along with some claims that are jaw-droppingly divorced from reality, such as:

THE TROLL COMMUNITY TRIES TO FRIGHTEN FOLKS AWAY from the liberating truth revealed in CtC by suggesting that CtC has been tested and found wanting in courts across the land. The reality is that no court has yet dared to actually address
what is actually revealed in CtC.

Really? Hendrickson's own losses in his civil and criminal cases don't count?

This seems to be a variation of "the court didn't refute my theories using right words so the court didn't really refute my theories" BS. No matter how adamantly a court dismisses (or ridicules) a tax denier arguement, if the court doesn't address the claim exactly the right way, the court hasn't really addressed the argument.

Anyway, Hendrickson then claims two victories in court:

1. Nathan Anderson getting an IRS summons quashed in federal district court.

2. Peter Hendrickson himself(!).

The Nathan Anderson "victory" is explained by Hendrickson here. Although Hendrickson uses a lot of words like "bogus IRS summons" and "apparent fishing expedition" and "attempting to harrass," the actual ruling clearly states that the judge was quashing the summons because the IRS had failed to give notice to the taxpayer as required by IRC section 7609. (The government claimed that notice was not required because the summons was in aid of collecting assessed taxes, but the judge held that the government had failed to show that there were taxes owing.)

So the victory was completely procedural, and has nothing to do with CtC. Does Hendrickson claim otherwise because he's an idiot, or because he's a pathological liar? I say "both."

And Hendrickson's "victory" is that the government withdrew its attempt to enforce summonses against Hendrickson back in 2004. It now appears likely that the summonses were withdrawn because the IRS had initiated a criminal referral, which resulted in Hendrickson's indictment in 2008. Big "victory."

Hendrickson also conflates the withdrawal of the summonses with attempts to "suppress" CtC, but the connection seems to be another of Hendrickson's self-serving delusions.

[notorial dissent]

Well, if Prattlin' Pete can twist the definition of "includes" sideways and in sixteen different directions from what it actually means, and procedural rejections are anything otherwise, then yes, I guess he could/would claim his resounding defeats as victories, obviously makes sense in the Lost Hope's universe, just not here where it really matters, but I like the big fat pathological lying idiot definition best, kind of poetic actually.

[Famspear]

THE TROLLS OFTEN CITE the adverse ruling in CPA Joe Fennell's case. But Joe was not arguing a CtC issue in his Tax Court case-- he was attempting to challenge an old assessment concerning a year prior to CtC being published, and for which he had ignored a notice of deficiency when it was issued long before ever hearing about CtC. Joe went into Tax Court arguing only that the ignored NOD was defective, and lost.

http://losthorizons.com/Documents/Regar ... leries.htm

That is a blatant lie. Fennell did indeed argue a CtC issue, and the Court rejected the CtC argument as being "frivolous."

Here is an excerpt from the actual text of Fennell's amended petition:

Respondent's [i.e., the Internal Revenue Service's] alleged 'assessments' of federal income tax against-petitioner are based upon respondent's deliberate inclusion into petitioner's income of pay received in exchange for petitioner's non-federally privileged private sector labor.

Non-federally-privileged private sector labor is not properly the subject of an excise under the excise laws of the United States.

These arguments are indeed Cracking the Code tax scam arguments (see below). It is this very language -- this challenge by petitioner Joseph Fennell -- that was rejected by the Tax Court. In referring to and even quoting this specific language from Fennell's petition, the Tax Court ruled that "petitioner's challenge is frivolous, and groundless." See page 2, and footnote 4 on pages 2 and 3, of the Court's Order of Dismissal and Decision in case no. 26285-07L, Fennell v. Commissioner on June 17, 2008.

Now, compare the wording in Fennell's petition to Blowhard Hendrickson's own words:

.....unprivileged, outside-of-federal-geographical-jurisdiction work cannot be taxed indirectly by the federal government.

---From p. 10, Peter E. Hendrickson, Cracking the Code: The Fascinating Truth About Taxation in America (12th Printing, Jan. 2010).

.....private-sector proceeds of work (in particular) cannot be taxed under an "income" tax.

---From p. 25, Cracking the Code.

....."income", "wages", "self-employment income", "employee", "employer" and "trade or business" – as these and certain other terms are used within, and in regard to, the tax law – have narrow legal meanings exclusively involving, and applying to, certain privileged activities, such as holding or administering a government office, or working in one.

---From introductory material, Cracking the Code.

[Famspear]

Previously, Prevaricating Pete Hendrickson has posted a commentary at losthorizons that includes the following statements about the Joe Fennell case:

On another matter, reference is made in this thread to Joe Fennell's petition to tax court, and his loss. It is important that it be understood that Joe's case involved years before even the publishing of CtC, and in regard to which he had ignored "notices of deficiency" and passed up his opportunity to contest the associated assertions of liability for years in which he had filed no returns (or "Schiff" returns-- I can't recall which, offhand). Joe subsequently argued that the NODs were defective or illegitimate, and had points to make in that regard (even if hyper-technical points), but his case can in no way be cited as an example of a litigant prosecuting a case involving CtC-educated behavior. At best it was a case of a newly CtC-educated litigant trying to recover from bad past practices by belatedly invoking new knowledge.

Yeah, but as I noted above, Fennell actually made CtC arguments in his petition, and the Tax Court actually rejected those arguments.

If the materials in Hendrickson's book constituted a correct explanation of the tax law, the theory explained in the materials would work in a court of law regardless of whether Fennell became aware of CtC before he filed the returns or after he filed the returns. In other words, if Fennell failed to report, as income, his receipts from a private-sector, non-federally privileged activity for a given year, the fact that he was unaware of Hendrickson's book when he filed the return would not preclude him from arguing and winning by using Hendrickson's theory later when he filed his Tax Court petition (that is, of course, if the Cracking the Code theory happened to be legally correct).

And even if Fennell had never heard of Hendrickson's book at the time he filed the returns, a rejection of that theory in Fennell's subsequent case by the U.S. Tax Court is, well, a rejection of the theory.

Sorry, Pete.

The law just doesn't work the way you want it to work.



A more subtle matter is the question of whether the Tax Court's rejection of Cracking the Code in the Fennell case is part of a holding by the Court, or whether the words of the Court are dicta. Where a court gives multiple reasons for a given result, each alternative reason that is explicitly labeled by the court as an independent ground for the decision is not treated as "simply a dictum." See O'Gilvie v. United States, 519 U.S. 79, 84 (1996).

Is the language of the Tax Court explicit enough in this case to be construed as constituting a label for an independent ground for the decision?

[Famspear]

Notice Blowhard Hendrickson's language:

......but his [Joseph Fennell's] case can in no way be cited as an example of a litigant prosecuting a case involving CtC-educated behavior.....

Notice the subtle distinction that Blowhard makes?

In other words, it is as though Blowhard is saying: "Even if Fennell used my theory in Court and even if the Court expressly rejected my interpretation of the law, it doesn't count as a loss for my theory, because Fennell wasn't aware of my book when he engaged in the 'behavior' -- the filing of the tax return."

Assuming that this is what Hendrickson is thinking, the question arises: What difference should it make?

Why would Fennell have to have been aware of Hendrickson's writings when Fennell filed the returns? If Hendrickson's theory is correct as applied to a given set of private-sector, non-federally privileged receipts for a given person in a given tax year, it should work as a legal theory in a subsequent court case about that very set of receipts, regardless of whether the recipient was aware of the theory at the time he filed the tax return or not.

[Famspear]

PS: The Court's rejection of Fennell's reiteration of Hendrickson's Cracking the Code arguments in Fennell's amended petition does indeed result in a ruling by the Court. In addition to quoting the very language from Fennell's amended petition and referring to the argument as being "frivolous" and "groundless," the Court stated "we find that that the petition and the amended petition in this case fail to raise any justiciable issue."

Sorry, Pete.

[Famspear]

Another oldie but goodie is the Andrew Scott case, in the U.S. Tax Court. Quoting from the decision in the case:

[. . . . ] a deficiency case in which Petitioner [Andrew Scott] asserts he is not an "employee" and did not receive "wages," as defined in the Code, although he acknowledges that he received earnings in exchange for his services in 2004.

[ . . . .]

Petitioner resided in Vermont at the time he filed the petition. Petitioner was a mortgage broker for the Manhattan Mortgage Company during 2004 and earned $61,072, from which Petitioner's employer withheld, as required by law, $8,828.55 of federal income tax. Also required by law, Petitioner's employer issued Petitioner a Form W-2 entitled "Wage and Tax Statement" reflecting that Petitioner received $61,072 of wages, tips, and other compensation during 2004. Petitioner filed a return for 2004 and reported "zero" on the line specified for "wages, salaries, tips, etc." In addition, Petitioner attached a Form 4852 entitled "Substitute for Form W-2, Wage and Tax Statement, or Form 1099-R, Distributions from Pensions, Annuities, Retirement or Profit-Sharing Plans, IRAs, Insurance Contracts, Etc." Petitioner prepared the substitute to report that Petitioner's employer paid him zero in wages while $8,828.55 was withheld for federal income tax.

[ . . . .]

Respondent [the Commissioner of Internal Revenue] issued Petitioner a statutory notice of deficiency, dated October 16, 2006, determining that Petitioner was liable for a $10,031 deficiency in federal income tax and determining that Petitioner was liable for a $2,941 accuracy-related penalty, under Section 6662, for 2004.

[ . . . .]

Petitioner informed Respondent that he [Andrew Scott] is a follower of a book entitled Cracking the Code: The Fascinating Truth about Taxation in America by Peter Eric Hendrickson, in which the author takes the position that "income " is not defined in the Code and that wages earned by non-federal employees are not subject to federal income tax. Petitioner also stated, in a letter, dated November 8, 2007, to Respondent, that his earnings are his property, not that of the State of Vermont or the Department of Treasury. He is not an employee, as defined BY LAW in the Code. Petitioner asserts that he had no taxable activity in 2004 and, therefore, has no tax consequences. [ . . . ]

Petitioner did not consult with any tax attorney in filing the return for 2004 or in checking Mr. Hendrickson's position in the book. Respondent warned Petitioner, in a letter, dated October 10, 2007, that Mr. Hendrickson's arguments have been repeatedly rejected by the courts and gave Petitioner cites to five different federal cases in which the courts rejected Mr. Hendrickson's arguments. Respondent also warned Petitioner, in the letter, that he was at risk that this Court might impose a penalty, under Section 6673, up to $25,000 if he continued to maintain such frivolous arguments. The Court also reminded Petitioner, at calendar call on June 2, 2008, and at trial, that he was at risk of the $25,000 penalty if he continued to maintain his misguided arguments.

[ . . . ]

Petitioner asserts that the only fraud in this case is the fraud the Internal Revenue Service (referred to as the IRS) has perpetrated against him for the 40-some years he has filed a return and paid taxes. Petitioner has been "enlightened" by Mr. Hendrickson's book and has filed zero returns for 2004, the year at issue; 2005 , 2006, and 2007 ( that is, the years after Petitioner read Mr. Hendrickson's book). Transcripts of his account for the tax years 2002 and 2003 (that is, the two years before the year at issue) indicate that Petitioner was aware that his wages constituted income, and he was required to file a return.

Because the 2004 return – the only return at issue in this case – was for a year before Scott read Hendrickson’s book, Peter Hendrickson might again try to argue that the Scott case is not a "CtC case." The problem with that argument, of course, would be that Mr. Scott obviously argued “Cracking the Code” IN COURT with respect to his “non-CtC” 2004 return, and the Court rejected the Cracking the Code argument. Later in the text, the Court states:

Petitioner argues that his income is not taxable because he is not an "employee" of the Manhattan Mortgage Company, nor did he earn "wages," as defined by the Code.

[ . . . ]

Courts consistently have upheld that taxpayers like Hendrickson, the author of the book, was an employee within the meaning of Section 3401(c). [ . . . ] More specifically, with respect to Petitioner's arguments gained from Mr. Hendrickson and his book, we find, as do other courts, where taxpayers like Petitioner argue that earnings are not taxable, he is not an "employee," and that he did not earn "wages," as defined in the Code [that such arguments] are all frivolous and false.

----from: Andrew D. Scott v. Commissioner, Docket No. 26392-06, United States Tax Court, Bench Op. (June 4, 2008).

The Court found Andrew Scott liable for a $10,031 deficiency in tax. The Court also sustained the IRS determination that Scott was liable for the accuracy-related penalty of $2,941 under Internal Revenue Code section 6662(a), and imposed a $20,000 penalty under Internal Revenue Code section 6673 for presenting a frivolous argument in court.

[Famspear]

Rusty Ragan is another follower of Hendrickson. He used to post at lost horizons dot com. Here is an excerpt from his Tax Court case:

......petitioner [T. Russell Ragan] alleges that his position as a network engineer is "an occupation of common right not taxable under the excise laws of the United States" and that his earnings of $76,905 do not constitute taxable wages because such earnings constitute "earnings for private-sector, non-federally-privileged work that I did for L-3 Communications during the year 2005 ."

The Tax Court's response?

In the very next sentence of the text:

Petitioner's allegations are frivolous and groundless.

--Order and Decision, Feb. 19, 2009, Ragan v. Commissioner, No. 11966-08L, U.S. Tax Court.

PS: The Court imposed a $5,000 penalty on Ragan, under section 6673, for frivolous litigation.

[AndyK]

Despite Pete's protestations, if he were to take about ten minutes to search the Tax Court's data base of opinions -- looking for the key word "Hendrickson" -- he would find at least four cases which (1) specifically referenced him and the step-by-step details of his methodology as applied by adherents including the Great Mooney and (2) all, repeat ALL, resulted in decisions for the Commissioner (some with frivolous litigation penalties) which, in detail, stated that the CtC philosophy was inherently WRONG.

However, he will never do such. His ego is too big to permit him to even ponder the possibility that he might be incorrect.

I just wonder if the various decisions against him, fines, and penalties have reduced him to the level where he has to rely on public assistance to support his family. If so, I wonder how he will be able to argue that such federally-privileged assistance is not taxable.

[LaVidaRoja]

Pete clearly believes that UNLESS the Court's decision specifically states that "The Petitioner[insert name] claim to not be subject to tax pursuant to the procedures and policies set forth in Peter Hendrickson's book "Cracking The Code" (likely need to insert copyright, etc info) is not correct for (specific reason Pete will accept) is not correct of valid and the petitioner is subject to tax." Pete wins.
And I very likely have NOT managed to phrase this in a manner that the Great Peter will accept.

[Famspear]

It would be interesting to know specifically what Blowhard Hendrickson, the Fabulous Felon, is doing to support his family financially. I wonder what his wife Doreen did when Hendrickson was in prison, too.

[AndyK]

Pete clearly believes that UNLESS the Court's decision specifically states that "The Petitioner[insert name] claim to not be subject to tax pursuant to the procedures and policies set forth in Peter Hendrickson's book "Cracking The Code" (likely need to insert copyright, etc info) is not correct for (WHATEVER specific reason THE COURT STATES, Pete will NOT accept IT SINCE THE COURT OPINION DIDN'T REFER TO THE SPECIFIC PARAGRAPH IN CtC) is not correct of valid and the petitioner is subject to tax." Pete wins.
And I very likely have NOT managed to phrase this in a manner that the Great Peter will accept.

Fixed it

[Quixote]

Many here have wondered aloud why Pete never removes a "victory" from his site once it is posted. Pete hints at the reason elsewhere in the article.

ONE OF THE PERNICIOUS FICTIONS persistently promoted by the "ignorance tax" crowd is that CtC-educated victories are the result of some kind of glitch in the tax-agency's systems-- that they have all "slipped through the cracks", and are just a series of remarkably widespread and sustained mistakes that'll get straightened-out in due course.

Pete never addresses the question as to how many such mistakes have been corrected, but leaves the reader with the impression that no CTC Worrier has ever had to repay an erroneously issued check. And that is despite his intimate familiarity with one such correction, the one involving his own $20,000 fraudulant refund.

[Famspear]

ONE OF THE PERNICIOUS FICTIONS persistently promoted by the "ignorance tax" crowd is that CtC-educated victories are the result of some kind of glitch in the tax-agency's systems-- that they have all "slipped through the cracks", and are just a series of remarkably widespread and sustained mistakes that'll get straightened-out in due course.

Hendrickson is lying. Indeed, he is very well aware that the tax refunds issued to those who have used Hendrickson's Cracking the Code (CtC) scam are indeed the result of glitches in the system at the Internal Revenue Service. He is well aware that NO ONE at the Internal Revenue Service has ever agreed with Hendrickson or any of his followers that the CtC scheme is anything other than what it actually is: a tax scam.

Hendrickson himself is a persistent, perseverant promoter of lies. He continues to claim that no court has rejected his scheme, when he is well aware that he himself is under a court order never to use his scheme on his own tax return again. He is well aware that he spent nearly two years in federal prison for using the scheme on his own tax returns. He is well aware of the court decisions (some cited in this forum) where the courts have mentioned him by name, as well as the name of his scheme.

And, at least part of the basis for his phony claim that the IRS is somehow approving of his scheme is the dollar amount of tax refund claims obtained by his followers using the scheme.

However, as has been noted several times before in the Quatloos forum, the total dollar amount of tax refunds issued to CtC scammers using the CtC method is insignificant as a percentage of total dollar amount of fraudulent tax refunds erroneously issued by the IRS each year.

We know this by comparing the dollar amount of CtC refunds that Hendrickson claims on his web site (currently, $11,105,694.95) to the total dollar amount of erroneous refunds according to the official reports of the Treasury Inspector General for Tax Administration.

The total refund amount that Pete has claimed over a period of about ten years is about $11.1 million. But let's say he hasn't updated his figure lately. Let's say it's $15 million. No, let's double it, and say that it's $30 million, since the scam got under way in around 2002 or 2003. That would average out to, say, $3 million per year.

How does $3 million in refunds per year (on average) compare to the total dollar amount of all fraudulent federal tax refunds?

One report indicates that the Internal Revenue Service paid out ONE BILLION DOLLARS in FRAUDULENT refunds for one JUST ONE YEAR:

IRS wrongly paid out $1 billion in 2007 refunds
Agency says it doesn’t have resources to deal with all fraud cases
The Associated Press
updated 4:25 p.m. ET, Thurs., Oct. 30, 2008

WASHINGTON - The government sent out more than $1 billion in fraudulent refunds last year and offered this explanation Thursday for the bad checks in the mail: The Internal Revenue Service has too few resources to pursue every tax fraud case.

IRS investigators never even looked at an estimated $742 million in fraudulent refunds, according to a report by the Treasury Department office that monitors the agency. When they did identify an additional $264 million in bad refunds, it was too late to stop them from being issued.

The report noted that the IRS must divide its limited resources among numerous areas of compliance. "However, this is a significant revenue loss to the federal government and that must be addressed," said J. Russell George, the Treasury's inspector general for tax administration.

The number of improper refunds filed appears to be growing rapidly, the report said. "The problem is becoming unmanageable, and the IRS cannot afford to continue handling it in the same manner as in the past," according to the report. It urged the tax agency to make the refund screening program — known as the Questionable Refund Program — a priority.

The IRS has estimated that the tax gap — the difference between taxes owed and taxes actually paid — at about $290 billion a year. Of that, about 57 percent comes from individuals understating incomes or overstating deductions and exemptions.

IRS spokesman Terry Lemons said the agency has made significant improvements over the past two years. "We stop the vast majority of fraudulent refunds and we prosecute people who try to cheat the system," Lemons said.

George's report recommended the IRS divert resources to go after such fraud cases. But Lemons said that could hurt other operations and mean fewer dollars from enforcement activities.

Lemons said the agency issued more than $470 billion in refunds in 2006 and 2007.

The report said the IRS fraud detection centers stopped more than $1.2 billion in fraudulent refunds in 2007, compared with $412 million in 2005, the last year the detection system fully functioned.

Because the system picks up only those refunds with higher dollar values, about 500,000 potentially fraudulent refunds did not enter the centers' screening process. Had those refunds been included, the centers would have identified an additional $742 million in fraud, the report estimated.

In 2006, because of a technical problem in the fraud detection system, the IRS succeeded in identifying and stopping only $189 million in fraudulent refunds while paying out an estimated $894 million, the report said....

(large font added by me, for emphasis).

Hendrickson has spent two terms in federal prison for tax crimes, and he has gotten what he deserved.

[notorial dissent]

Pete never addresses the question as to how many such mistakes have been corrected, but leaves the reader with the impression that no CTC Worrier has ever had to repay an erroneously issued check.

Prattlin' Pete is a pompous perpetually pandering posterior, as well as being a plenitudinous prevaricator. Since most, if in fact not all by this point, of the chuckleheads at Lost Hopes who have used his "for sure" method, have now gotten slapped with recall notices on the overpayments, and are also in deep trouble with the IRS as well, or are further in trouble and in tax court for that and similar issues, some to the point of going to jail. Pete the prevaricator as prime example. Basically, it sucks to be Pete, or any of his pretentious partisans.

[Quixote]

Why LostHeads will always lose in court:

I am currently in a tax case writing my legal brief.

CtC p. 72 states:

"The doctrine is simple and standard in statutory construction: when an element of a statute has once been promulgated, it remains the law, whether spelled out in a future version or not, unless explicitly repealed."

I need a citation to support this; it is a weakness in the argument as the judge could say the definition of compensation in the Classification Act of 1923 expired when repealed by the 1949 Act, and reverted to the ordinary meaning.

Never mind that the argument is at its base batshit crazy. It's those little details that will kill your case.

[Famspear]

Now "freeme" has created a new thread, complaining to Blowhard Hendrickson about Nationwide's posts:

I don't believe the purpose of this forum includes the origination of ad hominem responses, sarcastic insults, or unfounded accusations.

But Nationwide has recently posted the following about me:

"I of course encounter folks like our "freeme" here quite frequently. So like it or not I've come to know them & their agenda fairly well..."

"...did I call you Jay, as in Jay ADKISSON?"

"Your approach is subtle yet sophisticated and unrelenting. I don't doubt you have much experience with freedom-oriented forums. This seems to be a speciality of yours - posing as a freedom-fighter yet actually supporting something entirely different. I'm sorry you're not gaining a following here."

"...my opponent here posing as fake patriot "freeme"..."

After Nationwide's first negative post regarding me I posted the following in response to him:

Thu Feb 21, 2013 8:31 pm "Please do not bother to post responses to my posts unless you wish to adopt a more agreeable attitude."

Since he persisted as evidenced above, I decided to respond to his insults with absurd insults of my own, but that seems to have encouraged him to continue, and serves to muddy the forum with content that distracts from its purpose.

I have also observed that Nationwide has seemed to introduce additives from other sources into your workable methods -- one bit of evidence for this is contained in Nationwide's post of Sat Feb 23, 2013 11:52 am which includes an image containing "ARE YOU LOST AT C" appearing alongside CtC:

http://img29.imageshack.us/img29/4776/my109912.jpg

I will not respond any further to Nationwide's posts except to refer to this post.

I am open to any further suggestion or comment you might have...

http://www.losthorizons.com/phpBB/viewt ... 132#p29132

Maybe Preposterous Pete will send Doreen (Momma Hendrickson) to give these kids a stern, severe scolding. I can just hear it now.....

You kids need to learn to play together! Nationwide! Stop teasing freeme! And freeme, nobody likes a tattletale!

And leave your father -- I mean -- leave Pete alone! He has enough worries right now!

Don't make me have to come in there!

[Gregg]

Correct me if I'm wrong, but I find it ironic that the many faces of Harvester is making such a thing about who everyone else is. If all of his usernames were banned, LH would lose half of it's active posters....