There is no federal or state income tax on working wages by law in this country.

[Sonny Tufts]

And thus your point would be…?

That your distinction between earning a living and running a business is meritless.

26 USC Sects. 1011 and 1012, that is your “cost basis”, is respective only to affairs of business, property, and enterprise for the purposes of distinguishing the corpus from the gain or profit. The use of this term has nothing to do with determining the worth of contracts, labor, or livelihoods.

Mr. White, let me preface this by saying that you're in way over your head. You pretend to understand the Code, but you really haven't a clue about what it says.

That said, Section 1001 et seq. are the general rules for determining gain or loss from the sale or exchange of peroperty, and it is not restricted to sales and exchanges occurring in business affairs.

No, Section 721(a) is speaking to the gain or loss of the transferred object as a contribution to the partnership, not the gain or loss to the partner prior to the formation of the partnership and subsequent contribution.

Read the section again, Mr. White. It says just what I said it did. The partner contributing property to a partnership is making an exchange -- he is giving up the property in exchange for a partnership interest. Normally, such an exchange would be a taxable event, but Section 721 creates an exception and says that the contributor recognizes no gain.

Additionally, the initial basis in the value of the property would be determined by the value as set forth by the contractual contribution.

No, Mr. White, that is precisely what the statutes do not say. While a partner's capital account is based on the fair market value of contributed property, basis is not. Basis and capital accounts are entirely different concepts.

whereas the partners “cost basis” might have very well been $10K that is not to mean they are permitted to claim only $10K of their property valued at $100K as their respective contribution.

Exactly -- you are beginning to understand. If you contribute $100,000 cash and I contribute land worth $100,000 with a basis of $10,000, we each start out with capital accounts of $100,000 each. But the partnership's basis in the land is only $10,000, the same amount as my basis in my partnership interest.

Additionally, the scenarios you are attempting to raise create a host of problems (e.g., passing a $90,000 fictitious gain the partnership from was what actually the startup capital, creating the potentiality for a double-taxation scenario, generating a massive loss to the affected partner, etc.)

No, Mr. White. If the partnership sells the land for $100,000 two days after its formation, the law requires that the pre-contribution built-in gain of $90,000 be allocated to the contributing partner. There is no double tax, because partnerships don't pay federal income tax; they are flow-through entities. You really don't know any of this stuff, do you?

It was you that had originally insinuated that labors hold no “cost basis” in their labor and thereby all that they take in is pure gain and 100% taxable, given only to certain statutory exemption. I was only pointing out your utter lunacy on the issue.

Mr. White, it is the ignorant tax protesters (yes, that's redundant) who are trying to analyze compensation-for-work in terms of a sale or exchange. I do not, for the simple reason that Section 61(a) distinguishes between pay-for-work and gain from dealings in property and says that both are includable in gross income unless exempted. But even if one were to view pay-for-work as the amount received from an exchange of labor, the gain would be measured by the difference between the amount received (the pay) and the cost basis in the labor that was exchanged. Since the worker paid nothing for his labor, the entire amount of pay is gross income. Any argument to the contrary is frivolous and will likely result in sanctions for the one making it.

“The taxpayer next argues that wages are not income but an exchange of property. As money is property and labor is property, so his argument goes, his work for wages is a non-taxable exchange of property. Wrong again. Wages are income. See, e.g., Schiff v. Commissioner, 751 F.2d 116, 117 (2d Cir. 1984). The argument that they are not has been rejected so frequently that the very raising of it justifies the imposition of sanctions.” Connor v. Commissioner, 770 F.2d 17, 20 (2nd Cir. 1985), (the court not only ruled against the taxpayer, but also imposed sanctions of $2,000 for making a frivolous appeal).

“Appellant’s contention that the amounts he received from his employers constituted an equal, nontaxable exchanges of property rather than taxable income is clearly without merit. This court specifically rejected this argument in United States v. Lawson, 670 F.2d 923, 925 (10th Cir. 1982), as did the Tax Court in Rowlee v. Commissioner, 80 T.C. 1111, 1119-22 (1983).... Merely raising the argument that value received for labor does not constitute taxable income, but rather constitutes a nontaxable exchange of property, justifies the imposition of sanctions.” Casper v. Commissioner, 805 F.2d 902, 906 (10th Cir. 1986).

“According to Buras, income must be derived from some source. Wages cannot be taxed because the wage earner enjoys no gain from that source. Since the wage earner exchanges his labor and personal time for its equivalent in money, he derives no gain and therefore cannot be taxed. ... Appellant’s argument is refuted by one of the cases he cites. In Stratton’s Independence, Ltd. v. Howbert, 231 U.S. 399, 415, 34 S.Ct. 136, 140, 58 L.Ed. 285 (1913), the Court did define income as gain derived from labor. The Court went on to explain, however, that ‘the earnings of the human brain and hand when unaided by capital’ are commonly treated as income.”
United States v. Buras, 633 F.2d 1356, 1361 (9th Cir. 1980).

“Furthermore, Olson’s attempt to escape tax by deducting his wages as ‘cost of labor’ ... illustrate the frivolous nature of his position. This court has repeatedly rejected the argument that wages are not income as frivolous....” Olson v. United States, 760 F.2d 1003, 1005 (9th Cir. 1985).

“DeMoss contends that the compensation he received from his employers is not taxable because his basis in his labor is equal to the amount of compensation he received. The tax court properly rejected this frivolous contention. See Carter v. Commissioner, 784 F2d 1006, 1009 (9th Cir. 1986); Olson v. United States, 760 F.2d 1003, 1005 (9th Cir. 1985).” DeMoss v. Commissioner, 1995 U.S. App. LEXIS 2672, 75 A.F.T.R.2d 841 (9th Cir. 1995), (unpublished; sanctions imposed for filing a frivolous appeal).

“Appellant’s second argument is that his compensation in exchange for labor is property, not income. ... Again, he is wrong. The Third Circuit unequivocally has stated that ‘wages are income within the meaning of the Sixteenth Amendment.’ United States v. Connor, 898 F.2d 942, 944 (3rd Cir. 1990). The Third Circuit then warned that ‘[u]nless subsequent Supreme Court decisions throw any doubt on this conclusion, we will view arguments to the contrary as frivolous, which may subuect the party asserting them to appropriate sanctions.’ Id. Such authority is neither cited nor found, and appellant’s arguments will be dismissed as frivolous. Wages are income.”
Angstadt v. Internal Revenue Service, 84 AFTR2d ¸99-5455, 1999 WL 820866, at 2 (U.S.D.C. E.D.Pa. 1999).

“[Peth] states that the income taxes are directed to taxable gain. Because he receives a paycheck for his labor, and because the paycheck is equal to the fair market value of his labor, he argues there is no gain. 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.” Peth v. Breitzmann, 611 F. Supp. 50, 53 (E.D.Wis. 1985), 1985 U.S. Dist. LEXIS 21509, 85-1 U.S.T.C. ¶9321, 55 AFTR2d 1280 (complaints dismissed and sanctions imposed for filing frivolous actions “brought in bad faith”).

“Even if wages are, in effect, an exchange of equal value for value, they are nevertheless taxable income. Rowlee v. Commissioner, 80 T.C. 1111, 1121-1122 (1983); Rice v. Commissioner, T.C. Memo. 1982-129. And even if we apply section 1001 to determine petitioner’s gain, his basis is defined under sections 1011 and 1012 as his cost, not fair market value. Since he paid nothing for his labor, his cost and thus his basis are zero. Rice v. Commissioner, supra. Consequently, even under section 1001, his taxable income from his labor is his total gain reduced by nothing, i.e., his wages. ... Petitioner’s argument fails for the same reason that other protesters’ arguments fail; the worker’s cost for his services--and thus his basis--is zero, not their fair market value.” Talmage v. Commissioner, T.C. Memo. 1996-114, aff’d 101 F.3d 695 (4th Cir. 1996).

“Petitioner submitted to the Internal Revenue Service documents purporting to be 1995 and 1996 Federal income tax returns. The documents reported petitioner’s compensation earned in each year and then deducted the equivalent amount as ‘Property (money) exchanged for property (labor not subject to tax).” ... The only dispute that petitioner raised with respect to the amounts of compensation is his frivolous arguments that his wages are not taxable. These arguments, as petitioner was advised in the District Court order, citing United States v. Studley, 783 F.2d 934, 937 (9th Cir. 1986), have been consistently and thoroughly rejected and may be the basis for sanctions.” Wheelis v. Commissioner, T.C. Memo 2002-102, 2002 TNT 74-14, (sanctions of $10,000 imposed for frivolous arguments raised primarily for delay); aff’d 2003 TNT 108-7, No. 02-73119 (9th Cir. 5/16/2003).

“In effect, Ms. Sumter attempts to claim that the deduction (her total salary) was a necessary expense for the production of that same salary. She provides no support or credible justification for her untenable position. Ms. Sumter tries to cite case law in support of her “even exchange” argument; however, none of the cases she cites justify her position. In fact, the cases are contrary to her .position. [Discussion of cases omitted] Thus, courts have clearly rejected the “even exchange” argument, which erroneously asserts that no taxes are owed on employment wages, since the income from the services rendered was a fair market value and, therefore, no profit or gain occurred as a result of the work performed.” Sumter v. United States, 61 Fed. Cl. 517, 518 (2004).

“[A] review of the pleadings indicates that Mr. Ledford bases his entitlement to this relief on his view that the federal tax code does not tax compensation received for personal labor. Mr. Ledford’s view of the tax law is mistaken, as the tax code quite plainly defines income to include amounts received in compensation for services rendered. 26 U.S.C. § 61(a) (2000) (“[G]ross income means all income from whatever source derived including (but not limited to) the following items: (1) Compensation for services, including fees, commissions, fringe benefits, and similar items . . . .”). Indeed, every court that has considered the matter has found this argument to be wholly without merit -- so much so that merely raising it is considered sanctionable.” Ledford v. United States, 297 F.3d 1378, 1381, 2002 TNT 153-6, No. 02-5027 (Fed. Cir. 8/6/2002).

[Wheeljack]

Mr. White, it is the ignorant tax protesters (yes, that's redundant) who are trying to analyze compensation-for-work in terms of a sale or exchange. I do not, for the simple reason that Section 61(a) distinguishes between pay-for-work and gain from dealings in property and says that both are includable in gross income unless exempted. But even if one were to view pay-for-work as the amount received from an exchange of labor, the gain would be measured by the difference between the amount received (the pay) and the cost basis in the labor that was exchanged. Since the worker paid nothing for his labor, the entire amount of pay is gross income. Any argument to the contrary is frivolous and will likely result in sanctions for the one making it.

Weston, it is easy to see why the following people got whacked.

1. They claimed their wages as compensation for services on their 1040.

2. They then attempted to claim a deduction of compensation for labor from their claim of compensation for services.

Remember why we file a 4852. We do not include compensation for labor in compensation for services in the first place.

You can't claim it as one thing and then try to deduct it as another.

“The taxpayer next argues that wages are not income but an exchange of property. As money is property and labor is property, so his argument goes, his work for wages is a non-taxable exchange of property. Wrong again. Wages are income. See, e.g., Schiff v. Commissioner, 751 F.2d 116, 117 (2d Cir. 1984). The argument that they are not has been rejected so frequently that the very raising of it justifies the imposition of sanctions.” Connor v. Commissioner, 770 F.2d 17, 20 (2nd Cir. 1985), (the court not only ruled against the taxpayer, but also imposed sanctions of $2,000 for making a frivolous appeal).

“Appellant’s contention that the amounts he received from his employers constituted an equal, nontaxable exchanges of property rather than taxable income is clearly without merit. This court specifically rejected this argument in United States v. Lawson, 670 F.2d 923, 925 (10th Cir. 1982), as did the Tax Court in Rowlee v. Commissioner, 80 T.C. 1111, 1119-22 (1983).... Merely raising the argument that value received for labor does not constitute taxable income, but rather constitutes a nontaxable exchange of property, justifies the imposition of sanctions.” Casper v. Commissioner, 805 F.2d 902, 906 (10th Cir. 1986).

“According to Buras, income must be derived from some source. Wages cannot be taxed because the wage earner enjoys no gain from that source. Since the wage earner exchanges his labor and personal time for its equivalent in money, he derives no gain and therefore cannot be taxed. ... Appellant’s argument is refuted by one of the cases he cites. In Stratton’s Independence, Ltd. v. Howbert, 231 U.S. 399, 415, 34 S.Ct. 136, 140, 58 L.Ed. 285 (1913), the Court did define income as gain derived from labor. The Court went on to explain, however, that ‘the earnings of the human brain and hand when unaided by capital’ are commonly treated as income.”
United States v. Buras, 633 F.2d 1356, 1361 (9th Cir. 1980).

“Furthermore, Olson’s attempt to escape tax by deducting his wages as ‘cost of labor’ ... illustrate the frivolous nature of his position. This court has repeatedly rejected the argument that wages are not income as frivolous....” Olson v. United States, 760 F.2d 1003, 1005 (9th Cir. 1985).

“DeMoss contends that the compensation he received from his employers is not taxable because his basis in his labor is equal to the amount of compensation he received. The tax court properly rejected this frivolous contention. See Carter v. Commissioner, 784 F2d 1006, 1009 (9th Cir. 1986); Olson v. United States, 760 F.2d 1003, 1005 (9th Cir. 1985).” DeMoss v. Commissioner, 1995 U.S. App. LEXIS 2672, 75 A.F.T.R.2d 841 (9th Cir. 1995), (unpublished; sanctions imposed for filing a frivolous appeal).

“Appellant’s second argument is that his compensation in exchange for labor is property, not income. ... Again, he is wrong. The Third Circuit unequivocally has stated that ‘wages are income within the meaning of the Sixteenth Amendment.’ United States v. Connor, 898 F.2d 942, 944 (3rd Cir. 1990). The Third Circuit then warned that ‘[u]nless subsequent Supreme Court decisions throw any doubt on this conclusion, we will view arguments to the contrary as frivolous, which may subuect the party asserting them to appropriate sanctions.’ Id. Such authority is neither cited nor found, and appellant’s arguments will be dismissed as frivolous. Wages are income.”
Angstadt v. Internal Revenue Service, 84 AFTR2d ¸99-5455, 1999 WL 820866, at 2 (U.S.D.C. E.D.Pa. 1999).

“[Peth] states that the income taxes are directed to taxable gain. Because he receives a paycheck for his labor, and because the paycheck is equal to the fair market value of his labor, he argues there is no gain. 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.” Peth v. Breitzmann, 611 F. Supp. 50, 53 (E.D.Wis. 1985), 1985 U.S. Dist. LEXIS 21509, 85-1 U.S.T.C. ¶9321, 55 AFTR2d 1280 (complaints dismissed and sanctions imposed for filing frivolous actions “brought in bad faith”).

“Even if wages are, in effect, an exchange of equal value for value, they are nevertheless taxable income. Rowlee v. Commissioner, 80 T.C. 1111, 1121-1122 (1983); Rice v. Commissioner, T.C. Memo. 1982-129. And even if we apply section 1001 to determine petitioner’s gain, his basis is defined under sections 1011 and 1012 as his cost, not fair market value. Since he paid nothing for his labor, his cost and thus his basis are zero. Rice v. Commissioner, supra. Consequently, even under section 1001, his taxable income from his labor is his total gain reduced by nothing, i.e., his wages. ... Petitioner’s argument fails for the same reason that other protesters’ arguments fail; the worker’s cost for his services--and thus his basis--is zero, not their fair market value.” Talmage v. Commissioner, T.C. Memo. 1996-114, aff’d 101 F.3d 695 (4th Cir. 1996).

“Petitioner submitted to the Internal Revenue Service documents purporting to be 1995 and 1996 Federal income tax returns. The documents reported petitioner’s compensation earned in each year and then deducted the equivalent amount as ‘Property (money) exchanged for property (labor not subject to tax).” ... The only dispute that petitioner raised with respect to the amounts of compensation is his frivolous arguments that his wages are not taxable. These arguments, as petitioner was advised in the District Court order, citing United States v. Studley, 783 F.2d 934, 937 (9th Cir. 1986), have been consistently and thoroughly rejected and may be the basis for sanctions.” Wheelis v. Commissioner, T.C. Memo 2002-102, 2002 TNT 74-14, (sanctions of $10,000 imposed for frivolous arguments raised primarily for delay); aff’d 2003 TNT 108-7, No. 02-73119 (9th Cir. 5/16/2003).

“In effect, Ms. Sumter attempts to claim that the deduction (her total salary) was a necessary expense for the production of that same salary. She provides no support or credible justification for her untenable position. Ms. Sumter tries to cite case law in support of her “even exchange” argument; however, none of the cases she cites justify her position. In fact, the cases are contrary to her .position. [Discussion of cases omitted] Thus, courts have clearly rejected the “even exchange” argument, which erroneously asserts that no taxes are owed on employment wages, since the income from the services rendered was a fair market value and, therefore, no profit or gain occurred as a result of the work performed.” Sumter v. United States, 61 Fed. Cl. 517, 518 (2004).

“[A] review of the pleadings indicates that Mr. Ledford bases his entitlement to this relief on his view that the federal tax code does not tax compensation received for personal labor. Mr. Ledford’s view of the tax law is mistaken, as the tax code quite plainly defines income to include amounts received in compensation for services rendered. 26 U.S.C. § 61(a) (2000) (“[G]ross income means all income from whatever source derived including (but not limited to) the following items: (1) Compensation for services, including fees, commissions, fringe benefits, and similar items . . . .”). Indeed, every court that has considered the matter has found this argument to be wholly without merit -- so much so that merely raising it is considered sanctionable.” Ledford v. United States, 297 F.3d 1378, 1381, 2002 TNT 153-6, No. 02-5027 (Fed. Cir. 8/6/2002).

[Weston White]

That your distinction between earning a living and running a business is meritless.

False, this is not, as you acclaim, my “distinction”; for it is Subtitle A itself that makes such distinctions, between individuals, businesses, nonresident aliens, foreign corporations, et al. More than this, it is our U.S. Constitution that provides such distinctiveness between the various means of direct and indirect taxation.

Clearly, there is at virtually every level, a vast distinction between earning a livelihood and operating a business.

Mr. White, let me preface this by saying that you're in way over your head. You pretend to understand the Code, but you really haven't a clue about what it says.

The above is not worthy of any response on my part, mine and others research is wholly capable of standing on its own merits. Moreover, SCOTUS has made it more than clear what constitutional income means and it is not all that comes in, neither is it the source nor the corpus. Therefore, whatever was in fact the original intention of the IRC that intent has since been greatly solidified by the precedent of SCOTUS. Besides all of that, not even Black’s treatise agrees with your silly notions respective of common laborers. It is all good though, may you live eternally to continually blast holes into your own feet.

That said, Section 1001 et seq. are the general rules for determining gain or loss from the sale or exchange of peroperty, and it is not restricted to sales and exchanges occurring in business affairs.

Planet Earth to Sonny Jim, do you realize all that you are arguing about a generic procedure on how to determine the gain or loss from the originating investment or purchase or cost? Ergo, it is a common sense term, whereas, the action of its definition is just as applicable to the gains and profits of the individual as to the businessperson or entrepreneur. In other words, a big who cares!

And false, an “exchange” is not indicative of a “transfer”; for the latter is what those sections are addressing, you are yet again attempting to murky the waters in order to hide your apparent deceptiveness.

The fact remains that “cost basis” is an accounting/financial term pertaining to taxation, just as is “amortization” (as well as scores of other such industry jargon), both terms have little to nothing to do with the common engagements of the American masses.

Also to be kept in mind is that 26 USC Sec. 1011 derives from Section 113(b) of the 1939 IRC, now when you go review those surrounding sections you will notice that there is an awful lot of discussion about corporate activities, stocks, mergers, reorganizations, affiliations, distributions, liquidations, etc. (excerpt below), thereby hinting to the intended context of the surrounding sections. So yes, those sections clearly have to do with both business and entrepreneurial activities. If you do not want to admit to that, I could honestly care less. Simply put, none of this has anything at all to do with earning a living and is meant only to debase the underlying point and purpose of this thread.

Sec. 113(b) of the 1939 IRC:

…
(b) ADJUSTED BASIS.—The adjusted basis for determining the gain or loss from the sale or other disposition of property, whenever acquired, shall be the basis determined under subsection (a), adjusted as hereinafter provided.
(1) GENERAL RULE.—Proper adjustment in respect of the property shall in all cases be made—
(A) For expenditures, receipts, losses, or other items, properly chargeable to capital account, including taxes and other carrying charges on unimproved and unproductive real property, but no such adjustment shall be made for taxes or other carrying charges for which deductions have been taken by the taxpayer in determining net income for the taxable year or prior taxable years;
(B) in respect of any period since February 28, 1913, for exhaustion, wear and tear, obsolescence, amortization, and depletion, to the extent allowed (but not less than the amount allowable) under this chapter or prior income tax laws. Where for any taxable year prior to the taxable year 1932 the depletion allowance was based on discovery value or a percentage of income, then the adjustment for depletion for such year shall be based on the depletion which would have been allowable for such year if computed without reference to discovery value or a percentage of income;
(C) in respect of any period prior to March 1, 1913, for exhaustion, wear and tear, obsolescence, amortization, and depletion, to the extent sustained;
(D) in the case of stock (to the extent not provided for in the foregoing subparagraphs) for the amount of distributions previously made which, under the law applicable to the year in
which the distribution was made, either were tax-free or were applicable in reduction of basis (not including distributions made by a corporation, which was classified as a personal service corporation under the provisions of the Revenue Act of 1918, Feb. 24, 1919, c. 18, 40 Stat. 1057, or the Revenue Act of 1921, Nov. 28, 1921, c. 136, 42 Stat. 227, out of its earnings or profits which were taxable in accordance with the provisions of section 218 of the Revenue Act of 1918 or 1921);
(E) to the extent provided in section 337 (f) in the case of the stock of United States shareholders in a foreign personal holding company; and
(F) to the extent provided in section 28 (h) in the case of amounts specified in a shareholder's consent made under section 28.
...
SOURCE: http://www.defenderone.net/LRDC/SAL/1939_IRC.PDF

To be rather frank, I would compare your newest argument regarding “cost basis”, as to the same tact implemented by those arguing over Section 861 of the IRC. Sonny Jim, to that you are misguided in your reasoning.

Read the section again, Mr. White. It says just what I said it did. The partner contributing property to a partnership is making an exchange -- he is giving up the property in exchange for a partnership interest. Normally, such an exchange would be a taxable event, but Section 721 creates an exception and says that the contributor recognizes no gain.

No you are commingling the exceptions to be rendered for partnerships (including other engagements) with the otherwise general context of Subchapter O. The correct term as used in the IRC is “transfer”, not “exchange”; ergo, one transfers their contribution onto the partnership in order to become a partner. To exchange is to guarantee the receipt of something of a relative or equal value given to the circumstances or events involved. One’s contribution to a partnership may result in a negative loss, a total loss, a partial loss, or a greater gain or profit, however, in any instance it could not be properly said to have been equal or even to the originating investment put forth -hence the entire purpose of “investing”, as a risk worth the reward. As stated in general:

26 USC § 1001 - Determination of amount of and recognition of gain or loss
(a) Computation of gain or loss
The gain from the sale or other disposition of property shall be the excess of the amount realized therefrom over the adjusted basis provided in section 1011 for determining gain, and the loss shall be the excess of the adjusted basis provided in such section for determining loss over the amount realized.
(b) Amount realized
The amount realized from the sale or other disposition of property shall be the sum of any money received plus the fair market value of the property (other than money) received. In determining the amount realized—
…
(c) Recognition of gain or loss
Except as otherwise provided in this subtitle, the entire amount of the gain or loss, determined under this section, on the sale or exchange of property shall be recognized.
…

26 USC § 1011 - Adjusted basis for determining gain or loss
(a) General rule
The adjusted basis for determining the gain or loss from the sale or other disposition of property, whenever acquired, shall be the basis (determined under section 1012 or other applicable sections of this subchapter and subchapters C (relating to corporate distributions and adjustments), K (relating to partners and partnerships), and P (relating to capital gains and losses)), adjusted as provided in section 1016.
…

26 USC § 1012 - Basis of property—cost
(a) In general
The basis of property shall be the cost of such property, except as otherwise provided in this subchapter and subchapters C (relating to corporate distributions and adjustments), K (relating to partners and partnerships), and P (relating to capital gains and losses).

Which is (as noted above) respective of 26 USC 1016 (and is virtually identical to the above 1939 IRC Sec. 113(b) quotation): http://www.law.cornell.edu/uscode/text/26/1016

And no becoming a partner is itself not a taxable event; such would only become taxable whenever a partner receives distributions or whatever from the partnership as a gain or profit to them (neither would becoming a partner aid an individual in escaping their prior obligations for taxes, save for if they were intent on being dishonest form the outset), and I would tend to think that neither would startup capital be considered taxable.

Though as I have stated in the past, I do not study other aspects of the IRC; in other words, so far as I am concerned everything related to businesses and business activities, etc., meaning any and all realized gains and profits are correctly the target of the federal income tax and I care not to debate it, for to otherwise do so is ultimately moot.

No, Mr. White, that is precisely what the statutes do not say. While a partner's capital account is based on the fair market value of contributed property, basis is not. Basis and capital accounts are entirely different concepts.

Then we are arguing over nothing, as you had initially gave the appearance that you were saying a partner could only invest their original purchase cost as the value of their contribution, with whatever actual loss or gain being absorbed into the partnership itself. To which I argued that such an assertion was completely illogical and would amount to conversion, aside from being entirely disadvantageous to that contributing partner.

However, my true concern was the debate over the common laborer, a position to which I more than successively defended.

Exactly -- you are beginning to understand. If you contribute $100,000 cash and I contribute land worth $100,000 with a basis of $10,000, we each start out with capital accounts of $100,000 each. But the partnership's basis in the land is only $10,000, the same amount as my basis in my partnership interest.

Then to that point there was apparently a misunderstanding as to your initial comment.

No, Mr. White. If the partnership sells the land for $100,000 two days after its formation, the law requires that the pre-contribution built-in gain of $90,000 be allocated to the contributing partner. There is no double tax, because partnerships don't pay federal income tax; they are flow-through entities. You really don't know any of this stuff, do you?

But the partners receive allotted distributions to be paid out, respective to the remaining gains/profits of their partnership, so in that way the partnership entity (as a whole) would have incurred those additional taxes, be it directly or indirectly through whichever partner’s prior losses or gains, having been passed onto the partnership during its initialization -that is, as its invested startup capital.

And yes that is correct, as I have said to you before when you were running around on the Internet as “Legist”, I do not research the IRC as it applies to or effects businesses. To me that subject is irrelevant -however, so far as such subjects of taxation are concerned the only aspects that I really disagree with are the tax rates, as they are all set way too high; and all of the tax loopholes that are permitted for conglomerations to entirely avoid taxation and to receive vast sums in refunds, or rebates, or whatever else their highly paid lobbyists dream up.

Mr. White, it is the ignorant tax protesters (yes, that's redundant) who are trying to analyze compensation-for-work in terms of a sale or exchange. I do not, for the simple reason that Section 61(a) distinguishes between pay-for-work and gain from dealings in property and says that both are includable in gross income unless exempted. But even if one were to view pay-for-work as the amount received from an exchange of labor, the gain would be measured by the difference between the amount received (the pay) and the cost basis in the labor that was exchanged. Since the worker paid nothing for his labor, the entire amount of pay is gross income. Any argument to the contrary is frivolous and will likely result in sanctions for the one making it.

False, “compensation” has already been distinctly addressed within the derivation of 26 USC Sec. 61, having been enumerated apart from salaries and wages. This was not simply intentional surplusage. It was crafted so as to maintain the breadth of what is to be considerable as constitutional income; hence, the realized increase ascending out from its source.

False, SCOTUS has since 1913 developed (via common law precedence) the strict meaning of ‘gross income’, by stripping the contextual vagueness out from its global application; thus, whatever the statute attempts to continue postulating is legally irrelevant.

False, “cost basis” is respective only to the selling or other final disposition of tangible, transferable property; as to its exacting losses, gains, or profits, something which is not at all relatable to livelihoods alone.

False, such would be no different than one neighbor exchanging a small bag of homegrown organic tomatoes with their neighbor for a whole homegrown organic watermelon, for example -this is nothing more than an enjoyable exchange as equally beneficial to the respective agreement of both private parties.

False, neither may an individual’s toiling nor livelihood superimpose itself as a realized gain from capital or posture itself as the source thereof.

False, the statutory definition states not that labor or remuneration results in the realization of income, but that the realization of income derives from the increases brought about by applied salaries or wages (which are the common requites of laboring), or otherwise through “compensation” in whatever form received. The statutory definition states not that labor is as in the course of common livelihoods, but that labor is in the context of: “professions, vocations, businesses, trade, commerce, or sales, or dealings in property”.

False, even if your scenario were the case, it is the labor contract itself that sets forth the legal value, the worth, or the cost of that labor, which is to be thusly performed and once completed the receipt of payment, is in obligation and accord to that prearrangement. Therefore, no realized gain or profit has yet transpired, only a reciprocating conversion designated to yield a relationally equal effort or value; that is not until something additional has been received by the laborer, be it a bonus, tip, reward, special pay, etc., or otherwise a return on subsequent investments resulting from the prudent external application of the payments prior received.

While, the determination of “cost basis” may be apropos for the employer in relation to the operating of their business, such is not the case for the employee in relation to their earning a livelihood.

Simply, when one labors they are doing so with the positive goal of establishing the capital for which to serve as the source of their future taxable arrangements; however, it is not until they have first obtained that financial corpus that they begin entering into the realm of “ascended wealth” (to which you had prior spoke of), being that until that point they had possessed nothing of transferable, exchangeable value for which to procure that ascension and for which they are still in need of realizing a gain in order to do so.

[Weston White]

Weston, it is easy to see why the following people got whacked.

1. They claimed their wages as compensation for services on their 1040.

2. They then attempted to claim a deduction of compensation for labor from their claim of compensation for services.

Remember why we file a 4852. We do not include compensation for labor in compensation for services in the first place.

You can't claim it as one thing and then try to deduct it as another.

Oh yes, absolutely. Additionally, it is (that is I find it to be), very telling that SCOTUS will not pickup the ball on this or similarly related matters.

[Exiled_LFOD]

Dear Employer,

It has come to my attention that I am getting $#@!ed over. Last year the company testified that I earned income in the form of a W-2. Since science has proven it takes energy in order to perform work and energy is not created out of thin air, the company is a lying sack of $#@! omitting any costs associated with producing or converting energy in order to perform work when making income assertions. I have decided to rectify the matter this year.

Labor contracts have value. Presently all work performed is paid at a future date. Since I am a creditor loaning the company value until it is paid I have decided to stipulate new billing terms. In the future all work performed shall be due and payable upon delivery. I have attached a schedule of fees for late payments and the rate of interest unpaid work that has been performed shall accrue.

Since I anticipate I will be receiving a nice return on labor loans, I am excited that I might actually realize a gain this year.

Sincerely,
Employee

[Sonny Tufts]

Weston, it is easy to see why the following people got whacked.

1. They claimed their wages as compensation for services on their 1040.

2. They then attempted to claim a deduction of compensation for labor from their claim of compensation for services.

That's not quite accurate. In the Casper, Buras, Angstadt, Talmage, and Ledford cases, the taxpayer either never filed a return or never reported the amounts received.

[Wheeljack]

That's not quite accurate. In the Casper, Buras, Angstadt, Talmage, and Ledford cases, the taxpayer either never filed a return or never reported the amounts received.

But under examination they admitted to receiving wages and claimed the wages are not income line.

[Weston White]

But under examination they admitted to receiving wages and claimed the wages are not income line.

Yes, and that would be in clear cut violation of 26 USC Sec. 3502. See at: http://www.law.cornell.edu/uscode/text/26/3502

That being stated, the employee is saved from IRS W-4 entrapment via: 26 USC Sects. 3503, 6401(d), 6402(a),(l), 31(a)(1), et seq.

[Sonny Tufts]

Yes, and that would be in clear cut violation of 26 USC Sec. 3502. See at: http://www.law.cornell.edu/uscode/text/26/3502

Horsefeathers, Mr. White; once again, you have absolutely no understanding of what the Code says. 3502 simply says that Social Security and Railroad Retirement taxes aren't deductible in computing taxable income and that neither the employer nor the employee can deduct income tax withheld under Chapter 24 in computing taxable income. There is no "violation", and the statute has nothing whatsoever to do with what's includable in gross income.

[Weston White]

Horsefeathers, Mr. White; once again, you have absolutely no understanding of what the Code says. 3502 simply says that Social Security and Railroad Retirement taxes aren't deductible in computing taxable income and that neither the employer nor the employee can deduct income tax withheld under Chapter 24 in computing taxable income. There is no "violation", and the statute has nothing whatsoever to do with what's includable in gross income.

Yes, I know perfectly well what it states, I was the one that read it and posted the reference to it. I think it is you that failed to grasp the reference, which is about par with the likes of you.

Even still you are incorrect (supra):

(a) The taxes imposed by section 3101 of chapter 21, and by sections 3201 and 3211 of chapter 22 shall not be allowed as a deduction to the taxpayer in computing taxable income under subtitle A.
(b) The tax deducted and withheld under chapter 24 shall not be allowed as a deduction either to the employer or to the recipient of the income in computing taxable income under subtitle A.

[Weston White]

Double Post...

[Sonny Tufts]

Yes, I know perfectly well what it states, I was the one that read it and posted the reference to it.

Indeed you did, but it's obvious you didn't understand it. Wheeljack's reference to someone admitting receiving wages but maintaining that they aren't income is not only not a "violation" of 3502, it has no connection to 3502.

A violation of 3502 would consist of someone to try to deduct the withheld taxes from gross income (which, by the way, wouldn't necessarily eliminate his tax liability). Wheeljack is talking about someone who says what he received isn't included in gross income. Once you say that, there's no need to consider your deductions because your gross income is zero.

[Weston White]

Indeed you did, but it's obvious you didn't understand it. Wheeljack's reference to someone admitting receiving wages but maintaining that they aren't income is not only not a "violation" of 3502, it has no connection to 3502.

A violation of 3502 would consist of someone to try to deduct the withheld taxes from gross income (which, by the way, wouldn't necessarily eliminate his tax liability). Wheeljack is talking about someone who says what he received isn't included in gross income. Once you say that, there's no need to consider your deductions because your gross income is zero.

No, if you recall, Wheeljack had prior to stated the following (regarding all those case quotations):

“They then attempted to claim a deduction of compensation for labor from their claim of compensation for services.”

“You can't claim it as one thing and then try to deduct it as another.”

Which does have direct bearing on the statutory context of the “nondeductibility of taxes in computing taxable income”. Call it whatever you want, give it whatever name or label your heart desires, but that statute makes it clear that you cannot do that for the purposes of nullifying the equation respective to gross income in determination of its taxable income.

[Sonny Tufts]

Call it whatever you want, give it whatever name or label your heart desires, but that statute makes it clear that you cannot do that for the purposes of nullifying the equation respective to gross income in determination of its taxable income.

Mr. White, you need to lean the difference between deducting compensation and deducting the tax on the compensation. When you deduct the compensation you reduce gross income to zero (assuming you have no other income). This is what some of the people in the cited cases were trying to do. 3502 does not address this in any way, shape, or form.

3502 deals with deducting taxes, not deducting compensation. Unlike the situation in which you deduct compensation, when you deduct the tax on the compensation you do not eliminate gross or taxable income because the tax rate isn't 100%. If an employee makes $100,000 on which his employer withholds 7.65% in FICA and Medicare taxes and 25% in income tax, he would still have $67,350 in gross income even if he could deduct the withheld taxes. This is not what the tax protesters were trying to do. 3502 is therefore irrelevant to the discussion.

[Weston White]

Mr. White, you need to lean the difference between deducting compensation and deducting the tax on the compensation. When you deduct the compensation you reduce gross income to zero (assuming you have no other income). This is what some of the people in the cited cases were trying to do. 3502 does not address this in any way, shape, or form.

3502 deals with deducting taxes, not deducting compensation. Unlike the situation in which you deduct compensation, when you deduct the tax on the compensation you do not eliminate gross or taxable income because the tax rate isn't 100%. If an employee makes $100,000 on which his employer withholds 7.65% in FICA and Medicare taxes and 25% in income tax, he would still have $67,350 in gross income even if he could deduct the withheld taxes. This is not what the tax protesters were trying to do. 3502 is therefore irrelevant to the discussion.

Look, I am not going to debate this matter with you, you are beyond silliness now:

1. Such taxes in the context of 26 USC Sect. 3502 are the inevitable result of receiving “compensation”.

2. It clearly goes without saying that if you deduct your “compensation” you also deduct your taxes upon that “compensation”, just the same as if you have no “compensation”, then neither will you incur any respective taxes; which is in fact the resulting effect when you attempt to apply your laboring, pay, related costs, or whatever else in an effort to reduce your taxes (the actual percentage of this feat is of little relevance).

3. 26 USC Sect. 3502 additionally considers Chapter 24 withholdings, so it also pertains to other taxes being withheld besides SSI and FICA, ergo “wages”, a la 'gross income'.

4. E.g., “Olson’s attempt to escape tax by deducting his wages as ‘cost of labor’ .”; “Petitioner submitted to the Internal Revenue Service documents purporting to be 1995 and 1996 Federal income tax returns. The documents reported petitioner’s compensation earned in each year and then deducted the equivalent amount as ‘Property (money) exchanged for property (labor not subject to tax).””; and “In effect, Ms. Sumter attempts to claim that the deduction (her total salary) was a necessary expense for the production of that same salary.”

And as to your example, isn’t it 28% on the excess for that large sum, (but really it is 31%, although has been reduced by way of 26 USC Sec. 1(i)(2))?

[Weston White]

For everybody (that is all RPF members) keeping up on this thread, please be sure to cast you votes in the following two related polls (thank you):

http://www.ronpaulforums.com/showthr...16th-amendment

http://www.ronpaulforums.com/showthr...uo-methodology

[Weston White]

RESOLVED.


The status quo and its Sonny Jim, the logic to their foundations are fundamentally flawed for the following:

1. They correctly argue that the determination of the Pollock case was largely to the object being conjoined with its source, so far that either, as a subject of taxation require such to be laid by the rule of apportionment, as to the former, just as the latter; to which all consideration to the latter (ergo, the source) was subsequently nullified by the XVI Amendment. However, in that very breath they also argue that, the principles found by Pollock applied only to the investment of property, be it by rents, realty, stock, etc., and not whatsoever to laboring, livelihood, recompense, subsistence, or the right to live, itself.

2. Incorrectly, they argue that the federal government has always possessed the power to indirectly tax at the source of one’s laboring, livelihood, recompense, or subsistence without apportionment, and hence such powers of taxation withstand the XVI Amendment -but that the federal government had conveniently just never opted to do so, that is at least not until around the 1940’s and then on.

3. Analytically, they fail to grasp the construct that it does not get anymore “direct” than to take directly from one’s own property, capital, or stock -viz., personalty; that utterly, it would be political suicide to perpetually inhibit or delimit the productiveness, self-sufficiency, or sustainability of the American family unit; that historically it had been considered improper (such was so copiously noted within Pollock’ dicta, as well as through legislative avoidance prior to the 1940’s, which is right around the time when progressives, including both the Socialist Party of America (SP/SPA) and Communist Party USA (CPUSA) had well-enrooted themselves in American politics -see: 50 USC Sect. 841, et seq.) to take from the source, e.g., the American families subsistence, capital, or ability; that such a means of taxation is at its core a hindrance against private contract rights; that they deny what national income taxation is truly, actually, effectually all about.

4. Logically, by way of the Pollock case, it was deduced in principal that a tax upon an object, firstly having emanated from its source that itself would have demanded apportionment (if so taxed), would as well require apportionment, for the object and its source would be coalesced; that is until the object has realized a “severing” by following its own inherited distinctions.

5. In consequence, both the U.S. Department of the Treasury and its bureau the Internal Revenue Service (IRS), attest that their core power of national ‘income taxation’ derives from the XVI Amendment.

6. The auspices of the XVI Amendment take into account only the context of the findings on the pleadings of Pollock; to wit, nothing newly devised, as a taxing scheme, was intended to come within the objectives or parameters of the Internal Revenue Code (IRC).

7. Quintessentially, ‘indirect taxes’ are the antithesis of ‘direct taxes’.

8. Indirect taxation pertains to taxes levied on the beneficial receipt of tangible (i.e., convertible, exchangeable, or transferable), inherently valuable property, e.g., items, objects, realty, things, etc.; including taxes levied upon the privileges and benefits of participation, permission, profession, purchase, engagement, arrangement, transfer, business, trade, entrepreneurship, profit, gain, etc.

9. Direct taxation pertains to ‘taxation’ in general, whereas its imposition is accorded through assessment -that is to mean an official valuation, determination, or charge. While, indirect taxes do no necessitate such stringent requirements.

10. The crisply timeless distinction is that a direct tax is one in which its assessment invariably falls upon its subject; while indirect taxes are determinable by its subjects to be paid either at the subject’s own expense or through transference onto a third-party by respectively increasing costs, charges, fees, etc., and in either case, including other similar instances or arrangements, may ultimately be willfully avoided by all parties involved (e.g., by selective non-participation).

11. Thereby, in the course of indirect taxation the subject is always permitted the opportunity to recover the costs associated with the tax, while in the course of direction taxation the subject is always left to sustain an unrecoverable loss.


SEQUITUR. Even when adhering to the methodologies espoused by the status quo and its Sonny Jim, the federal income tax still invalidates itself from constitutionality for (1) it is a perpetual tax that is levied in a manner that can only be construed as a direct tax being so assessed upon its source, while without any emergent presence being manifest, and (2) it attributes an outright abuse of the national powers of taxation, being neither for any valid causation of (i) national debt, (ii) national defense, or (iii) national welfare, while levying trillions, upon trillions, unyieldingly from the populace, and still yet it encourages the federal government to rely upon borrowing trillions more from foreign nations who certainly will during a later date demand that certain actions be taken, state secrets be released, and technologies surrendered, to which ultimately, will serve only to undermine the core of American fundaments; therefore, placing the United States of America, as whole, in a very precarious situation, as we are left only to capitulate to the demands so made by the many foreign nations we have become permanently indebted to.

Yet in reality such a method of federal income taxation, may only be established as being legitimately (constitutionally) proper when taxed through a method of direct taxation, as by caste, laboring, livelihood, recompense, subsistence, or otherwise the right to live, so by the empirical berthing of capitations, polls, and personal taxation.

[Weston White]

At this point it is important to note that the (federal) ‘income tax’ is considered to be a ‘progressive tax’ (notice the use of the term “progressive”) because the rates of the tax increase in conjunction with the growth of its bracketed or baseline figures; however, the aspects of what attributes to the necessity for this process are conveniently omitted from this contrived little equation. Hence, its purpose-at-large is to decouple the resulting inflationary damage being caused, relentlessly so, by the Federal Reserve System’s credit-into-debt rationed borrow-to-lend by way of our nonconvertible fiat currency (that is to mean that so long as the good times are rolling the “rationing” is set to monetize mode -i.e., money and credit remain in abundance for all, but devaluing the currency in the process, subsequently causing the costs of goods, rates, and services to steadily rise (with recompense for working left trailing behind in disproportion), so much, until inevitably those good times begin heading South that the “rationing” switches into demonetize mode -i.e., money and credit now exist only for the privileged few, effecting a total monetary recoil), i.e., Dollar devaluation by way of amassed-monetization. Ultimately, the income tax manufactures a “locked-in” borrow-to-buy dependant society; meanwhile, self-realization becomes but a distant dream.


Now, to add an additional aspect for consideration, so as to point out the utter lunacy in all of this, historically (as provided below), Congress has greatly fluctuated the tax rates, through bracketed amounts varying between the greater sum of $10,000 to $250,000 and above from 1913 to present: 1%, 2%, 3%, 5%, 6%, 7%, 10%, 11%, 12%, 14%, 15%, 16%, 17%, 18%, 19%, 21%, 22%, 23%, 24%, 25%, 26%, 27%, 28%, 31%, 32%, 33%, 34%, 35%, 36%, 37%, 38%, 39%, 39.6%, 41%, 42%, 43%, 44%, 45%, 49%, 50%, 51%, 53%, 54%, 55%, 56%, 58%, 59%, 60%, 62%, 64%, 66%, 68%, 70%, 72%, 75%, 76%, 78%, 80%, 81%, 85%, 88%, 89%, 90%, 91%, 92%, and 94%.
* Data compiled from Wikipedia.

Thus, to emphasize this point, Congress could in effect levy income taxes at whatever percentage rates they desired, whenever they desired, for as long as they desired, simply by implementing their crafty scale from 1% all the way to 100%, and in actuality they could even exceed those if so desired; for example, say they called for a tax rate of 125%, what would be there to stop them from doing so (aside, from the very real consequences that the higher the rate is set, the less motivation or reward there is to attempt earning within whatever determined sums)?

To better depict this notion, say that during the first quarter of each tax period the rate was set at the above mentioned 125% and then reduced to 20% throughout the remaining three quarters, while lending only a special caveat during that first quarter, which would be, for example: during the first quarter of each tax period everything earned (be it by overtime or by holding additional jobs) beyond an individual’s first full 40-hour workweek is exempt from taxation under this proposed system, though such excess could be voluntarily contributed by the individual to go towards paying their remaining 25% tax obligation to be due by the end of that current tax period.

So, say that you earn $8,000 throughout that first quarter from your fulltime job to cover your own national “fair share” tax obligations (being a patriotic American and all) and another $4,000 in excess to cover your own subsistence during this strenuous period of time in overtime pay and additional work from a secondary job that you’re holding.

So now, during the remaining three quarters you still owe another $2,000 (on that remaining portion of 25% from the above $8,000) in taxes in addition to your now reduced 20% tax rate on all earning still yet to be received throughout the remaining year, therefore, you better get to work my patriotic friend, because you have a lot of taxes still to be paid!

In closing, I hope that the point I was attempting to make has been well taken.

[Sonny Tufts]

However, in that very breath they also argue that, the principles found by Pollock applied only to the investment of property, be it by rents, realty, stock, etc., and not whatsoever to laboring, livelihood, recompense, subsistence, or the right to live, itself.

That's because that's what the Pollock court said.

We have considered the act only in respect of the tax on income derived from real estate, and from invested personal property, and have not commented on so much of it as bears on gains or profits from business, privileges, or employments, in view of the instances in which taxation on business, privileges, or employments has assumed the guise of an excise tax and been sustained as such.

Incorrectly, they argue that the federal government has always possessed the power to indirectly tax at the source of one’s laboring, livelihood, recompense, or subsistence without apportionment, and hence such powers of taxation withstand the XVI Amendment -but that the federal government had conveniently just never opted to do so, that is at least not until around the 1940’s and then on.

False. Pay for work was taxable under the first federal income tax law passed in 1861 and under all its amendments, as well as under the 1913 act. In fact, the latter even had a withholding provision.

Direct taxation pertains to ‘taxation’ in general, whereas its imposition is accorded through assessment -that is to mean an official valuation, determination, or charge. While, indirect taxes do no necessitate such stringent requirements.

Nonsense. A capitation is a direct tax that requires no valuation. Moreover, indirect taxes often involve valuation issues.

The crisply timeless distinction is that a direct tax is one in which its assessment invariably falls upon its subject; while indirect taxes are determinable by its subjects to be paid either at the subject’s own expense or through transference onto a third-party by respectively increasing costs, charges, fees, etc., and in either case, including other similar instances or arrangements, may ultimately be willfully avoided by all parties involved (e.g., by selective non-participation).

Crisp it may be, but this argument has been specifically rejected by the Supreme Court in the Knowlton and Nicol decisions.

for example, say they called for a tax rate of 125%, what would be there to stop them from doing so (aside, from the very real consequences that the higher the rate is set, the less motivation or reward there is to attempt earning within whatever determined sums)?

This was answered by Chief Justice John Marshall almost 200 years ago:

is admitted that the power of taxing the people and their property is essential to the very existence of Government, and may be legitimately exercised on the objects to which it is applicable, to the utmost extent to which the Government may choose to carry it. The only security against the abuse of this power is found in the structure of the Government itself. In imposing a tax, the legislature acts upon its constituents. This is, in general, a sufficient security against erroneous and oppressive taxation. McCullouch v. Maryland, 17 U.S. 316 (1819)

[Wheeljack]

False. Pay for work was taxable under the first federal income tax law passed in 1861 and under all its amendments, as well as under the 1913 act. In fact, the latter even had a withholding provision.

On April 26, 1913, Cordell (Judge) Hull, a Representative from Tennessee who had helped draft the legislation, explained the "new" income tax law adopted by Congress following the adoption of the Sixteenth Amendment:

"In any event, the proposed tax is measured by net profits or gains, and is not imposed upon gross income nor capital nor other property. If a citizen has not been successful in his efforts to accumulate profits he is not required to pay the tax, but if he has prospered he is required to contribute to his Government, not the scriptural tithe, but a small percentage of his net profits."

Mr. Hull went on to state:

"The proposed law should be construed as similar laws have been construed by the courts with respect to the application of the tax [Corporation Excise Tax Act of 1909], and that is that the income in question shall be the measure of the tax and not the specific fund out of which the tax is necessarily payable; the bill takes as the measure of the tax the net income of the proceeding year. Paragraph B defines the net income of a taxable individual or person. Income as thus defined does not embrace capital or principle, but only such gains or profits as may be realized from rent, interest, salaries, trade, commerce, or sales of any kind of property, and so forth, or profits or gains derived from any other source."

Source for Hull's quotes: Congressional Record, Volume 50: Part 1, pp. 505-506.

Sonny,

Is your physical and mental being your ultimate form of capital? Yes or No.

[Weston White]

Sonny, in case you have failed to noticed (obviously so), you have already long past lost this debate, you are finished here, washed out; you're self-destructive. Pointedly, your newest anonymous attempts at a cover-up and reply are fronted and egregious.

And no that is not what Knowlton intended to state (Knowlton v. Moore, 178 U.S. 41, 47 (1900)): “… The definition is as follows: “Direct taxes bear immediately upon persons, upon the possession and enjoyments of rights; indirect taxes are levied upon the happening of an event or an exchange.”” And moreover in Tyler v. United States, 281 U.S. 497, 502 (1930): “.... A tax laid upon the happening of an event, as distinguished from its tangible fruits, is an indirect tax...”

Thereby, it is only to be concluded that if the result of a tax is to bear immediately upon a person, or the enjoyments of their inalienable rights to exist as such an individual, or their resulting personalty or corpus as their capital, principal, or stock in holding, even while the tax might be championed to be upon an exchange or an event, the tax must concede to the former method and reveal its true nature as a direct tax (for such being DIRECTLY upon its subject or object without first the instance of a “severing”), and thus, it is to require apportionment. As such is historically the case, being an instance of capitation taxes or personal taxes.

And again, no that is an entirely incorrect assertion of Pollock, pay for work, had always intended to include only professional and vocational employments (e.g., SB/SE), occupations in business and excisable activities, public service within the national government and its instruments of holdings, structured business affairs and arrangements, employments of general entrepreneurialism, etc. The federal income tax had never, ever, never touched the common day laborer until after the progressive’s 1940’ withholding schemed presented itself. America is a Creator granted republic and not a communist’s pipedream turned reality.

Simply, you are reading that paragraph completely out of context, as there are easily a dozen other statements, and from as many sources, within Pollock that completely counter such illusionist dreams of yours (and the status quo that owns you), to which you are attempting to perpetuate as a false-reality, and desperately so; for contriving is the chosen way of the progressive and its status quo mechanisms.

As to your citing Nicol v. Ames, in a prior debate, I had destroyed your weakly plotted reliance there as well, see why you are wrong on that reference at (Sonny Jim, go ahead and refresh your infinitesimal, yet happily fluoridated, memory cells): http://www.iwarrior.defendindependen...5&p=1162#p1162


1. The proper subject of ‘income taxation’ is neither upon the right to subsist nor earn a livelihood, but only upon the benefits of newly achieved wealth.

2. If subsistence or livelihoods were in fact such wealth acquired, then the act of merely “earning a living” (i.e., working from one week onto the next as an effort to cover the accumulating costs of personal expense and necessity throughout the many individual weeks of subsequent years, until retirement has been achieved) would truly serve to be inconsequential.

3. And hence, the now vastly present problem, the national government no longer serves their constituents, but only elitist cabals, rather only their covert interests and agendas, including those of the Council on Foreign Relations (CFR), Bilderberger, United Nations (UN), Israel, China, et al.

4. If the prior federal taxing statutes in fact already possessed a withholding provision in the context that you are attempting to allude, then there would have been no need or call for one in the 1940’. So to that point you are completely and grossly arrogant.

Nonsense. A capitation is a direct tax that requires no valuation. Moreover, indirect taxes often involve valuation issues.

This is evidence that you have not a single clue, whatsoever, of what you are even talking about. While you may be knowledgeable in the area of completing IRS tax documents and referencing United States Codes (USC) and its regulations (yet utterly failing (intentionally) in the area of comprehending common law), you hold zero understanding as to the historical aspects of the means, modes, and methods of taxes and taxation. As you have just show by your above reply.

[Weston White]

On April 26, 1913, Cordell (Judge) Hull, a Representative from Tennessee who had helped draft the legislation, explained the "new" income tax law adopted by Congress following the adoption of the Sixteenth Amendment:

"In any event, the proposed tax is measured by net profits or gains, and is not imposed upon gross income nor capital nor other property. If a citizen has not been successful in his efforts to accumulate profits he is not required to pay the tax, but if he has prospered he is required to contribute to his Government, not the scriptural tithe, but a small percentage of his net profits."

Mr. Hull went on to state:

"The proposed law should be construed as similar laws have been construed by the courts with respect to the application of the tax [Corporation Excise Tax Act of 1909], and that is that the income in question shall be the measure of the tax and not the specific fund out of which the tax is necessarily payable; the bill takes as the measure of the tax the net income of the proceeding year. Paragraph B defines the net income of a taxable individual or person. Income as thus defined does not embrace capital or principle, but only such gains or profits as may be realized from rent, interest, salaries, trade, commerce, or sales of any kind of property, and so forth, or profits or gains derived from any other source."

Source for Hull's quotes: Congressional Record, Volume 50: Part 1, pp. 505-506.

Sonny,

Is your physical and mental being your ultimate form of capital? Yes or No.

Further supporting Wheeljack's notion is depicted at: http://www.taxhistory.com/cor/disdirect.html

Summarizing the greatness of the included subject-matter: “Congress has the power and authority to take 100% of income, however they have limited themselves to "taxable income". So what is the effect on each "person"? In the case of corporations (artificial persons) there is no adverse effect, in that they retain their capital and their ability to continue to operate, as the tax is levied only upon their "profits". In the case of "business, trades and professions (independent contractors), there is no adverse effect upon the business entity (net-income), so long as the owner has sufficient capital to support themselves. What about the laborer, the "employee’ under the master-servant relationship, common law? A tax of 100% of taxable income would be devastating. Does the 16th Amendment allow Congress to take 100% of the "employee’s" (labor for hire, common law) wages, while at the same time prohibit them from taking anything more than the "net-income" or profits acquired by other "persons"?”

See also: http://www.taxhistory.com/congrecord.html

[Sonny Tufts]

Sonny,

Is your physical and mental being your ultimate form of capital? Yes or No.

In a way, it is. But that's not what's taxed. What is taxed is the income your capital generates in the form of compensation for work. Or did you miss the part where Hull refers to "salaries"?

[Sonny Tufts]

And no that is not what Knowlton intended to state

Mr. White, that is precisely what Knowlton stated. You, the executor in Knowlton, and the taxpayer in Nicol all argued that a direct tax is one that can't be shifted to someone else. This argument was rejected:

But it is asserted that it was decided in the income tax cases that, in order to determine whether a tax be direct within the meaning of the Constitution, it must be ascertained whether the one upon whom by law the burden of paying it is first cast can thereafter shift it to another person. If he cannot, the tax would then be direct in the constitutional sense, and, hence, however obvious in other respects it might be a duty, impost, or excise, it cannot be levied by the rule of uniformity, and must be apportioned. From this assumed premise it is argued that death duties cannot be shifted from the one on whom they are first cast by law, and therefore they are direct taxes requiring apportionment.

The fallacy is in the premise. It is true that in the income tax cases the theory of certain economists by which direct and indirect taxes are classified with reference to the ability to shift the same was adverted to. But this disputable theory was not the basis of the conclusion of the court. The constitutional meaning of the word direct was the matter decided. Considering that the constitutional rule of apportionment had its origin in the purpose to prevent taxes on persons solely because of their general ownership of property from being levied by any other rule than that of apportionment, two things were decided by the court: First, that no sound distinction existed between a tax levied on a person solely because of his general ownership of real property, and the same tax imposed solely because of his general ownership of personal property. Secondly, that the tax on the income derived from such property, real or personal, was the legal equivalent of a direct tax on the property from which said income was derived, and hence must be apportioned. These conclusions, however, lend no support to the contention that it was decided that duties, imposts and excises which are not the essential equivalent of a tax on property generally, real or personal, solely because of its ownership, must be converted into direct taxes, because it is conceived that it would be demonstrated by a close analysis that they could not be shifted from the person upon whom they first fall. The proposition now relied upon was considered and refuted in Nicol v. Ames, 173 U.S. 509 , 43 L. ed. 786, 19 Sup. Ct. Rep. 522, where the court said ( p. 515, L. ed. p. 791, Sup. Ct. Rep. p. 525):
'The commands of the Constitution in this, as in all other respects, must be obeyed; direct taxes must be apportioned, while indirect taxes must be uniform throughout the United States. But while yielding implicit obedience to these constitutional requirements, it is no part of the duty of this court to lessen, impede, or obstruct the exercise of the taxing power by merely abstruse and subtle distinctions as to the particular nature of a specified tax, where such distinction rests more upon the differing theories of political economists than upon the practical nature ofth e tax itself.

'In deciding upon the validity of a tax with reference to these requirements, no microscopic examination as to the purely economical or theoretical nature of the tax should be indulged in for the purpose of placing it in a category which would invalidate the tax. As a mere abstract, scientific, or economical problem, a particular tax might possibly be regarded as a direct tax, when as a practical matter pertaining to the actual operation of the tax it might quite plainly appear to be indirect. Under such circumstances, and while varying and disputable theories might be indulged as to the real nature of the tax, a court would not be justified, for the purpose of invalidating the tax, in placing it in a class different from that to which its practical results would consign it. Taxation is eminently practical, and is, in fact, brought to every man's door, and for the purpose of deciding upon its validity a tax should be regarded in its actual, practical results, rather than with reference to those theoretical or abstract ideas whose correctness is the subject of dispute and contradiction among those who are experts in the science of political economy.'"

indirect taxes are levied upon the happening of an event or an exchange.”” And moreover in Tyler v. United States, 281 U.S. 497, 502 (1930): “.... A tax laid upon the happening of an event, as distinguished from its tangible fruits, is an indirect tax...”

Indeed. And the event that triggers the income tax is the realization of income. The fact remains is that there is one and only one case in the history of the country that has held that a federal tax was invalid as an unapportioned direct tax -- Pollock. And that case (a) specifically limited itself to the issue of a tax on investment income, and (b) had its reasoning overruled by the 16th Amendment. Every other court has consistently held that a tax on pay for work needn't be apportioned, rejecting idiotic arguments such as the ones you throw against the wall in the vain hope that something will stick.

pay for work, had always intended to include only professional and vocational employments (e.g., SB/SE), occupations in business and excisable activities, public service within the national government and its instruments of holdings, structured business affairs and arrangements, employments of general entrepreneurialism, etc. The federal income tax had never, ever, never touched the common day laborer until after the progressive’s 1940’ withholding schemed presented itself.

Unfortunately for you, Mr. White, the statutes have never distinguished between the income earned by a common day laborer and that earned by others.

there are easily a dozen other statements, and from as many sources, within Pollock that completely counter such illusionist dreams of yours (and the status quo that owns you), to which you are attempting to perpetuate as a false-reality, and desperately so; for contriving is the chosen way of the progressive and its status quo mechanisms.

Aside from your continual mangling of the English language, you fail to recognize the undeniable fact that no court has ever held that a tax on pay for work has to be apportioned; tio the contrary, every single time this moronic argument has been made, the idiot making it has lost and has frequently been fined for wasting the court's time with such a frivolous claim.

If the prior federal taxing statutes in fact already possessed a withholding provision in the context that you are attempting to allude, then there would have been no need or call for one in the 1940’. So to that point you are completely and grossly arrogant.

Mr. White, you continue to display your abysmal ignorance of history. The withholding feature was added in the 1913 Act, but it was repealed a few years later.

[Wheeljack]

In a way, it is. But that's not what's taxed. What is taxed is the income your capital generates in the form of compensation for work. Or did you miss the part where Hull refers to "salaries"?

What is taxed is the income your capital generates in the form of compensation for work.
Exactly.

As I said a laborer makes an investment in a business. If that investment is used to push a broom for 8 hours has that investment generated any income for that business.
If that business sells airplanes, then his investment has not generated any income whatsoever.
If that business is a cleaning service, then his investment has generated income, however is he being paid from the income generated. If he receives an hourly wage, then he is being paid from the capital of the business and not from the income generated. The employer is deducting the payment of wages as a capital expense.

If that investment is used to convince people to buy a product or service, then it has generated income. If the employee is paid a commission, based on a percentage of the sales generated, then the employee has received income generated from the investment of his capital.


A salary is what is paid to a principle of a business. A principle is one who capitalizes a business. A principle can not be paid from his own capital. If a principle is receiving income from a business then he is reaping profits.

Did you miss the part where Mr. Hull did not refer to "wages". I do think that he knew the difference between salaries and wages.

Sonny, answer this question.

If section 61 includes all wages, then why is it that the bureaucrats can't openly print that? And we all know that if they could, they would.

There is only one answer. Because it would be a violation of the Law.

[Sonny Tufts]

If section 61 includes all wages, then why is it that the bureaucrats can't openly print that? And we all know that if they could, they would.

There is only one answer. Because it would be a violation of the Law.

There is no need to amend Section 61 to have it apply to "wages" because it already does. The section uses the term "Compensation for services", which has consistently been held by the courts, without exception, to include wages, salaries, and every other kind of pay-for-work.

There is no violation of the law, unless you think there's something in the Constitution that prohibits an unapportioned tax on compensation received for working for someone else. If you do, please cite the specific provision that says so or a case that says so.

[Wheeljack]

There is no need to amend Section 61 to have it apply to "wages" because it already does. The section uses the term "Compensation for services", which has consistently been held by the courts, without exception, to include wages, salaries, and every other kind of pay-for-work.

There is no violation of the law, unless you think there's something in the Constitution that prohibits an unapportioned tax on compensation received for working for someone else. If you do, please cite the specific provision that says so or a case that says so.

As I pointed out in my previous post, if you receive compensation for services in the form of a wage then Section 61 does apply to your income. There is not one court case that raised the question that employment is or is not a service, therefore the courts have never held that Section 61 applies to compensation for employment received in the form of a wage.

Now the IRS knows that employment is not a service, but that under certain conditions a service can qualify as employment.
This is why Form SS-8 exists.

The specific provision is the 16th Amendment which Mr. Hull correctly points to as having no application to the return of capital or principle.

.

[Weston White]

In a way, it is. But that's not what's taxed. What is taxed is the income your capital generates in the form of compensation for work. Or did you miss the part where Hull refers to "salaries"?

1. No your logic exists in pure fallacy, the “capital” (viz., the source) must first exist in a tangible form; the breadth of the income tax cannot implant itself under any other mode than a capitation, poll, or personal tax, to which each mode still demands apportionment, a legitimate intent for the imposition of the tax, and exigent circumstance.

2. The breadth of the income tax is not in consideration of human capital; it is in consideration of physical capital that possesses the capacity of being inherently valued through transference, exchange, or conversion.

3. Earning a living by way of laboring is not by any means taxable as a gain or profit, but is simply a conversion, being an output of human exertion in exchange for a respectively equal value in physical capital (be it in money, items, or objects); to which the income tax is then dependent upon that newly acquired physical capital in realizing a bona fide gain or profit, thusly, itself becoming subsequently taxable.

4. The income tax is not a tax upon a mere conversion of capital; it is a tax upon a realized gain or profit arising (deriving) through a systematic conversion.

5. The income tax is not a tax upon all income received (gross income); it is a tax upon income deriving form a source (net income), i.e., constitutional income.

6. Again, wages and salaries are in reference to the various methods of professional business and the like, and not to laboring or toiling in and of itself. The federal income tax is only upon constitutional income, such had been explicitly stated in public bills; such had been explicitly stated within federal tax statutes; as just the same that such had been explicitly and intentionally stated to indicate that very breadth and intent as by its respective legislative history.

7. The Legislature cannot justly conceal what a given mode of taxation actually is beneath the exterior that is being marketed (propagandized) upon the affected populace, simply by labeling it something other than what it logically is; hence, without exception, it is what it is, period (e.g., until so severed, a shadow is of its source).

[Weston White]

Mr. White, that is precisely what Knowlton stated. You, the executor in Knowlton, and the taxpayer in Nicol all argued that a direct tax is one that can't be shifted to someone else. This argument was rejected:

Wow, this again, really? Sonny Jim, I had already destroyed your arguments on this point, which you are yet again attempting to raise, your prior reply to that was just as weak then as it is at present (and for that matter succession, gift, and similar taxes cannot be reasonably conceived as being anything remotely comparable to a mode of ‘direct taxation’, and neither is such a method of taxation to be assessed directly (personally) upon the executor; ergo, the case is entirely inapplicable to the present debate), you may review prior comments and retorts at:

1. http://www.ronpaulforums.com/showthr...=1#post4418498

2. http://www.ronpaulforums.com/showthr...=1#post4426439

Indeed. And the event that triggers the income tax is the realization of income. The fact remains is that there is one and only one case in the history of the country that has held that a federal tax was invalid as an unapportioned direct tax -- Pollock. And that case (a) specifically limited itself to the issue of a tax on investment income, and (b) had its reasoning overruled by the 16th Amendment. Every other court has consistently held that a tax on pay for work needn't be apportioned, rejecting idiotic arguments such as the ones you throw against the wall in the vain hope that something will stick.

And most certainly, such is in fact the case so far as determining ‘taxable income’ when qualifying as a bona fide gain or profit through the process of conversion, such by that which is tangible; and not so, when existent as a source unto itself, i.e., capital, corpus, or personalty.

Ergo, the core of consideration providing the XVI Amendment was in reflection to the already existent breadth of ‘incomes’, having been so beset in consequence to the ‘1909 Corporation Excise Tax Act’, i.e., constitutional income.

You are exhibiting emotional appeals, while relying solely upon lower courts that are themselves malfunctioning in outrageous arrogance to SCOTUS precedence, and all the while, discounting literal mountains of contrary and vastly superior evidence. People that debate largely through emotional appeals, do so because they have no true argument to be raised, and moreover they realize they have nothing else consequential to fallback upon and argue for.

Unfortunately for you, Mr. White, the statutes have never distinguished between the income earned by a common day laborer and that earned by others.

Neither are the statutes required to. You appear to have a failing grasp of comprehending contextual logic and analytical deduction. For example, according to your flawed notions, the IRC needs to explicitly exempt all nationality of persons and all nation-states, otherwise through one means of reasoning or another they somehow fall unwittingly subject to the IRC’ definition of ‘person’, and that should space-aliens ever land and visit in America they would to become the taxable subjects of the IRC.

While, correctly, general recompense (pay, remuneration, etc.) for such common day labors is not itself taxable by the IRC, any compensation or whatever other forms of ‘gross income’ they should receive is.

Aside from your continual mangling of the English language, you fail to recognize the undeniable fact that no court has ever held that a tax on pay for work has to be apportioned; tio the contrary, every single time this moronic argument has been made, the idiot making it has lost and has frequently been fined for wasting the court's time with such a frivolous claim.

Oh my, you must be jaundiced. As to the rest of your posted bollock, refer to my above response addressing your emotional appeals.

Mr. White, you continue to display your abysmal ignorance of history. The withholding feature was added in the 1913 Act, but it was repealed a few years later.

My goodness me! Never was withholding (stoppage at the source) or the federal income tax intended to be imposed upon the whole of the population in the manner that it is at present, and since the 1940’. The federal income tax is, as an undeniable fact, being intentionally misapplied so as to perpetuate internationalism, while providing cover for the scheming “police state” agenda of the Federal Reserve System and its elitist-eugenicist-corporatist fat cats.

And to further note on this aspect, even though the population of the United States of America has since 1913 increased only by a multiple of 3.2. Presently, economists mostly agree that the federal government could reasonable function on between $400-$600-billion per year; now if you take the revenue generated by the national income tax back in 1913 (during which was the time that World War I was beginning to take shape), while adjusting for inflation to our present Dollar value and multiply that figure by a factor of about two-dozen, you respectively come up with a sum of 325-billion. Clearly, the national individual income tax (and its coupled, hidden taxes, e.g., SSI, FICA, etc.) is, as a fact, bringing in vastly too large a sum per annum, which is now at a fairly steady $2.3-trillion. The federal government, as a whole, remains dizzily intoxicated, guzzling from their public punch bowl, while the public stands back watching, themselves stupefied and poisoned.

[Weston White]

There is no need to amend Section 61 to have it apply to "wages" because it already does. The section uses the term "Compensation for services", which has consistently been held by the courts, without exception, to include wages, salaries, and every other kind of pay-for-work.

There is no violation of the law, unless you think there's something in the Constitution that prohibits an unapportioned tax on compensation received for working for someone else. If you do, please cite the specific provision that says so or a case that says so.

Negative, generally speaking, 26 USC, Sect. 61 (et seq.), does not include within its scope “wages” or “salaries”, but only to the ‘incomes’ emanating (i.e., “deriving”) therefrom.

For 26 USC, Sect. 61 to actually include what you’re wrongfully insinuating, it would need to be amended similarly to as proposed at: http://www.ronpaulforums.com/showthr...=1#post4451413

Until that has actually been accomplished under our public law, 26 USC, Sect. 61 in no way includes nor intended to include what you, your lower -and in most all instances merely advisory or otherwise inapplicable- court decisions, or the U.S. Department of the Treasury and its IRS have been so wrongfully insinuating.

Other than that one need only to look toward our IX Amendment: “The enumeration in the Constitution, of certain rights, shall not be construed to deny or disparage others retained by the people.” In other words, it was never intended for the national government to become so intimately involved in the daily affairs and private arrangements of the masses; that is to the effect of controlling (without any yield or reservation) anywhere from 1%-100% of their ability or productivity.