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Personal income tax liability


Dear Mr.


Thank you for your recent letter requesting a legal opinion as to your legal obligations with respect to federal income taxation.  A legal opinion letter is used by an individual to assist in determining whether or not he or she is subject to the law, which we commonly refer to as the "income" tax, and that person's legal obligations with respect to it.


Before I get into the substance of the opinion letter I will tell you about my qualifications to render this opinion.  I was born on August 18, 1943, in an adobe house my father built in Cochise County, Arizona. Incidentally, the house is still standing, though it has been added to and remodeled to suit relatives who still live there.  I taught myself Spanish before I started school in 1948.  I taught myself to read and write English in the Compton City Schools.  I received a bachelor of arts degree from California State University at Los Angeles in 1968, in Government: Public Service.  I graduated from the University of California at Los Angeles School of Law in 1971 and I received a Juris Doctor degree.  I have practiced law for more than 25 years.  During that time, I dealt with practically every bureaucratic agency in local, state and federal government, I was trained to be a bureaucrat so I got very good results for my clients who had business with these  agencies. The IRS is one agency that I never got involved in either personally or professionally.  It is fortunate that I had little contact with the IRS, because it kept me from being co-opted by that infamous gang.  Many people who develop a professional relationship with the IRS eventually see that relationship turn into a symbiotic one that can't be shaken loose.


I have given you some details about my life that are not ordinarily seen in a legal opinion letter.  I do that for this reason.  I have always considered myself self-taught despite the fact that I have attended one school or another for more than twenty years.  Even as a U.S. Army Reservist, in the Army Security Agency, a part of Army Intelligence, I was in school for five months after basic training.


Whatever success I had in my law practice I attribute to my habit of explaining to my clients the law that applied to their individual cases until they could understand the law themselves.  I constantly "taught" the law to my clients.  This provided me an endless source of clients from my happy pupils.  I have heard the advice, "If you really want to learn something, teach it," in many situations and on many occasions.  I have followed this advice in every other facet of life and it has not failed me.


This then is the method that I employed in learning the law of income taxation.  This is the method that I recommend to you if you are to learn it well.


There is an additional caveat that must be given, and that is the body of knowledge that is to be taught must rest on a solid foundation of truth.  In law school, I was taught income taxation by a recognized authority.  He had written a textbook on the subject and had taught at very prestigious schools.  It was unfortunate, but he had not learned the truth about the Sixteenth Amendment.  You will quickly learn to recognize reputable authorities by this cachet.  Anyone who bases the "income" tax on the Sixteenth Amendment has an incomplete education in the tax field.


I mention my natural birth at home in a house my own father had built out of sun-dried brick and my subsequent self-education to establish the Spirit that I hope to communicate to all who read this letter.  This experience enables me to recognize truth a little faster and quicker than some of my fellow attorneys. It also frees me from the belief that I absolutely need what government has to offer.  You too, can free yourself from need simply by letting go of that thought.


The Europeans who first came to the Americas knew next to nothing of personal freedom.  Knowledge of Life, Liberty and the Pursuit of Happiness must have come from observation of the freest People in the world, the Native Americans.  These People have been dispossessed of their land and we occupy it now. It would be tragic if we lose the Spirit of Freedom because we are tempted to replace it with a little comfort and social security.


If you read what follows with an open mind and an unhardened heart, You too will find the Spirit that the Founding Fathers put into the Constitution to keep us free. .


The so-called "income" tax most familiar to working people all over America is found in the Internal Revenue Code or IRC, which is also found in Title 26 of the United States Code.  All federal law is codified, in that, if you cannot find it written down in the United States Code it is not federal law.  There is no federal common law.  That means that there is no unwritten federal law that has been established by custom and usage.  This is very important in our discussion of your obligations, if any, under the Internal Revenue Code.


Nearly, everyone assumes that any person who has income or earnings over a minimum amount owes this tax.  I know of only one expert on taxation who has questioned the assumption.  That enlightened skepticism has enabled that researcher to discover some truths that have been buried in old case law and elsewhere. it is so widely assumed by attorneys, CPAs and the general public that "Everyone" owes an "income" tax that a full exposition of the subject of federal income taxation, the Constitution and individual civil liberties must be undertaken in order to make a reasoned decision as to whether or not one is subject to (liable for) such a tax.


One would think that such an important subject as taxation and an individual's obligation to pay it would be a subject taught in public school.  It is my opinion that public schools as instruments of the government are not going to teach anything that might undermine anything that government does.  It is my opinion that public education has destroyed the natural love to learn that exists in all individuals.  The people don't question authority because they are taught not to.  Again, it is my opinion that the public schools are preaching belief in government dogma and not independent learning.  That is why, in my opinion, so many unwarranted assumptions are made about the "income" tax and other topics of vital importance to the people.  In my opinion there is no place for government in education.  I am firmly committed to learning and especially learning about government but government has no place in learning.


Throughout this opinion you will find sprinkled, among case citations, my opinions on subjects that I think explain why things are as they are.  They are there to explain and teach, in my own way, why it is necessary for you to pay me to explain something that you should have been taught, long ago, in school.  What you were taught is something more dangerous.  You were taught to trust and believe the government.  My opinions are there also to make it clear that while many people have had the same doubts, they just haven't done something about them, as you have.


Everyone thinks that anyone with any kind of income or earnings has to pay a tax on it.  That alone should have aroused suspicions about its applicability to nearly-everyone.  Unfortunately it has not.  Today, any discussion relating to the so-called "income" tax, deals with trivial details concerning ways to decrease income and increase deductions, and not to whether one is subject to (liable for) the tax at all.  If all this takes on a conspiratorial air, I will not disagree.


I will assume that you along with the rest of us have had no formal instruction in taxation.  You would think that the nation's law schools would devote some time and discussion to the applicability of the "income" tax to ordinary working men and women.  That was not done.  When I attended UCLA Law School there was no discussion of the Constitutional context of taxation.  In none of the exercises that appeared at the end of every chapter of the textbook that we used, was there an example of a common working man or woman with an "income" tax problem.  Just about every problem dealt with ABC Corp. Or an XYZ Corp. I recall my law school professor just reading from the Sixteenth Amendment in order to impress upon us the broad taxing authority that Congress possessed.  We never visited the Constitution again.  You as well as I did not receive any proper instruction on personal income taxation.  I doubt whether anyone in the United States has received any instruction on the specific topic of whether or not the "income" tax is a tax which they are subject to or liable for.  The law schools don't make any attempt at educating the lawyers that should be assisting the layman in determining whether or not he is subject to or liable for the "income" tax.  That was my experience in law school.


My law professor had written the textbook we used.  I can assure you that nowhere in that book was the subject of taxation as it concerned working men and women discussed.  It was assumed that the Internal Revenue Code would apply to everyone in every exercise we discussed.  In every textbook and treatise that I have examined, since I learned the true nature of the Sixteenth Amendment, the author or authors have merely assumed that the income tax would be applicable to common working men and women.


I myself, might have also continued to assume that the "income" tax applied to everyone that had a minimum income (or earnings) had I not read a couple of books written by Otto Skinner.  Otto Skinner has thoroughly and thoughtfully examined income taxation in those two books (The Best Kept Secret, "Taxpayer" v. Nontaxpayer and If You Are the Defendant), and in a recent comprehensive manual (The Biggest "Tax Loophole" of All), for determining whether or not the so-called "income" tax applies to any particular individual.  In no other taxing situation is it so important that a correct decision be made with regard to an individual's liability for or subjection to the so-called "income" tax.  Incorrect determinations can subject an individual to undue civil and/or criminal penalties and/or a lifetime of being deprived of his property (earnings or otherwise) by taxing agencies and others under the guise, pretext, sham and subterfuge of supposedly collecting taxes.


In my opinion, it is nothing less than a public disgrace that such a momentous decision should be attended by so little information and instruction. It is my belief that the IRC was written in such a way that would cause the American Public to be confused as to their obligations under the IRC.  Good government requires a fair, stable and transparent tax system.  By transparent I mean that the subject, object and purpose of the tax ought to be clear.  What I think about the writing of the Code is, of course, conjecture.  What is not the subject of conjecture is that the United States government has done nothing to change these perceptions.  What is fact is that the overwhelming majority of Americans believe that they owe a tax simply because they have income or earnings.  If this group was pressed to state why the so-called "income' tax applied to them, they simply could not.  This national neglect of a topic vital to the American people is a scathing indictment of both the political leadership and educational system of the country.  The lack of public discussion on so vital an issue increases our need for a thorough examination of the so-called "income" tax.  In fact, it demands that it be done.  The debate about the "income" tax currently underway is really a popularity contest between the flat income tax and the national retail sales tax. It digs no deeper than that.


I am flattered that you have chosen me to give you my professional opinion of your legal obligations, if any, with regard to this so-called "income" tax.  I wish that I could take credit for the research and analysis that will follow.  It is in major part the effort of Mr. Otto Skinner, a man I greatly admire for the work that he has done and for the light that he has shed on a very obscure but exceedingly important subject.


In the pages that follow you will find the legal basis for all federal taxation in summary form.  I have emphasized certain portions of the text by making them bold so that you can focus on them when you teach this subject to others.  Do not neglect the teaching aspect of learning.  Teaching is learning.


There can be no intelligent discussion of any tax until it is first determined what it is, exactly, that is being taxed.  Is it people, and if so, specifically which people?  Is it property, and if so, precisely which property?  Or is it some revenue taxable activity, and if so, precisely which activity?


I submit that before an individual can determine whether he is liable for a tax, or required to make a tax return, he must first be able to find the answers to the following questions.


1.  What is it, exactly, if anything, that is being taxed? (People?  Property?  Some revenue taxable activity?)

2.  In which section, if any, in the internal revenue laws is a tax imposed on that particular subject?

3.  In which section, if any, in the internal revenue laws does it identify the person liable for that particular tax?

Every individual who is seeking information regarding federal taxation should become familiar with the taxing clauses of the United States Constitution.  They are as follows:


Representatives and direct taxes shall be apportioned among the several States which may be included within this Union, according to their respective numbers, which shall be determined by adding to the whole number of free persons, including those bound to service for a term of years, and excluding Indians not taxed, three fifths of all other persons.  United States Constitution, Article 1, § 2, cl. 3. (In part.)


The Congress shall have power to lay and collect taxes, duties, imposts and excises, to pay the debts and provide for the common defense and general welfare of the United States; but all duties, imposts and excises shall be uniform throughout the United States. United States Constitution, Article 1, § 8, cl. 1.


No Capitation, or other direct, tax shall be laid, unless in proportion to the census or enumeration hereinbefore directed to be taken.  United States Constitution, Article 1, § 9, cl. 4.


No tax or duty shall be laid on articles exported from any State.  United States Constitution, Article 1, § 9, cl. 5.


Essentially, the above clauses of the original United States Constitution require all direct taxes to be imposed according to the rule of apportionment and all indirect taxes to be imposed by the rule of geographical uniformity.


It is now necessary to understand the difference between a direct tax and an indirect tax.  As will be shown below, the courts have determined that direct taxes are capitation taxes and property taxes (which include both real and personal property taxes); and that indirect taxes are taxes imposed upon taxable activities or events.


We all have to agree with the United States Supreme Court when, in 1930, it stated that an indirect tax is a tax laid upon the happening of an event, as distinguished from its tangible fruits and, in 1937, when it stated that all direct taxes (capitation taxes and property taxes) must be apportioned among the States of the Union according to census or enumeration.


A tax laid upon the happening of an event, as distinguished from its tangible fruits, is an indirect tax.

Tyler v. United States, 281 U.S. 497, at 502 (1930).


The subject matter of taxation open to the power of the Congress is as comprehensive as that open to the power of the states, though the method of apportionment may at times be different.  "'The Congress shall have power to lay and collect taxes, duties, imposts and excises." Art. 1, § 8. If the tax is a direct one, it shall be apportioned according to the census or enumeration.  If it is a duty, impost, or excise, it shall be uniform throughout the United States.  Together, these classes include every form of tax appropriate to sovereignty. Cf.  Burnet v. Brooks, 288 U.S. 378, 403, 405; Brushaber v. Union Pacific R. Co., 240 U.S. 1, 12.  Whether the tax is to be classified as an "excise" is in truth not of critical importance.  If not that, it is an "impost" (Pollock v. Farmer's Loan & Trust Co., 158 U.S. 601, 622, 625; Pacific Insurance Co. v. Soule, 7 Wall. 433, 445), or a "duty" (Veasie Bank v. Fenno, 8 Wall. 533, 546, 547; Pollock v. Farmers' Loan & Trust Co., 157 U.S. 429, 570; Knowlton v. Moore,, 178.  U.S. 41, 46). Steward Machine Co. v. Davis, 301 U.S. 548, at 581-582 (1937). (Emphasis added.)


We must also understand along with the United States Court of Appeals, Third Circuit when, in 1960, it stated that the requirement of apportionment is limited to taxes on real and personal property and capitation taxes.


Indeed, the requirement for apportionment is pretty strictly limited to taxes on real and personal property and capitation taxes. 

Penn Mutual Indemnity Co. v. C.I.R., 277 F.2d 16, at 17, 19­-20 (3rd Cir. 1960). (Emphasis added.)


There currently is no federal tax which is apportioned among the States.  I therefore conclude that the so-called "income" tax is neither a property tax nor a capitation tax, but instead is in the category of an indirect tax, which would be a tax imposed on some taxable activity or event that is taxable for revenue purposes under the government's revenue raising power; as opposed to strictly regulatory purposes under a government's police power.


I conclude that it is the subject of the tax (the thing being taxed, be it people, property or activity) which is the correct criterion to be used in determining which class (direct or indirect) the tax belongs.  As Otto Skinner explains since the burden of every tax is generally passed on to or independently borne by the final user of goods, services or property, whether the burden of a tax is passed on to another is immaterial in determining which class a tax belongs.


William Shakespeare said it first in print when he asked, "'What's in a name...". So we must agree with the United States Supreme Court that the name by which a tax is described in a statute is immaterial.

The name by which the tax is described in the statute is, of course, immaterial.

Dawson v. Kentucky, 255 U.S. 288, at 292 (1921).


In other words, just because a tax is called an "income" tax, it does not necessarily mean that income is the thing being taxed.  Since income is a form of property (either tangible or intangible), I conclude that income is not, and cannot be, the subject of an indirect tax.  Since earnings of any sort are in the form of property (either tangible or intangible), I conclude that regardless of the sort of earnings, such earnings are not, and cannot be, the subject of an indirect tax, but the income or earnings can be used to measure (and/or name) the tax. (I also conclude that a person's annual earnings cannot be the subject of a direct tax on property because most people spend their earnings almost as fast a they receive them, and the disappearance of the fund would prevent a tax on that property.)


An excellent example of an indirect tax is found in the Corporation Excise Tax law of 1909, wherein the tax was imposed on the activity of doing of business in a corporate capacity with the income being used to measure the tax.


That every corporation, joint stock company or association organized for profit and having a capital stock represented by shares, and every insurance company . . . shall be subject to pay annually a special excise tax with respect to the carrying on or doing business by such corporation, joint stock company or association, or insurance company, equivalent to one percentum upon the entire net income over and above five thousand dollars received by it from all sources during such year . . . .  "The Corporation Tax" law, (Ch. 6, 36 Stat. 11). (Emphasis added.)


As the latter organizations share many of the benefits of corporate organization it may be described generally as a tax upon the doing of business in a corporate capacity.....

In other words, the tax is imposed upon the doing of business of the character described, and the measure of the tax is to be the income,  Flint v. Stone Tracy Co., 220 U.S. 107i-at 146 (1911).


Congress has never imposed a capitation tax.  Also, the last time a property tax was successfully imposed by Congress was during the days of the Civil War.


In 1913, the Sixteenth Amendment was (purportedly) ratified and became part of the United States Constitution.  The Sixteenth Amendment states:   The Congress shall have power to lay and collect taxes on incomes, from whatever source derived, without apportionment among the several States, and without regard to any census or enumeration.  United States Constitution, Sixteenth Amendment.


I submit that many people have misinterpreted the wording of the Sixteenth Amendment and have incorrectly concluded that this amendment authorized a direct tax without apportionment.  I submit that one of the reasons for such an incorrect conclusion is because people do not know that the word "on" (as used in the Sixteenth Amendment) can mean "with regard or respect to", or "in reference to" or even "measured by".


on ... 22. a. In regard to, in reference to, with respect to, as to.

The Oxford English Dictionary, Second Edition, 1989, pg. 795.


on ...  12. with respect or regard to.

Random      House Unabridged Dictionary, Second Edition, 1993, pg. 1352.


on ...  (5) the object in connection with which payment, computation of interest, reduction or similar settlement is made. ... 7 a : with regard to : with reference or relation to : about.

Webster's Third New International Dictionary of the English Language, Unabridged, 1993, pg. 1575.


I submit that the Sixteenth Amendment, correctly interpreted, means that Congress can exercise its original constitutional power to use income to measure indirect taxes (which it imposes on the happening of revenue taxable activities or events), and do so without apportioning such indirect tax among the States.


For example, a corporation could receive income from rental property, but the excise tax is on the activity of doing business in a corporate capacity and the income derived from the rental property is merely used to measure the excise tax, which is in the class of indirect taxes.  Such a tax is not subject to the rule of apportionment.

I agree with the United States Supreme Court that if the Sixteenth Amendment were misconstrued so as to authorize a direct tax (capitation or property tax) without apportionment, it would cause the Sixteenth Amendment to come into irreconcilable conflict with Article I, § 2, clause 3 and Article I, § 9, clause 4, previously cited.


But it clearly results that the propositions and the contentions under it, if acceded to, would cause one provision of the Constitution to destroy another; that is, they would result in bringing the provisions of the Amendment exempting a direct tax from apportionment into irreconcilable conflict with the general requirement that all direct taxes be apportioned.  Moreover, the tax authorized by the Amendment, being direct, would not come under the rule of uniformity applicable under the Constitution to other than direct taxes, and thus it would come to pass that the result of the Amendment would be to authorize a particular direct tax not subject either to apportionment or to the rule of geographical uniformity, thus giving power to impose a different tax in one State or States than was levied in another State or States.  This result instead of simplifying the situation and making clear the limitation on the taxing power, which obviously the Amendment must have been intended to accomplish, would create radical and destructive changes in our constitutional system and multiply confusion.

Brushaber v. Union Pacific R.R Co., 240 U.S. 103, at 11-12 (1916). (Emphasis added.)


I concur with the United States Supreme Court in that the Sixteenth Amendment conferred no new power of taxation, that it did not extend the taxing power to new or excepted subjects, and that the amendment simply prohibited the power of income taxation possessed by Congress from the beginning of our national government from being taken out of the category of indirect taxation to which it inherently belonged.


[Bly the previous ruling [Brushaber Case] it was settled that the Sixteenth Amendment conferred no new power of taxation but simply prohibited the previous complete and plenary power of income taxation possessed by Congress from the beginning [of our national government under the Constitution] from being taken out of the category of indirect taxation to which it inherently belonged . . . .

Stanton v. Baltic Mining Co., 240 U.S. 103, at 112 (1916). (Emphasis and explanation added.)


The Sixteenth Amendment . . . does not extend the taxing power to new or excepted subjects . . . .

Peck & Co. v. Lowe, 247 U.S. 165, at 172 (1918).


Staying within the bounds of Article 1, § 2, clause 3 and Article 1, § 9, clause 4, previously cited, the only class of tax than can be constitutionally imposed without apportionment among the States is an indirect tax.  It is the "without apportionment" language of the Sixteenth Amendment which is to prohibit the courts from treating any so-called "income" tax, or any tax measured by income or earnings, as anything other than an indirect tax.  A misinterpretation of the true meaning of the Sixteenth Amendment has allowed the Internal Revenue Service to grow into the tyrannical and-hated agency it is today.  Also, the growth of "Big Government" would not have been possible without such a misinterpretation of the Sixteenth Amendment by so many different people.


It is important to note that the Sixteenth Amendment does not impose any tax, and does not even mention any subject of any tax, but merely refers to taxes measured by income.  It is also important to note that Congress has always had the constitutional power to measure indirect taxes by the income or earnings resulting from revenue taxable activities upon which Congress imposes a tax.  This fact is demonstrated in the 1911 case of Flint v. Stone Tracy Co., cited above.  It is my opinion that this is precisely what the United States Supreme Court meant in the Stanton Case, cited above, when it referred to the power of income taxation possessed by Congress from the beginning.


Since a so-called "income" tax is an indirect tax, the questions arise as to: (1) which events or activities, if any, have been taxed, and (2) who, if anyone, is made liable for those particular taxes?  I find that the Internal Revenue Code is quite clear as to what is being taxed and who is liable in regard to excise taxes relating to the distillation or importation of distilled spirits as well as the manufacturing or importation of tobacco products.  To wit:


(a)  General.  The distiller or importer of distilled spirits shall be liable for the taxes imposed thereon by section 5001(a)(1).   26 U.S.C. 5005(a). (Emphasis added.)

(a)(1) Original liability.  The manufacturer or importer of tobacco products shall be liable for the taxes imposed thereon by section 5701.   26 U.S.C. 5703(a)(1). (Emphasis added.)


The so-called "income" tax presents a different situation.  I have found no place in the Internal Revenue Code that imposes a tax on any of the events or activities of the average American citizen.  Also, I find no place in the Internal Revenue Code that purports to make any American citizen, as such, liable for any so-called "income" tax.


Furthermore, I find no authority for anyone to make a determination that you are  liable for any so-called "income" tax.  It is my opinion that if the revenue laws do not specifically make a person liable for a tax, then no other person has the authority to make such a determination.


It is my opinion that individuals have assumed that they are subject to the so-called "income" tax.  They have subsequently completed tax forms, and by doing so, have provided prima facie evidence (evidence on its face) of being liable for a so-called "income" tax.  With this prima facie evidence in hand, the Internal Revenue Service personnel have merely presumed they are dealing with a person who is liable for the so-called "income" tax.  The past and current political leadership has failed to clearly explain the principles upon which the nation was founded.  Such an explanation would show the public that it was not generally liable for the so-called "income" tax.  Our grossly inadequate educational system is really to blame, for it fails to educate the citizen in the fundamentals of constitutional taxation.  Ultimately, responsibility rests with the individual citizen and you have taken the right approach by seeking competent professional advice.


I agree with the United States Court of Appeals, Fifth Circuit, when it said: "We see no distinction between the phrases 'liable for such tax' and 'subject to a tax'."


We see no distinction between the phrases "liable for such tax" and "subject to a tax".

Houston Street Corp. v. C.I.R., 84 F.2d 821, at 822 (5th Cir. 1936). (Emphasis added.)


It is important to point out that the phrase "tax liability" (in the sense of an amount owed) is different from the phrase "liable for a tax" which means "subject to a tax".  I conclude that one cannot have a tax liability (in the sense of an amount owed) unless he is first subject to (liable for) a tax.  The Secretary of the Treasury, or his delegate, has the statutory authority to determine the tax liability (amount of tax) of one who is subject to (liable for) a tax, but I find no statutory authority for anyone to determine who is or who is not subject to (liable for) a so-called "income" tax.


I agree with the United States Court of Claims in that the internal revenue laws relate only to persons who are subject to (liable for) a tax.


The revenue laws are a code or system in regulation of tax assessment and collection.  They relate to taxpayers, and not to nontaxpayers.  The latter are without their scope.  No procedure is prescribed for nontaxpayers, and no attempt is made to annul any of their rights and remedies in due course of law.  With them Congress does not assume to deal, and they are neither of the subject nor of the object of the revenue laws.

Economy Plumbing and Heating v. United States, 470 F.2d 585, at 589 (Ct.Cl. 1972). (Emphasis added.)


(Footnote 3 of this case.) The term "taxpayer" in this opinion is used in the strict or narrow sense contemplated by the Internal Revenue Code and means a person who pays, overpays, or is subject to pay his own personal income tax. (See Section 7701(a)(14) of the Internal Revenue Code of 1954.) A "nontaxpayer" is a person who does not possess the foregoing requisites of a taxpayer.   Economy, supra, fn. 3, at 590. (Emphasis added.)


I submit that one cannot know if he is subject to a tax until: (1) it is determined just what it is, exactly, if anything, that is being taxed (Is it people?  Is it property?  Or is it some revenue taxable activity?); (2) the precise section of the internal revenue laws that imposes a tax on that particular subject; and (3) the precise section of the internal revenue laws that identifies the person who is liable for that particular tax.


Section 1 of the Internal Revenue Code imposes a tax on the "taxable income" of virtually every individual ("taxpayer").


However, the term "taxable income" has its own special statutory definition.  Section 63(a) of the Code defines "taxable income" as it relates to an individual-who has filed a tax return and has elected to itemize his deductions.  The tax return provides merely prima facie evidence that the individual is subject to (liable for) the tax.


When one files a tax return showing taxes due, he has, presumably, assessed himself and is content to become liable for the tax, and to pay it either when it is due according to the statute, or when he can get the money together.   Lyddon & Company v. United States, 158 F.Supp. 951 at 953 (U.S. Ct. of Claims, 1958).


Section 63(b) defines the term "taxable income" (in the case of an individual ("taxpayer" as defined) who does not elect to itemize deductions on a return for the "taxable year") as "adjusted gross income" which has its own statutory definition. (If one has not made a tax return, he obviously has not elected to itemize deductions.)


Section 62 of the Code defines "adjusted gross income" essentially as the "taxpayer's" "gross income" minus allowable deductions. (One would, of course, have to be a ""taxpayer" as defined in the Code before this section, or any other section of the Code would apply.)


Section 63 refers to the term "taxable year" and section 62 refers to the term "taxpayer"'.  These terms each have their own special statutory definition.


Section 441(b) of the Code defines the term "taxable year" as follows:  

For purposes of this subtitle, the term "taxable year" means-

(1)  the taxpayer's annual accounting period, if it is a calendar year or a fiscal year­-

26 U.S.C. 441(b). (In part.  Emphasis added.)


Section 1313(b) of the Code defines the term "taxpayer" as follows:

Notwithstanding section 7701(a)(14), the term "taxpayer" means any person subject to a tax under the applicable revenue law.   26 U.S.C. 1313(b).  (Emphasis added.)


Section 7701(a)(14), defines the term "taxpayer" as follows:

(a)  When used in this title, where not otherwise distinctly expressed or manifestly incompatible with the intent thereof-

(14)  Taxpayer.  The term "taxpayer" means any person subject to any internal revenue tax.

26 U.S.C. 7701(a)(14). (Emphasis added.)


It is my opinion that the Internal Revenue Code has been very carefully written, by using terms with special statutory definitions (such as "taxpayer", "taxable year", "taxable income" and "adjusted gross income") so as to show that the tax applies only to one who is subject to the tax and not to one who is not subject to the tax.  In spite of the fact that politicians and the news media seem to refer to all Americans as "taxpayers", this term has a much narrower meaning for purposes of the Internal Revenue Code.  It is my opinion that the court in the Economy Case cited above clearly shows that there are those who are subject to (liable for) a tax imposed in the Internal Revenue Code, and those who are not.  With over sixty excise taxes in the IRC, there are no shortages of "taxpayers".  There is no need to add yourself to this list.


The Privacy Act, 5 U.S.C. 552a(e)(3) requires government agencies, when requesting information from an individual, to inform the individual of the authority which authorizes the solicitation of the information, whether disclosure is mandatory or voluntary, the principle purpose or purposes for which the information is intended to be used, the routine uses which may be made of the information, and the effect on him, if any, of not providing the information.


The Privacy Act and Paperwork Reduction Act notice which the Internal Revenue Service uses states, in part:

Internal Revenue Code sections 6001, 6011, and 6012(a) say you must file a return or statement with us for any tax for which you are liable. Your response is mandatory under these sections.


It is my opinion that the response is mandatory only if the individual is liable for (subject to) a tax and has a requirement under the sections referenced.


Section 6001 states, in part:  

Every person liable for any tax imposed by this title . . . shall keep such records, render such statements, make such returns . . . .   26 U.S.C. 6001. (In part.  Emphasis added.)


Section 6011 states, in part:

(a)  General rule.  When required by regulations prescribed by the Secretary any person made liable for any tax imposed by this title . . . shall make a return or statement . . . .   26 U.S.C. 6011(a). (In part.  Emphasis added.)


It is obvious that an individual would not be required to make a tax return or keep records under these sections unless the individual was liable or made liable for a tax imposed in the Internal Revenue Code.


Section 6012 is worded somewhat differently, but the results are the same.  Section 6012(a) reads, in part:

(a) General rule.  Returns with respect to income taxes under subtitle A shall be made by the following:

(1)(A) Every individual having for the taxable year gross income which equals or exceeds the exemption amount . .  26 U.S.C. 6012(a). (In part.  Emphasis added.)


If you are not subject to or liable for a revenue tax, you are not a "taxpayer" as that term is defined in the Code, you could not have a "taxable year" as that term is defined in the Code (which is a "taxpayers" annual accounting period), and section 6012 does not apply to you.


In other words, if you are not a "taxpayer" as that term is defined by statute, you cannot have a "taxable year".


It is important to point out that the term "income" is not defined in the Internal Revenue Code.


The general term "income" is not defined in the Internal Revenue Code.

United States v. Ballard, 535 F.2d 400, - 405 (8th Cir. 1976)


The term "income" has been defined by the United States, Supreme Court as profit or gain received by the recipient (the taxpayer) for his own use or benefit.  It should be noted that the United States Supreme Court did not restrict the term "income" for "income" tax purposes to mean only corporate profit, as some people have claimed.  Profit or-gain (or even gross receipts) can be used to measure a tax on any revenue taxable activity.


For the present purpose we require only a clear definition of the term "income" as used in common speech, in order to determine its meaning in the Amendment; and, having formed also a correct judgment as to the nature of a stock dividend, we shall find it easy to decide the matter at issue.


After examining dictionaries in common use (Bouv.  L.D.; Standard Dict.; Webster's Internat.  Dict.; Century Dict.), we find little to add to the succinct definition adopted in two cases arising under the Corporation Tax Act of 1909 (Stratton's Independence v. Howbert, 231 U.S. 399, 415; Doyle v. Mitchell Bros.  Co., 247 U.S. 179, 185)- "Income may be defined as the gain derived from capital, from labor, or from both combined," provided it be understood to include profit gained through a sale or conversion of capital assets, to which it was applied in the Doyle Case (pp. 183, 185).


Brief as it is, it indicates the characteristics and distinguishing attribute of income essential for a correct solution of the present controversy.  The Government, although basing its argument upon the definition as quoted, placed chief emphasis upon the word "gain," which was extended to include a variety of meanings; while the significance of the next three words was either overlooked or misconceived.  "Derived-from-capital";-"the gain-derived from-capital," etc.  Here we have the essential matter: not a gain accruing to capital, not a growth or increment of value in the investment; but a gain, a profit, something of exchangeable value proceeding from the property, severed from the capital however invested or employed, and coming in, being "derived," that is, received or drawn by the recipient (the taxpayer) for his separate use, benefit and disposal;-that is income derived from property.  Nothing else answers the description.   Eisner v. Macomber, 252 U.S. 189, 206-207 (1920). (Emphasis added.)


It is also important to point out that the "income" (profit or gain) is not even being used to measure the so-called "income" tax.  The tax in Subtitle A is, in fact, measured by gross earnings ("gross income") minus the deductions Congress has chosen to allow the "taxpayer" as defined. See 26 U.S.C. 61 and 62. Since neither "income" nor earnings can be the subject of an indirect tax, what is or is not "income" for purposes of the so-called "income" tax is immaterial in determining who is or who is not subject to the tax.


It should be pointed out that various federal appellate courts have determined the so-called "income" tax to be an indirect tax, while others have determined it to be a direct tax.  It is my opinion that the lower courts which have determined the so-called "income" tax to be a direct tax are in contravention (violation) of the United States Supreme Court's rulings in both the Brushaber Case and the Stanton Case cited herein.  A lower court does not have the authority to rule contrary to the United States Supreme Court, and any such rulings are invalid as case law.


In as much as I find no place in the Internal Revenue Code that makes you liable for any so-called "income" tax, I cannot tell you that you should make a tax return reporting your income or earnings.  It is my opinion that it is up to you to determine if you are liable for (subject to) a so-called "income" tax and that no one else has the authority to make that determination. In my opinion, as an attorney for more than a quarter of a century, if the internal revenue laws do not make you liable for a tax, it is reasonable to determine that you are not liable for (subject to) a tax and you would, therefore have no requirements under the internal revenue laws.


It is my opinion that the signing of any form which is provided under the internal revenue statutes or regulations provides prima facie evidence that the signer is subject to (liable for) the tax.  It is further my opinion that no person or government has the authority to force an individual to sign a form that the individual does not believe to be true.


I must advise you that many individuals have been charged criminally and subsequently incarcerated for supposedly violating Internal Revenue Code sections 7201, 7203, and 7205(a).  It is my opinion that the these sections are strictly penalty statutes which do no more than to make it a crime and specify the penalties for violating some other unidentified section or sections of the Internal Revenue Code.  Neither section 7201 nor 7203 specify any section of the Code which could be violated. it is my opinion that a criminal complaint or indictment alleging the violation of a penalty statute, without reference to a specific statute which could be violated, fails to charge an offense which can be legally tried in a court of law, an d such a complaint or indictment should be dismissed as insufficient; either sua sponte (by the court) or upon motion by the accused.


Section 7205(a) does refer to section 3402.  However, to get a conviction for a violation of section 3402, the government is supposed to prove that the accused is an individual who is required to supply the information.  Unless the individual is subject to (liable for) a tax imposed by the Code, he cannot be one who is required to supply information.


Furthermore, section 3402(f)(2)(A) only requires an individual to complete a withholding exemption certificate for any exemptions he claims under the revenue laws.  It is my opinion that if an individual makes no claim at all, he has no requirement under the law to complete any exemption certificate in the first place.


It is my opinion that the penalty statutes, by themselves, cannot be violated.  It is further my opinion that an individual cannot be lawfully convicted unless the government prosecutor actually proves that a particular statute was actually violated by the individual accused of the crime.


Section 7201 reads as follows:


Any person who willfully attempts in any manner to evade or defeat any tax imposed by this title or the payment thereof shall, in addition to other penalties provided by law, be guilty of a felony and, upon conviction thereof, shall be fined not more than $100,000 ($5 00,000 in the case of a corporation), or imprisoned not more than 5 years, or both, together with the costs of prosecution.

26 U.S.C. 7201. (Emphasis added.)


Section 7203 reads as follows:


Any person required under this title to pay any estimated tax or tax, or required by this title or by regulations made under authority thereof to make a return, keep any records, or supply any information, who willfully  fails to pay such estimated tax or tax, make such return, keep such records, or supply such information, at the time or times required by law or regulations, shall, in addition to other penalties provided by law, be guilty of a misdemeanor and, upon conviction thereof, shall be fined not more than $25,000 ($100,000 in the case of a corporation), or imprisoned not more than I year, or both, together with the cost of prosecution. in the case of any person with respect to whom there is a failure to pay any estimated tax, this section shall not apply to such person with respect to such failure if there is no addition to tax under section 6654 or 6655 with respect to such failure.

26 U.S.C. 7203. (Emphasis added.)


Section 7205(a) reads as follows:


Any individual required to supply information to his employer under section 3402 who willfully supplies false or fraudulent information, or who willfully fails to supply information thereunder which would require an increase in the tax to be withheld under section 3402, shall, in addition to any other penalty provided by law, upon conviction thereof, be fined not more than $1000, or imprisoned not more than 1 year, or both.

26 U.S.C. 7205(a). (Emphasis added.)


Several facts should be pointed out regarding the above three penalty statutes of the Internal Revenue Code.


Regarding section 7201, it would be virtually impossible for an individual to attempt to evade or defeat a tax imposed by the Code unless the individual was subject to (liable for) such a tax.  Unless the individual is subject to (liable for) a tax, it would be impossible for him to be lawfully convicted for having committed a felony under section 7201.


Regarding sections 7203 and 7205, unless an individual is subject to (liable for) a tax, he would have no requirement to make returns or statements or supply information under some section of the Internal Revenue Code.  If an individual has no such requirement, it would be impossible for him to be lawfully convicted for having committed a misdemeanor under either section 7203 or 7205.


Another fact that should be pointed out is that each of these sections require the act, or omission, to have been committed willfully.  The United States Supreme Court has ruled that the term '"willfulness" for purposes of the Internal Revenue Code is the voluntary, intentional violation of a known legal duty.


Taken together, Bishop and Pomponio conclusively establish that the standard for the statutory willfulness requirement is the voluntary, intentional violation of a known legal duty.

Cheek v. United States, 498 U.S. 192, at 201 (1991).


It is my opinion that one could not willfully commit an act or omission under the internal revenue laws if he was unable to find any section of the Code that made him liable for (subject to) a tax and further unable to determine whether the subject of the tax is people or property or some revenue taxable activity which has been taxed.


I must caution you that not reporting your earnings to the Internal Revenue Service could result in the imposition by Internal Revenue Service personnel of civil penalties and/or a recommendation by them to the Justice Department to bring Criminal charges against you.  It is my opinion that such actions are based on mere assumptions, presumptions and prima facie evidence which all can be rebutted, but not without a legal battle.  Such battles must be fought with a sound understanding of constitutional law as well as court rules and procedures.  You have taken an important first step in asking for my opinion in this matter.


This opinion letter is based upon my understanding of constitutional law, statute law and the court decisions, including those cited herein.  If you have any questions regarding this opinion, please do not hesitate to call.


I urge you to study all court decisions upon which you place your reliance.  I further urge you to study The Best Kept Secret, "Taxpayer " v. Nontaxpayer, If You Are the Defendant, and The Biggest "Tax Loophole" of All, by Otto Skinner, which provide the reader with the clearest explanation of constitutional taxation and defense strategies I have ever read.  The books Mr. Skinner has written are available from my office.


It is my dream that individual citizens like you will begin to study the Constitution and the cases that have interpreted the Constitution, and that you will join with-others who also study the law of this great country and learn until we again have a Nation of law and learning.


Constitutionally yours, Dr. Eduardo M. Rivera


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