We use Subchapter B.
Then why are there so many references, in the index, the statutes, and the regulations, pointing one to Subchapter N to "determine the sources of income for the purposes of the income tax?" Note that it doesn't say "for the purposes of the income tax if you are a nonresident alien," but for the purposes of THE income tax, the whole thing. Income tax
Sources of income
Determination, 26 § 861 et seq...
Within the U.S., 26 § 861
No mention there of "ignore this if you are a US citizen."
Why does Section 61 of the code have this cross reference? Income from sources -
Within the United States, see section 861 of this title
Without the United States, see section 862 of this title
Again, no mention of "ignore this if you are a US citizen working in the US."
You're proceeding from a foregone conclusion here - "all income of US citizens MUST be taxable," your foregone conclusion, "and since Section 861 doesn't show the income of most US citizens to be taxable, Section 861 must not apply to most US citizens."
You're drawing a conclusion about the application of Section 861 based on your foregone conclusion that all income of US citizens is taxable income, instead of based on the law and regulations.
Because if you're in the sections where it refers to Subchapter N, Section 861, the presumption is that you are a nonresident alien. The only documents and regulations that refer to Subchapter N, Section 861 are those documents and regulations that a nonresident alien must use in order to determine and report his tax liability.
Why does Section 61 of the code have this cross reference?
Income from sources - Within the United States, see section 861 of this title Without the United States, see section 862 of this title Again, no mention of "ignore this if you are a US citizen working in the US."
The text you cited does not appear in Title26, Subtitle A, Chapter 1, Subchapter B, Part I, Section 61.
The totality of Section 61 is reprinted below:
Sec. 61. - Gross income defined
(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.
(b) Cross references For items specifically included in gross income, see part II (sec. 71 and following). For items specifically excluded from gross income, see part III (sec. 101 and following)
As you can see, Section 61 makes NO MENTION of Section 861 whatsoever. Either you are misinformed--and quite badly misinformed, at that--or you are LYING.
Pray tell which one it is.