Continuing with Famspear

[Quixote]

Where does it say income derived from those things?

Right here: Note that the verb derived is followed by several prepositional phrases all beginning with the preposition from.

That, subject only to such exemptions and deductions as are hereinafter allowed, the net income of a taxable person shall include gains, profits, and income derived from salaries, wages, or compensa- tion for personal service of whatever kind and in whatever form paid, or from professions, vocations, businesses, trade, commerce, or sales, or dealings in property, whether real or personal, growing out of the ownership or use of or interest in real or personal property, also from interest, rent, dividends, securities, or the transaction of any lawful business carried on for gain or profit, or gains or profits and income derived from any source whatever, including the income from but not the value of property acquired by gift, bequest, devise, or descent:

[SteveSy]

Where does it say income derived from those things?

Right here: Not that the verb derived is followed by several prepositional phrases all beginning with the preposition from.

That, subject only to such exemptions and deductions as are hereinafter allowed, the net income of a taxable person shall include gains, profits, and income derived from salaries, wages, or compensa- tion for personal service of whatever kind and in whatever form paid, or from professions, vocations, businesses, trade, commerce, or sales, or dealings in property, whether real or personal, growing out of the ownership or use of or interest in real or personal property, also from interest, rent, dividends, securities, or the transaction of any lawful business carried on for gain or profit, or gains or profits and income derived from any source whatever, including the income from but not the value of property acquired by gift, bequest, devise, or descent:

Fine....it's insignificant and only confuses the issue.

See my point above.

My only argument is that just because something is listed doesn't mean the government taxed it as income. It may very well be that all those things combined yield no income whatsoever.

[Famspear]

SteveSy wrote:

Where does it say income derived from those things? As far as I see it the only time derived from is used is in relation to wages, salaries and compensation for services.

G - O - T - C - H - A, STEVIE!!

FORM 1040 FOR THE YEAR 1913!



From Form 1040 for period March 1, 1913 - December 31, 1913, and for the entire years 1914 and 1915:

DESCRIPTION OF INCOME

Page 2, line 1: "Total amount derived from salaries, wages, or compensation for personal service of whatever kind and in whatever form paid"

Page 2, line 2: "Total amount derived from professions, vocations, businesses, trade, commerce, or sales or dealings in property, whether real or personal, growing out of the ownership or use of interest in real estate or personal property, including bonds, stocks, etc. [ . . . ]"

Page 2, line 3: "Total amount derived from rents and from interest on notes, mortgages, and securities (other than reported on lines 5 and 6) [ . . . ]"

Page 2, line 4: "Total amount of gains and profits derived from partnership business, whether the same be divided and distributed or not"

Page 2, line 5: "Total amount of fixed and determinable annual gains, profits and income derived from interest upon bonds and mortgages or deeds of trust [ . . . ]"

Page 2, line 6: "Total amount of income derived from coupons, checks, or bills of exchange for or in payment of interest upon bonds issued in foreign countries [ . . . ]"

Page 2, line 7: "Total amount received from fiduciaries"

Page 2, line 8: Total amount of income derived from any source whatever, not specified or entered elsewhere on this page"

Page 2, line 9: "Totals"

AND ON THIS LITTLE QUESTION ABOUT WITHHOLDING OF TAX:
The 1913 Form 1040, page 2, specifically has columns denominated A and B for each of the above lines 1 through 9. Column A is labeled "Amount of income on which tax has been deducted and withheld at the source." Column B is for items of income on which tax was not deducted and withheld at the source.

Line 10 on page 2 aggregates all the totals in the columns A and B on line 9. Line 11aggregates certain dividend income, and line 12 is total gross income.

If there was no Federal income tax withholding for 1913, why does the 1913 Form 1040 have a column for income on which the tax was withheld, Steve?

By the way, don't ask me why they used "received" on line 7 instead of "derived." If the term "derived" applies only to the wage income for 1913, Steve, then why is the term "derived" used for the amounts on lines 2, 3, 4, 5, 6, and 8 on Form 1040 for that year?

Hint: Steve, I have blank copies of all Form 1040s going back to the first year this form was used - 1913. The original form was used for 1913, 1914, and 1915. For tax year 1916, the Form 1040 became an annually changed form.

[Famspear]

PS - Apologies to everyone here for citing to a Federal tax form. Stevie hates it when you cite primary authority, so I had to dig.

[Famspear]

Here you go, Steve:

Form 1040 for 1913

http://www.irs.gov/pub/irs-utl/1913.pdf

[jg]

To clarify because you're doing a good job confusing the issue.

Even if it is income derived from rents and interest its not the entire rent or interest that is taxed as income. It's income derived from those things. Rent itself is not income, first you must deduct the capital invested. It also lists securities, does that mean all securities were counted as income?

Indeed it is the income or net gain after allowable deductions (including the cost basis for sales) that is derived from the item or source of the income.
But that is not the same that you claim for wages or salary when you say it is only the amount of earnings on investment or use of the proceeds from the activity.

Which is it? Is income derived, in your mind, only the earnings on the saved portion as you seem to have said earlier for wages and salaries OR is it the amount of net gain after allowable deductions as you say it is for rent (and such)??

[SteveSy]

PS - Apologies to everyone here for citing to a Federal tax form. Stevie hates it when you cite primary authority, so I had to dig.

Lol, so you got me on something I wasn't even looking at...I was talking about the law.


In any case it proves nothing. The point is very simple. The implication made by this group is that wages and salaries were listed therefore they were taxed as income in whole. Securities were also listed does that mean all securities were taxed in whole as income?


What was taxed was gains profits or income "derived" or "from" those things. Those things may or may not yield an income. Seriously you're not arguing all transactions from lawful business were taxed as net income are you?

[Quixote]

What was taxed was gains profits or income "derived" or "from" those things.

Right. And what was also taxed is the gains, profits or income derived from wages. What do you not understand about that?

[SteveSy]

Which is it? Is income derived, in your mind, only the earnings on the saved portion as you seem to have said earlier for wages and salaries OR is it the amount of net gain after allowable deductions as you say it is for rent (and such)??

I don't believe wages of the average worker were considered income back in 1913. Wages could be income but under a business perspective such as an employment service.

My only argument has been that the theory that items listed in the law back in 1913 mean they were income and taxed as such is nonsense. Again, securities, rent, and any transactions done in business was also listed in the same paragrpah. The government didn't treat them in their entirety as net income.

No workers were taxed in 1913, first because the exemption was far too high, next because no wage earner had those kind of earnings back then.

[Famspear]

SteveSy wrote:

Lol, so you got me on something I wasn't even looking at...I was talking about the law.


In any case it proves nothing. The point is very simple. The implication made by this group is that wages and salaries were listed therefore they were taxed as income in whole. Securities were also listed does that mean all securities were taxed in whole as income?


What was taxed was gains profits or income "derived" or "from" those things. Those things may or may not yield an income. Seriously you're not arguing all transactions from lawful business were taxed as net income are you?

Yes, I just had to do a funny this time. And you're right - Form 1040 is not "the law".

Also, I agree with you, Steve (uh-oh, more earthquakes), I'm not arguing that all "transactions" from lawful (or unlawful) businesses were taxed as net income. I am saying that you're wrong on what the law is about the "wage" issue and gross income. Wages and salaries are included in gross income under what is now section 61, without any reduction for any "deduction" or "exemption" or "exclusion" (however we want to term it) under any "derived" theory, or for that matter under any "human capital" theory or "cost of wages theory" etc. Yeah, there are statutory exceptions for things like certain combat pay, but all that is covered in the Code. By contrast, in a sale of stock, only the excess of the amount realized over adjusted basis (and adjusted basis is usually based on historical cost) is includible in gross income. But you and I will probably never agree, and I think we've beat this to death for now.

Thanks for being a good sport about my sneaky "gotcha" -

I gotta hit the road and get home.
-regards, Famspear

[SteveSy]

What was taxed was gains profits or income "derived" or "from" those things.

Right. And what was also taxed is the gains, profits or income derived from wages. What do you not understand about that?

Ok, I agree with that. That doesn't mean all wages were treated as income.

[jg]

Which is it? Is income derived, in your mind, only the earnings on the saved portion as you seem to have said earlier for wages and salaries OR is it the amount of net gain after allowable deductions as you say it is for rent (and such)??

I don't believe wages of the average worker were considered income back in 1913. Wages could be income but under a business perspective such as an employment service.

My only argument has been that the theory that items listed in the law back in 1913 mean they were income and taxed as such is nonsense. Again, securities, rent, and any transactions done in business was also listed in the same paragrpah. The government didn't treat them in their entirety as net income.

No workers were taxed in 1913, first because the exemption was far too high, next because no wage earner had those kind of earnings back then.

I know you do not think so; but your inconsistent treatment is not a valid reason for wages not beng subject to income tax.

Your last paragraph also is not a reason wages are not subject to income tax. Just because the exemption was high or the wages were low is not a reason, were the exemption lower or the wage higher, that they would not be subject to the income tax. Quite the opposite claim can be made- that the writers of the law intentionally made the exemption high enough to exclude the wage earners; since they were fully cognizant that the income tax would be paid by those workers on their wages if the exemption were not so high.