Extremely difficult tax question ...

[Arthur Rubin]

Because Robert purchased the original asset for $50,000, Robert has a basis of $50,000. When Robert transfers the asset to John by gift, the receipt by John is non-taxable to John for Federal income tax purposes (Code section 102), and John has a carryover basis in that asset of $50,000.

John then barters that asset away in one or more transactions and, by the end of the year, ends up with an asset with a value of $85,000. The difference of $35,000 ($85,000 minus $50,000) is the total gain (or gains) John has realized. In this example, the $35,000 realized gain is also the recognized gain, since we haven't posited any additional facts that would make the gain be non-taxable.

In this case, $35,000 excess of the value of the last asset held at the end of the year over John's basis in the asset he acquired from Robert also happens to be equal to the total gain (or gains) John realized. (It is also equal to John's recognized gain.)

It's a subtlety, but gain on the last asset between the time it is acquired and the end of the year (or the time it's sold) is not taxable or recognized, and I think not realized.

Suppose some of this gain is through actual gain in value, not due to John cheating his barter participants. At the last trade of 2018 he trades an asset worth $80,000 for the last asset. If the last asset is worth $85,000 at the end of the year, because of appreciation, John is only taxed on $30,000. (The details of short-term capital gains vs. ordinary income are too complicated to go into, and require more details than either of us wants to go into.) The last $5,000 is not taxed until he sells or exchanges the asset.

[Famspear]

Because Robert purchased the original asset for $50,000, Robert has a basis of $50,000. When Robert transfers the asset to John by gift, the receipt by John is non-taxable to John for Federal income tax purposes (Code section 102), and John has a carryover basis in that asset of $50,000.

John then barters that asset away in one or more transactions and, by the end of the year, ends up with an asset with a value of $85,000. The difference of $35,000 ($85,000 minus $50,000) is the total gain (or gains) John has realized. In this example, the $35,000 realized gain is also the recognized gain, since we haven't posited any additional facts that would make the gain be non-taxable.

In this case, $35,000 excess of the value of the last asset held at the end of the year over John's basis in the asset he acquired from Robert also happens to be equal to the total gain (or gains) John realized. (It is also equal to John's recognized gain.)

It's a subtlety, but gain on the last asset between the time it is acquired and the end of the year (or the time it's sold) is not taxable or recognized, and I think not realized.

Suppose some of this gain is through actual gain in value, not due to John cheating his barter participants. At the last trade of 2018 he trades an asset worth $80,000 for the last asset. If the last asset is worth $85,000 at the end of the year, because of appreciation, John is only taxed on $30,000. (The details of short-term capital gains vs. ordinary income are too complicated to go into, and require more details than either of us wants to go into.) The last $5,000 is not taxed until he sells or exchanges the asset.

That is a different fact pattern from the one I was assuming. You're assuming that some of the increase in value occurs AFTER the last asset is acquired. In my example, my assumption is that the fair value of the last asset acquired is $85,000 at the time it is received. I didn't make my fact pattern completely clear.

[AndyK]

Say at the start of the year a man is in possession of x amount of some lawful material on US soil. During the year he makes a series of trades, bartering, though never trading any currency, and ends up with x+y amount of the material.

Now, prove whether taxes are owed, and how they are to be paid. Any proof must show a clear nexus between laws and the man and his actions.

Good luck! You'll need it!

If I can add one additional assumption to the above: The IRS is made aware of the transaction and the value of 'y' is significant enough to warrant attention.

What will happen is that, some time in the future, (well past the time the tax returns for the year in question are due to be filed) 'man' will receive a nice letter from the IRS asking him to please discuss the omission of '$y' from his tax return.

According to law and regulation, the onus now falls on 'man' to demonstrate that he does not owe tax on '$y'

The IRS (and we) need not provide

a clear nexus between laws and the man and his actions

. 'Man' needs to provide the proof.

He can do so to an IRS examiner or auditor, a Tax Court judge, or a Federal judge.

Alternatively, he can submit inane posts on the Internet while he watches his assetd being seized and sold.

[Gregg]

"Man" stole a barn full of chemicals no one knew about when his idiot best friend got arrested having carnal knowledge of some local livestock. "Man" took these chemicals, which were worth about $50,000 when BubbaJoeBillyBob put them in the barn and moved them to his trailer in his mother's basement. After reading some stuff on the internet, "Man" made a batch of really terrible Methamphetamine and sold it on an online anonymous exchange market, and now has $85,000 worth of Bitcoin, which he wishes to convert to useless fiat currency so he can buy a trailer of his own to park his Camaro on cinder blocks in front of.

The only thing is, if he has to pay taxes on the $85K, for which he can show no basis or source of, he won't have enough to have the Camaro towed out to his new Double Wide "Villa-Daddy". So, he needs you to explain to him how he can not have to pay taxes or explain to the bank where the hell he got that kind of money anyhow.

[daddy]

Nope, still no proof. You are not very good at these sort of things, are you?

But but, daddy is here to help you out:

"26 U.S. Code § 61. Gross income defined" is incomplete as it contains the undefined word "income". The term "gains" is never defined, just some reference to "section 1202 gains" which contains a circular definition to "gain". The term "compensation" for self-employed contains a reference to "net earning from self-employment" which references "gross income", hence circular.

Must have been a couple of monkeys with typewriters ...

[eric]

Let me tell you a story..... Daddy, your logic reminds me of way back when I was about fourteen years old. The undefined circular logic routine that you seem to claim as proof of your suppositions is something that got beaten out of me by my teachers. Their standard reply was that "words mean things". For the uninitiated that means commonly accepted useage at the time it was written except for special cases defined in law. Simply quoting by cut and paste would earn a fail grade with the comment that "eric does not fully understand the material". BTW, my teachers were published authors, poets and Shakespearian actors. I even had a lawyer as my geography teacher one year. Similarly they had no compunctions about handing out C grades with the comment that Farley or Kathleen is not performing up to their potential. It is left as an exercise for the student to figure out who Farley or Kathleen were. If you were Canadian you would find this easy but for you I will give you a hint - just google "N Roy Clifton" and find his students.

[fortinbras]

"income" by itself is not defined by statute, altho related terms such as "gross income" and "taxable income" are defined.

"Income" itself is not defined by statute because it is a central term in the 16th Amendment, and it is not appropriate for Congress to manipulate the meaning of a Constitutional provision by creating or choosing the meanings of the words used in the Constitution. The terms used in the Constitution are usually determined by the ordinary meaning (the dictionary meaning - English dictionaries, not law dictionaries or any other specialized dictionaries) at the time the provision was proposed.

[Famspear]

Nope, still no proof. You are not very good at these sort of things, are you?

Yes, we are good at this. You're still not getting it.

But but, daddy is here to help you out:

No, you're here to make a fool of yourself. And you're continuing to do it. You're repeating tax protester rhetoric you've found on the internet. For years, you people have been copying and pasting this crap.



Most words in most legal materials are not "defined" in those materials.

Try again.

[Famspear]

Oh, and just in case "daddy," our latest victim, is too dense to get it: Here are some examples of other very important terms from the Internal Revenue Code that are not defined in the Internal Revenue Code:

"deduction"
"Internal Revenue Service"
"tax return"
and, of course:
"tax"

While we’re at it, here are some examples of very important terms from the United States Constitution that are not defined in the United States Constitution:

"compelled in any criminal case to be a witness against himself"
"cruel and unusual punishments"
"direct tax"
"due process of law"
"an establishment of religion"
"equal protection of the laws"
"Excessive bail"
"excessive fines"
"freedom of speech"
"privileges or immunities of citizens of the United States"
"the right of the people to keep and bear Arms"
"right to vote"
"slavery"
"a speedy and public trial"
"State"
"Suits at common law"

And, here it is, once again:
"tax"

Most terms in most legal materials -- especially including many of the most important and technical terms -- are not “defined” in those materials, Einstein. You know nothing about legal materials. You know nothing about U.S. Federal taxes.

Move out of momma’s basement, kid.

[Famspear]

The little fellow started this thread with the title, "Extremely difficult tax question . . ." Yet, what he came up with was this:

Now, prove whether taxes are owed, and how they are to be paid. Any proof must show a clear nexus between laws and the man and his actions.

That's not a question.

It's not even a declaration about what he claims the law is.

And, when presented with the Scripture showing him that the ball is in his court, he has still posed no question. He has still posed no declaration about what he claims the law is.

[AnOwlCalledSage]

That's not a question.

It is however pure authentic frontier gibberish. And no sidewindin' bushwackin', hornswagglin' cracker croaker is gonna convince me otherwise.

[NYGman]

The ol' "the law is what I say it is, prove me wrong" ploy. When will they ever come here with a well reasoned, researched, and with citations, explanation of why the specific code section should not apply. At least others throw in some of what they think is case law, but usually ends up being used out of context or pulled from an irrelevant part of the case.

Daddy failed on this one. However as pointed out, it may be hard for the IRS to find out, unless you start to flaunt it. And therein lies the problem. Many who earn unreported income start to flaunt it and attract attention. That, or someone close to them turns them in for the reward after a falling out, which seems to happen a lot in these circles.

[Pottapaug1938]

Even if we DID decide to accept daddy's "challenge" -- if we can dignify it thus, and provide the demanded proof, he would simply "move the goalposts", or engage in "special pleading", and declare that our responses are not sufficient to provide what he wants.

Like so many trolls of his kind, he comes here with a carefully-worded question, hoping that our answers may be used against us in his circle-jerk of tax deniers.

[AnOwlCalledSage]

He also fails on a quite fundamental level. It doesn't actually matter if one denies the existence of laws, if law enforcement, the state and courts carry out enforcing those laws that one is in denial of.

Someone geezer had a few words on the subject:

“Ignorance of the law is no excuse in any country. If it were, the laws would lose their effect, because it can always be pretended.”

[AndyK]

Again, Daddy's (mis)understanding of the law is not relevant. Period.

What matters is the understanding of the law by various courts as published in the findings, opinions, and decisions of a multitude of cases.

First: "Show me the law" has been a consistent loser at the starting gates. It (and many similar arguments such as "income is not defined") have lost so many times that they are deemed frivolous and are subject to BIG financial penalties by the courts.

Second: We all -- more likely each of us -- have more experience dealing with tax law, tax protesters, and tax evaders than you could possibly imagine. Your word games (to paraphrase a judge) are so time-worn that they do not merit serious consideration.

[Number Six]

There is a huge chasm between the theoretical and real, you can debate forever who owes what, but realistically what people agree in transactions or are able to get away with are a lot more important. If former members "Gold and Silver eagles", "Captain Kickback" and "DMVP" were involved in heavily taxed transactions, would any of them file taxes on them?

[daddy]

The little fellow started this thread with the title, "Extremely difficult tax question . . ." Yet, what he came up with was this:

Now, prove whether taxes are owed, and how they are to be paid. Any proof must show a clear nexus between laws and the man and his actions.

That's not a question.

It's not even a declaration about what he claims the law is.

And, when presented with the Scripture showing him that the ball is in his court, he has still posed no question. He has still posed no declaration about what he claims the law is.

Famspear is like a chihuahua. It can bark and show teeth, but is not taken seriously. But don't worry, daddy's got him on a tight leash - yes he does, yes he dooooeeeess.

Famspear is of course aware of one of the definitions of "question", namely "a subject or aspect in dispute or open for discussion" - whups! Such a shame, famspear!

Oh and by the way, the question remains unproven. This really is too easy!

[eric]

Famspear is of course aware of one of the definitions of "question", namely "a subject or aspect in dispute or open for discussion" - whups! Such a shame, famspear!
Oh and by the way, the question remains unproven. This really is too easy!

Hey Daddy, or whatever name you are posting under this time since you sound very familiar, you still haven't answered my question. Who was Farley and who is Kathleen? You seem very adept at picking out various cut and paste segments from the web, so go for it.

[Famspear]

Famspear is like a chihuahua. It can bark and show teeth, but is not taken seriously. But don't worry, daddy's got him on a tight leash - yes he does, yes he dooooeeeess.

No. I am not like a Chihuahua. And, yes, you do take me seriously.

Famspear is of course aware of one of the definitions of "question", namely "a subject or aspect in dispute or open for discussion" - whups! Such a shame, famspear!

No. You haven't put anything in "dispute" yet. Such a shame, daddy-o!

Oh and by the way, the question remains unproven. This really is too easy!

No, you're not finding this to be easy. And no, "questions" don't need to be "proven."

You're afraid to pose a question.

[Arthur Rubin]

Famspear is like a chihuahua. It can bark and show teeth, but is not taken seriously. But don't worry, daddy's got him on a tight leash - yes he does, yes he dooooeeeess.

Nonsense. Chihuahuas should be taken seriously. So should Famspear, but for different reasons.