Challenge to Ducky

[LPC]

My intent earlier was not to play a game, or invoke a response as I got. I was just trying to avoid using words which have narrow legal meanings.

Your belief that there are words with "narrow legal meanings" is one of your problems.

For example, the word "wages" is defined in the Internal Revenue Code, but it has a fairly broad meaning and not a narrow one, and encompasses 99% of the regular, ordinary, every-day, meaning of the word "wages," and more.

The belief that the words used in the Internal Revenue Code have "narrow legal meanings" is essentially tautological, because once you make that assumption (contrary to numerous court decisions that rely on the plain, ordinary meanings of words) you can pretty much twist words to mean anything you want.

The irony here is that the IRC is using words in their natural sense while tax deniers like Hendrickson are using unnatural meanings while claiming that the IRC is deceptive. The idea that the IRC might mean what it says is rejected out of hand.

Sorry Dan, the reason I picked you was that you are an attorney at law, and have, verifiably, a lot of experience in tax law and specifically income tax law.

I actually have relatively little experience in income tax law. My real expertise is in estate and gift tax law.

The reason I asked you to endorse my particular wording was because of the fact that if you had, I would feel as though CTC is bunk.

CtC is bunk.

But you're only going to believe me if I "endorse" your choice of magic words? How typical of a tax denier.

How about the opinion of the judge who decided Hendrickson's own case?

From the amended order:

3. During 2002 and 2003, Defendant Peter Hendrickson was employed by Personnel Management, Inc., and earned wages of $58,965 and $60,608, respectively, during those years.

2002 tax year

4. As required by law, Defendant Peter Hendrickson’s employer withheld federal income taxes ($5,642.20), social security taxes ($3,655.83) and Medicare taxes ($854.93) from his wages in 2002 and paid over those amounts to the IRS. Also, as required by law, Mr. Hendrickson’s employer issued him a Form W-2 Wage and Tax Statement that correctly reported his wages and those withholdings.

5. Defendant Doreen Hendrickson received $3,773.00 in non-employee compensation from Una E. Dworkin in 2002. As required by law, Dworkin provided her with a Form 1099 that correctly reported this non-employee compensation.

6. Defendants’ 2002 Form 1040 tax return, which was filed with the IRS in August of 2003, falsely reported “zero” wages on line 7. An IRS Form 4852 attached to the return falsely reported that Defendant Peter Hendrickson received no wages during 2002. The Form 4852 did report that federal income taxes ($5,642.20), social security ($3,655.83) and Medicare taxes ($854.93) totaling $10,152.96 had been withheld from his wages during 2002.

7. Defendant Peter Hendrickson also claimed on his Form 4852 that he had asked his employer to “issue forms correctly listing payments of ‘wages as defined in [sections] 3401(a) and 3121(a),’ but that his company had refused for 'fear of IRS retaliation.'”

8. Defendants requested, on line 70 of their joint 2002 tax return, a refund of the $10,152.96 in federal income, social security, and Medicare taxes that had been withheld from Defendant Peter Hendrickson’s wages during 2002.

9. Because Defendants reported that they had no income, the IRS, unaware that Defendants’ report was false, treated the withheld federal taxes as a tax overpayments and applied them on April 15, 2003 to (1) Defendant Doreen Hendrickson’s unpaid 2000 tax liability ($1,699.86); and (2) the outstanding tax balances owed by Defendant Peter Hendrickson for 2001 ($6,521.11) and 2000 ($1,931.99).

10. The refunds or credits described above were erroneous within the meaning of IRC § 7405(b). Defendants were not entitled to refunds of federal income taxes for 2002 because their federal income tax liability for that year – $6,327.00 – exceeded the amount of the federal income taxes withheld from Defendant Peter Hendrickson’s wages by his employer ($5,642.20), which constituted the only tax payments made by Defendants in 2002. Furthermore, Defendants were not entitled to a refund, under any circumstances, of the social security and Medicare taxes that had been withheld from Defendant Peter Hendrickson’s wages during 2002.

2003 tax year

11. As required by law, Defendant Peter Hendrickson’s employer withheld federal income taxes ($5,620.02), social security taxes ($3,757.60) and Medicare taxes ($878.72) from his wages in 2003 and paid over those amounts to the IRS. Also, as required by law, Mr. Hendrickson’s employer issued him a Form W-2 Wage and Tax Statement that correctly reported his wages and those withholdings.

12. Defendant Doreen Hendrickson received $3,188.00 in non-employee compensation from Una E. Dworkin in 2003. As required by law, Dworkin provided her with a Form 1099 that correctly reported this non-employee compensation.

13. Defendants’ 2003 Form 1040 tax return falsely reported “zero” wages on line 7. An IRS Form 4852 attached to the return reported that Defendant Peter Hendrickson received no wages during 2003. The Form 4852 did report that federal income taxes ($5,620.02), social security ($3,757.60) and Medicare taxes ($878.72) totaling $10,256.34 had been withheld from his wages during 2003.

14. Defendant Peter Hendrickson also claimed on his Form 4852 that he had asked his employer to “issue forms correctly listing payments of ‘wages as defined in [sections] 3401(a) and 3121(a),’ but that his company had refused for 'fear of IRS retaliation.'”

15. Defendants requested, on their joint 2003 tax return, a refund of the $10,228.00 in federal income, social security, and Medicare taxes that had been withheld from Defendant Peter Hendrickson’s wages during 2003.

16. Because Defendants reported that they had no income, the IRS, unaware that Defendant’s report was false, treated the withheld federal taxes as tax overpayments and applied them on April 15, 2004 to (1) Defendant Peter Hendrickson’s unpaid 2000 tax liability ($5,551.44); and (2) three frivolous return penalties that had been assessed against Defendants under IRC § 6702 ($515.66, $553.17 and $529.18). The IRS also sent a refund check sent to Defendants on October 10, 2004 in the amount of $3,172.30.

17. The refunds or credits described above were erroneous within the meaning of IRC § 7405(b). Defendants were not entitled to refunds of federal income taxes for 2003 because their federal income tax liability for that year – $6,061.00 – exceeded the amount of the federal income taxes withheld from Defendant Peter Hendrickson’s wages by his employer ($5,620.02), which constituted the only tax payments made by Defendants in 2003. Furthermore, Defendants were not entitled to a refund, under any circumstances, of the social security and Medicare taxes that had been withheld from Defendant Peter Hendrickson’s wages during 2003.

18. Defendants contend that their Forms 4852, as described above, accurately reported that they received no wages or other compensation in 2002 and 2003. Defendants base their contention on theories contained in a book entitled Cracking the Code, which was written by Defendant Peter Hendrickson. On page 76 of Cracking the Code (“CtC”), Defendant Peter Hendrickson, states “So, actually, withholding only applies to the pay of federal government workers, exactly as it always has (plus 'State' government workers, since 1939, and those of the District of Columbia since 1921).”

19. Defendants’ contention that withholding applies only to government workers is frivolous and false. See, e.g., Sullivan v. United States, 788 F.2d 813, 815 (1st Cir.
1986); United States v. Latham, 754 F.2d 747, 750 (7th Cir. 1985); (contention that “under 26 U.S.C. § 3401(c) the category of ‘employee’ does not include privately employed wage earners is a preposterous reading of the statute.”); O’Connor v. United States, 669 F. Supp. 317, 322 (D. Nev. 1987). Defendant Peter Hendrickson was an employee of Personnel Management, Inc. in 2002 and 2003 within the meaning of IRC § 3401(c). Defendant Peter Hendrickson’s employer properly withheld federal income and employment taxes from his wages.

United States v. Peter Eric Hendrickson, No. 06-11753 (U.S.D.C. E.D. Mich. 5/2/2007)

[grammarian44]

Having reviewed Hendrickson's case for the first time in a while, I think my question for Ducky would be why in the world the withholding statutes (and the meanings of "includes" or "employee") would be at all relevant to the question of tax liability when the Hendrickson court imposed liability on and upheld the injunction against Doreen Hendrickson even though it stated loud and clear that she received non-employee compensation. Doesn't this just show the complete irrelevance of the meanings of "employee," "wages," and "includes" in determining whether someone is liable to tax on compensation?

So Ducky, please explain Doreen Hendrickson's tax liability. Somehow or other, the court found that she had received income in the form of compensation even though the court stated she received no compensation in an employee capacity. Under your theory, how is that even remotely possible?

[Famspear]

LPC, in addressing Ducky, wrote:

Your belief that there are words with "narrow legal meanings" is one of your problems.

For example, the word "wages" is defined in the Internal Revenue Code, but it has a fairly broad meaning and not a narrow one, and encompasses 99% of the regular, ordinary, every-day, meaning of the word "wages," and more.

[ . . . ]

The irony here is that the IRC is using words in their natural sense while tax deniers like Hendrickson are using unnatural meanings while claiming that the IRC is deceptive. The idea that the IRC might mean what it says is rejected out of hand.

[ . . . ] But you're only going to believe me if I "endorse" your choice of magic words? How typical of a tax denier.

The "magic words" problem that LPC has documented here (and in his Tax Protester FAQ) is, I think, related to what I see as a chronic tendency of many tax protesters to try to construct elaborate, pseudo-technical arguments, based in part on a false belief that the protesters can fake their way to the result they want as long as the "logic" and the verbiage appear sophisticated and convoluted enough. Peter Hendrickson is just as bad as the rest on this point. To non-lawyers, some tax protester arguments are appealing in part simply because they appear so "technical," so esoteric. Indeed, I seem to recall a comment by one person (perhaps by Ducky) that he found Hendrickson's writings "compelling."

If you find Hendrickson's writings "compelling," then you probably ain't read much tax law, bud.

Most of these people have little if any experience actually reading a really technical, well-researched, well-written treatise on federal tax law. Even if presented with a really well done treatise on one hand and Cracking the Code on the other, these people have no substantial skill that would allow them to differentiate between the "sugar bowls" of real, legitimate legal analysis and a "cow patty" like Cracking the Code.

From time to time, I have the experience of seeing a contract or other document that was obviously drafted by a non-lawyer (no offense intended to my non-lawyer colleagues here). I suspect many lawyers here have seen this. Often, the document is obviously the end result of something that was drawn from bits and pieces of documents that WERE drafted by lawyers. Once the non-lawyers get hold of the information, they think they can achieve the effect they want. Sometimes it does not work so well. Even if the contract, etc., achieves what was intended, the document suffers from the inclusion of subtle drafting errors that betray, to an experienced lawyer, the genesis of the document: an unsteady, unlearned hand connected to a brain untutored in the art of saying what the drafter wanted to say in a way most carefully calculated to achieve the desired legal result.

In other words, it's easy to spot amateur work (and I mean "amateur" in the pejorative sense). Hendrickson's material is classic amateur work. For tax protesters, the old saying holds true: A little knowledge is a dangerous thing.

Elaborating on what I said a few days ago: Once you spend enough time in both the kitchen and the barn yard, you have no trouble distinguishing the sugar bowls from the cow patties. Tax protesters, for the most part, seem to lack the ability (or the willingness) to make that distinction.

[Ducky]

Ok,

I concede that CTC stands on shaky ground. Not being an attorney, I obviously don't have the requisite experience to sift through all of this info and really know what it means. It seems to me from my brief experience here, that being an "informed" tp (I know that is an oxymoron) would probably become all consuming as far as the direction one's life goes. Although, there are those that just don't file, not really considering the consequences or the legality of that.

Actually does anybody have any stats that show, out of the workforce in the US, how many people don't actually file?

Anyway, thank you for elucidating many issues. It really doesn't make sense for one to steer his/her family down a path of TP, because it inevitably ends up to be more expensive and time consuming than just paying the tax. Like I stated earlier, I have never filed CTC, and have no intention to. It is quite simple to see that one can be successful and enjoy whatever lifestyle he/she sees fit, and also pay an income tax.

before I go, I have one last question.

Just curious, how many of you have actually read his book cover to cover?

Anyway, I will heed your suggestions.

Thank you for being polite, fair and sincere in the discussion, I hoped that you also found my style to be polite and fair. Much better to always attack the argument rather than the person.

I will drop in from time to time to check up on things, as you are all definitely an interesting and intelligent crowd!

Thanks again,

Ducky

[Nikki]

Ok,

I concede that CTC stands on shaky ground.
....

Comparatively speaking, California stands on shaky ground.

CTC stands on a house of cards with a foundation of an imaginary cloud.

[grammarian44]

Just curious, how many of you have actually read his book cover to cover?

I have not read the book cover-to-cover for pretty much the same reason that I have not read any books by people who deny the Holocaust. It's not necessary to know every detail of the argument to be able to see that its central thesis is horribly incorrect.

[Quixote]

Just curious, how many of you have actually read his book cover to cover?

I read the first chapter and found nothing but unsupported opinion and blatant lies. I skimmed the rest of the book to see if I could determine the basis for Hendrickson's belief that income from compensation for services was not income. I never found it. At some point he just starting assuming his wages were not income without ever attempting to prove it. I have a low tolerance for BS, so I did not read all of his convoluted arguments based on thin air. And the library wanted their book back.

[Imalawman]

Just curious, how many of you have actually read his book cover to cover?

I read the first chapter and found nothing but unsupported opinion and blatant lies. I skimmed the rest of the book to see if I could determine the basis for Hendrickson's belief that income from compensation for services was not income. I never found it. At some point he just starting assuming his wages were not income without ever attempting to prove it. I have a low tolerance for BS, so I did not read all of his convoluted arguments based on thin air. And the library wanted their book back.

Same here, but I made through a little further with careful reading, but it was essentially a lot of sound and fury signifying nothing. Written by a ex-con mail bomber.

Best of luck Ducky, I hope that you don't go down the road of tax protesting. Remember, its not only financially stupid, but its illegal and can land you in the slammer.

[Famspear]

Ok,

I concede that CTC stands on shaky ground. Not being an attorney, I obviously don't have the requisite experience to sift through all of this info and really know what it means.

[ . . . ]

before I go, I have one last question.

Just curious, how many of you have actually read his book cover to cover?

Dear Ducky: Thanks for your input. I certainly hope you will come back here often.

I for one have not read Hendrickson's "book" at all. I have read portions of what he has written on his web site. I also have not read any of Irwin Schiff's "books"; I have never read any "book" by any tax protester. Hendrickson's "book" -- like the books of Schiff and other tax protesters -- is apparently nothing more than a self-published tax evasion scheme.

I and other Quatloos contributors have studied the arguments the protesters have published on the internet. For the past nine years I have studied the arguments protesters have raised in courts of law. I have also read what legal scholars have written about tax protester arguments. For the past two and a half years, studying tax protester arguments has been an almost daily exercise for me. Because of this (to repeat myself), I don't need to study each and every cow patty in the barn yard to know a cow patty when I see one; I don't need to read Hendrickson's book to know his arguments fit in the cow patty category.

Hey, you know, so far I have had about a dozen articles on the subject of federal income taxation published nationally (and not self-published, but published by a national professional association consisting primarily of -- gasp -- lawyers -- that will remain anonymous). I understand that the writings of other Quatloos regulars have been published (check out LPC's web site, for example, for a list of his publications). So, I wonder if anyone will ever be curious enough, or will ever think it important enough -- to ask Peter Hendrickson if he has read what the Quatloos regulars have written -- on the subject of federal tax law.

[webhick]

Hmm. Pete doesn't have a return policy on his book. Looks like poor Ducky is out $25. But that's better than being saddled with a frivolous filing penalty and eventually having his wages garnished.

Did anyone notice that Darth Hendrickson's cult earnings are up to $43k as of 05/02/08? I wonder how big it has to get for him to consider it to be effective? I also wonder if, when the time comes, the account these funds are in will show up in an asset search. Well, assuming it hasn't been spent yet, or isn't under someone else's name.

So, um, anyway. I'm going to be starting an "Illegal Pretense Fund." When it gets big enough, I might tell you what it's for.

[Famspear]

Oh boy!

From the material webhick linked at losthorizons:

Support the Legal Offense Fund! Yes, you read that right-- this is OFFENSE, not defense. When and if it gets large enough to be effective, this fund will be used to finance legal actions to force misbehaving taxing agencies (and their agents and tools) to abide by the law, including an eventual class action lawsuit on behalf of those CtC-educated filers whose accurate and truthful testimony is being deliberately-- and criminally-- excluded from the record under one pretext or another (such as those discussed here), so that the government involved can evade the inconvenient realities of the law! These actions will be of immediate benefit only to those being currently victimized in one way or another, but they will also forestall the same, or similar, violations in the future. So, even if you've had nothing but victories in upholding the law, you, too, have an interest in this endeavor.

Contributions must be made with the understanding that no guarantees are offered as to the specifics of how the money will be allocated, or that any individual contributor will realize any specific personal benefit. And, guess what? Contributions to this fund will not be tax deductible... Of course, no one likely to contribute to THIS fund had any interest in tax deductions. Anyway, if you want to participate, click on the PayPal button below [ . . . ]

(bolding added).

OK, this could be gist for a good law school exam question! Spot the issues!

I'll start with: Is there a way that the receipts are not taxable to Peter Hendrickson at the time of receipt? What about an express trust, with Peter as the the trustee?

So, do we have an express trust? (Rule against perpetuities? Just thought I'd throw RAP in; uh, nobody expects me to actually discuss RAP, though, right? I hope not, 'cause I have no f#@*&% idea.) If we have a valid express trust, who are the beneficiaries? Are the beneficiaries vested in interest? Contingent beneficiaries? If anybody contributed more than whatever the gift tax exclusion amount is for any one year (uh, I know it used to be $10,000, but nobody really expects me to keep track of that changing number, right - 'cause I just do income tax; estate and gift tax = Dan's expertise), does that person have a gift tax problem?

Assuming this is really a trust that is a separate taxable entity from Peter Hendrickson for federal income tax purposes, what is Pete's obligation as a fiduciary of the trust to file returns for the trust and make sure that the federal income taxes are paid?

Can Peter win on the argument that this thing is a "church," and is exempt from federal income taxation? (Stated another way, what are the chances I can I get a sex change operation and then become a ballerina with the Bolshoi Ballet?) Wait! How about the Cracking the Code Church of Lost Horizon Financial Security for the use and benefit of Peter E. Hendrickson et ux. and maybe possibly if they're lucky various contingent beneficiaries???? Oh, no, I guess that kinda sounds like another trust......

Even if we have no express trust, are there any equitable remedies available to those who contribute, if something untoward happens. Under what circumstances?

For that matter, do we have any federal or state securities laws implicated here?

Can I go home now?

EDIT: AT THIS POINT, INSERT "I'M GOING HOME" BY TEN YEARS AFTER, FROM THE SOUNDTRACK OF THE FILM "WOODSTOCK."

[jg]

http://www.youtube.com/watch?v=UfAP3zBRoRw

[webhick]

Famspear,

You'll find my favorite part of his Legal Offense Fund verbiage below.

These actions will be of immediate benefit only to those being currently victimized in one way or another, but they will also forestall the same, or similar, violations in the future.

Sounds like Pete's acknowledging that many have been screwed, and more will be in the future. So, like donate now, and we'll send you a stress ball you can squish in prison.

BTW, Legal Offense Fund is abbreviated "LOF", which also stands for "Lube, Oil, Filter." For some reason, I find that funny.

[rachel]

Hey Ducky,
If 3401(a) wages are supposedly "federally connected" through the 3401(c) definition of "employee" then why are the same exclusions of 3121 "employment" for Social Security found in 3401(a) "wages"?
I major oversight of Hendricksons and more proof he's incompetent.
Take a look at 3401(a)(2)(g) its telling you that 3121(a) wages are included.
(g)) unless the remuneration paid for such labor is wages (as defined in section 3121 (a))

Code: Select all

(2) for agricultural labor (as defined in section 3121 (g)) unless the remuneration paid for such labor is wages (as defined in section 3121 (a)); or 
(3) for domestic service in a private home, local college club, or local chapter of a college fraternity or sorority; or 

Code: Select all

(9) for services performed by a duly ordained, commissioned, or licensed minister of a church in the exercise of his ministry or by a member of a religious order in the exercise of duties required by such order; or 

Code: Select all

(10) 
(A) for services performed by an individual under the age of 18 in the delivery or distribution of newspapers or shopping news, not including delivery or distribution to any point for subsequent delivery or distribution; or 
(B) for services performed by an individual in, and at the time of, the sale of newspapers or magazines to ultimate consumers, under an arrangement under which the newspapers or magazines are to be sold by him at a fixed price, his compensation being based on the retention of the excess of such price over the amount at which the newspapers or magazines are charged to him, whether or not he is guaranteed a minimum amount of compensation for such services, or is entitled to be credited with the unsold newspapers or magazines turned back; or 

Code: Select all

(17) for service described in section 3121 (b)(20);

I mean come on!
Pete's definitely pulling a fast one on his readers because it stands to reason that if 3401(a) "wages" excludes the same exclusions found in 3121 "employment" then most assuredly 3121(a) wages" are included in 3401(a).
I can say "pulling a fast one" because I brought this oversight of Pete's to Pete's attention with no reply about a year and a half ago. He obviously didnt want that getting out to his readers.
Petes well aware his book is leading his followers down a primrose path.

[LPC]

Not being an attorney, I obviously don't have the requisite experience to sift through all of this info and really know what it means.

I'm not an engineer, but I would not believe someone who is not an engineer and who claims to have built a car that is powered by water.

I'm not a doctor, but I would not believe someone who is not a doctor and who claims to have found a cure for cancer.

So why would anyone believe someone who is not a lawyer and who claims to have found a tax strategy that exempts most incomes from income tax?

And most of what you need to "sift through all this info" is that the laws mean what they say. When the 16th Amendment says that Congress has the power to tax incomes, then Congress has the power to tax incomes. When section 61(a) of the Internal Revenue Code says that "gross income" means "all income," then gross income really means ALL INCOME. When section 61(a)(1) says that gross income includes compensation for services, then gross income includes compensation for services.

And so forth.

Just curious, how many of you have actually read his book cover to cover?

I've never seen a copy of the book. What I know of the "CtC method" is what I've picked up from the Lost Horizons web site and forum, and Hendrickson' own pleadings in his own cases.

And even if I had the book, I wouldn't read it "cover to cover." I don't need to eat the whole apple to know it's rotten, and some tax protester crap is simply too painful to read. It's kind of like reading something that Babel Fish has translated from English to Japanese to German and then back into English. There's really not much coherence left, and it hurts my head to try to make sense out of it.

[The Operative]

It really doesn't make sense for one to steer his/her family down a path of TP, because it inevitably ends up to be more expensive and time consuming than just paying the tax.

BINGO!

Just curious, how many of you have actually read his book cover to cover?

I haven't read it and I don't need to in order to know it is bunk. I once tried to sit through America: Freedom to Fascism. After the first five minutes, I had found about a dozen errors and I just couldn't watch it after that.

[LPC]

I'll start with: Is there a way that the receipts are not taxable to Peter Hendrickson at the time of receipt?

Sorry to burst your bubble, but gifts are not income.

And has anyone ever tried to explain the anti-injunction act to a tax denier? It's not pretty.

(Rule against perpetuities? Just thought I'd throw RAP in; uh, nobody expects me to actually discuss RAP, though, right? I hope not, 'cause I have no f#@*&% idea.)

True story: I tried to make a joke last week about the "Delaware tax trap," which can result in federal estate tax if a perpetual trust (in a state such as Delaware that has repealed the rule against perpetuities) includes a special power of appointment, and (get this) no one laughed.

In retrospect, I think there were three problems: (1) My audience was a group of lawyers, but not tax lawyers, so they didn't really understand the Delaware tax trap. (2) I don't really understand the Delaware tax trap. (3) The Delaware tax trap really isn't funny at all.

[webhick]

In retrospect, I think there were three problems: (1) My audience was a group of lawyers, but not tax lawyers, so they didn't really understand the Delaware tax trap. (2) I don't really understand the Delaware tax trap. (3) The Delaware tax trap really isn't funny at all.

Technically, there were four problems. The fourth was that you forgot to mention that the Delaware tax trap makes some taxpayers chew their iguana's legs off to get out of it.

But the good news is that you saved yourself from having to wear the funny jacket that makes you hug yourself.

[Famspear]

I'll start with: Is there a way that the receipts are not taxable to Peter Hendrickson at the time of receipt?

Sorry to burst your bubble, but gifts are not income.

So, under the gift theory, Peter would argue that under the language as quoted above, the putative donor sends the money based on a "detached and disinterested generosity" out of "affection, respect, admiration, charity or like impulses"-- i.e., not "primarily" based on "the incentive of anticipated benefit" of an economic nature.

[grixit]

The televangelists have a word for it, "love offering".