Hendrickson hearing, motion to dismiss indictment

[Famspear]

"The claim that salaries, wages, and compensations for personal
services are to be taxed as an entirety and therefore must be
returned by the individual who has performed the services which
produce the gain is without support, either in the language of
the Act or in the decisions of the courts construing it. Not
only this, but it is directly opposed to provisions of the Act
and to regulations of the U.S. Treasury Department, which
either prescribed or permits that compensations for personal
services not be taxed as a entirety and not be returned by the
individual performing the services. It is to be noted that, by
the language of the Act, it is not salaries, wages, or
compensation for personal services that are to be included in
gains, profits, and income derived from salaries, wages, or
compensation for personal services."
- [Lucas v. Earl, 281 U.S. 111 (1930)] -

Yes, mutter, you fell for one of the oldest tax protester frauds of all.

The verbiage you cited is not from the Court’s opinion in Lucas v. Earl. As I have noted on numerous occasions, is an almost direct quote from page 17 of the taxpayer's brief filed with the U.S. Supreme Court in connection with the government's petition for a writ of certiorari. Guy C. Earl, the taxpayer, was the Respondent. The taxpayer's brief was written by Earl’s attorneys: Warren Olney, Jr., J.M. Mannon, Jr., and Henry D. Costigan. In some versions of the case as reported, this statement and other quotes and paraphrases from pages 8, 10, 14, 15, 17, and 18 of the taxpayer's brief are re-printed as a headnote ABOVE the opinion of the Court itself by Justice Holmes. The U.S. Supreme Court in Lucas v. Earl rejected these arguments. As every tax lawyer knows, Mr. Earl lost the case.

[Famspear]

The Oliver v. Halstead fakery is an old tax protester trick as well. Oliver v. Halstead, 196 Va. 992, 86 S.E.2d 859 (1955). Oliver v. Halstead is not a tax case. This is a Virginia Supreme Court case, and no issues of taxation were presented to or decided by the court.

Conner v. United States, 303 F. Supp. 1187 (S.D. Tex. 1969), aff’d in part and rev’d in part, 439 F.2d 974 (5th Cir. 1971). This appears to be a tax protester's attempt to create the false impression that this case was about taxability of wages. This case had nothing to do with wages or the taxability of wages. This case was about the taxability of compensation paid by an insurance company to a policy holder whose house had burned down. The insurance company was reimbursing the homeowner for the costs of renting a place to stay after the home burned down -- under the terms of the insurance policy. The insurance company was not paying "wages." The compensation was for the loss of a home by fire.

What about Edwards v. Keith? The actual ruling in Edwards v. Keith is that an individual receiving life insurance sales commissions (for personal services rendered as a life insurance agent) before the effective date of the income tax statute (in this case, the Revenue Act effective on and after March 1, 1913) must pay federal income tax on the commissions received by that individual on or after March 1, 1913, even though the commissions were earned prior to that date.

The tax protesters appear to be trying to use the language that a person "does not derive income by rendering services and charging for them" to falsely imply that the Court in Edwards v. Keith had ruled that income from personal services (such as a wage, salary, or commission) is not taxable, when such income is taxable. The issue decided by the Court was the timing of the recognition of that income. The Court was simply pointing out that, for an ordinary individual taxpayer using the cash method, the income is recognized at the moment the cash is received, not at the moment the income is earned. In effect, the tax protesters who cite Edwards v. Keith are, as usual, trying to take a case where the Court ruled income to be taxable when received, and falsely implying that the Court ruled that the income was not taxable at all.

Edwards v. Keith, by the way, deals with an ordinary individual using the cash method for timing of income recognition. For taxpayers who use the accrual method (many business taxpayers, for example), the income is indeed recognized when the income is earned, and not when the money is received.

Congress does give the IRS fairly wide leeway in interpreting the statutes -- and the courts have so ruled, over and over. For example, Congress has made certain things non-taxable, such as interest income on municipal securities (IRC sec. 103). The IRS cannot simply say: "We don't care; we gonna make taxpayers pay tax on interest income on municipal securities." What the IRS can do is interpret the statutes. Sometimes, Congress uses the statutes to give the U.S. Treasury Department the authority to basically "add" something to the law by using a Treasury regulation. See, e.g., IRC sec. 1398(g)(8). The IRS itself cannot change the statute; only Congress can do that.

EDIT: Above material adapted from something I wrote "in another forum".

[mutter]

"... one does not derive income by rendering services and
charging for them."
- [Edwards v. Keith, 231 F 111 (1916)] -

Don't you think you should read the cases you cite, Mr. Mutter?

yes I do thats why I am taking a paralegal course so I for myself can learn to read and understand the law and cases.
I see nothing wrong with this cite

[The Operative]

"... one does not derive income by rendering services and
charging for them."
- [Edwards v. Keith, 231 F 111 (1916)] -

Don't you think you should read the cases you cite, Mr. Mutter?

yes I do thats why I am taking a paralegal course so I for myself can learn to read and understand the law and cases.
I see nothing wrong with this cite

Other than you take it completely out of context. How about a more complete quote...

But no instructions of the Treasury Department can enlarge
the scope of this statute so as to impose the income tax upon unpaid
charges for services rendered and which, for aught any one can tell,
may never be paid. To take the illustration given above, the charge
for the argument in the Court of Appeals, unpaid on December 31,
1915, could not be included as taxpaying income for 1915, because it
was not paid in that year and the client might die insolvent on ]an—
nary 1, 1916; but as soon as it is paid it becomes taxpaying income
of the year in which such payment is made, although it was made for
services performed in a prior year. The phraseology of form 1040
is somewhat obscure; perhaps it means that there shall be included
actual receipts (a) for services rendered in the year for which return is
made and tb) for unpaid accounts, or charges for services rendered
in former years, and paid in the year for which return is made. But
it matters little what it does mean; the statute and the statute alone
determines what is income to be taxed. It taxes only income “derived"
from many different specincd sources; one does not "derive income"
by rendering services and charging for them.

Your quote, when shown in its original context, clearly references that merely charging for a service does not constitute income. However, the court made clear that receiving payment for services rendered is income.

EDIT: BTW, you can read the entire decision here.

[mutter]

dang so I can put any cite on here and one of you can tell me how its wrong?
that will save me some time.

[Nikki]

dang so I can put any cite on here and one of you can tell me how its wrong?
that will save me some time.

Better that we do so than for you to get the same information from opposing counsel at a Tax Court or criminal evasion trial.

[mutter]

dang so I can put any cite on here and one of you can tell me how its wrong?
that will save me some time.

Better that we do so than for you to get the same information from opposing counsel at a Tax Court or criminal evasion trial.

Agreed I ll be back after some reading

[Famspear]

dang so I can put any cite on here and one of you can tell me how its wrong?
that will save me some time.

Better that we do so than for you to get the same information from opposing counsel at a Tax Court or criminal evasion trial.

Mutter, you should ask yourself: "Why are these Quatloos regulars already aware of these cases I am citing?"

The tax protester movement is a scam. The cases you are citing are simply cases that have been cited by other tax protesters over and over and over. It's a scam. Copy and paste. Copy and paste. The internet has helped to enlarge the tax protester/tax denier movement, but the internet is, ironically, also the downfall of tax protesters as individuals. Lots and lots of people have been taken in by the fake quotations, as well as the quotations taken out of context, etc. You are not the first, and you won't be the last. Look at Peter Hendrickson's web site. He has copied and pasted citations to many cases that have been cited by tax protesters for years.

None of these cases stand for the proposition that Hendrickson has made, which is that compensation for private sector, non-federally privileged work is somehow not taxable. Hendrickson is running a scam.

I know that it's hard for you to accept that you've been had, but -- you've been had. There is an entire universe of knowledge of which you are just not aware when it comes to U.S. federal income tax law. And Hendrickson is not aware of it either. That's why he makes the mistakes he makes.

I would seriously encourage you to read The Tax Protester FAQ by Daniel B. Evans, at:

http://evans-legal.com/dan/tpfaq.html

Re-read Hendrickson's garbage, and then read The Tax Protester FAQ. Think.

[mutter]

I ll agree to the read and re-reading of hendrickson's book IF you take the quote of mine off your signature bar

[Dr. Caligari]

Income being connected to a federal priviledge

Mutter:
First of all, thanks for coming here to Quatloos to post. Most of the folks at LH don't seem to be interested in other points of view.

Second, regarding your quote above: Can you show me one case ever decided by any federal court anywhere which held that income must be "connected to a federal privilege"? Just one?

[Famspear]

I ll agree to the read and re-reading of hendrickson's book IF you take the quote of mine off your signature bar

Done! And thanks for coming to Quatloos!

[LPC]

Wow Evans you drawl quite a few conclusions about me personally based on lets see, NOTHING.
One can tell someone has nothing of value to say or cant prove their point if they are calling people names. I wont respond to any such posts, so keep it civil.

From the Lost Horizons forum on 1/15/2009, from a thread titled "Daniel B. Evans: The Tax Protest FAQ":

If you actually read what he writes with a keen eye you will find he is nothing more than a shill repeating IRS mantras ladden with definded terms that he never defines.

I draw conclusions from what people write, and I call a spade a spade.

The conclusion I draw from what you've written above is that you are a hypocrite.

[Famspear]

Dear Mutter: Just as a follow-up to what Dr. Caligari asked in a recent post......

Here's what I would suggest: Look for any federal court case where an individual argued that the compensation he/she received for rendering personal services (whether called "wages," or "salary," or anything else) was not taxable under the U.S. federal income tax laws on the ground that the compensation was not received in connection with an activity involving a federal privilege (or in whatever language you think Peter Hendrickson wants to use) AND the court ruled in THE TAXPAYER'S FAVOR.

You will not find any such case. None. Not even one.

Then, consider this (adapted from something I wrote in another forum):

Some tax protesters argue that they should be immune from federal income taxation [ . . . ] on the ground that they have not requested a privilege or benefit from the government. These kinds of arguments have been ruled without merit. For example, in the case of Lovell v. United States the United States Court of Appeals for the Seventh Circuit stated:

Plaintiffs argue first that they are exempt from federal taxation because they are "natural individuals" who have not "requested, obtained or exercised any, privilege from an agency of government." This is not a basis for an exemption from federal income tax. [ . . . ] All individuals, natural or unnatural, must pay federal income tax on their wages, regardless of whether they received any "privileges" from the government.

--Lovell v. United States, 755 F.2d 517, 85-1 U.S. Tax Cas. (CCH) paragr. 9208 (7th Cir. 1984).

The argument that an individual who received Form W-2 wages or other compensation is not subject to federal income tax because the individual has "neither requested, obtained, nor exercised any privilege from an agency of government" was ruled frivolous by the United States Court of Appeals for the First Circuit in Sullivan v. United States, 788 F.2d 813, 86-1 U.S. Tax Cas. (CCH) paragr. 9343 (1st Cir. 1986), and again in Kelly v. United States, 789 F.2d 94, 86-1 U.S. Tax Cas. (CCH) paragr. 9388 (1st Cir. 1986).

The argument that an individual who received Form W-2 wages is not subject to federal income tax unless the tax is imposed in connection with "government granted privileges" was ruled frivolous by the United States Court of Appeals for the Seventh Circuit in Coleman v. Commissioner, 791 F.2d 68, 86-1 U.S. Tax Cas. (CCH) paragr. 9401 (7th Cir. 1986).

The argument that an individual who received Form W-2 wages is not subject to federal income tax unless the taxpayer enjoys a "grant of privilege or franchise" was ruled frivolous by the United States Court of Appeals for the Eighth Circuit in May v. Commissioner, 752 F.2d 1301, 85-1 U.S. Tax Cas. (CCH) paragr. 9156 (8th Cir. 1985).

The argument that an individual who received Form W-2 wages is not subject to federal income tax unless the taxpayer has obtained a "privilege from a governmental agency" was ruled frivolous by the United States Court of Appeals for the Ninth Circuit in Olson v. United States, 760 F.2d 1003, 85-1 U.S. Tax Cas. (CCH) paragr. 9401 (9th Cir. 1985), and by the United States Court of Appeals for the Tenth Circuit in Prout v. United States, 31 Fed Appx. 624, 2002-1 U.S. Tax Cas. (CCH) paragr. 50,304 (10th Cir. 2002) (not for public.).

Regarding the taxability of income in connection with events or activities not involving a government privilege or franchise, the United States Supreme Court ruled in Rutkin v. United States that the receipt of money obtained by extortion is taxable as income to the wrongdoer. Rutkin v. United States, 343 U.S. 130 (1952). I don't think extortion involves the exercise of a privilege, federal or otherwise.

The U.S. Supreme Court ruled in James v. United States that the receipt of money obtained through embezzlement is taxable as income to the wrongdoer, even though the wrongdoer is required to return the money to its owner. James v. United States, 366 U.S. 213 (1961). And please: There simply is no "privilege" to embezzle money.

All the cases I cited involved taxpayers who made these arguments, and the courts ruled against these arguments. These are not cases where quotes are simply taken out of context, where the case was really about "something else." These are not cases involving fake quotes. These citations are not tax protester tricks.

Pete Hendrickson tries to fool his followers into thinking that there is something in these kinds of cases that somehow makes the holdings in these cases not apply to his Cracking the Code scam. He is wrong.

And Hendrickson's scam has been specifically rejected in at least one federal case -- where Hendrickson and Cracking the Code were specifically mentioned by the court. As noted in the Tax Protester Dossiers web site (the companion to Daniel B. Evans' Tax Protester FAQ), in the case of Hendrickson acolyte Andrew D. Scott, the United States Tax Court noted that Scott had informed the IRS that he was a follower of Hendrickson's book, Cracking the Code. The IRS had warned Scott that Hendrickson’s arguments had been repeatedly rejected by the courts.

The Tax Court found Scott’s arguments — that he was not an “employee,” and that he did not earn “wages” — to be “frivolous and false.” 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. Andrew D. Scott v. Commissioner, Docket No. 26392-06, United States Tax Court, Bench Op. (June 4, 2008).

[LPC]

this isnt a willfullness issue this is an issue of the Gov. or anyone attempting to prove you didnt believe what you signed.

"the Gov. or anyone attempting to prove you didn't believe what you signed" is EXACTLY a willfulness issue.

Hendrickson has been indicted for willfully filing false returns. To convict him, the government must prove both that the returns were false AND that Hendrickson knew that they were false. That's what "willfully" means in this context.

i wouldnt be offering the court an affirmitive defense.

Not to get bogged down in nit-picking, but lack of willfulness is not an "affirmative defense."

[LOBO]

I can't believe nobody has gotten mutter to slip and call himself an "employee", which would, of course, render him liable for the income tax.

Bonus points to anyone who gets him to say his name backwards, thus sending him back to the 5th dimension.

[mutter]

ive an idea why doesnt someone do an analysis of CtC and I mean a legal this is why as a matter of law PHs is wrong and I ll post it at lost horizons. i dont really care if he bans me.
I will post comments to your posts but I ve got alot of reading to do and my boss is out [sic] so its all on me today

[mutter]

Wow Evans you drawl quite a few conclusions about me personally based on lets see, NOTHING.
One can tell someone has nothing of value to say or cant prove their point if they are calling people names. I wont respond to any such posts, so keep it civil.

From the Lost Horizons forum on 1/15/2009, from a thread titled "Daniel B. Evans: The Tax Protest FAQ":

If you actually read what he writes with a keen eye you will find he is nothing more than a shill repeating IRS mantras ladden with definded terms that he never defines.

I draw conclusions from what people write, and I call a spade a spade.

The conclusion I draw from what you've written above is that you are a hypocrite.

Yup you busted me being a hypocrite. I have read some of your stuff in the past and do think some of it is just word games.
However, i am going to re read some(cos theres alot) of it and redraw my conclusions. Everyday I learn more about the law and why people are wrong in their conclusions. You will note I chastised someone for posting something on a common law jury. Which I find to be an oxymoron considering its judges and jurists not juries that create the common law.
In other words I am attempting to learn and keep an open mind
Now if willfullness is not an affirmitive defense then what kind would it be. I mean you are affirming something there. Whats the test for being affirmitive?

[mutter]

Income being connected to a federal priviledge

Mutter:
First of all, thanks for coming here to Quatloos to post. Most of the folks at LH don't seem to be interested in other points of view.

Second, regarding your quote above: Can you show me one case ever decided by any federal court anywhere which held that income must be "connected to a federal privilege"? Just one?

No but PHs has a SCOTUS case or two in CtC that shows the income tax is an excise and all excises are on a priviledge. True or false? thus "income" must be connected to a federal priviledge----is the theory.
most people wont change their minds once they make them up. its human nature
Like I said if you provide convincing evidence I will examine it with an open mind. so far Ive some serious doubts about CtC.

[mutter]

I can't believe nobody has gotten mutter to slip and call himself an "employee", which would, of course, render him liable for the income tax.

Bonus points to anyone who gets him to say his name backwards, thus sending him back to the 5th dimension.

yes is would under CtC, but you know I already am a citizen and have a SSN so all that made me liable too. You wouldnt beleive the arguments I ve had about those two being wrong. Some women cussed me out like a drunken sailor cos I wouldnt buy the citizenship nexus. that is until I told her if that was true the Gov would always go heres the defendants address motion for summary judgment.

I am from the 11th dimension. Hmmm rettum no thats too close to redrum for me

[Imalawman]

Income being connected to a federal priviledge

Mutter:
First of all, thanks for coming here to Quatloos to post. Most of the folks at LH don't seem to be interested in other points of view.

Second, regarding your quote above: Can you show me one case ever decided by any federal court anywhere which held that income must be "connected to a federal privilege"? Just one?

No but PHs has a SCOTUS case or two in CtC that shows the income tax is an excise and all excises are on a priviledge. True or false? thus "income" must be connected to a federal priviledge----is the theory.
most people wont change their minds once they make them up. its human nature
Like I said if you provide convincing evidence I will examine it with an open mind. so far Ive some serious doubts about CtC.

I believe you Mutter. I think that you will be surprised at how misleading PH has been with his case citations. The most important thing that I have found is making the distinction between what you believe the law ought to be and what it actually is.

We don't defend the tax system as perfect or even a great thing, but we do insist that it is the law - even if it sucks at times. From the beginning of civilization, people have complained about taxes on their property and income. But like it or not, it is the law and once you start examining the IRC from a comprehensive standpoint, tax protester theories are just silly.