Woman Beats IRS in Court Over Income Tax Protest

FoxNews ^ | 08/14/03 | Staff Writer

[bedolido]

This is a partial transcript of The Big Story With John Gibson, August 12, 2003, that has been edited for clarity. Click here to order the complete transcript.

JOHN GIBSON, HOST: Every payday, Uncle Sam takes a good chunk of your paycheck. A woman in Tennessee decided enough was enough and stopped paying. The IRS (search) took her to court and, get this, she beat them.

[Frapster]

bump for later reading *this debate is quite interesting*

[savedbygrace]

Did she really claim 99 exemptions?

[1rudeboy]

That's what I heard.

[lavaroise]

If she's shifted income and assets out of her name to protect them from seizure, they could nail her for fraudulent transfer.

hmmm, choosing a place of foreign living is voluntary and thus paying taxes, in a theoreticaly free world is a voluntary choice of place where you want to live... of course one should give up US citizenship in that case.. which means that it would be more an INS case rather than an IRS case.

[NYFriend]

I'm not going to argue with you. If that's what you believe, then fine. Thr reality is that an amendment to the Consitution could turn the US to a monarcy, or make any other radical change. Your right in that the framers wanted to leave most things to the States, but that's not how are system works anymore. A big part of tat is the income tax, because it provides the government with revenue to fund it's intrusions. Once there is an amendment, the Constitution is no longer the document it started out as. The Internal Revenue Code count income as being domestic AS WELL AS foreign.

[savedbygrace]

Then that's what'll come back to bite her, IMO. Though I can't imagine Larry Becraft taking the case if she had done that.

[1rudeboy]

You cannot renounce citizenship in order to avoid paying taxes. If you do, the IRS will keep you on-the-hook for a number of years.

[Dead Dog]

The code is ambiguous, they are going to have the burden of proof in a civil court. The IRS will have to present a case and prove the amount she owes, which often times can be disproved by the same tax code. No two accountants come up with the same number twice, and niether do IRS agents. This isn't as if she is going into and administrative arbritrations hearing.

One of the first things I was taught when dealing with the FAA, or any other alphabet soup administration, is to hire a lawyer and get the case in a civil court. The IRS would have been better served by ignoring her.

Invective such as "If you don't think so, your living on a different planet than me." sounds petty.

[Dead Dog]

Not having taxes withheld is a different case than not paying them. It would have to be a separate charge. She claimed 99 exemptions in order to avoid witholding, which is a finable violation of rules, not a criminal or civil offense. We all claim however many exemptions on the W-4 needed to avoid getting a refund.

[mvpel]

The Internal Revenue Code count income as being domestic AS WELL AS foreign.

Can you lay out the statutes and regulations that set forth that provision?

[american spirit]

Bump for later....this could be a long one.

[AD from SpringBay]

More power to this woman and (never thought I'd say this) her lawyer. There is a very thin line between current levels of taxation and theft. Shots have been fired over far far less.

[1rudeboy]

I was merely responding to the argument that she didn't "know" that her income is taxable.

[Dead Dog]

I see what your getting at, but does not witholding imply she knew her income was taxable? If you you've been billed in error, do you pay it in full or do you seek an explaination first?

[1rudeboy]

Unfortunately, if you believe the IRS has made an error, the best thing to do is to pay the contested amount and request a refund. That way, no penalties or interest are assessed if the ruling is not in your favor. The actual request for a refund is also what formally begins the process of resolving the dispute.

As for this woman, my point was that civilly, her attorney will have a tough time proving that she did not know that her income was subject to tax. The fact that she was filling-out tax forms to avoid with-holding is a mighty big hurdle.

[Jack Black]

If you give up US citizenship to avoid paying taxes you are still liable for them. Ted Kennedy got this passed a few years ago. He was outraged that some rich people were renouncing their citizenship and moving to tax havens. If the IRS determines you have moved primarily to avoid taxes they will send you a bill. They may not have much luck collecting it if you are in the Cayman islands, but they could make it very unpleasant to visit old friends in the USA.

[dave66]

>Ms. Kuglin, are you aware that the U.S. government taxes individual income?


hey, 1rudeboy, i want to determine my taxable income, if any, for the money i've received by living and working exclusively in the the U.S.. what exact sections of the irs Code do i use to figure my tax liability??

don't throw out the stupid answer, "the entire irs Code book", 'cause that fully exposes your DUMB ignorance.

the correct answer can be determined by answering the four questions listed below, questions the irs won't give you answers to -- answers which American citizens certainly deserve correct answers to given (1) the irs Code as written, (2) the oath of office the irs employees take, and (3) the mission statement of the irs itself.

you might as well throw our Constitution in the garbage, because the feds/irs ain't using it here on income taxes!

imagine that, a citizen wants to determine his or her tax liability, and the irs won't tell them what exact part of the law and associated regulations to look at!!

yeh, 1rudeboy, the government "taxes individual income", but the law and associated regulations truthfully show that those who "live and work exclusively in the U.S." don't have to file or pay! the law shows, and only shows, that those who are legal (or illegal) aliens, those who derive income from working outside the U.S, those who make income from foreign sources or those who work in a U.S. possession like Puerto Rico or Guam -- these people, and these people ONLY, are liable for filing and paying the "income tax"..

then, and only then, do the legal and Constitutionally written irs Codes apply and those people listed above have to "file and pay".

so what's been going on here in the U.S. for decades is the irs has been MISREPRESENTNG and MISAPPLYING the LEGAL laws that are already "on the books".

without being liable for an "income tax" (if you live and work exclusively in the U.S.), can you imagine having an extra 25% or more of income every year?? would you purchase more cars, housing, washers/dryers, clothing, books, food, entertainment, travel, etc.?? how 'bout investing some more of that extra money in the stock market so companies could expand their products and services and thus create American jobs?!!

hmm, NOT COLLECTING that ILLEGAL "income tax" from most of us sounds better and better for this country all the time!! just don't ask you local politician! they will squack loudly and warn of national disasters happening every five minutes if they can't continue to spend your "income tax" dollars. they can't breathe or live a day without collecting money from special interest groups AND spending your money!

the joke is, the fed government doesn't even need our "income tax" dollars! between motor fuel taxes, telephone taxes, electric taxes, natural gas taxes, excise taxes, the "income tax" just allow them to more totally control your pocketbook, control every small nuance of your financial life, and then spend, spend, spend their illegal heist on the goofy prgrams they spend it on.

i.e., the fed dept of Education has done a marvelous job on raising the reading and math skills of students nationwide, now haven't they?!? (cough, cough, choke) hey, maybe people are now smart enough to read hillary's book?! so, do we really need to spend hard earned "tax" dollars on an overblown, unaccountable, inept fed dept of Education??

how 'bout the three BILLION the feds sent to Haiti in the past ten years?!? has it done a marvelous job at helping the poverty of "the people" of Haiti?? and certainly not a dollar of the $3 BILLION went to the dictator and his corrupt henchmen now did it?!?

can you think of any other goofy fed spending, possibly with your "income tax" dollars??

wouldn't this country be much better off if the fed govt was much smaller in size and more accountable for the legal taxes they can "legally" collect?

if so, then have the feds follow the law as written and they will become smaller like the Founding Fathers envisioned!!!!!

learn the issues and the law as written, contact your representatives in small groups and demand answers and accountability.

what the feds/irs do with collecting the "income tax" from most Americans is more than 180 degrees in the opposite direction that our Founding Fathers dreamed of for this country.

to make "income taxes" legal for the irs to collect from American citizens who "live and work exclusively in the U.S.", a Constitutional Amendment would have to be passed.

any pol who talks the silly talk of replacing the irs with a "natinal sales tax" WITHOUT the mention of a Constitutional Amendment being required, that pol is ignorant of the law and pulling your leg and putting the Chinese wool over your head!! and that's why "national sales tax" won't happen either. same with the "flat tax" BS talk.

and through that timely procedure of creating a Constitutional Amendment, many citizens might find that the irs has been illegally collecting "income taxes" from most Americans. whoa, that might just create a big problem now wouldn't it!! so, the irs/feds just say " let's just keep things as is".

try reading the U.S. Constitution and find out for yourself.

because the deceptive and crooked treas dept lawyers made it possible to hide the truth for the past 8 decades by moving sections of law around and adding so much damn legalese, that the average citizen who tries to figure it out, can't.

virtually all irs employees are not shown the law, they are just told to "do things this way, and don't ask any questions". they somehow have confused anyone who simply asks the irs any questions of the law as written, and then considers them as "tax protesters".

don't count on h&r block to show you, they don't keep a copy of the irs code book in any of their offices!! but, they will give you the big invoice for their services after "doing things the way they are told".

try it and find out for yourself.

don't count on your elected reprentatives to show you, because they are very ignorant of the law and would rather worry about spending your "income tax" dollars and furthering their careers. they will send you a form letter if you write them and they will treat you like a "tax protester" if you simply ask for clarification of the irs Code as it's written!!

try it and find out for yourself.

don't count on most tax lawyers and tax accountants to answer the following four questions about the irs Code, answers that are necessary to determine one's taxable liability. these people are mostly very ignorant of the law itself and make a VERY good income doing your taxes. they'll just sluff the serious topic off and say, "oh, that doesn't apply to you. you shouldn't even be looking there unless you want to end up getting fined and/or sent to jail." and, anyway, why would they be interested in giving up all that income??

try it and find out for yourself.

here's the four questions that the irs CAN'T ANSWER (because you're probably talking to someone who's ignorant about the law as written) or WON'T ANSWER(same ignorance, or wants to hide the truth).

try it and find out for yourself, 1rudeboy.


1) Who should and who (if anyone) should not use the rules in 26 USC §
861(b) and the related regulations beginning at 26 CFR § 1.861-8 (in
addition to any other pertinent sections) to determine his taxable domestic income?

2) If a U.S. citizen lives and works exclusively within the 50 states, and receives all of his income from within the 50 states, do 26 USC § 861(b) and 26 CFR § 1.861-8 show such income to be taxable?

3) Should one refer to 26 CFR § 1.861-8T(d)(2) to determine whether the
“items” of income he receives (e.g. compensation, interest, rents) are
excluded for federal income tax purposes?

4) What is the purpose of the list of non-exempt income in 26 CFR §
1.861-8T(d)(2)(iii), and why is the domestic income of the average American
not on that list?

[NYFriend]

26 USC 61

(a) General definition
Except as otherwise provided in this subtitle, gross 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;
(2) Gross income derived from business;
(3) Gains derived from dealings in property;
(4) Interest;
(5) Rents;
(6) Royalties;
(7) Dividends;
(8) Alimony and separate maintenance payments;
(9) Annuities;
(10) Income from life insurance and endowment contracts;
(11) Pensions;
(12) Income from discharge of indebtedness;
(13) Distributive share of partnership gross income;
(14) Income in respect of a decedent; and
(15) Income from an interest in an estate or trust.


There are cases upholding this definition. See Commissioner v. Glenshaw Glass 348 US 436, and Commissioner v. Kowalski 434 US 7794.

[mvpel]

26 USC 61
(a) General definition
Except as otherwise provided in this subtitle, gross income means all income from whatever source derived, including (but not limited to) the following items:

Right, but this is not conclusive until you know the statutory meaning of all the words in this sentence.

In 26 USC 5841, Federal law states that “[t]he Secretary [of the Treasury] shall maintain a central registry of all firearms in the United States which are not in the possession or under the control of the United States.”

Why aren't the feds asking you to register your grandpa's old broken-down .22 with the Secretary of the Treasury? Because in 26 USC § 5845(a), the statutory definition of the word "firearm" is set forth, and it is clear there that they don't mean most of the rifles and handguns in the US, but they do mean poison gas, silencers and land mines.

If you stopped reading the law at 5841, as you have here with section 61 of the IRC, you might not come to that conclusion and erroneously think that your land mine or silencer didn't need to be registered with the government because it's not a "firearm" in the conventional sense, and think that your grandpa's old broken down .22 rifle did, because it is.

What is meant by "all firearms" here in legalese is not the same as what a plain-English reading of the sentence would suggest. And the legalese definition is what matters here, not the plain-English definition.

The same goes for 26 USC 61. The term "whatever source" does not mean "whatever source" if the definition of the word "source" is set forth elsewhere in the law, just as "all firearms" in 26 USC 5841 does not mean "all firearms" because of the definition in 5845(a).

In the annotated United States Code, in the cross-reference for Section 61, we find the following:

Income from sources -
Within the United States, see section 861 of this title.
Without the United States, see section 862 of this title.”

Section 861 and its regulations set forth the definition of the word "source," just as section 5841 in Title 26 sets forth the definition of the word "firearm" for the purposes of the respective statutes.

[NYFriend]

Not sure where you're comming from, but OK.
26 USC 861 from findlaw.
http://caselaw.lp.findlaw.com/scripts/ts_search.pl?title=26&sec=861
Thanks for the note.