Pennsylvania Tax Detractor Convicted for Not Reporting Back Taxes

A Philadelphia jury August 12 convicted section 861 proponent Larken Rose for not filing back taxes, bolstering the IRS's efforts to fight ongoing doubts about the validity of the code.

Former IRS agent turned anti-tax advocate Joseph R. Banister walked away from a similar tax fraud indictment earlier this summer (for coverage, see Doc 2005-13738 or 2005 TNT 121-1), a legal coup heralded by leaders of the so-called tax honesty movement as confirmation their controversial views are gaining ground.

Rose was charged with willfull failure to file after refusing to submit federal returns from 1998 through 2002. He has openly admitted to not filing federal or state taxes since 1997 and has actively invited goverment prosecution since at least 2001.

The conviction could land Rose in prison for up to five years (one year per count). He was placed under house arrest until his sentencing on November 15.

His wife and business partner, Tessa R. David, will face the same charges in a separate criminal proceeding tentatively set to begin as early as August 19.

Rose has for years raised questions as to whether specific foreign sourcing rules trump the broader income filing requirements. He maintains that the current system misconstrues gross and taxable income -- a distinction which he claims places domestic earnings outside the reach of the existing income tax structure -- and insists the Service has never adequately refuted his interpretation of 861 regulations.

The prosecution team split their time between establishing that Rose and David received enough income from their home-based medical transcription business during the years in question to warrant filing a return (IRS records project joint earnings of approximately $500, 000 across the five-year timeframe), and chronicling a half-dozen instances when IRS officials attempted to convince Rose about the limited scope of the 861 provision.

During the trial, various IRS agents testified that the 861 rules apply specifically to the calculation of foreign tax credits.

Assistant United States Attorney Floyd J. Miller introduced a string of IRS notices and other official correspondence amassed by Rose as proof he knew the 861 position was invalid, but noted that Rose chose not to file anyway. Miller also touted a number of adverse district and tax court rulings which Rose had been a party to as additonal justification that his 861 position was flawed.

"This is a case about a man who doesn't want to pay his fair share," Miller argued, and lampooned the one-time groundskeeper for holding himself out as the "supreme interpreter of the internal revenue code."

While acknowledging that the judiciary had considered aspects of his 861 position, Rose stressed that the recent decisions failed to counter his understanding of the underlying income statutes.

"I was told by the judges that domestic income is taxable. I was told by the law that it wasn't," he stated, adding, "I want to be convinced by evidence, not an assertion." --------------------------------------------------------------------------------

The Truth About The Trial of Larken Rose

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The trial of Larken Rose concluded on August 12, 2005 and its resulting guilty verdict prove one thing very clearly … the depths to which some individuals in our own government have sunk and the lengths to which those individuals will go to keep Americans from learning the truth about the misapplication of the federal income tax code.

Consider the following:

During a pre-trial hearing dealing with what evidence could be admitted at trial, presiding Judge Michael Baylson made clear that Mr. Rose’s political views are irrelevant and not to be discussed. Yet, what did lead prosecuting attorney, Floyd Miller, repeat throughout the trial and focus on during his final statement? He emphasized nothing greater than Mr. Rose’s political views.

The judge also made an interesting ‘about face’ from the beginning to the end of the trial. On the first day of proceedings, while explaining to the jury that they should not read anything about the case outside the courtroom, Judge Baylson stated, “It’s unlikely that you’ll hear anything about this trial on the TV or in the news.” However, during his concluding statement while thanking the jury he stated, with emphasis, “This was a very important case for the government.” He then paused and almost as an afterthought added, “and also for Mr. Rose.”

If the Judge knew that this case was of massive importance to the government, why would he assume at the outset that it wouldn’t be widely reported by the TV or news? And interesting contradiction, don't you think?

Even more disturbing was the fact that prior to the defendant and the public being informed of the verdict, a New York Times reporter, David Cay Johnson, long known to misrepresent the underlying facts of this issue, was personally escorted by the Courtroom Deputy to do a private interview with the two alternate jurors behind the locked doors of the courtroom.

How was this special treatment obtained by Mr. Johnson, who was not observed at the trial prior to its final day? What was discussed during this restricted rendezvous? No mention of this meeting occurs in Mr. Johnson’s article which was published in today’s New York Times.

Why also, after permitting the New York Times reporter to do a private interview, did the judge attempt to prohibit anyone else from speaking with the jurors by sealing the courtroom for several minutes after the verdict, effectively holding the entire remaining gallery captive while the jury was allowed to scurry out of the building?

Those that attended the trial know that several IRS agents attempted to portray the proper application of Section 861 on the witness stand as nothing more than a section of law by which ‘wealthy individuals’ who have both foreign and domestic income avoid double taxation. In spite of the fact that the title of Section 861 is "Income from Sources Within the United States." In contrast, the New York Times article published today by Mr. Johnson claims the exact opposite. Mr. Johnson claims that Section 861 itself shows the wages of the average American to be taxable. It is impossible for both of these claims to be correct and further demonstrates the deliberate obfuscation surrounding the proper application of this section of law.

The prosecution's witnesses made other deliberate misrepresentations during the trial. The worst of which was the claim that every court that has examined the issue of the proper application of Section 861 of the Internal Revenue Code has found claims related to its application to be frivolous. This was repeated by the judge himself. The opposing reality is that there has not yet been one single federal court ruling to correctly characterize the position taken by Mr. Rose. In previous cases, either the legal argument was incorrectly presented, deliberately mischaracterized by the government, or utterly ignored by the courts.

The most blatant case of court's refusing to address the issue when properly presented is the refund lawsuit brought by the author of this article. In 2003, a refund lawsuit was brought wherein the proper application of Section 861 was the primary issue of contention. Not only did the court refuse to address it, but the Department of Justice, representing the government, disobeyed a direct instruction from the court to answer Interrogatories that would have gotten to the very heart of the matter. Even more unsettling is that a Motion to Compel answers to those Interrogatories was filed but never showed up on the court docket. It mysteriously disappeared from existence!

If ever there were an opportunity for the federal judiciary or the Department of Justice to demonstrate any alleged fallacy of The 861 Evidence, this was it. But attorneys for the Department of Justice along with a federal judge himself simply could not do so.

True Americans recognize the tribute due Mr. Rose, who, like John Hancock before him pledged his life, his fortune and his sacred honor in defiance of tyranny and deliberately drew the ire of the ‘powers that be’ so that all could be free. While the document to which John Hancock boldly signed his name is revered throughout America, Mr. Rose's "Declaration," namely his "Please Prosecute Me" challenge, was disallowed into evidence as hearsay. It is a bitter irony, that Mr. Rose has been persecuted and unjustly convicted for trying to defend the rights of the very jurors who decided his case.

The unfortunate and incorrect verdict in this case, while devastating to the personal life of Mr. Rose, will do nothing to change the underlying truth that the Internal Revenue Code and its Regulations hold the disturbing truth of the greatest financial fraud in history

Have you noticed that the people who know the most about the subject and are able to note specifics - recognize that Larken is correct .... the others always speak in generalities and are so quick to observe that to oppose the governments position is dangerous (duhh) ..."usually wind up in a world of hurt". They talk about "fair share" etc. and seemingly are oblivious to that fact that the questions raised by Larken is a matter of what the Law actually requires.....not if is is "fair" not if it is "constitutional" (larken has repeatedly said the code IS constitutional ) Larken does not disagree with the law, he does not make any value judgment as to whether it's fair ... it is simply a matter of reading what it says. Anyone who reads the Code and Regs, reads Supreme court rulings (set aside what the lower courts, including the tax courts say - because they don't count!) understands the restrictions the Constitution puts on the taxing powers ( as articulated in Bruschaber, and Stanton and Flint) Read what was discussed on Congress as the 16th amendment was being debated. Understand the intent of the founders.
Educated persons know that Rose is correct. The fundamental law does not allow an unapprotioned tax on ones income and the code is written as such, albeit cryptically. The code is a mess and everyone knows it.

If ever there were an opportunity for the federal judiciary or the Department of Justice to demonstrate any alleged fallacy of The 861 Evidence, this was it. But attorneys for the Department of Justice along with a federal judge himself simply could not do so.

After actually slogging through the screed you posted, I can tell you that, contrary to what whoever wrote that garbage claims, the idiotic Section 861 "argument" wasn't even an issue in Rose's trial.

Rose didn't defend himself based on a claim that his goofy 861 claims are true and therefore his income isn't taxable.

Rose didn't even bother to make a pre-trial motion to dismiss because his claims about 861 are valid (presumably because he knows perfectly well that they're not).

In fact, he totally abandoned his 861 claims as a defense, and instead raised a Cheek defense. That is, his defense was "I truly believed my 861 interpretation, so therefore my failure to file wasn't willful."

The jury didn't buy it. They didn't believe his claim that he believed his own 861 BS. They took less than 90 minutes to convict him.

Get it yet?

The issue was never whether Rose's self-serving interpretation of 861 is valid or not. The issue was solely whether Rose willfully ignored a known legal duty to file.

The government didn't have to "demonstrate any alleged fallacy" in Rose's 861 claim because Rose abandoned it. In fact, the judge instructed the jury that, as a matter of law, Rose's interpretation of 861 was wrong, an instruction to which Rose did not object.

His failure to file was willful, and now he will pay for it with prison time.

He will also be required to file the delinquent returns and to pay the unpaid taxes, plus penalties and interest.

Then, if he still doesn't get it, he can do the prison thing all over again, because he didn't file for 2003 or 2004 in addition to 1998-2002, the 5 years he was prosecuted for.

And then there's Pennsylvania state returns, which he apparently also didn't file for many years, so they may have a crack at him, too. And Pennsylvania's definition of what is taxable has nothing to do with the federal IRC, so it'll be real interesting to hear his theory on why he didn't want to pay those taxes.

Your hero is a loser. His arguments are losers. People who think he is anything other than a loser are losers.

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