Time: Sun Jun 15 19:39:19 1997 by primenet.com (8.8.5/8.8.5) with ESMTP id TAA25288; Sun, 15 Jun 1997 19:33:07 -0700 (MST) by usr02.primenet.com (8.8.5/8.8.5) with SMTP id TAA25989; Sun, 15 Jun 1997 19:32:58 -0700 (MST) Date: Sun, 15 Jun 1997 19:31:36 -0700 To: (Recipient list suppressed) From: Paul Andrew Mitchell [address in tool bar] Subject: SLS: TaxProphet Hot Topics - February 1996 (fwd) <snip> > >From: am-her@juno.com (Rusty Lee) > >The guy who wrote this message must be a real piece of work !!! >He's obviously one who makes a living from the "system" and the fraud >that has been perpetrated upon the People by that system. Clowns like >this guy are the ones who belong in the circus !!! > >Harold T. says there is a great followup \ rebuttal to this message by John Kurtz - >" Response to the Taxprophet at http://kwicsys.com/wtp/other.htm ". > >Could one of you who I am forwarding this message to please take a look >at the above response on the net and forward it to me.?.?!?. >I would REALLY appreciate it. >Rusty > >--------- Begin forwarded message ---------- >From: Harold Thomas <harold@halcyon.com> >Subject: TaxProphet Hot Topics - February 1996 > >This is a multi-part message in MIME format. > >--------------741D6D15044 >Content-Transfer-Encoding: 7bit > >Anyone like to rebut what this "Tax Prophet" has to say at: >Http://www.taxprophet.com/hot/feb96.html ??? >He seems to feel that P.T. Barnum was referring to you (and I)! > >Harold >http://www.halcyon.com/harold/ > >--------------741D6D15044 >Content-Transfer-Encoding: 7bit >Content-Disposition: inline; filename="feb96.html" >Content-Base: "Http://www.taxprophet.com/hot/feb96.ht > ml" > ><BASE HREF="Http://www.taxprophet.com/hot/feb96.html"> > ><HTML> ><HEAD> ><TITLE>TaxProphet Hot Topics - February 1996</TITLE> ></HEAD> ><BODY> ><CENTER> ><A HREF="hot.html"><IMG BORDER=0 SRC="../gifs/hot_bar.gif"></A><P> ></CENTER> ><CENTER> ><H3>February, 1996 Hot Topics</H3> ><P> ><A NAME="feb96"><H3>THE TAX PROTESTOR MOVEMENT:</H3></A> ><H3>Proof that P.T. Barnum Was Right</H3> ></CENTER> ><HR> ><BR CLEAR=all> >Circus legend P.T. Barnum's famous saying, "There's a sucker >born every minute!" accurately describes the intellectual >underpinnings of the tax protestor movement. Today's hucksters >are getting rich promoting the notion that one does not have to >pay federal income taxes on the money he or she earns. The victims >of these scams pay twice: once to the huckster who entices them >to a seminar or sells them a book costing big bucks; and again >when the IRS or the Courts levy huge penalties and fines, in addition >to the taxes owed plus interest. ><P> >Although the overwhelming majority of our citizens acknowledge >their obligation to pay federal income taxes, there exists a tiny, >but vocal, minority who share a delusion that they can single-handedly >rebel against the system and avoid paying income taxes altogether. >These people believe, that in spite of our tax laws, they have >no obligation whatsoever to pay taxes, and they repeatedly assert >this futile and frivolous claim before the IRS and in court. ><P> >Unfortunately, many are using the Internet to espouse their irrational >positions, and those uninformed taxpayers could be seduced by >the argument that only "suckers" pay taxes. Actually, >the opposite is true: Only "fools" would believe that >the U.S. has no right to collect taxes from them, and those who >play the tax protestor game wind up big losers. Because tax protestors >have moved onto the Internet, this month's Hot Topics will address >their so-called legal arguments. ><P> >While some tax protestors set forth sophisticated arguments that >are nonetheless rejected as frivolous (See <I>Coleman v Cm.</I> >50 TCM 118, 120 (1985)), most fail to cite any legal precedent >or cite to cases that are irrelevant to their theories. The courts >are generally intolerant of "tax protestor rhetoric and legalistic >gibberish" uttered by errant and malinformed tax protestors. ><I>Pabon v. Cm.</I> TCM 1994-476. A review of the Internal Revenue >Code and case law shows that those making such arguments are routinely >fined for abusing our court system and some wind up in prison. ><P><hr> ><CENTER><h4>Addressing Common Tax Protestor Arguments</h4> </CENTER> ><P> ><CENTER> ><P> ><h5>Historical Note: Income Taxes Do Not Violate Constitutional >Rights</h5> ></CENTER> ><P> >Americans can reminisce about a time in their history when direct >income taxes were prohibited by the constitution. Prior to the >adoption of the Sixteenth Amendment to the Constitution, the >Constitutional >requirement of apportionment among the states of "direct >taxes" (Art. 1, Sec. 9, clause 4) prohibited Congress from >passing an income tax act. The Sixteenth Amendment, ratified by >the necessary three-fourths of the states on February 25,1913, >eliminated the requirement of apportionment of taxes on incomes. >It granted Congress power to lay and collect taxes on incomes, >from whatever source derived, without apportionment. Thus, in >1913, the bull was let out of the cage, and however one may wish >to fantasize, there is no going back now. ><P> >Even so, some tax protestors continue to challenge the constitutional >authority of Congress to impose an income tax on individuals. >They choose to ignore the last ninety years of constitutional >law developed in this area. They also ignore the precise holding >of the Supreme Court in <I>Pollock v Farmer's Loan and Trust Co</I>., >157 US 429, 158 US 601 on rehearing (1895) which stated that taxes >on income from employment were not direct taxes and were not subject >to the necessity of apportionment. <I>Ficalora v Cm.</I> 85-1 >USTC Sec. 9103, 751 F 2d 85 (1984). ><P> >In addition to arguing that the income tax is unconstitutional, >tax protestors often claim that the Tax Court is an unconstitutional >court, and that the income tax laws violate the individual's >constitutional >rights, such as the right of freedom of religion, the Fifth Amendment >privilege against self-incrimination, and the Thirteenth Amendment's >prohibition of involuntary servitude. The courts always reject >these arguments and impose substantial penalties. ><P><hr> ><CENTER><h4>For Once and For All, Wages are Taxable Income and Federal >Reserve Notes are Legal Tender</h4> </CENTER> ><P> >Many tax protestors may not realize that their arguments are frivolous. >Arguments which the courts consider frivolous are subject to severe >monetary sanctions (discussed later). They may believe their contentions >are based on an intelligent and eloquently expressed analysis >of their constitutional and God-given rights. That is probably >what the taxpayer in the case of <I>Peth v. Breitzmann</I>, 84-1 >USTC Sec. 9321 (1984) thought. <U>Peth</U> is a typical individual >who set forth a common laundry list of reasons that he was not >required to pay taxes. Among other claims, he argued that wages >were not includible in income; he was not a person liable for >tax; he was not an employee; and federal reserve notes were not >legal tender. ><P> >The taxpayer further contended that he earned no "income" >because the income taxes are directed to taxable gain, and since >he receives a paycheck equal to the fair market value of his labor, >there was no gain. The Court responded that "no court has >ever accepted this argument for the purpose of determining taxable >income. Indeed, it has always been rejected. For once and for >all, wages are taxable income." ><P> >In answer to the taxpayer's "silly" federal reserve >argument, the Court pointed out that "Congress has declared >federal reserve notes to be legal tender for all public and private >debts, and this declaration is the supreme law of the land." ><P><hr> ><CENTER><h4>United States Citizens are Taxpayers Subject to the >Jurisdiction >of the IRS</h4> </CENTER> ><P> >Many tax protestors improperly construe terms and definitions >found in Code sections or tax cases to reach a conclusion that >they are exempt from tax. These arguments are always futile and >can be perilous to one's wallet. The IRS and the court will likely >hold that such arguments are frivolous and subject the tax protestor >to monetary sanctions. ><P> >For example, Section 1 of the Code "imposes an income tax >on the income of every individual who is a citizen or resident >of the United States..." [Reg. §1.1-1(a)]. The regulations >further determine income tax liability on individuals as follows: ><BLOCKQUOTE> >(b) <I>Citizens or residents of the United States liable to tax</I>. >In general, all citizens of the United States, wherever resident, >and all resident alien individuals are liable to the income taxes >imposed by the Code whether the income is received from sources >within or without the United States... ></BLOCKQUOTE><p> > ><BLOCKQUOTE> >(c) <I> Who is a citizen</I>. Every person born or naturalized >in the United States and subject to its jurisdiction is a citizen.... >Reg. §1.1-1. ></BLOCKQUOTE> > ><P> >Tax protestors often point out that the word "individual" >is not defined in the Code or regulations, and conclude that they >are not individual U.S. residents or citizens subject to federal >income tax. However, read in context, the Code and regulations >use the word "individual" in its common language usage; >thus, the term need not be defined. Clearly, you and I are >"individuals" >and are liable for federal taxes. Any other interpretation of >the clear language of the code is merely a word game played by >people who have never won a case or ruling in any court. ><P> >In a similar attempt to manipulate language in the Code, the taxpayer >in <I>Blum v. IRS</I>, 91-1 USTC Sec 50,140 (1991) a resident >of Missouri, failed to persuade the Court that he was not a citizen >of the United States subject to the jurisdiction of the IRS. He >asserted the language in the Code limits to Washington D.C. or >the United States territories. ><P> >Likewise, a taxpayer's claim that as a natural born citizen of >Montana he was a nonresident alien and, thus, not a "taxpayer" >as defined in the Tax Code, was rejected by the Court as meritless. ><I>US v Hansen</I>, 94-1 USTC Sec 50,075 (9th Cir, 1994). ><P> >The Court also rejected as frivolous a taxpayer's contention that >she was not a "taxpayer" because she was "an absolute, >free born and natural individual." In <I>US v Studley</I>, >86-1 USTC Sec. 9390 (9th Cir, 1986) the Court noted that: ><P> ><blockquote>...this argument has been consistently and thoroughly >rejected >by every branch of the government for decades. Indeed advancement >of such utterly meritless argument is now the basis for serious >sanctions imposed on civil litigants who raise them.</blockquote> ><P> >The taxpayer in <I>Peth</I> maintained that he was not "an >officer, employee, or elected official, of the United States, >the District of Columbia, or any agency of the United States or >the District of Columbia" under the levy and distraint provisions >of 26 U.S.C. §6331(a), mistakenly assuming that this provision >applies only to federal officers and employees. ><P> >The taxpayer in<I> Peth</I> also argued unsuccessfully that he >was not an "employee" under 26 U.S.C.§3401(c) because >he is not a federal officer, employee, elected official, or corporate >officer. The Court pointed out that this definition of >"employee" >does not exclude all other wage earners. ><P> >Finally, the taxpayer in <I>Peth</I> failed to convince the Court >that his wages were exempt from withholding under 26 U.S.C >§3401(a)(8)(B), >which excludes remuneration for services rendered within a United >States possession. The Court pointed out that the Plaintiff was >wrong in assuming that Wisconsin is a "United States possession." ><P><hr> ><CENTER><h4>The Hooven Case is Irrelevant to Income Tax Liability</h4> ></CENTER> ><P> >Some tax protestors cite Blacks Law Dictionary (which is not legal >precedent) for the definition of the United States: ><P> ><blockquote><B>United States.</B> This terms has several meanings. It may >be merely the name of the sovereign occupying the position analogous >to that of the sovereigns in family of nations, it may designate >territory over which the sovereignty of the United States extends, >or it may be collective name of the states which are united by >and under the Constitution. <U>Hooven & Allision Co. vs. Evatt, >U.S. Ohio</U>, 324 U.S. 652.</blockquote> ><P> >Somehow, tax protestors read this definition to mean that only >"federal" and not "state" citizens are subject >to federal income tax. They believe the case of <I>Hooven & >Allison Co. v. Evatt</I>, 324 US 652 (1945), (<I>Hooven I</I>) >provides legal precedent for the proposition that they are not >liable for income taxes. However, the<I> Hooven I</I> case (which >was subsequently overruled in part) was decided before the Internal >Revenue Code of 1954 was enacted and has nothing whatsoever to >do with an individual's liability for federal income tax. <I>Hooven >I</I> dealt with whether state taxation of imports violates the >Import-Export clause of the United States Constitution, Art. I, >§ 10, cl .2. The Court concluded that imported merchandise >is exempt from state taxation until it is removed from the package >in which it is imported, or when used for the purpose for which >it is imported. The Court, noting that the term "United States" >may be used in any one of several senses, also concluded that >although the Philippines is a territory belonging to the United >States, it is not constitutionally united with it, and goods brought >from the Philippines constitute "imports" within the >meaning of the constitutional provision. <I>Hooven I</I>, 324 >U.S. 671,673. ><P> ><I>Limbach v. Hooven & Allison Co.</I>, 466 US 353 (1984) >(<I>Hooven II</I>) overruled <U>Hooven I</U> to the extent that >a state personal property tax could not be imposed until the goods >are removed from the original packaging. The Court held that >nondiscriminatory >ad valorem property taxes are not prohibited by the Import- Export >Clause. Thus, <U>Hooven I</U> and <U>Hooven II</U> are irrelevant >to tax protestor arguments. These cases are not legal authority >for individual federal income tax liability cases and should not >be cited as precedent. ><P><hr> ><CENTER><h4>Tax Protestors will be Sanctioned</h4> </CENTER> ><P> >Congress, the courts and the IRS are not sympathetic to tax protest >principles. In<I> Peth</I>, discussed above, the Court dismissed >the taxpayer's action and awarded costs to the private defendants >and double costs to the government. Finding that the taxpayer's >action was frivolous and brought in bad faith, the Court pointed >out that: ><P> >A considerable amount of time has been spent processing plaintiff's >action, and it has been determined to be wholly without merit. >Indeed, it is frivolous. No reasonable person could seriously >think that, for example, the revenue laws can be avoided and the >government's tax collection efforts can be brought to a standstill, >by the contention that wages are not income... ><P> ><blockquote>...[T]he First Amendment does not provide a broad license to >file >frivolous and vindictive lawsuits that harass and intimidate tax >collection officials and delay tax collection efforts. Such lawsuits >squander the monies of responsible persons who recognize their >duty to carry a share of the nation's tax burden.</blockquote> ><P> >The IRS is authorized to immediately assess a penalty of $500 >upon an individual who files an income tax return containing a >position which (a) does not contain information from which the >correctness of the reported tax liability can be determined, (b) >is substantially incorrect, (c) frivolous or (d) reflects a desire >(which appears on the purported return) to delay or impede the >administration of the Federal income tax laws. Sec. 6702 [1986 >Code]. ><P> >To attack the waste of scarce judicial resources by tax protest >activities, the Tax Court may require the taxpayer to pay to the >United States a penalty of up to $25,000, whenever it appears >to the Tax Court that the taxpayer's position is frivolous, groundless, >or has been maintained primarily for delay. Sec. 6673 [1986 Code]. >See:<I> Coleman</I>, 50 TCM at 120 (where damages under IRC Sec. >6673 were awarded to the government). ><P> >The Supreme Court and a U.S. Court of Appeals are also authorized >to impose penalties upon the taxpayer in any case where the decision >of the Tax Court is affirmed and it appears that the appeal is >frivolous, groundless or instituted primarily for delay. Sec. >7482 (c) (4) [1986 Code] Thus, the tax protestor's efforts to >avoid payment of income taxes may result in payment of significant >penalties in addition to the income taxes he or she attempted >to avoid. ><P><hr> ><h4><Center>Act on Those Beliefs -- Go to Jail</h4></Center> ><P> >Tax protestor gibberish will not insulate you from a criminal tax evasion >conviction. >The Supreme Court in <I>Cheek v US</I>, 91-1 USTC 50,012 (1991), >expressly >stated that a tax protestor's argument, which included the litany of >claims that taxes were unconstitutional, were clearly frivolous >and were not objectively reasonable (meaning that no reasonably objective >person would believe in the merits of those arguments). In Cheeks, the >taxpayer, >who was convicted of tax evasion for failing to file income tax >returns, argued that he was, in effect, "duped" by the >tax protestor rhetoric and honestly believed that he was not a >taxpayer under the Internal Revenue Code. Cheeks claimed he attended >seminars, listened to attorneys and engaged in self-study regarding >the unconstitutionality of federal tax system. He claimed that >because of this "indoctrination," he sincerely believed >that the tax laws were unconstitutional.<p> > >Some argument!! Once the tax protestor movement finally makes it to the >Supreme Court and the only defense to the crime of tax evasion is that >the protestor was stupid and brainwashed into believing the movement's >propaganda !<p> > >The Supreme Court sent >the case back for a retrial, stating that to convict him of tax >evasion the government had to prove that Mr. Cheek did not have >a good faith belief that he was complying with the tax laws. The Court >of Appeals erroneous held that Cheek was not entitled to raise the good >faith belief argument because no reasonably objective person would ever >believe he did not have an obligation to comply with the federal tax >system. >At the retrial, Cheek was once again convicted of tax evasion, >was fined heavily and was sent to prison. Cheek failed to convince the >trial that he had a good faith belief in his position. The same result >will befall those tax protestors who fail to file tax returns: If >caught, expect to go to prison for tax evasion. ><P> >The <I>Cheek</I> case is interesting because it graphically demonstrates >that relying on seminars, self-study and even attorney's opinions >regarding the unconstitutionality of the tax system can (and usually >will) land you in prison for tax evasion. The Supreme Court made >it clear that the arguments used by tax protestors have no merit >whatsoever. Clearly, the tax protestor movement should stand beside the >flat-earth society in terms of intellect and credibility. ><P><hr> ><CENTER><h4>CONSTRUCTIVE PROTEST: POLITICAL ACTION AND TAX PLANNING</h4> ></CENTER> ><P> >A taxpayer has the legal and moral right to decrease his or her >tax liability through means which the law permits. <I>Automatic >Canteen Company of America v State Board of Equalization</I>, >238 Cal. App. 2nd 372 (1965). However, tax protestors have used, >and will likely continue to develop, a variety of groundless arguments >in their attempts to circumvent federal income tax laws. Rather >than waste time, energy and money in such futile pursuits, those >opposed to paying taxes are best advised to use their resources >in the political arena and in learning about legal means to reduce >their tax liability. Tax protestors can support candidates and >laws that will reduce the dreaded tax bite from every dollar earned. >They can also become informed about legal ways to conduct their >business affairs and plan their estates to reduce their tax liability.<p> > ><P> ><hr size="4" align="center" Width = "75%"> ><hr size = "3" align="center" Width = "50%"> ><hr size = "3" align="center" Width = "25%" > ><P> ><HR SIZE=4> ><A HREF="../index.shtml"><IMG SRC="../gifs/castle.gif"></A> ><A HREF=#top><IMG SRC="../gifs/cbup_button.gif"></A> ><A HREF="../tp_email.html"><IMG SRC="../gifs/cbemail_button.gif"></A> ><A HREF="../resume/resume.html"><IMG SRC="../gifs/cbtp_button.gif"></A> ><P> >| <A HREF="../index.shtml">Home Page</A> >| <A HREF=#top>Top of Page</A> >| <A HREF="../tp_email.html">E-mail Form</A> >| <A HREF ="../resume/resume.html">Firm Profile</A> >| ><BR> ><HR SIZE=4> >**NOTE: The information contained at this site is for educational >purposes >only and is not intended for any particular person or circumstance. A >competent tax professional should always be consulted before utilizing >any >of the information contained at this site.** ></BODY> ></HTML> > >--------------741D6D15044-- > > >--------- End forwarded message ---------- > > ======================================================================== Paul Andrew Mitchell : Counselor at Law, federal witness B.A., Political Science, UCLA; M.S., Public Administration, U.C. Irvine tel: (520) 320-1514: machine; fax: (520) 320-1256: 24-hour/day-night email: [address in tool bar] : using Eudora Pro 3.0.2 on 586 CPU website: http://www.supremelaw.com : visit the Supreme Law Library now ship to: c/o 2509 N. Campbell, #1776 : this is free speech, at its best Tucson, Arizona state : state zone, not the federal zone Postal Zone 85719/tdc : USPS delays first class w/o this As agents of the Most High, we came here to establish justice. We shall not leave, until our mission is accomplished and justice reigns eternal. ======================================================================== [This text formatted on-screen in Courier 11, non-proportional spacing.]
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