Some Basic Income Tax Decisions

 

      In 1894 Congress adopted an income tax which was later declared unconstitutional in Pollock v. Farmers' Loan and Trust Co, 157 U.S. 429, 15 S.Ct. 673.  The Pollock Court found that the income tax was a direct tax which could only be imposed if the tax was apportioned; since the tax was not apportioned, it was found unconstitutional.  Congress avoided the decision by passing the 16^thth Amendment was later interpreted in the case of Brushaber v. Union Pacific Railroad Co., 240 U.S. 1, 36 S.Ct. 236 (1916).  After the BrushaberStanton v. Baltic Mining Co., 240 U.S. 103 (1916) ruled that the 16^th Amendment conferred no new power of taxation.  Since then the courts have become very confused on the issue of the income tax.  In the case of United States v. Turano, 802 F.2d 10 (1^st Cir. 1986), the Court held that the "16^th Amendment eliminated the indirect/direct distinction as applied to taxes on income.  In Fiscalora v. Commissioner, 751 F.2d 85 (2^nd Cir. 1984), the court stated that the personal income tax was an indirect tax.  In United States v. Sitka, 845 F.2d 43 (2^nd Cir. 1988), the Court took the position that the income tax is direct. Amendment which was ratified in 1913.  The 16 case, the case of

 

                Furthermore, the courts cannot agree which statue requires the filing of tax returns.  In Commissioner v. Lane-Wells Co, 321 U.S. 219, the court noted that Section 54, the predecessor of Section 6001, governed the filing requirement.  But in Beard v. Commissioner, 793 F.2d 139, (6^thUnited States v. Neff, 954 F.2d 698, (11^th Cir. 1992), the Court ruled that Section 6012 governed the filing requirement.  And in United States v. Pilcher, 672 F.2d 875, (11^th Cir. 1982), the Court ruled that Section 7203 is the statue that requires the filing of returns. Cir. 1986), the court ruled that Section 6011 governed the filing requirement.  But in

 

            The fact is that the courts cannot agree on whether or not the income tax is a direct or an indirect tax and they cannot agree on which statute requires the filing of a tax return. The courts continue to send individuals off to jail for willful failure to file returns.  Isn't that a terrible travesty of justice to punish individual citizens for failing to understand a system that the courts themselves cannot understand?

GREAT QUOTES

 

"In a recent conversation with an official at the Internal Revenue Service, I was amazed when he told me that 'If the taxpayers of this country ever discover that the IRS operates on 90% bluff, the entire system will collapse'". - Henry

Bellmon, Senator (1969)

 

 

"If no information or return is filed, [the] Internal Revenue Service cannot assess you". - Gary Makovski, Special IRS Agent, testifying under oath in U.S. v. Lloyd

 

"The United States has a system of taxation by confession". - Hugo Black, Supreme Court Justice, in U.S. v. Kahriger

 

"Only the rare taxpayer would be likely to know that he could refuse to produce his records to IRS agents ... Who would believe the ironic truth that the cooperative taxpayer fares much worse than the individual who relies upon his constitutional rights". - Judge Cummings, U.S. Federal Judge in  U.S. v. Dickerson (7th Circuit 1969)

 

"Your income tax is 100 percent voluntary tax, and your liquor tax is 100 percent enforced tax. Now, the situation is as different as night and day...". - Dwight E. Avis, former head of the Alcohol and Tobacco Tax Division of the IRS, testifying before a House Ways and Means subcommittee in 1953.

 

"All we have to do now is to inform the public that the payment of social security taxes is voluntary and watch the mass exodus". - Walter E. Williams, John M. Olin Distinguished Professor of Economics at George Mason University in Fairfax, VA, January 24, 1996

 

"To lay with one hand the power of government on the property of the citizen, and with the other to bestow it on favored individuals ... is none the less robbery because it is ... called taxation". - United States Supreme Court in Loan Association v. Topeka (1874)

 

"... bank records are not the depositor's private papers and having given the information to the bank, the depositor has no legitimate expectation of continued privacy ... ". - United States Supreme Court in U.S. v. Miller

 

"... 100% of what is collected is absorbed solely by interest on the Federal Debt ... all individual income tax revenues are gone before one nickel is spent on the services taxpayers expect from government". - 1984 Grace Commission report submitted to President Ronald Reagan

 

"Of all contrivances for cheating the laboring classes of mankind, none has been more effective than that which deludes them with paper money". - Daniel Webster, lexicographer

 

"All the perplexities, confusion and distress in America rise ... from downright ignorance of the nature of coin, credit and circulation". - John Adams, in a letter to Thomas Jefferson in 1787

 

"I believe that banking institutions are more dangerous to our liberties than standing armies". - Thomas Jefferson

 

"Give me control over a nation's currency and I care not who makes its laws" -Baron M.A. Rothschild (1744 - 1812)

 

".. we conclude that the [Federal] Reserve Banks are not federal ... but are independent, privately owned and locally controlled corporations ... without day to day direction from the federal government." - 9th Circuit Court in Lewis v. United States, June 24, 1982

 

"If all bank loans were paid ... there would not be a dollar of coin or currency in circulation. Someone has to borrow every dollar we have in circulation. We are absolutely without a permanent money system". - Robert Hemphill, Federal Reserve Bank in Atlanta, in foreword to "100% Money" by Irving Fisher.

 

"America will never be destroyed from the outside. If we falter and lose our freedoms, it will be because we destroyed ourselves." - Abraham Lincoln

 

"We are going to impose our agenda on the coverage by dealing with issues and subjects that we choose to deal with".

- Richard M. Cohen, former Senior Producer of CBS political news.

 

"Our job is to give people not what they want, but what we decide they ought to have". - Richard Salant, former President of CBS News.

 

"Democracies have ever been spectacles of turbulence and contention have ever been found incompatible with personal security or the rights of property and have in general been as short in their lives as they have been violent in their deaths".- President James Madison

 

"It is not the function of our government to keep the citizen from falling into error it is the function of the citizen to keep the government from falling into error". - United States Supreme Court in American Communications Association v. Douds

 

"Fear can only prevail when victims are ignorant of the facts". - Thomas Jefferson

 

"None are more hopelessly enslaved than those who falsely believe they are free." - Johann W. Von Goethe

 

"They that can give up essential liberty to obtain a little temporary safety deserve neither liberty nor safety." - Benjamin Franklin

 

"He who knows nothing is nearer to the truth than he whose mind is filled with falsehoods and errors". - Thomas Jefferson

 

"In the beginning of a change, the patriot is a scarce man brave, hated, and scorned. When his cause succeeds, however, the timid join him, for then it costs nothing to be a patriot." - Samuel Clemens, author writing under the pen name "Mark Twain"

"The true danger is when liberty is nibbled away, for expedients, and by parts ... the only thing necessary for evil to triumph is for good men to do nothing." - Edmund Burke

 

"If a nation expects to be ignorant and free, it expects what never was and never will be ... The People cannot be safe without information. When the press is free, and every man is able to read, all is safe." - Thomas Jefferson

 

"The right to freedom being the gift of God, it is not in the power of man to alienate this gift and voluntarily become a slave". - Samuel Adams

 

"To sin by silence when they should protest makes cowards of men." - Abraham Lincoln

 

"Government big enough to supply everything you need is big enough to take everything you have ... The course of history shows that as a government grows, liberty decreases". - Thomas Jefferson

 

"Any truth is better than make-believe ... rather than love, than money, than fame, give me truth". - Henry David Thoreau

 

"Most people, sometime in their lives, stumble across truth. Most jump up, brush themselves off, and hurry on about their business as if nothing had happened." - Sir Winston Churchill

 

"I know of no safe depository of the ultimate powers of society but the people themselves, and if we think them not enlightened enough to exercise control with a wholesome discretion, the remedy is not to take it from them, but to inform their discretion". - Thomas Jefferson

 

 

 

 

Common Law Business Organizations

 

      Many people are setting up common law trusts (hereinafter referred to as CLT's to run their businesses.  How will they fare with this idea?

 

      Individuals who are selling CLT's as the ultimate way to avoid paying taxes are simply selling a sham.  Proponents of this concept take the position that because the organization is based on the common law right to contract that it does not have to file tax returns or pay taxes as it would have to do if it were a corporation or a trust.  The promoters also claim that once an individual's assets are transferred to the trust, it can pay personal expenses for the individual and that these expenses do not constitute taxable income.  The IRS would resolve this issue with tax law related to taxation of corporate benefits.  The fact is that many people who set up common law trusts are going to have a great deal of trouble in the future.  See U.S. v. Schmidt, 935 F.2d 1440 (4th Cir. 1991)(conviction for conspiracy to evade taxes); Zmuda v Comm'r 79 T.C. 714 (1982); (back taxes and negligence penalty). Keefower v. Comm'r 65 T.C.M. (CCH) 2999 (1993) back taxes and penalties for negligence and substantial underpayment).

      Be very careful about believing promoters of common law trusts.  If it sounds too good to be true, it probably is.