THE ORGANIZATION OF THE COURTS

 

             There are two systems of courts in the United States: the federal and the state systems.  Both the feds and the state governments have trial level courts.  The states, have a much more comprehensive set of courts than the feds.  Some state courts handle minor stuff like traffic fines and small claims, etc.  These courts usually are located in every reasonably sized town in the state.  In most states, jury trials are allowed in some courts and not others.  There is usually a level of court that handles specialized matters like divorce and juvenile delinquents, etc. The court structure in states varies a great deal.  As you can see, things can get relatively complex at the state level since there can be so much variation.

 

            Litigation at the Federal level is more reasonably organized.  There are only about ninety-two trial courts in the Country at the Federal Level.  Each state has at least one and it is called a Federal District Court.  If you are filing a suit against our good buddies at the IRS, you generally sue them in Federal Court although there are sometimes when you might want to sue in a state court.

 

            These federal courts hear matters such as criminal violations of federal law; jury trials are available in criminal cases and in many civil cases that involve more than $20.00.  There are several specialized sets of courts that are located in Washington.  These courts handle appeals of administrative decisions, patent appeals, tax appeals, and other claims.

 

            There are supreme courts at the state level and there is a United States Supreme Court at the federal level, which deals with matters involving federal law or the federal Constitution.   The Federal Supreme Court gets many thousands of cases each year, but dismisses almost 90 percent of them as unworthy of review.  Some state supreme courts hear a high percentage of appeals brought to them, and others hear a much smaller percentage.

 

            Any decision of a state supreme court may be appealed to the United States Supreme Court.  As a matter of fact, the main connection between the state courts and the federal courts is the United States Supreme Court. A case that is taken up for review may be either affirmed or reversed. State courts are constitutionally required to follow the Supreme Court but sometimes they ignore its decisions.

 

            The type of court system that we have allows different law to be made on similar issues in different states. Sometimes state courts will deny federal jurisdiction over a case to protect the sovereignty of their own court system.

 

            If you are litigating with the IRS, you will find that you will have to really learn your way around the federal courts.  It is best to start your learning by practicing with easier lawsuits.  For example, if the IRS doesn't give you the information you request under FOIA, you can sue them to get more.  A FOIA suit is a great first suit against the IRS as the law is skewed in favor of the plaintiff; and you will probably get some concessions.  It is nice to start out a winner.  Remember that the best way to learn about the court systems in this country is to use them and if everyone would use the court system to defend himself or herself against harassment from the IRS, we would not have the tax system that we currently have. So hang in there and keep on keeping on!

 

 

CONGRESSIONAL NEWSPEAK

 

 

            Recently an individual wrote to his congressman and asked some pertinent questions about the income tax. The friendly congressman ignored all the questions and sent a Xeroxed page from the Congressional Research Service which was obviously written as general information to combat the issues in the Freedom Movement.  Interestingly enough, Congress really feels compelled to go out of its way to protect the IRS.  With the kind of congress we now have, it is no surprise that we have the

tax system we do.

 

            The section on our voluntary tax system is reproduced here so that we can enjoy the incredible doublespeak that Congress relies on to continue in the IRS scam. Notice how Congress states that voluntary does not mean "voluntary in the meaning of

optional."

 

            The congressional diatribe goes as follows:

 

            We do not have a voluntary tax system in the sense that payment of taxes is optional.  There are specific provisions of law, which require the payment of income taxes.  There are civil and criminal penalties for failing to pay these taxes or file the required returns. Several rather tenuous arguments have been put forward to support the contention that paying income tax is optional.

 

            First, statements by many, including some by past IRS Commissioners, have been taken out of context to support this position. The phrase "voluntary tax system" is commonly used in discussion of our tax compliance system.  The United States does have a system of collecting taxes that depends to a certain extent upon voluntary compliance.  Although this country does have withholding on certain types of income, much of the income tax revenues come from tax on other sources of income (such as interest, dividends, self-employment, etc.) where the individual must supply the information for the system to function efficiently.  Supplying this information is not voluntary in the meaning of optional.  However, if a large percentage of the citizenry did not report their income, our system of collection would not work efficiently, leading to the often misunderstood statement that we rely upon voluntary compliance in our tax system.

 

-----------------------------

 

 

            Well, I hope you enjoyed reading the above quote.  Now let's all have a good laugh!  Note the following:

 

 The Congress' statement states that there are sections that require the payment of tax. However, they didn't state which section.  The fact that they have not named the specific section that requires the payment of income taxes is because there

isn't one.

 

            1.  The statement states that our system depends to a certain extent upon voluntary compliance.  What extent is that? Are they alleging that some people supply information voluntarily and others are required to supply the information?

 

            2.  And how about the incredible statement that supplying information is not voluntary

 in the meaning of optional!!! If the tax system is not voluntary in the meaning of optional then it is voluntary in the meaning of voluntary, or is it voluntary in the meaning of required?

 

            3.  And then get the hooker; the congress admits that if a large percentage of the citizenry did not report their income, the collection system would not work efficiently.  They claim that this has something to do with the often-misunderstood statement that we rely upon voluntary compliance in our tax system.  If congress admits in clear English that the phrase: "voluntary compliance" leads to frequent misunderstanding, then why don't they tell the IRS to quit using the word.  The IRS could always use the word required instead of voluntary compliance.  It would clearly state their position and it would

use less ink.  Why is it that Congress defends the IRS' unclear use of the word voluntary?  Well, it is this author's opinion that the Congress and the IRS both know that they cannot require individuals to give them information that can immediately be used in criminal tax cases. Therefore, they say we have a voluntary tax system, then they throw a few unlucky individuals in jail every year who haven't volunteered to scare everyone else into volunteering.

 

            As you read this article, don't you feel mad?  Isn't it frustrating that we live in a country in which the people are terrorized by a gestapo-like agency that uses unclear English in its demands and that agency is protected by Congress?  Well, if you are mad enough about it, then do something.  It doesn't matter what you do, but do something.  As long as the American Public goes along with the double speak and intimidating tactics of the IRS, they have the tax system they deserve.  Let's get in gear and educate those around us so they can see that the truth is far different from the IRS' propaganda.

 

Any Freedom Group or Newsletter has my permission to print this article and use this idea.  If you can improve on it please do.  Call me at (303) 455-0837 if you want to discuss the issues.

 

 

THE ATTESTED SUMMONS: CONTEST ALL THIRD AND FIRST PARTY SUMMONSES ON THIS ISSUE.

 

(The following article was written in 1991; however, the IRS is still capable of making this mistake.  If you get an unattested summons, raise this issue).

 

            As many of you know, there was a great case in the Nebraska District Courts where a patriot blasted an IRS summons because it did not follow the statue properly regarding the required attestation.  The IRS appealed the

case to the Eighth Circuit and in December of 1991, the IRS won the issue.  Except that the Eight Circuit said  "As the IRS has now been alerted to the requirements for an attested copy, future summonses should comply with this holding."

 

            However, the interesting point to watch is that the issue has prevailed in two other District Courts.  In the United States District Court for the Middle District of Florida, the Court ruled that the IRS did not comply with the attested summons issue.  This case was a first party case and the name of the case is United States of America, v. Glenn S. Davis, case No. 91-333-MISC-ORL-19.

 

            Another District Court ruled against the IRS in the United States District Court for the District of South Carolina, Greenville Division in the case of James and Mary Henderson v. United States, which is a third party summons case; In the case of Henderson v United States the Court ruled that the "summons must have a written and signed certification or memorandum that the copy is a true and correct copy of the original."

 

    Well what do you know! You can get the two District Court wins in our favor.  If you are in the 8th Circuit, do it too, and if you are in any other circuit, contest all third party summonses on this issue.  If you get a First Party Summons, add this issue to your Fifth Amendment Issue. 

            Good luck and don't let them get you down, they make a lot of mistakes.

 

NET WORTH AND TAX FRAUD

 

 

 

 

 

           The IRS can use the net worth of  individuals to attack them on the issue of civil or criminal fraud.  The essential condition of a fraud case is the reconstruction of income with a reasonable idea of the opening net worth as a starting point to figure the increases in net worth.    Of course, the accuracy of the result depends entirely upon the inclusion in the computation of the opening net worth.  Once the government provides a computation and supporting records, the burden shifts to the individual.  Many times, the validity of the net-worth reconstruction resolves down to the individual's claim that he  had a certain amount of accumulated cash at the beginning of the taxable period.  In the majority of cases, such testimony has been rejected. (Anderson v. Comm., 250 F2d 242 (CA5, 1977); Carmack v. Comm., 183 F2d 1 CA5, 1950); Lipsitz v. Comm., 21 TC 917 (1954).

 

           The net-worth increase reconstruction must follow certain additional rules. The taxpayer's assets must be treated consistently as of the beginning and end of the taxable periods.  The government must allow depreciation and amortization.

 

           There is a different burden of proof for the government in civil and criminal fraud cases.  The United States is not required to prove the precise amount of unreported income with mathematical certainty.  Convictions have repeatedly been sustained where the net-worth increase computation of unreported income showed proof of an understatement of income and a willful attempt to evade tax. (Holland v. U.S. 209 F.2d 516 (CCA10, 1954).  The Government is required to prove a likely source of the unreported income and, in establishing the defendant's opening net worth, must negate every reasonable possibility that the defendant had other assets at the beginning of the prosecution period.

 

           The following are standards used by the courts as they evaluate tax fraud situations:

 

           1.  The government must negate explanations of the taxpayer which are inconsistent with guilt and reasonably susceptible of being checked.

 

           2.  A net-worth increase, alone, cannot be assumed to be attributable to taxable income.  There must be evidence that supports the inference.  However the proof of a likely source of taxable income is sufficient. Holland v. U.S. 348 US 121; U.S. v. Massei, 355 US 595, U.S. v. Dwoskin, 644 F2d 418 9CA5, 1981).

 

           3.  Willful intent to evade has to be proven by independent evidence and it cannot be inferred from an understatement of income.  A pattern of understated income with failure to record all income on the books will support an inference of willfulness. U.S. v.  Skalicki, 615 F2d 1117 (CA5, 1980); U.S. v. Tunnell, 481 F2d 149 (CA5, 1973).

 

           4.  Once the Government establishes a prima facie case, the defendant remains silent at his peril. (Holland v. U.S., 348 US 121; U.S. v. Hall, 650 F2d 994; U.S. v. Tolbert, 367 F2d 778 (CA7, 1966).

 

           5.  Detailed comprehensive jury construction  on the net worth method of proof are required.

 

           As you can see, the government has a lot of power.

 

 

It just hit me!

My cat sleeps about 20 hours a day. He has his food prepared for him. His meals are provided at no cost to him.

He visits the doctor once a year for his checkup, and again during the year, if any medical needs arise. For this he pays nothing, and nothing is required of him.

He lives in a nice neighborhood in a house that is much larger than he needs, but he is not required to do any upkeep. If he makes a mess, someone else cleans it up. He has his choice of luxurious places to sleep. He receives these accommodations absolutely free.

He is living like a king, and has absolutely no expenses whatsoever. All of his costs are picked up by others who earn a living.

I was just thinking about all this, and suddenly it hit me like a brick: My cat is a CONGRESSMAN!

COMPULSORY PRODUCTION OF DOCUMENTS

 

An Article by Attorney Larry Becraft

   The provisions of the United States Code regarding summons enforcement proceedings, 26 U.S.C., §§ 7601 through 7610, have over the last three decades been the subject of much litigation and consequently have been construed by the federal courts of appeals as well as the United States Supreme Court. In Reisman v. Caplin, 375 U.S. 440, 84 S.Ct. 508 (1964), the Supreme Court held that a witness or taxpayer could challenge an I.R.S. summons on any appropriate grounds and may assert as a defense to the proceedings the fact that the materials sought by the I.R.S. relate solely for use as evidence in a criminal prosecution. In United States v. Powell, 379 U.S. 48, 85 S.Ct. 248 (1964), the Court outlined four requirements which must be shown before any summons can be enforced. In Donaldson v. United States, 400 U.S. 517, 91 S.Ct. 534 (1971), the Court held that an I.R.S. summons could lawfully be used for a criminal investigation provided the summons also had a civil purpose. In Couch v. United States, 409 U.S. 322, 93 S.Ct. 611 (1973), the Court held that the Fifth Amendment to the U.S. Constitution did not protect tax records in the possession of a taxpayer's accountant. In United States v. Bisceglia, 420 U.S. 141, 95 S.Ct. 915 (1975), the Court allowed the issuance of a John Doe summons for the purpose of investigating a $40,000 deposit of $100 bills. In Fisher v. United States, 425 U.S. 391, 96 S.Ct. 1569 (1976), the Court held that the Fifth Amendment did not protect tax records in the possession of the taxpayer's attorney. See also United States v. Rylander, 460 U.S. 752, 103 S.Ct. 1548 (1983). This line of cases clearly shows that the Internal Revenue Service has very broad summons authority and may secure virtually any record or document in the possession of a third party.

    I.R.S. summonses are issued to two separate and distinct classes of persons, with one class representing third parties who have possession and custody of books and records of the taxpayers under investigation, and the other class comprising taxpayers under investigation. A summons enforcement action is utilized when compliance with the summons has not been obtained due to the taxpayer notifying the third party not to comply, by the institution of a suit to enjoin enforcement, or by the refusal on the part of the taxpayer to comply when summons is directed to him. When the Service proceeds to enforce a summons issued to either a third party recordholder or the taxpayer himself, its burden of proof is very minimal and amounts to nothing more than proof of compliance with the requirements of Powell, supra; see United States v. Will, 671 F.2d 963 (6th Cir. 1982).

    Whereas the burden of proof upon the Service is relatively light in summons enforcement actions, a taxpayer opposing enforcement of the summons has a far heavier burden to carry. Basically, a taxpayer seeking denial of enforcement of the summons has available three defenses: (a) bad faith; (b) institutional posture, and (c) the Fifth Amendment. The "bad faith" defense is based upon Reisman v. Caplin, supra, and Donaldson v. United States, supra, and involves those situations wherein the summons has been issued for the improper purpose of gathering evidence needed for a criminal prosecution after referral to the Department of Justice. The "institutional posture" defense is based upon United States v. LaSalle National Bank, 437 U.S. 298, 98 S.Ct. 2357 (1978), and relates to those situations when the Service has made an institutional commitment to criminally prosecute the taxpayer under investigation but desires to withhold referral to the Justice Department to allow for the gathering of additional evidence needed for a successful criminal prosecution.[1] These two defenses are most often utilized by a taxpayer when intervening in a third party summons enforcement action or commencing an action to enjoin enforcement of the summons. Although a taxpayer opposing enforcement of a summons issued to him may assert the defenses of "bad faith" and "institutional posture," he will most likely rely upon the third defense available to him, that of the Fifth Amendment.

    The history and development of the Fifth Amendment right against self-incrimination has been one of slow but sure expansion of the benefits of its protection. James Madison, the prime author of this provision in the Bill of Rights to the U.S. Constitution, sought this provision to prevent the development in our country of proceedings similar to or identical with Spanish Inquisitions or Star Chamber proceedings. A cursory examination of the William Penn Case, 6 How. St. Tr. 951 (1670), reveals that resort to "Spanish Inquisitions" has on many occasions been desired in order to bring about the efficient operation of governmental machinery; this is what Madison desired to avoid by inserting the Fifth Amendment into our Constitution. The original intent or purpose for the Fifth Amendment was to compel the government to procure independent evidence of the facts and proof of a crime other than through the mouth of the accused. Without such a requirement and with the availability of procedures such as the Inquisition or Star Chamber, the government could constantly harass law abiding citizens and might on some occasion procure, through duress and coercion, a confession. But as is well known, such confessions are highly suspect, hence we have the protection of the Fifth Amendment.

    One of the most appropriate statements concerning the Fifth Amendment and its operation was made by U.S. Supreme Court Justice John Marshall in the case of United States v. Aaron Burr. Chief Justice Marshall, quoted in Counselman v. Hitchcock, 142 U.S. 547, 565, 12 S.Ct. 195 (1892), maintained that a witness could plead the Fifth Amendment not only in situations where his answer to a question would directly implicate him in a crime, but also in response to questions the answer to which would provide a link in the chain of evidence needed to convict the witness of a crime. Protection from compulsory testimony designed to implicate a witness in a crime has been secured through the Fifth Amendment and has been one of the most sacred principles known to American jurisprudence. This principle of the Fifth Amendment protection from compulsory testimony, absent a grant of immunity,[2] has seen no erosion in its application since first expounded and requires but few citations to support it; see Hale v. Henkel, 201 U.S. 43, 26 S.Ct. 370 (1906), Blau v. United States, 340 U.S. 159, 71 S.Ct. 223 (1950), and Hoffman v. United States, 341 U.S. 479, 71 S.Ct. 814 (1951).

    The question of Fifth Amendment protection for the books, records and personal documents of a witness who may be implicated in a crime was first really considered in Boyd v. United States, 116 U.S. 616, 6 S.Ct. 524 (1886), where the Supreme Court expanded Fifth Amendment protection against compulsory testimony to books and records of the witness. In granting such protection, the Court held:

"And any compulsory discovery by extorting the party's oath, or compelling the production of his private books and papers, to convict him of crime, or to forfeit his property, is contrary to the principles of a free government. It is abhorrent to the instincts of an Englishman; it is abhorrent to the instincts of an American. It may suit the purposes of despotic power, but it cannot abide the pure atmosphere of political liberty and personal freedom," 116 U.S., at 631-32.

"And we are further of opinion that a compulsory production of the private books and papers of the owner of goods sought to be forfeited in such a suit is compelling him to be a witness against himself, within the meaning of the fifth amendment to the Constitution, and is the equivalent of a search and seizure -- and an unreasonable search and seizure -- within the meaning of the fourth amendment," 116 U.S., at 634-35.

    Since the decision in Boyd, the Supreme Court has on some occasions limited the full import of that historic ruling. In Wilson v. United States, 221 U.S. 361, 31 S.Ct. 538 (1911), the Court held that the Boyd principle did not apply to corporations; see also United States v. Peter, 479 F.2d 147 (6th Cir. 1973); and In Re Grand Jury Empanelled March 8, 1983, 722 F.2d 294 (6th Cir. 1983). Still later, application of Boyd to partnership records was prohibited in Bellis v. United States, 417 U.S. 85, 94 S.Ct. 2179 (1974). However until 1984, it still appeared that personal, non-corporate tax records of a person with potential criminal liability were still protected by Boyd principles. When the Supreme Court held that Boyd protection did not apply to partnership records in Bellis, supra, it expressly affirmed this proposition by stating:

"The privilege applies to the business records of the sole proprietor or sole practitioner as well as to personal documents containing more intimate information about the individual's private life," 417 U.S., at 87-88.

Likewise, Fisher, supra, did not emasculate Boyd in any respect as the issue in that case was completely different; in fact, the Court in Fisher definitely appeared to have sided with Boyd in the last paragraph of its opinion:

"Whether the Fifth Amendment would shield the taxpayer from producing his own tax records in his possession is a question not involved here; for the papers demanded here are not his 'private papers,' see Boyd v. United States," 425 U.S., at 414.

    Shortly after its decision in Fisher, the Court was confronted with a similar issue in Andresen v. Maryland, 427 U.S. 463, 473-74, 96 S.Ct. 2737 (1976). Here, a search warrant had been issued for the seizure of certain private books and records, and the criminal defendant was not required to produce those records or authenticate them because authentication was achieved by the use of third parties. The Supreme Court in Andresen did not emasculate Boyd in any way and in fact expressly affirmed Boyd:

"Thus, although the Fifth Amendment may protect an individual from complying with a subpoena for the production of his personal records in his possession because the very act of production may constitute a compulsory authentication of incriminating information ..., a seizure of the same materials by law enforcement officers differs in a crucial respect -- the individual against whom the search is directed is not required to aid in the discovery, production or authentication of incriminating evidence."

    The Fifth Amendment to the U.S. Constitution states that no person shall be compelled to be a "witness" against himself in a criminal prosecution. Similar provisions exist in the constitutions of the various states of our nation, with some such constitutional provisions following the Fifth Amendment via use of the word "witness" while other provisions offer more expansive protection by stating that no person shall be compelled to give "evidence" against himself in a criminal prosecution. There exist distinct and crucial differences in the type of protection offered under these two different types of constitutional provisions. The protection against being compelled to give "evidence" against the accused is far broader than protection only afforded to "witnessing" and giving "evidence" arguably would include providing to the prosecution documents incriminating to the accused. The protection afforded by the Fifth Amendment is only that of proscribing testimonial compulsion and is not as all encompassing as the provisions prohibiting compulsory production of "evidence."

    Neither Fisher nor Andresen disturbed the holding in Boyd or Bellis and both are wholly consistent with these two other cases. What the Supreme Court did in these two cases was note the crucial difference between protecting "evidence" and being a compelled "witness"; private papers may no longer be specially protected and in a distinct and different class from other evidence, property or contraband. What the Supreme Court has directed is that an accused cannot be compelled to produce his own incriminating books and records because such would involve to a degree an amount of authentication of such books and records on the part of the accused; such is tantamount to compelled testimony specifically proscribed by the Fifth Amendment. What the Supreme Court has commanded is that if the government desires to obtain personal books and records and use the same against the accused, it must be done through witnesses other than the accused himself.

    A survey of pre-1984 decisions reveals the continued vitality of the principles of Boyd and the crucial government-citizen relationship which it protects. In the First Circuit case of In Re Grand Jury Proceedings (Martinez), 626 F.2d 1051, 1056 (1st Cir. 1980), the court found that "personal, self-created business records in the possession of a sole proprietor or practitioner would enjoy a privilege against subpoena." In the Second Circuit, the case of United States v. O'Henry's Film Works, Inc., 598 F.2d 313 (2nd Cir. 1979), held that a corporate official's Fifth Amendment plea to questions concerning the location of corporate records was valid; see also United States v. Beattie, 522 F.2d 267 (2nd Cir. 1975), United States v. Patterson, 219 F.2d 659 (2nd Cir. 1955), In Re Grand Jury Subpoena Duces Tecum, 657 F.2d 5 (2nd Cir. 1981), In Re Grand Jury Witness (Gilboe), 699 F.2d 71 (2nd Cir. 1983), and United States v. Bobart Travel Agency, Inc., 699 F.2d 618 (2nd Cir. 1983). The three cases of In Re Grand Jury Empanelled March 19, 1980, 680 F.2d 327 (3rd Cir. 1982), In Re Grand Jury Proceedings (Johanson), 632 F.2d 1033 (3rd Cir. 1980), and In Re Grand Jury (Colucci), 597 F.2d 851 (3rd Cir. 1979), demonstrate that the Third Circuit has protected private books and records from compulsory production. In United States v. Henry, 491 F.2d 702 (6th Cir. 1974), the Sixth Circuit quashed an I.R.S. summons to a taxpayer already indicted on a narcotics offense. The Seventh Circuit, faced with a pro se litigant in United States v. Awerkamp, 497 F.2d 832 (7th Cir. 1974), who was prematurely raising Fifth Amendment objections to the enforcement of an I.R.S. summons, held that the taxpayer could make specific Fifth Amendment pleas to questions directed at him when he complied with the order of enforcement.

    In two other Seventh Circuit cases, Hill v. Philpott, 445 F.2d 144 (7th Cir. 1971), and United States v. Dickerson, 413 F.2d 1111 (7th Cir. 1969), that court held that the records of an individual taxpayer were immune from a summons. The Eighth Circuit, in Isaacs v. United States, 256 F.2d 654 (8th Cir. 1958), held a Fifth Amendment plea of a corporate official to be valid when he responded to questions relating to $99,000 in checks written by the corporation. Another Eighth Circuit opinion in United States v. Plesons, 560 F.2d 890 (8th Cir. 1977), would have granted protection to the records of a doctor if he had raised his Fifth Amendment plea to a grand jury subpoena before testifying about those records. In the Ninth Circuit cases of United States v. Cohen, 388 F.2d 464 (9th Cir. 1967), and United States v. Helina, 549 F.2d 713 (9th Cir. 1977), protection of a taxpayer's records from production was upheld. The above cases demonstrate that the great weight of authority in the various circuits has been that an individual taxpayer's records are protected from compulsory production because of the Fifth Amendment.

    The Fifth and Eleventh Circuits have apparently treated this precise issue more often than the others and have conclusively held that tax records of an individual are immune from production on the basis of Boyd. In Stuart v. United States, 416 F.2d 459 (5th Cir. 1969), In Re Grand Jury Proceedings (McCoy), 601 F.2d 162 (5th Cir. 1979), In Re Oswalt, 607 F.2d 645 (5th Cir. 1979), In Re Grand Jury Subpoena (Kent), 646 F.2d 963 (5th Cir. 1981), and United States v. Meeks, 642 F.2d 733 (5th Cir. 1981), this principle was upheld. More specifically in United States v. Davis, 636 F.2d 1028, 1043 (5th Cir. 1981), that court held:

"Their cumulative teaching is that any incriminating papers in the actual or constructive possession of an individual, which he holds in his individual capacity, ... and which he himself wrote or which were written under his immediate supervision, are absolutely protected by the Boyd principle from production by subpoena or equivalent process, regardless of whether they are business-related or more inherently personal in content."

    The Sixth Circuit does not deviate in any respect from comparable decisions made in other circuits. In Patty v. Bordenkircher, 603 F.2d 587 (6th Cir. 1979), the court held that the government couldn't compel a criminal defendant to testify concerning his previous criminal convictions where they were relevant to a habitual offender statute. In United States v. Hill, 601 F.2d 253 (6th Cir. 1979), that court acknowledged that a taxpayer could raise Fifth Amendment objections by refusing to answer specific questions. In United States v. Doss, 563 F.2d 265, 275 (6th Cir. 1977), a case involving an indicted defendant called before a grand jury, that court concluded:

"However, upon the trial of the defendant in a criminal case, it would be a clear violation of a defendant's right against self-incrimination under the Fifth Amendment of the Constitution to compel him to take the stand, testify and produce his records, relating to the matter with which he is charged."

    The erosion of Boyd principles started in the early eighties. In United States v. Schlansky, 709 F.2d 1079, 1084 (6th Cir. 1983), a case where the taxpayer under investigation was compelled to surrender certain of his records which had previously been in his accountant's possession, the Sixth Circuit held that the three elements of compulsion, testimonial communication and incrimination by such communication were requisites to a valid assertion of the Fifth Amendment:

"Under this focus the key question is whether the compelled production involves compelled testimonial communication. The answer to this question in turn depends on whether the very act of production supplies a necessary link in the evidentiary chain. Does it confirm that which was previously unknown to the government; e.g., the existence or location of the materials? Does it supply assurance of authenticity not available to the government from sources other than the person summonsed? Though the party seeking to avoid compliance does not have to show more than is required to demonstrate that the privilege is properly claimed, he must make some showing that the act of production alone would involve an incriminating testimonial communication."

    The Third Circuit case of In Re Grand Jury Empanelled March 19, 1980, 680 F.2d 327 (3rd Cir. 1982), involved the issue of compulsory production of books and records and that court continued to uphold the principles of Boyd. Because of a desire to have the Supreme Court adopt the Schlansky rationale, the government sought and obtained a writ of certiorari with the United States Supreme Court to review the decision in this case. On February 28, 1984, the U.S. Supreme Court reversed the above decision in United States v. Doe, 465 U.S. 605, 104 S.Ct. 1237, 1242 (1984). In this pronouncement, the Court reversed its former holding in Boyd and held that books and records were no longer protected by the Fifth Amendment. It reasoned that the Fifth Amendment protected only compelled testimony and not books and records, and it relied heavily upon its rationale in Fisher, supra. But while the Court decided to withdraw Fifth Amendment protection to books and records, it held that production of such books and records was entitled to such protection. The Court reasoned that compulsory production of books and records via subpoena or summons is communicative in nature and similar to giving testimony, therefor such production is entitled to Fifth Amendment protection:

"Compliance with the subpoena tacitly concedes the existence of the papers by the taxpayer. It also would indicate the taxpayer's belief that the papers are those described in the subpoena."

    The U.S. Supreme Court in Boyd v. United States, supra, clearly held that compulsory production via subpoena or summons of books, records and other documents in the possession of a witness was not permitted by the Fifth Amendment. This decision prevailed for some 98 years and effectively prevented the government from obtaining such written documentation from one having potential criminal liability. In United States v. Doe, supra, the Court changed its construction of the Fifth Amendment and held that the Amendment did not protect such records; and by making this change, a problem not addressed by Boyd arose. If the records are not protected from compulsory production by the amendment, what protection by the Fifth Amendment is left to a witness under process to produce documents? In Doe, the Court analyzed this situation and found that the mere act of producing such documents via compulsion non-verbally provides the following:

(a) Such production concedes that the requested documentation exists;

(b) Such production proves that the same are in the witness' possession;

(c) Such production proves that the witness believes that the documents so produced are those which are sought;

(d) The act of production authenticates the documents.

Because of these non-verbal but communicative aspects present within any act of production, the Court held that the Fifth Amendment applied to the act of production. Thus, even though there is no longer any protection afforded by the Fifth Amendment for books and records, the Fifth Amendment's protection for the act of production accomplishes virtually the same result as under the Boyd doctrine.

    This has proven to be the case as shown by various cases decided subsequent to Doe. In In re Kave, 760 F.2d 343, 355-56 (1st Cir. 1985), an attorney was permitted to plead the protection of the Fifth Amendment because the request to produce certain documentary evidence would have in effect, under the "act of production" rule, forced her to testify against herself, the court explaining:

"The compelled production of such documents is prohibited only if there are testimonial aspects to the act of production itself. ... This rule extends to the business records of a sole proprietor ... In this context, the rule has three elements: The Fifth Amendment protects against compulsory surrender of (1) personal business records, (2) in the possession of a sole proprietor or practitioner, (3) only with respect to the testimonial act implicit in the surrender itself."

    For a few years after Doe, its rule was applied to corporate records. The Doe "act of production" rule was followed in In Re Grand Jury Proceedings, 747 F.2d 1098 (6th Cir. 1984), and In Re Grand Jury Matter, 768 F.2d 525 (3rd Cir. 1985), to prevent the compulsory production of corporate and partnership records. However, in Braswell v. United States, 487 U.S. 99, 108 S.Ct. 2284 (1988), the Court held that Doe did not apply to corporate records; see also Doe v. United States, 487 U.S. 201, 108 S.Ct. 2341 (1988).

    But the application of Doe has continued as to personal and private records. In United States v.(Under Seal), 745 F.2d 834 (4th Cir. 1984), a case decided some seven (7) months after Doe, the Fourth Circuit specifically held that personal and individual records can't be forcibly produced by any process, over a Fifth Amendment objection; see also United States v. Cates, 686 F.Supp. 1185 (D.Md. 1988); United States v. Argomaniz, 925 F.2d 1349 (11th Cir. 1991); and United States v. Sharp, 920 F.2d 1167 (4th Cir. 1990). In In Re Grand Jury Proceedings on Feb. 4, 1982, 759 F.2d 1418 (9th Cir. 1985), it was determined that records of a party under investigation in the hand's of his attorney were entitled to protection under the Doe "act of production" rule. Further, there is no "tax exception" to this rule; see United States v. Troescher, 99 F.3d 933 (9th Cir. 1996). Thus, according to the rationale of these cases, the compulsory production of private personal records cannot be obtained in view of a valid Fifth Amendment objection. Therefore, it is clear that the decision in Boyd still produces a legal result, even if from its "grave."

CONCLUSION

A summons or subpoena for individual books and records, either personal or business, can't be enforced over a Fifth Amendment objection because of the Doe "act of production" rule.

****************************

THE CIVIL PROCEEDING

    The rule that a party or a witness can plead the right against self-incrimination in civil proceedings has been well established by an abundance of authority. In Lefkowitz v. Turley, 414 U.S. 70, 77, 94 S.Ct. 316 (1973), the U.S. Supreme Court stated this rule as follows:

"The Amendment not only protects the individual against being involuntarily called as a witness against himself in a criminal prosecution but also privileges him not to answer official questions put to him in any other proceeding, civil or criminal, formal or informal, where the answers might incriminate him in future proceedings."

The subsequent decisions of Maness v. Meyers, 419 U.S. 449, 95 S.Ct. 584 (1975), and Pillsbury Company v. Conboy, 459 U.S. 248, 103 S.Ct. 608 (1983), serve only to buttress this basic principle and apply it to specific situations. This rule is followed by the federal appellate courts; see In re Kave, 760 F.2d 343 (1st Cir. 1985); National Life Ins. Co. v. Hartford Accident & Indemnity Co., 615 F.2d 595 (3rd Cir. 1980); Wehling v. Columbia Broadcasting System, 608 F.2d 1084 (5th Cir. 1979); In Re Corrugated Container Anti-Trust Litigation, 620 F.2d 1086 (5th Cir. 1980); In re Morganroth, 718 F.2d 161 (6th Cir. 1983); and United States v. Jones, 703 F.2d 473 (10th Cir. 1983).

    Decisions on this point by various state courts reveal that this rule is not a modern one. In Morris v. McClellan, 154 Ala. 639, 45 So. 641, 645 (1908), that Alabama court acknowledged that a party in a civil case could claim the right against self-incrimination. In International Brotherhood of Teamsters v. Hatas, 287 Ala. 344, 252 So.2d 7, 21 (1971), the court held:

"The privilege against self- incrimination afforded by section 6 of the 1901 Constitution of Alabama has been held available to a party in a civil action."

Similar decisions have been made by courts in other States in the Union. In State ex rel. Hudson v. Webber, 600 S.W.2d 691, 692 (Mo. App. 1980), a judgment debtor pleaded his right against self-incrimination in answer to questions posed to him regarding his financial affairs, his fear of incrimination being related to federal taxes. The court sanctioned the answers of this party:

"This privilege is available to a judgment debtor in proceedings pursuant to sections 513.380-513.390, RSMO 1978."

The great weight of other State authorities holds that the right clearly applies in civil cases; see Carson v. Jackson, 466 So.2d 1188 (Fla.App. 1985); Lewis v. First American Bank of Palm Beach, 405 So.2d 300 (Fla.App. 1981); Travis Meat & Seafood Co. v. Ashworth, 127 Ga. App. 284, 193 S.E.2d 166 (1972); In re Zisook, 88 Ill.2d 321, 430 N.E.2d 1037 (1982); Martincich v. City of Hammond, 419 N.E.2d 240 (Ind. App. 1981); Whippany Paper Board Co. v. Alfano, 176 N.J.S. 363, 423 A.2d 648 (1980); Banca v. Town of Phillipsburg, 181 N.J.S. 109, 436 A.2d 944 (1981); People ex rel. Anonymous v. Saribeyoglu, 131 Misc. 2d 647, 501 N.Y.S.2d 286 (1986); Byrd v. Hodges, 44 N.C.App. 509, 261 S.E.2d 269 (1980); Ohio Civil Rights Commission v. Parklawn Manor, Inc., 41 Ohio St.2d 47, 322 N.E.2d 642 (1975); Rey v. Means, 575 P.2d 116 (Okl. 1978); Caloric Corp. v. Unemployment Compensation Board of Review, 452 A.2d 907 (Pa. Comwlth. 1982); Ex Parte Stringer, 546 S.W.2d 837 (Tex.App. 1985); Smith v. White, 695 S.W.2d 295 (Tex.App. 1985); Affleck v. Third Judicial District Court of Salt Lake County, 655 P.2d 665 (Utah 1982); Eastham v. Arndt, 28 Wash. App. 524, 624 P.2d 1159 (1981); and In re Grant, 83 Wis.2d 77, 264 N.W.2d 587 (1978).

END NOTES:

[1] Pursuant to the 1982 TEFRA, summonses may now be issued solely for a criminal investigation, thus these decisions no longer have any effect.

[2] The statutory provisions regarding immunity grants are found in 18 U.S.C., §§ 6001, et seq.
 
  TAKING THE FIFTH ON TAX RETURNS

     There are basically two important Supreme Court decisions regarding the circumstances under which one may assert the Fifth Amendment regarding income tax returns. The first and most important case was United States v. Sullivan, 274 U.S. 259, 47 S.Ct. 607 (1927), where the Court concluded that to assert the Fifth, one must do it on the return. See also Garner v. United States, 424 U.S. 648, 662-63, 96 S.Ct. 1178 (1976).

    An example of how today's federal appellate courts address this issue is shown via United States v. Neff, 615 F.2d 1235, 1238 (9th Cir. 1980), where that court held:

 "The Supreme Court has stated that the privilege against self-incrimination, if validly exercised, is an absolute defense to a section 7203 prosecution for failure to file an income tax return. Garner v. United States, supra, 424 U.S. at 662-63, 96 S.Ct. at 1186-1187.  The Court has also held, however, that the privilege does not justify an outright refusal to file any income tax return at all. United States v. Sullivan, 274 U.S. 259, 263, 47 S.Ct. 607, 71 L.Ed. 1037 (1927).  Furthermore, an objection may properly be raised only in response to specific questions asked in the return.  Id.  See Garner v. United States, 501 F.2d 228, 239 n.18 (9th Cir. 1974) (en banc), aff'd Garner v. United States, supra, 424 U.S. 648, 96 S.Ct. 1178, 47 L.Ed.2d 370.

 "We are here faced with a case in which the taxpayer did assert his privilege in response to specific questions in the tax return form, but did so on such a wholesale basis as to deny the IRS any useful financial or tax information. Other circuits, faced with similar wholesale assertions of the privilege against self-incrimination, have concluded that a tax return form which contains no information from which tax liability can be calculated does not constitute a tax return within the meaning of the IRS laws.  Once these courts determine that the taxpayer has filed no return, simple application of the Sullivan precedent, which states that the Fifth Amendment will never justify a complete failure to file a return, invalidates the Fifth Amendment defense.  E. g., United States v. Irwin, 561 F.2d 198, 201 (10th Cir. 1977), cert. denied, 434 U.S. 1012, 98 S.Ct. 725, 54 L.Ed.2d 755 (1978); United States v. Silkman, 543 F.2d 1218, 1219-20 (8th Cir. 1976) (per curiam), cert. denied, 431 U.S. 919, 97 S.Ct. 2185, 53 L.Ed.2d 230 (1977); United States v. Daly, 481 F.2d 28, 30 (8th Cir.)  (per curiam), cert. denied, 414 U.S. 1064, 94 S.Ct. 571, 38 L.Ed.2d 469 (1973)."

(The previous discussion was written by Attorney Larry Becraft)

THE MONOPOLY MONEY GAME

 

 

           The new economics is different from anything that we have previously experienced.  Not everyone is directly affected.  Corporations are downsizing but profits are upsizing. That is because corporations are making bigger profits with fewer workers.  But inflation is creeping on. Corporations are able to bypass the economic laws because of the global monopolization of industries like the auto industry.  This phenomenon of price increases in a crises-ridden economy is the direct result of the new level of power and control that the finance capital has over all the world's economic developments.

 

           So there is a vicious cycle of money circulation. The government borrows money that is passed onto the monopoly capital controlling the corporations; especially the military industries.  Then the government pays interest on the money it borrowed from the big banks and financial institutions and then it borrows the same money again from the same financial institutions and keeps paying the interest on the money.  So the circle keeps going around and around and getting bigger and bigger because more tax monies get stuffed into it each year.  The repayment of the loans and the interest has its own inner cycle within the big circle.  The repayment does not stimulate the economy, it adds nothing to the economy and so all the taxes the government collects simply widen the circle of debt. Now Clinton has a new "gimmick."  He says that the new taxes will be placed into a "trust fund," but the truth is these taxes will simply be placed into the debt cycle to create new sources of profits for the banks, financial institutions and huge monopolies.  Clinton's rhetoric is simply pure demagogy: a ploy to fool the ignorant while the government takes more and more of their wealth to increase the debt cycle.  So how bad will things get before they get better?  Probably a lot worse since the people take so long to wake up. (I wrote this article 20 years ago.  Was I right?)

Quiet Title Suits

 

            If the IRS has seized and sold property, the sale can be set aside if the IRS has failed to follow statutory procedures.  Some of the mistakes that might convince a judge to set aside a sale are the following:

 

(1) Failure to give sufficient notice of sale (i.e. a mailed notice may be defective.)

(2) Failure to notify the citizen of the minimum bid price established by the Service.

(3) Failure to properly and fully describe the property to be sold in the Notice of Seizure.

(4) Failure to properly effectuate the initial seizure.

(5) Failure to give Form 2433,  Notice of Seizure to the client.

(6) Failure to conduct the sale in the county in which the property is situated.

(7) Defects in the Certificate of Sale

(8) Defects in the District Director's Deed.

           

            Federal courts have set aside sales in various instances.  In Marietta v. District Director, the court upheld the setting aside of an IRS Certificate of sale where the IRS had failed to give adequate notice of the sale.  In Reece, the court specifically held that it could set aside an IRS sale of land and declare the sale to be void for failure to serve a statutory Notice of sale on the citizen. The court held that the notice was defective because it was mailed, not personally delivered to the citizen.  In Kulawy v. United States, the court held that the Certificate of sale was invalid because the minimum day requirement under IRC 6335 was not met prior to sale. In Aqua Bar and Lounge v. United States, the court set aside an IRC sale because the Notice of Seizure and the Notice of Sale were not personally served upon the citizen.  In Kelly v. Lunding, the Court denied the validity of the buyer's title from the District Director because the procedures set forth in 26 USC 6335 were not complied with. In Ringer v. Basille, the court held that an IRS sale could be set aside when the government failed to realize anything approaching a reasonable value.

 

Refund Litigation

           

            Citizens may file refund suits against the IRS in the Federal District Court or the United States Claims Court (IRC Section 7422.  The citizen must first have paid the alleged tax liability. This requirement has been held to require the taxpayer to pay the entire tax liability, including statutory additions. prior to the initiation of any administrative claim procedure.  In Trust Fund Recovery Penalties, the Courts have allowed such refund claims if the citizen has paid the tax liability due for one employee for one period.  The payment of $100 has been held to be sufficient. The claim must be filed within two  years of payment and the suit may be filed six months after the filing of a claim for a refund unless the IRS rejects the claim during the six-month period.  If the claim is rejected, a suit may be filed with two years from the date of the mailing of the notice of disallowance (IRC Section 6532(a)(1).

 

            The IRS maintains a policy of suspending administrative collection actions during the pendency of a refund suit.  The Department of justice handles the Case and may settle the case without trial.  The settlement criteria are the following:

 

            1.  The probability of the citizen prevailing on the merits.

            2.  The probability that the citizen might be awarded attorney fees should he prevail in the case.

            3.  The possibility, if the IRS should lose the litigation that the case might establish a precedent, which would hinder tax administration.

            4.  The financial ability of the citizen to pay the tax liability.

            5.  The perceived ability of the taxpayer's attorney in deciding whether to settle the case.

            If the citizen wishes to attempt to settle a case out of court, he may address a letter to the assistant attorney general in charge of the tax division.  The offer should set forth clearly the proposed terms of settlement.  If the settlement is accepted, the case is jointly dismissed. The DOJ will not disclose the terms of settlement in the stipulation to avoid setting precedents by settling cases.

 

The Anti-Injunction Act

 

            Generally speaking, you cannot sue the government on tax issues because of the Anti-Injunction Act, IRC 7421.  There are some exceptions to the rule.  The courts have held that the purpose of the statute is to permit the collection and assessment of taxes and to permit the United States to get prompt collection of its revenue without judicial intervention.

 

            Internal Revenue Code Sections 6320 and 6330(d) allow the citizen to seek judicial remedy from IRS liens and levies.  A citizen who has exercised her rights to appeal under IRC 6320 and 6330 with respect to liens and levies now has specific authority to seek judicial review. 

 

            When the IRS issues a Statutory Notice of Deficiency, the citizen has 90 days to file a petition with the Tax Court.  Once the petition is filed, the IRS cannot assess and collect the tax until the issue has been litigated in the Tax Court.

Judicial Relief Against IRS Tyranny

 

            Internal Revenue Code Section 7433 provides that a taxpayer may sue the United States if a collection employee "recklessly or intentionally" violates the Internal Revenue code. (IRS 7334(a). 

 

            The Internal Revenue Service Restructuring and Reform Act of 1998 revised IRS Section 7433 to allow suits for negligent violation of the Internal Revenue Code in the collection of tax.  Before this amendment, it had been very difficult for citizens to prove that an IRS employee had intentionally or recklessly disregarded the Code.

 

            The Reform Act of 1998 permits up to $100,000 in civil damages caused by an officer or employee of the IRS who negligently disregards the provisions of the Code or Treasury regulations in connection with the collection of Federal tax.  The damages are $1 million if the disregard was willful or reckless.  The act also permits up to $1 million in civil damages caused by an officer or employee of the IRS who willfully or recklessly violates provisions of the Bankruptcy Code. IRC 7433 is intended to be an exclusive remedy for recovery of damages caused by improper collection activity by the Service.  Before suit, the plaintiff must exhaust administrative remedies.  The award of damages will also be reduced by any amount that the damages could have been mitigated by the plaintiff (IRC 1744(d)(2).  The taxpayer must file a Form 843 Claim in which he specifies the actual damages caused by the IRS' illegal actions.  The IRS has six months to consider the claim.  If the Service rejects the claim, the taxpayer then has a right to go to court.  The taxpayer may also go to court after six months if the IRS fails to answer.

 

            An action under this section of the code must be filed within two years of the date the cause of action arises.  If the court finds that the action is frivolous, Congress has provided sanctions.   IRC Section 6673(b) provides up to a $10,000 sanction if congress finds that the litigation is frivolous.  

Tax Court Ramblings

 

            Taxpayers filed a motion in the Tax Court to redetermine interest on the deficiency pursuant to Section 7481(c) and the Tax Court Rule 261, but they did not prepay the interest claimed by the IRS.  The Tax Court denied the motion on the grounds that it lacked jurisdiction to hear a claim for a redetermination of interest pursuant to Section 7481(c) when the taxpayer did not pay the interest before filing for the redetermination.  The Circuit upheld the Tax Court stating that the language of Section 7481(c) is plain and clear.  The Tax Court may make a redetermination of interest in cases where the taxpayer prepays both the entire amount of the deficiency and the interest claimed by the IRS on the deficiency,  Bax 13 F2d 54.  In the case of Conklin, 897 F2d 1027, the IRS issued two separate notices of deficiency.  The Tax Court held that it had jurisdiction to hear the petition and the taxpayer appealed.  The court of appeals held that the payment of a tax liability by either spouse extinguishes the obligation by either taxpayer. 

 

            The Tax Court cannot apply overpayment to deficiencies for other years.  The Tax Court credited a 1962 overpayment to deficiencies determined for the years 1960 and 1961.  The 9th Circuit Court of Appeals reversed for the IRS and stated that the action exceeded the Tax Court's Jurisdiction under Section 6214(b) First Sec Bank, 592 F2d 1046 (9th Cir. 1979).

 

            In Stanley, 81 TC 634 (1983), the Tax Court held that since the wife was under duress that no returns were filed for the years  in question, but the Court determined that it had jurisdiction to redetermine the taxpayer's separate liability because the wife had reasonable notice and the opportunity to participate in the proceedings.  (Jones, 79 TC 668(1982). In Bregin 74 TC 1097 (1980), the court ruled that it lacked jurisdiction on an erroneous IRS refund.  An individual had estimated an amount of taxes withheld because his W-2 was inaccurate.  The IRS overlooked the estimate and paid him a refund.  It later attempted to get the refund back but the court determined that it lacked jurisdiction because the claim was not a deficiency and it was barred by the statute of limitations.

           

In Allison, 997 TC 544 (1991), the Tax Court issued a ruling on the bankruptcy stay.  When a bankruptcy case is closed or dismissed or a discharge has been granted or denied pursuant to 11 USC Section 362(c)(2), the automatic stay is terminated and the reopening of a case does not, absent an order from the bankruptcy court, reinitiate the stay.  Therefore, since a discharge was issued and a stay was not invoked, the Tax Court case could proceed.

TAXES AND THE MILITARY INDUSTRIAL COMPLEX

 

 

 

     Next to the gift of life, freedom is the most important gift that can be given to mankind.  This belief is fundamental to the design for our nation.  The validity of this design is demonstrated by the fact that the United States has a longer life under the same form of government than any other nation.  However, our freedoms are currently under siege because our leaders are manifesting an inability to control and use wisely the power we have given them.

 

     Our economy is totally tied into and controlled by the military-industrial complex.  The military is the single most important purchaser in the American marketplace.  It would currently be impossible for the American economy to withdraw

itself from this dependence. 

 

     We have a huge national debt that is growing each year as a result of this "socialism for the military" and the waste is incredible.

 

     The Committee on Armed Services of the House of

Representatives has issued a report on the way that arms contractors have taken advantage of the taxpayers by passing along bills that have nothing to do with national defense.

 

     Here some examples:

 

     1.  Boeing charged the U.S. taxpayers $11,750 for its          sponsorship of the World Paper Airplane Championship.

 

     2.  Boeing passed along charges totaling $2,458 for golf fees, cart rentals, and liquor at executive meetings in Carlsbad, California, in April 1979 and Tucson, Arizona, in November 1979.

 

     3.  General Dynamics passed along to the government its costs in attempting to sell its weapons to foreign countries.

 

     4.  Rockwell charged the government for its executive

 dining room and cafeteria operations in the amount of $1,040.588.

 

     5.  The Fort Worth division of General Dynamics sent in a bill for $10,713 to cover the losses of the company barbershop.

 

     6.  Sperry tried to charge the government with $160,480  for expenses incurred in connection with the sale of  the company's commercial products in Europe.

 

     7.  Newport News sought reimbursement for a company         house used almost exclusively by the president of   the company.

 

     8.  McDonnel Aircraft claimed $1,558,377 for   "rearrangement expenses," by which was meant a wide   range of costs.

 

     9.  Sperry billed the government $899.982 for "traffic  department" expenses.

 

     Senator David Pryor of Arkansas has stated: "The Pentagon today is the biggest socialistic empire in the

United States."  It is an empire that sucks up two thirds of the country's annual revenues and paralyzes our will to resist inefficiency, and incompetence.  Massive military

spending is now institutionalized.

 

     The ultimate danger already exists:  Military spending is not a result of foreign policy because foreign policy is a result of military spending.  Our nation is on a one-way street to disaster.

 

     And the list of abuses goes on and on; the national-debt continues to grow, the waste continues; and the congress passes more and more laws designed to pressure, intimidate and oppress the middle-class wage earners and small- businessmen who are the backbone of the funding for this system of fraud, deceit and corruption.

 

 

A Guide to Federal Income Tax Law

 

Administration

 

      The Internal Revenue Service (I.R.S.) is an administrative agency that acts within the Treasury Department and it is responsible for enforcing the tax laws.  It is the largest section of the Department of the Treasury.  The Internal Revenue Code (I.R.C.) is the codification of the federal tax laws and it is Title 26 of the United States Code.  When the text of the Code is ambiguous, the courts look to the "subjective" legislative intent.  If the courts cannot discern the "subjective" legislative intent, they will then look to "objective" intent.  The Treasury Regulations interpret and implement the Internal Revenue Code.  They are issued by the Treasury Department and drafted by the I.R.S.  The Regulation numbers correspond to the I.R.C. numbers.  The regulations corresponding with the Internal Revenue Code are Title 26 of the C.F.R.  The Regulations have the force of law. A Regulation is valid as long as it is not an unreasonable interpretation of a statute.  The courts determine the issue of reasonableness by analyzing the statutory text, the legislative history, the purpose of the law, the timing of the regulation in relation to the statute and any re-enactment of the statutory provision by Congress. 

 

      The Statutes and Regulations are interpreted by published revenue rulings.  These rulings are an official interpretation of the law by the I.R.S. for the benefit of the taxpayers.   They are published in the Internal Revenue Bulletin and in the Cumulative Bulletin. They have precedential value.  Private Letter rulings and technical advice memoranda are also submitted by the IRS but they are based on specific facts and they don't have any precedential value.  They are only binding to a particular taxpayer if the facts are accurate.

 

Tax Litigation

 

      The taxpayer can file a refund suit for an overpayment of taxes.  An individual who pays taxes owed by another under protest may sue for a refund.  The Taxpayer Bill of Rights (1996) allows the taxpayer to sue the I.R.S. for up to $1 million when the IRS abuses its collection privileges.  When a taxpayer is issued a 90-day letter, he can go to Tax Court without first paying the disputed tax.  Tax Court has the jurisdiction to review the deficiencies that are asserted by the I.R.S.  The Tax Court can order a payment or a refund but it cannot order equitable relief.  An individual can also pay the tax and litigate for a refund in U.S. District Court or he can litigate in the Court of Claims in Washington D.C.

 

      Cases may be appealed to the Circuit Courts of Appeals and to the U. S. Supreme Court.

 

Some Definitions:

 

                  Section 61 of the Internal Revenue Code defines Gross Income, which is the starting point for the computation of the tax base.  Section 61 says that income is not excluded from taxation and income is taxed from whatever source derived. Taxable income is defined as gross income less the deductions and is the income against which tax rates are applied to compute the tax paid. 

 

      Deductions are related to current or prior expenditure of money and they are items that directly reduce income.  Specifically, nothing is deductible unless it is provided for in the Internal Revenue Code.  Each taxpayer is entitled to one personal exemption and a deduction for a spouse and dependents. 

 

      Credits are a direct reduction in tax liability.  There is a child tax credit of $500 per child under 17.  There is an estate tax credit of $600,000.      Basis is a central concept in income taxation.  It generally refers to the taxpayer's cost.  It is adjusted to reflect subsequent events.  The basis equals the sum of nondeductible capital expenditures with respect to an asset and there is no gross income on the disposition if the proceeds are less than the basis. 

 

What is Gross Income?

 

      Gross Income is the addition to wealth after deducting the costs of goods sold and the basis of property sold before there is any reduction by expenses associated with acquiring the wealth unless a Code Section excludes it. Gross Income is not limited to cash received and there is no requirement that gross income be from the product of labor or capital.

 

Doing Your Own Legal Research

 

      If you are in a challenge with the Internal Revenue Service, there is a good chance that you will have to learn to do legal research.  The following discussion should be of help to you.

 

      The government issues Law and that is the primary authority.  The judicial branch interprets the statute or the constitution.  The executive branch issues rules or regulations to implement legislation.  Lower courts follow the rulings of higher courts in their jurisdiction. A court can consider reasoning of another court but is not bound by it.  In other words a decision by the Court of Appeals for the 9th Circuit would only be persuasive but not mandatory for another Court of Appeals. 

 

      The doctrine of Stare Decisis binds all courts to their own earlier decisions unless they are reversed by a higher court or themselves. The biggest problem in the Freedom Movement is that individuals follow the thinking of their Tax Guru and not the thinking of the courts.  In order to find out the meaning of a tax statute, you need to identify the legal issues and decide how the law relates to the facts of the case.  You can get a broad overview of the general subject matter categories by using treatises, encyclopdias, and legal periodicals. If the case or statute is known, the primary authority may lead to other primary and secondary authority. 

 

      The most widely used on-line services are Westlaw and Lexis.  You can also get information at no charge at www.findlaw.com.  The House of Representatives Law Library is located at www.house.gov.  The Senate Law Library is located at www.senate.gov.  You can check out the Virtual Law Library at Indiana University School of Law at www.law.indiana.edu/law. Supreme Court is located at http://supct.law.cornell.edu/supct. Most opinions of federal and state courts appear in West's National Reporter System.

 

      The reporting of cases is organized according to jurisdiction and geography.  Several states are combined to include a regional area.  For example TX, AR,  KY, MS, and TN make up the Southwest Reporter from West.     When the court makes a decision, it first publishes a slip opinion.  The slip opinion is available from the clerk of the court.  Then an advance sheet is published which are paperbound pamphlets containing cases from a jurisdiction.  The final published form is a bound volume that has a table of cases in alphabetical order according to state.

 

      If you want to use a case. you must Shepardize it.  This means that you must look in Shepard's Citations and find out if the case law is still good law and make sure that it has not been overturned.  At the Federal level, you will research cases from the federal courts.  The district court cases are found in the Federal Supplement and the Courts of Appeals cases are found in the Federal Reporter.  When you go to the law library, ask the librarian for the locations of these volumes.  To Shepardize, find a copy of Shepard's citations.  The volumes are not cumulative,  check through each bound volume and paper supplement.  When you find the number of your case, check to see if it has been quoted in subsequent cases.  If it has, then check to see if it was overturned.  Read cases under your case to see how it was cited.

 

      In dealing with the IRS, you may come up against decisions from the Tax Court and the Bankruptcy Court.  You can find Tax Court decisions in CCH and Prentice Hall publications.  You can find bankruptcy stuff in the Bankruptcy Reporter which is published by West.  It includes cases from the U.S. Bankruptcy Courts, U.S. District Courts, Courts of Appeals and U.S. Supreme Court. 

 

      The cases at the Supreme Court Level are published in the U.S. Reports, which is the official reporter.  They are also published in the U. S. Supreme Court Reports, Lawyer's Edition.  United States Law Week contains all the U.S. Supreme Court Actions. There is also a Supreme Court Bulletin.

 

      The Federal Reporter includes opinions of all Federal Appeals Courts. There are 13 Circuit Courts of Appeal.  The Federal District Court Cases are in the Federal Supplement. Federal Law is published in the U.S. Code and the U.S. Code Annotated.  You can look up statutes in the U.S. Code Annotated and read court cases under those statutes. 

 

      The research procedures involve the topic method and the descriptive word method.  With a known case you can check the index of the Notes of Decision.  Without a case refer to the U.S. Sup.Ct.Digest and the U.S. Sup.Ct. Reports Digest, Lawyer's Edition and Modern Federal Practice Digest and Federal Practice Digest 2d. 

 

      A federal statute is first created by the introduction of a bill in the legislature.  The number on the bill is preceded by S or H (Introduced by the Senate or the House).  The law is first a "slip law," then it is given a public law number such as P.L. 98-130: 130th law enacted during the 98th Congress. 

 

Civil Procedure

 

      If you wish to file a suit in the federal district courts, you must have jurisdiction.  A federal question can be litigated in federal courts 28 USC 1331.  Federal law creates the cause of action or the plaintiff's right to relief depends on the resolution of a substantial question of federal law. The federal courts have jurisdiction if the controversy is for more than $75,000 and there is a controversy between citizens of different states.  There must be complete diversity.  The plaintiff and defendant cannot be citizens of the same state.  The domicile determines diversity.  The domicile is defined as the place you are physically located in with the intent to remain there indefinitely.  The diversity must exist at the time that the complaint is filed with the clerk.  A defendant with counter-claims, cross-claims or third party claims may bring them in Federal court as long as the Federal court has jurisdiction over the original claims. A plaintiff with a valid federal question claim may bring along a state-based claim in Federal Court.

 

      Claims may be removed from state to federal court if the federal courts would have had original jurisdiction or if federal question jurisdiction existed at the time the action was filed or if diversity jurisdiction existed at the time the action was filed. In diversity cases, the case is tried in the judicial district where any defendant resides (28 USC 1391(a).

 

      To initiate a lawsuit against the government or any other entity, you must write a complaint.  The complaint is the initial pleading of a lawsuit and it is the plaintiff's statement of a cause of action.  The complaint must include a short and plain statement of the grounds on which the court's jurisdiction depends.  It should give a short, plain statement of the claim showing that the pleader is entitled to relief. It should demand the relief that the pleader seeks and it may demand alternative relief.  The defendant may set out affirmative defenses in his answer.  Allegations in a complaint are admitted when they are not denied; there should be specific answers, which admit those allegations that are true and refute those challenged as untrue.  The answer to a complaint must be served within 20 days except government entities have a longer period of time to respond. The defendant may raise various issues such as subject matter jurisdiction, lack of personal jurisdiction, insufficiency of process, failure to state a claim upon which relief can be granted. etc.  Parties may amend their pleadings once before a responsive pleading is served and at all other times permission must be granted by the court for an amendment of the Pleadings.

 

      The commencement of the suit requires the service of a summons which is issued by the clerk of the court.  The summons may be served by a U.S. Marshall or other individual other than the plaintiff.  Paperwork must be filed with the court to show that the summons was properly executed.

 

      Summary judgment motions may be filed. These motions rely on the issue that there is no genuine issue of material fact and that the moving party is entitled to judgment as a matter of law.  The movant includes affidavits made on personal knowledge stating only such facts that would be admissible at trial.   The movant bears the burden of coming forward and establishing that there is no factual dispute.

 

      Discovery is the process of finding facts relevant to the subject matter of the cause of action, which is not privileged.  Any material admissible at trial is discoverable.  Evidence that would be inadmissible is still discoverable as long as it is reasonably calculated to lead to the discovery of admissible evidence.  A party may discover the identity of any expert that the opposition expects to call at the trial and the substance of the facts and the opinions to which the expert is expected to testify.  There are limitations on privileged issues.  There is absolute privilege on attorney-client privilege.  Irrelevant matters and confidential matters are protected. Protective orders must be sought in confidential matters.

 

      There can be a request for a directed verdict, which is a motion for a judgment as a matter of law stating that there "is no legally sufficient evidentiary basis for a reasonable jury to have found for that party with respect to that issue.

 

      Appeals can be made from a final adverse judgment. 

 

The Rules of Evidence

 

      A court can take judicial notice of a fact as true without the necessity of formal proof.  Legislative facts are those facts that are relevant to "legal reasoning" and the "lawmaking process." The adjudicative facts are the rules which relate to the parties.  Who did what, where, when, how, with whom and with what motive.  Facts that normally would go to the jury may be given judicial notice because no reasonable person could dispute them, such as the reliability of radar speed tests and the boiling point of water.  The effect of judicial notice is that it is binding on the jury to accept as conclusive any fact that is judicially noticed.  

 

      The burden of proof is on the party who asserts a fact.  Without evidence, the fact does not go to the jury.  The burden in on the plaintiff to prove the allegations in the complaint.  In a civil case the standard of proof is a preponderance of the evidence but in a criminal case, the defendant must be convicted beyond a reasonable doubt. Direct evidence proves a proposition directly. Circumstantial evidence tends to prove the issue indirectly through inference. 

 

      Evidence must be relevant.  If the evidence tends to prove or disprove a fact of consequence, is related to an issue in the case, or logically tends to prove a proposition, it is irrelevant. All relevant evidence is admissible unless it is excluded by a specific rule.  Evidence may be excluded by judicial discretion. Most relevancy problems involve circumstantial evidence.  Character evidence is admissible when it is directly on issue.  Opinion testimony of lay witnesses is generally inadmissible.  Expert witness testimony is generally admissible. The client holds the privilege to refuse to disclose and to prevent anyone else (including lawyer) from disclosing a confidential communication between attorney and client during legal services.

 

      A statement made out of court is hearsay.  Leading questions are allowed on cross-examination and the witness cannot refuse to answer.  Leading questions are improper on direct examination except to establish preliminary facts; to aid the witness with memory loss; when questioning a hostile witness, child witness, timid witness, etc.

      A business record that is made in the regular course of business is admissible.

 

Some Aspects of Criminal Procedure

 

      Several Constitutional Amendments apply in criminal situations.  The Fourth Amendment gives protection from unreasonable searches and seizures.  The Fifth Amendment gives freedom from self-incrimination.  The Sixth Amendment gives a right to assistance of counsel and a speedy trial.  The Fourteenth Amendment puts due process of law limitations on the states. 

 

      A law enforcement officer may arrest only where there is probable cause to believe that one has committed a crime.  The arrests can be made with or without a warrant.  Suspects are booked at the police office and a file is opened with pertinent information.  The prosecutor files a charge if there is enough evidence.   When the defendant is in custody after an arrest, a magistrate or judge informs him of the charges against him, the right to counsel, the bail amount.  The prosecutor prepares the charging document or information with the allegations of the crime.  The Grand Jury then decides whether an Indictment shall issue after hearing the prosecutor's evidence.  Then the defendant is arraigned and he pleads either guilty, no contest or not guilty to the Grand Jury Indictment.

 

      Pretrial motions may be filed.  A Motion to Suppress is a pretrial motion that can be filed to suppress what was obtained by the prosecution that the defense believes was illegally obtained by an illegal search or seizure.  It is the prosecutor's duty to disclose documents, tangible objects, lists of witnesses that are to be called at trial.  The Constitution's Due Process Clause requires the prosecution to disclose to the defense any exculpatory evidence within the prosecution's possession.  The defendant has a right to a trial by jury if he is charged with a felony or a misdemeanor punishable by more than six months in jail. The defendant has a right to cross-examine witnesses and to remain silent. 

      The government violates the 4th Amendment if the search warrant is overbroad.  Evidence obtained by violating the defendant's constitutional rights may not be introduced at trial to prove the defendant's guilt.

 

Some Bankruptcy Issues

 

      Some individuals may find themselves in a situation in which they have to declare bankruptcy against the IRS.  This is possible in most cases if you prepare in advance.  Returns must be filed for two years and the taxes must be three years old.  There must also be 240 days since the date of assessment.  You can file either a Chapter 7 which is a complete bankruptcy or a Chapter 13 which is a  payment plan bankruptcy.  Claims of the government and other creditors may be secured to the value of property.  Once a bankruptcy is filed there is an automatic stay of collection activities.  Any IRS levies must immediately be removed. 

Trusts

      There are many individuals that are selling common law and other sorts of trusts to protect assets from the IRS.  These individuals also claim that business trusts are exempt from income tax.  These trust schemes do not work.  The IRS can challenge them at various levels.  Even if the trust is set up properly and operated properly, the IRS can attack the trust on theories of transfer liability and fraudulent transfer.  It is possible to set up a trust for purposes of passing assets between generations but this will not necessarily protect assets against the IRS. 

      Remember that you are dealing with the most powerful agency in the most powerful country in the world and act accordingly.

 

 

 

 

 

 

STATUE OF LIMITATIONS ISSUES

 

            Generally, the statute of limitations period for all income taxes is three years from the date the return was filed.  However there are some exceptions.  If an individual does not file a return, the statute of limitations on assessment or collections without assessment is never set in operation and the IRS may begin a proceeding for collection whenever they want to (IRC Section 6501(c)(3).  One problem with the Quiet Title approach is that if no return has been filed, the statute doesn't end, so the IRS might be able to correct the problem and start over again.

 

            A tax return is deemed filed on the day it was due for the purposes of the statute of limitations even if it was filed early.  If an individual does not file a return and the IRS files one for him pursuant to 6020(b), the statute of limitations period does not begin.

 

            There is a six-year limitations period on assessment in cases where the taxpayer has omitted from gross income more than 25% of the gross income stated in the return.

 

            Section 6501(a) provides that taxes can be assessed within three years after a return is filed and Section 6502 provides for a ten-year period of limitation for collection after the date of assessment.

 

            The statute of limitations issue as a defense for the individual must be pleaded and proved.  The government must prove an exception to the running of a statute.

 

            If a return is delinquent, the period of limitation runs from the time of filing (J.P. Bell Co., Inc v. Comm., 3 BTA 254; Paul Haberland v. Comm., 25 BTA, 1370.  When delinquent returns are filed, if they are not false or fraudulent, the running of the period of limitations begins.

 

            The date of mailing is the date of filing.  The date of the United States postmark stamped on the cover in which the document was mailed is the date of delivery.  (IRC 7502).

 

            For a return to comply with the law and start the statute of limitations it must do the following:

 

             1.  is made in good faith

             2.  cover the entire period    

              3.  contains information as to the various items of income, deductions and credit.

 

            The failure to use the exact form will not prevent the running of the statue of limitations if the return was filed in good faith.

 

            The lack of a signature has been held to be a defect which deprives an individual of the statue of limitations. (Lucas v. Pilliod Lumber Co., 281 US 245, 74 L.Ed 829, 50 SCt 297 (1930); Comm. v. Krug, 78n F2d 57; Fourth and Railroad Realty Co. v. Comm., 25 TC 458.

 

            The commissioner is prohibited from making an assessment during the 90 days after a Statutory Notice of Deficiency is issued and during the time in which the case has been docketed in the Tax Court.  The period of limitations on the making of assessments or the collection by levy is suspended during the time a case is in the Tax Court and for 60 days thereafter.

 

            The mailing of the notice of deficiency does not suspend the running period of the statute of limitations with respect to any additional deficiency that may be alleged in a subsequent deficiency notice. (Reg. Section 301.6503(a)-1(a).

 

            If there is a dispute over Third Party Records, the statue of limitations is suspended.  That means that if you file a Motion of Quash a Summons, the statue of limitations will be suspended during the period of the litigation.

 

            Tax refund claims must be filed within three years from the time the return was filed or within two years from the time the tax was paid.

 

            The filing of a tax return does not start the assessment period. (Davidovitz v. U.S., 58 F2d 1063.  See also Heffernan v. Alexander 48 F2d 855). The assessment is that made by the Secretary (U.S. v. Amori, 136 F Supp 601).  It is made by "recording the liability of the taxpayer in the office of the Secretary." (IRC Section 6203).  The six-year period of limitations begins to run when the Secretary signs the assessment, not the date the list is made.  As you can see there is a lot to learn, but hang in there, you can learn it.

 

 

THE HISTORY OF THE TAX LIEN 

 

 

        The power of the IRS to assert a tax lien against an individual comes from the Constitution.  Article 1, Section 8 of the United States Constitution state that , "The Congress shall have the Power to lay and collect Taxes, Duties, Imposts and Excises...but all Duties, Imposts and Excises shall be uniform throughout the

 United States..."

 

        Federal tax lien statutes were enacted in 1865 (13 Stat 470-471), and they have been amended from time to form the basic structure of the Federal tax liens.  They were made a part of the Internal Revenue Code in 1939 and they were included

 in the Internal Revenue Code of 1954 and here we are today.

 

        The recording of a notice of lien causes subordination of other liens.  There has been a lot of litigation regarding the rights of the Federal Government as a tax creditor in relation to other creditors.  In determining the answers to these

questions, federal rather than state law governs. See U.S. v. Waddill, Holland and Flinn, Inc. 323 U.S. 353, 89 L.Ed. 294, 65 S. Ct 304 (1945.)

 

        The Federal Tax Lien is invalid against any purchaser, holder of security interests, mechanic's lienors or judgment lien creditors until the IRS has filed a notice of lien pursuant to Section 6323(a).  A validly filed Federal Tax Lien follows personal property (e.g. a motor vehicle) into the hands of subsequent mortgagees, pledgees, purchasers or judgment creditors, provided the property is identifiable as belonging to the taxpayer and otherwise subject to the lien. (Rev. Rul 54-257, 1954-2 CB 429.

 

        In the majority of cases, the Federal Tax Lien begins at the time a tax is assessed.  It is important to be aware of Section 6323(b)(1) of the Internal Revenue Code which invalidates a lien, even though properly filed against any mortgagee, plegee or purchaser which is made for full consideration when, the purchaser was without notice or knowledge of the existence of the lien.  However, a mortgage is not entitled to priority unless it is executed in good faith rather than in

 fraud.

 

        As you can see, this stuff gets really complicated.  Basically you have to know that if you have property, the IRS can probably get it through a lien and subsequent seizure.  There are protections for other lien holders, however and you will have to look at each situation to discover the proper approach to any problem.

 

 

LESSONS FROM HISTORY

 

           The income tax system in this country has created a situation that is close to intolerable for the people.  It is an oppressive system that pays no attention to Constitutional limits.  It is very complicated and it requires an incredible amount of paperwork.  The rich can essentially avoid it by arranging their affairs such that they don't have to pay any income tax.

 

           Even though the Constitution was designed to protect Taxpayers, it is of no help.  The Supreme Court and the other courts look the other way when income tax issues are argued. Unfortunately, abusive and oppressive taxes have been with mankind for many years.  As a matter of fact they are indelibly written into history.  The American taxing system has not learned from the mistakes of the past.  We have a punitive and confiscatory tax system and it is getting worse. The most important thing that we know from history is that angry taxpayers will eventually get fed up enough to end a bad-taxing system even if it means throwing out the current government.  It has happened many times in the past, and it is sure to happen again in the future.

 

           Many great nations have, in the past, fallen down because of their ineffective and unfair taxing systems.  The tax system in our country, especially the income tax system is enforced only by the surrender of Constitutional liberties.  Individuals continually voluntarily waive their Fifth and Fourth Amendment Rights every year when the send in their returns.  The IRS takes property without due process as guaranteed by the Fifth Amendment.  There is no doubt that our abusive system must step on the Constitution in order to continue its wicked ways.

 

           Our IRS is so powerful that everyone is afraid of it. The judges and the politicians can be labeled as "illegal tax protestors" anytime and they can be singled out for prosecution.  This is the reason that it is not popular to challenge the income tax system.

 

           Even the ancient Greeks knew that tyranny is produced by direct taxation.  Our fore fathers knew that too.  However, our government has ignored the lessons of history and it is  proceeding on a dangerous course.  Financial privacy must be preserved if liberty is to survive.  However, in the last few years, the courts and the congress have wiped out what little financial privacy still existed.  If you give any information to a bank, you might as well have given it to the IRS.  The IRS has total access to everything.  You have no privacy.

 

           As the system in this country gets worse and worse, as indeed it will, tax evasion will become more and more pervasive.  Actually, tax evasion is probably so deep rooted at this point in time, that it is impossible to stop it.

 

           The government's computers are getting so good, that in the near future, every single transaction that you make could be recorded in a giant database under your social security number.  Any paranoid government official could know everything about you at the touch of a computer key.  We are headed to a system in which we will be serfs of the all- powerful IRS.  Will the American People allow that to happen? The answer to the question is impossible to know at this point, but if there is any learning to do from history, it is a sure bet that people will continue to find ways to rebel and protect themselves from the all powerful tyranny of the IRS.  As the pressure gets worse and worse, the rebellion will get worse and worse.  As the government thinks up new and creative ways to oppress, the populace will think up new and creative ways to fight back.  The battle will continue until the nation develops a tax system that is fair and just and that upholds the Constitutional rights of the people. Until that happens, the fire of freedom will continue to heat up in preparation for the end of the abuse.

 

 

 

 

           

Quiet Title Victory

            The following case is quoted in its entirety because it is a very clear demonstration of the procedure that can be used to get a house back in a tax sale when the IRS seizes and sales the house to a third party.  The techniques used in the case were developed by the famous paralegal, Vern Holland of Tulsa, Oklahoma.  It is important to read this case to get a good understanding of the technique for defeating the IRS in relation to a tax sale of property.

            The case is Village of Dimondale, v. Leslie A. Grable, NO. 213277 State of Michigan Court of Appeals, April 21, 2000.

            Defendant Leslie A. Grable appeals as of right from an order granting summary disposition in favor of Richard E. Albert, for whom the Village of Dimondale has been substituted on appeal.  Grable argues that the trial court erroneously quieted title to his land in Richard E. Albert, who later sold the land to the Village of Dimondale, because the tax deed Albert acquired to Grable's property was void.  We agree and reverse.

I.  Statutory Background

            This case involves the application of three separate and distinct provisions of the Internal Revenue Code, each of which relate to the process by which the federal government forecloses on property in order to collect unpaid federal taxes.  The first of these provisions is the "notice and demand" requirement of 26 USC 6303(a), which prescribes the process the Internal Revenue Service[i] must follow to notify a taxpayer of an assessment of the tax following the taxpayer's failure to pay the tax.  This provision states:

            Where it is not otherwise provided by this title, the Secretary [of Treasury] shall, as soon as practicable, and within 60 days after the making of an assessment of a tax pursuant to section 6203, give notice to each person liable for the unpaid tax, stating the amount and demanding payment thereof.  Such notice shall be left at the dwelling or usual place of business of such person, or shall be sent by mail to such person's last known address.  [Id. (emphasis supplied).]

The second provision is the "notice of seizure" requirement of 26 USC 6335(a), which delineates the process by which the IRS must notify a taxpayer of a seizure of property for failing to pay the tax.  This provision states:

As soon as practicable after seizure of property, notice in writing shall be given by the Secretary [of the Treasury] to the owner of the property (or, in the case of personal property, the possessor thereof) or shall be left at his usual place of abode or business if he has such within the internal revenue district where the seizure is made.  If the owner cannot be readily located, or has no dwelling or place of business within such district, the notice may be mailed to his last known address.  Such notice shall specify the sum demanded and shall contain, in the case of personal property, an amount of the property seized and, in the case of real property, a description with reasonable certainty of the property seized.  [Id. (emphasis supplied).]

As is readily apparent, the assessment and demand statute, 26 USC 6303(a), requires service by leaving the notice at the dwelling or usual place of business of the taxpayer or by mail.  In contrast, the seizure statute, 26 USC 6335(a), requires the IRS to give notice by personal service or by leaving the notice at the usual place of abode or business of the taxpayer.  Only if the IRS cannot readily locate that taxpayer or if the taxpayer has no dwelling or place of place of business within the internal revenue district can the IRS give notice through the mail to the taxpayer's last known address.

            The third provision governs notice of a proposed sale of seized property, 26 USC 6335(b), and requires the IRS to give notice to the taxpayer of the proposed sale in the same way the Secretary would give notice of the seizure under 26 USC 6335(a).  Additionally, this sale provision requires the IRS to give notice to the public through publication or posting.

II.  Factual Background

            According to Grable, in 1974, he and his wife acquired real property at 120 North Bridge Street in Dimondale, Michigan.  The property is described as:

            The Southwesterly 24 feet in width of the northeasterly 56 feet in width of Lot 5, Block 21, Original Plat to the Village of Dimondale, Eaton County, Michigan, as recorded in Liber 1 of Plats, Page 65, Eaton County Records.  Commonly known as 120 Bridge St; Dimondale, Michigan 48821; Parcel:  21-081-000-621-053.

Apparently, during calendar years 1980, 1981, 1983, 1984, 1985, and 1986, Grable did not pay his federal taxes and the Internal Revenue Service began the process of assessing, seizing, and selling the property at 121 North Bridge Street.  The record does not make clear when the IRS gave Grable a "notice and demand" related to a tax assessment under 26 USC 6303(a).  However, the IRS gave the 26 USC 6335(a) "notice of seizure" to him on May 13, 1994 and gave the 26 USC 6303(b) "notice of sale" notice to him on November 26, 1994.  While the IRS personally served Grable with the 26 USC 6335(b) "notice of sale," it is undisputed that the IRS mailed the 26 USC 6335(a) "notice of seizure" to Grable.  Clearly, this was not in strict compliance with 26 USC 6335(a).

III.  Federal Procedural History

            At roughly the same time the IRS gave these two notices to Grable in 1994, it also began the process of assessing, seizing, and selling property owned by Grable & Sons Metal Products, Inc. (the "Grable Corporation") to enforce a levy for $2,916,474.58 in unpaid taxes.  Apparently, the IRS took action with respect to property located at 116 Bridge Street, Dimondale, Michigan and 601-701 Plains Road, Eaton Rapids, Michigan.  The Grable Corporation contested the matter and, on June 3, 1994, Federal District Court Judge Gordon J. Quist issued his opinion categorizing the case, along with several additional cases involving Grable, the Grable Corporation, and others, as a "tax protester" case.  (Judge Quist later deemed the cases against these individuals and corporations as "tax evader" cases.)  In any event, Judge Quist determined, among other things, that the government had given the proper "notice and demand" under 26 USC 6303(a) to the Grable Corporation.  In an unpublished opinion, the United States Court of Appeals for the Sixth Circuit affirmed Judge Quist. 

This federal litigation, however, has little relevance to this quiet title action for three reasons.  First, the litigation involved the Grable Corporation and not Grable himself.  Secondly, the litigation did not, as the Village of Dimondale conceded at oral argument before this Court, explicitly involve the property at 121 North Bridge Street.  Thirdly, the litigation involved the "notice and demand" requirement of 26 USC 6303(a), not the "notice of seizure" requirement of 26 USC 6335(a).

IV.  The Instant Quiet Title Action

            In December 1994, Grable filed a notice (the "Grable notice") with the Register of Deeds for Eaton County to inform all bidders that he would challenge any sale of enumerated pieces of property in the United States District Court for the Western District of Michigan.  According to the Village of Dimondale, among the properties described in Grable notice was the property at 121 North Bridge Street.  Rather clearly, then, in December 1994, Grable had received some type of actual notice of, in the words of the Grable notice, "the sale of personal or real property of Grable and Sons Metal Products, Inc. and Leslie A. Grable."  (Emphasis supplied.)

            The IRS sold the property at 121 North Bridge Street at auction to James T. Holberg in December 1994.  Holberg obtained a tax deed to the property in November 1995 and, in June 1997, Holberg conveyed the property at 121 North Bridge Street to Richard E. Albert.  Albert filed a quiet title action against Grable in September 1997.  Grable answered the complaint and asserted his affirmative defense that the tax sale to Holberg was invalid from its inception because the IRS failed to comply with the notice requirements in 26 USC 6335.  In his answer to the complaint, Grable asked the court to dismiss the complaint and grant "such further relief as is just and proper." 

            In early 1998, Albert and Grable filed cross-motions for summary disposition.  Grable moved for summary disposition under MCR 2.116(C)(10), again claiming that because the sale was void, Albert had no valid title to the property.  In this motion, for the first time, Grable requested that the trial court to quiet title to the property at 121 North Bridge Street in him. 

            Albert moved for summary disposition under MCR 2.116(C)(9), asserting three main arguments.  First, Albert argued that because the federal courts had repeatedly held Grable's challenges to the IRS procedures to be meritless, res judicata barred this latest defense, which was or could have been raised in the federal litigation.  Second, Albert claimed that a tax deed is prima facie evidence of the facts stated therein and effective to convey all right, title, and interest of the delinquent taxpayer, leaving Albert with title superior to any interest Grable had in the property.  Third, Albert contended that Grable had actual notice and every opportunity to raise the issue of the inadequate notice before the tax sale but had failed to redeem the property within a reasonable amount of time, which was inequitable.  In a supplemental brief, Albert also argued that this Court had held that "under 26 USC 5335 [sic] service of notice of sale by mail was entirely permissible."[1]

            Grable responded that none of the litigation in the federal courts involved issues raised in the present litigation because:  (1) those cases did not involve the notice requirements of 26 USC 6335(a); (2) those cases concerned only personal property owned by a corporation; and (3) the IRS did not sell the property in issue in this case until after that litigation was final in the District Court, and up to the time of the sale, the IRS could have complied with the requirements of 26 USC 6335(a) by giving him notice of the seizure by personal service.

            In May 1998, the trial court granted Albert's motion for summary disposition.  The trial court reasoned that the general rule in Michigan is that where "a serious defect occurs in the tax sale, it may be attacked by the owner of the premises, provided he acts promptly and does equity."  The trial court acknowledged that Grable notified prospective buyers that he would sue on the validity of the seizure.  However, the trial court also noted that Grable presented many arguments to the federal district court challenging the seizure of the property at 121 North Bridge Street, including an argument that notice from the IRS was insufficient under 26 USC 6303, but lost those arguments repeatedly in federal court.  (Indeed, the Federal District Court sanctioned Grable for instituting frivolous litigation.)  The trial court also stated that the purpose of the notice requirement is to prevent disputes over whether a taxpayer received notice, but Grable never disputed that he received actual notice of the seizure.  The trial court also remarked that Grable had the opportunity to redeem the property, did not do so, and then remained silent for two years and nine months after the sale; Grable only acted to defend his rights in the property at 121 North Bridge Street when Albert brought the quiet title action, and only then did Grable contend that notice of the seizure was improper.  The trial court concluded that Grable had acted in an untimely and inequitable fashion and ultimately entered judgment quieting title in favor of Albert.

            After the trial court quieted title to the property at 121 North Bridge Street in Albert, Albert conveyed that property to the Village of Dimondale.  When Grable appealed the trial court's decision to quiet title in Albert, this Court granted the Village of Dimondale's motion to be substituted as the appellee in this case. 

V.  The Parties' Arguments

            Grable does not explicitly challenge the trial court's decision to grant Albert summary disposition pursuant to MCR 2.116(C)(9).  Rather, he claims that the sale to Holberg was void because the IRS failed to comply strictly with the statutorily mandated notice procedure in 26 USC 6335(a).  Therefore, according to Grable, Albert, and ultimately the Village of Dimondale, had no title in the property at 121 North Bridge Street and the trial court should have quieted title in him.  Grable also asserts that equitable doctrines may not override the IRS's duty to comply strictly with the notice procedures delineated in 26 USC 6335. 

            The Village of Dimondale, arguing in Albert's stead, responds that the trial court properly granted summary disposition because (1) Grable failed to plead a valid defense, (2) the tax title is prima facie evidence of the facts stated therein, and (3) Grable had actual notice and every opportunity to raise the issue of the inadequacy of notice before the sale, but inequitably delayed acting.

VI.  Standard Of Review

            This Court reviews a trial court's decision with respect to a motion for summary disposition de novo.  Spiek v Dep't of Transportation, 456 Mich 331, 337; 572 NW2d 201 (1998).

VII.  Summary Disposition In Favor of Albert Under MCR 2.116(C)(9)

            The trial court did not specify the subsection of MCR 2.116(C) under which it granted summary disposition.  However, because the trial court granted summary disposition in favor of Albert on the basis of his argument that Grable had failed to assert a valid defense, we assume that it ruled under MCR 2.116(C)(9), the court rule Albert cited in his motion for summary disposition. 

            Summary disposition under MCR 2.116(C)(9) is proper if a defendant fails to plead a valid defense to a claim.  Nicita v Detroit (After Remand), 216 Mich App 746, 750; 550 NW2d 269 (1996).  A motion under MCR 2.116(C)(9) tests the sufficiency of a defendant's pleadings by accepting all well-pleaded allegations as true.  Lepp v Cheboygan Area Schools, 190 Mich App 726, 730; 476 NW2d 506 (1991).  If the defenses are "so clearly untenable as a matter of law that no factual development could possibly deny plaintiff's right to recovery," then summary disposition under this rule is proper.  Id., quoting Domako v Rowe, 184 Mich App 137, 142; 457 NW2d 107 (1990).

            Albert alleged that the tax deed extinguished Grable's interest in the property at 121 North Bridge Street.  Grable answered that the tax sale had not transferred his interest, and affirmatively claimed that the deed was void because of the IRS's failure to comply with the requisite notice procedures in 26 USC 6335(a).  Thus, Grable categorically denied the material allegations of the complaint, and stated a legally cognizable defense.  See Nasser v Auto Club Ins Ass'n, 435 Mich 33, 47; 457 NW2d 637 (1990), quoting Pontiac School Dist v Bloomfield Twp, 417 Mich 579, 585; 339 NW2d 465 (1983) ("‘[W]hen, as here, a material allegation of the complaint is categorically denied, summary [disposition] under [MCR 2.116(C)(9)] is improper.'") (alterations in the original).

            Further, a court may look only to the parties' pleadings in deciding a motion under MCR 2.116(C)(9).  MCR 2.116(G)(5).  "Pleadings" as defined in MCR 2.110(A) include only a complaint, cross-claim, counterclaim, third-party complaint, answer to any of these, and a reply to an answer.  MCR 2.110(A).  A motion for summary disposition is not a responsive pleading under MCR 2.110(A).  City of Huntington Woods v Ajax Paving Industries, 179 Mich App 600, 601; 446 NW2d 331(1989).  The trial court in this case noted many alleged facts only presented to it in the wealth of documentary evidence submitted by the parties, not in the pleadings.  The trial court relied on these alleged facts when it determined that Grable had acted inequitably, which is an improper foundation for granting summary disposition under MCR 2.116(C)(9).  Thus, the trial court clearly erred by granting summary disposition under MCR 2.116(C)(9).

VIII.  Summary Disposition In Favor Of Grable Under MCR 2.116(C)(10)

            The trial court's error in granting Albert summary disposition does not end our analysis because, by granting that motion, the trial court simultaneously denied Grable's motion for summary disposition under MCR 2.116(C)(10).  Accordingly, we must determine whether the trial court also erred in denying Grable's motion.

            Under MCR 2.116(C)(10), summary disposition may be granted if, there "is no genuine issue as to any material fact, and the moving party is entitled to judgment . . . as a matter of law."  MCR 2.116(C)(10).  A court must consider the pleadings as well as affidavits, depositions, admissions and other documentary evidence in the light most favorable to the nonmoving party.  Ritchie-Gamester v City of Berkley, 461 Mich 73, 76; 597 NW2d 517 (1999).  However, the nonmoving party must produce evidence showing a material dispute of fact left for trial in order to survive a motion for summary disposition under this court rule.  MCR 2.116(G)(4); Etter v Michigan Bell, 179 Mich App 551, 555; 446 NW2d 500 (1989).

            Although Grable did not dispute that he received actual notice of the sale of the property at 121 North Bridge Street by certified mail, Albert declined to admit that notice by certified mail was defective and specifically asserted that he needed an opportunity to review the IRS records to determine whether the claimed defect actually existed.  Accordingly, Albert argued that if the trial court denied his motion under MCR 2.116(C)(9), it should deny Grable's motion under MCR 2.116(C)(10) because discovery was not yet complete.   "As a general rule, summary disposition is premature if granted before discovery on a disputed issue is complete."  Dep't of Social Services v Aetna Casualty & Surety Co, 177 Mich App 440, 446; 443 NW2d 420 (1989).  "However, summary disposition may be proper before discovery is complete where further discovery does not stand a fair chance of uncovering factual support for the position of the party opposing the motion."  Prysak v RL Polk Co, 193 Mich App 1, 11; 483 NW2d 629 (1992).

            It is clear that Albert did not carry his burden of providing proof of proper notice at the time the trial court ruled on the motions for summary disposition.  Etter, supra.  Albert did not assert or provide an evidentiary basis for what he believes he might find to support the existence of a factual dispute.  See Bellows v Delaware McDonald's Corp, 206 Mich App 555, 561; 522 NW2d 707 (1994) ("If a party opposes a motion for summary disposition on the ground that discovery is incomplete, the party must at least assert that a dispute does indeed exist and support that allegation by some independent evidence.").  Nor is it apparent what other information the parties might be able to produce on this issue beyond an official IRS record indicating that IRS staff mailed a written notice of the seizure to Grable by certified mail.  There is no reason to believe that the IRS provided duplicate notice to Grable by certified mail and one of the proper means identified in 26 USC 6335(a).  Indeed, the IRS evidently thought the notice of seizure by certified mail was sufficient because it went ahead with the tax sale.  Thus, summary disposition before discovery closed was not premature because additional discovery was unlikely to reveal "factual support for" the Albert's, and now the Village of Dimondale's, arguments.  Prysak, supra.

            The absence of this evidence of proper notice had a conclusive effect on the quiet title action.  The law is clear that a tax sale purchaser cannot obtain clear title if the government failed to perfect its right to sell clear title by strict compliance with the provisions for notice of the levy, seizure, and sale.  Ruff v Isaac, 226 Mich App 1, 5-6; 573 NW2d 55 (1997); Goodwin v United States, 935 F2d 1061, 1065 (CA 9, 1991).  Absent literal compliance with the provisions of 26 USC 6335(b), a tax sale of land is "void."  Aqua Bar & Lounge, Inc v United States, 438 F Supp 655, 658 (ED Pa, 1977).  In Howard v Adle, 538 F Supp 504, 507 (ED Mich., 1982), the federal court stated that notice of sale by certified mail was insufficient to comply with the statute.  The Howard Court rejected the government's interpretation of 26 USC 6335(a), which would have permitted certified mail delivery, as contrary to the plain language of the statute.  Id.  While these federal cases deal with IRS failures to comply with the notice procedure for the sale of property under 26 USC 6335(b), there is little justification to read 26 USC 6335(a), the provision on notice of seizures, differently because the procedure for notice under 26 USC 6335(b) incorporates the procedure for notice under 6335(a).

            Recently, this Court determined that the IRS complied with the notice procedure of 26 USC 6335(a) when it served the plaintiffs by certified mail because they could not be "readily located."  Ruff, supra at 8.  However, this Court stated that the statute is unambiguous, and should be given its plain meaning.  Id., citing Robinson v Shell Oil Co, 519 US 337; 117 S Ct 843; 136 L Ed 2d 808 (1997).  Here, there is no evidence that Grable could not be "readily located." 

            Furthermore, "When a delinquent taxpayer contests a third-party purchaser's title to property acquired through a tax sale, the general rule is that ‘the burden of showing literal compliance with statutes governing the sale of land for taxes is upon the claimant under the tax sale.'"  Ruff, supra at 5, quoting McAndrews v Belknap, 141 F2d 111, 115 (CA 6, 1944).  On the facts presented, Albert, and now the Village of Dimondale, did not meet this burden.  While this may appear to be an anomalous result in light of the evidence in the Grable notice that Grable minimally had actual notice of the proposed sale of the property at 121 North Bridge Street, we find nothing in the record that can serve to excuse the IRS from strict compliance with the requirements of 26 USC 66335(a) for notice of seizure.  In the absence of that notice, the tax deed was invalid and the trial court should have quieted title in Grable by granting him summary disposition under MCR 2.116(C)(10) and entering a judgment to that effect.

The Village of Dimondale's additional arguments do not persuade us to reach a different result.  For instance, the Village of Dimondale, as did Albert, contends that under 26 USC 6339(b), a tax deed is valid on its face because the deed is prima facie evidence of the facts stated in it.  We do not quibble with that statement of the law.  However, here, the tax deed stated:

            WHEREAS, the sale was conducted in compliance with all of the requirements of Sub-chapter D, Chapter 64, of the Internal Revenue Code and Regulations thereunder. 

Grable has rebutted this statement by showing inadequate notice, which neither Albert nor the Village of Dimondale has proven wrong by submitting contrary evidence.  See Margiotta v Dist Director of Internal Revenue Service, Brooklyn, 214 F2d 518, 522 (CA 2, 1954).  Therefore, the statement in the tax deed that it complied with all relevant statutory provisions has no effect on our decision.

            The Village of Dimondale and Albert's argument that Grable's inequitably delay in acting on his rights bars his claim to the property is similarly without merit.  It is not at all clear in Michigan that the general rule that a party aggrieved by a defective tax sale must act promptly and equitably to avoid the sale applies when there was defective notice of a tax assessment, seizure, or sale.  See Howard, supra at 508, quoting Detroit Trust Co v Lieberwitz, 275 Mich 429, 436; 266 NW 406 (1936).  In both Howard and Ruff, the taxpayers were plaintiffs who attempted to quiet title, and in doing so opened the door to the respective defendants' claims that they acted inequitably.  In this case, Grable, the defendant, did not institute the equitable action to quiet title.  Therefore, we see no reason to bar him from asserting an otherwise valid defense to the claim against his property.  See generally Stabile v General Enterprises, 70 Mich App 711, 718; 246 NW2d 375 (1976) (equity is a shield, not a sword).

IX.  Conclusion

            The trial court erred in three ways.  First, it erroneously considered evidence outside the pleadings when granting summary disposition to Albert under MCR 2.116(C)(9).  Second, the trial court ignored that Grable had pleaded a valid defense when asserting that the tax deed Albert possessed was invalid for lack of proper notice under 26 USC 6335(a).  Finally, the trial court erroneously denied summary disposition to Grable when there was no issue of material fact left in dispute regarding whether Grable received proper notice when the IRS seized his property. 

            Reversed and remanded for an order of summary disposition in favor of Grable and judgment quieting title to the disputed property in him.  We do not retain jurisdiction.  Grable, having prevailed in full, may tax costs pursuant to MCR 7.219.

/s[1] In actuality, the Internal Revenue Service acts on behalf of the Secretary of Treasury.  Therefore, we refer to the Secretary of Treasury's obligations as the obligations of the IRS.

[1] Albert's reference to Ruff v Isaac, 226 Mich App 1; 573 NW2d 55 (1997), makes it clear that the provision referred to was 26 USC 6335.

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[1] Albert's reference to Ruff v Isaac, 226 Mich App 1; 573 NW2d 55 (1997), makes it clear that the provision referred to was 26 USC 6335.

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The KISS Principle and PT Barnum: I Hope you Look Before you leap. A Bit of Freedom History

 

(This article was written in 1989 and is provided here for a bit of history.)

 

        Peggy Christensen (who was very active in the early movement and who has since dropped out of the movement.) and the Golden Mean Team have done it again.  On November 3,1989, the IRS was defeated once again by the Fifth Amendment.  (The KISS Principle). In the case of United States of America v. George Allee, the First Circuit Court of Appeals vacated the contempt charge of the IRS.  The Court of Appeals said that Allee could take the Fifth Amendment on a question-by-question basis and that the judge would have to decide on each question if Allee could take the Fifth.  The moral of the story is this: If you receive a First Party Summons, you can beat it on the Fifth.  You have two choices:  either comply or plead the Fifth as to specific questions.

 

        For years, the Great Freedom Fighter, Peggy Christensen and the Golden Mean Team have been arguing the Fifth in support of a defense against the failure to file Income Tax Returns.  Obviously the filing of a return is testimony for the purposes of the Fifth Amendment.  If you are an illegal tax protester, you are a project of the Criminal Investigation Division.  You certainly have a right to be worried about your Fifth Amendment Rights.  If you are not filing tax returns and you do not have an attorney opinion letter advising you that you will be required to waive your Fifth Amendment Rights, you are not acting wisely.   I hope that you are not offended.  But why should you spend time in a Federal Penitentiary when you don't have to?  There are attorneys that understand the issue.  There are attorneys that know the truth.

 

        I have watched a lot of Federal Criminal Tax Trials and I will tell you now that there are a lot of arguments in the Freedom Movement that are ridiculous.  For example there are individuals who are filing1040NR returns and getting refunds. There are other individuals who are filing 1040 returns with Form 2555 attached and they live in Colorado.  You know that PT Barnum once said that a sucker is born every minute.  He was right, there are probably two suckers born every minute in the Freedom Movement. There are individuals who are waiving their Fifth Amendment Rights by claiming that the IRS has not followed the proper delegation of authority procedures.  There are still other individuals putting exempt on their W-4's and there are individuals who are living on $75.00 a week for years while they file a Quiet Title Action that sits on the judge's docket with no hope of action.  As far as I am concerned, they are all stupid. (I hope I haven't offended you). The system can be changed.  The IRS can be changed without so much sacrifice.  There are no silver bullets but the best argument in the Freedom Movement that has ever been developed is the Fifth Amendment Issue and Peggy Christensen has been doing it for years.  Keep it Simple

Stupid:  KISS.

 

        If you would like to discuss the methods that you can use to create a situation that is effective and comfortable, let me know.  YOU CAN FIGHT THE IRS AND AND YOU CAN DO IT WITHOUT PUTTING THE IRS IN THE POSITION OF NAILING YOU WITH EITHER A CRIMINAL OR A CIVIL HIT.  So take it easy, relax and forget all the complicated arguments that you will hear.  Keep it Simple Stupid.  If you are not filing returns, be sure that you are relying on counsel.  Remember that the IRS will use Third Party Records against you. If you are a wage earner, don't put exempt on a W-4.  Fill out the W-4 with either a "ZERO" and allow the IRS to take everything or put the amount of allowances that is allowed by the use of their instructions.  If you put more allowances that you are allowed according to their rules, they will be in the driver's seat.

  If you have wages, you are not judgment proof.  You will have to fight the IRS through a Refund Lawsuit.  However, just because you have paid taxes through withholding does not mean that you cannot fight back.  If the arguments of the Freedom Movement will work; the will work in a refund lawsuit.  It is not hopeless.  SO FIGHT BACK!  If you are advised by another individual to do one of the following:  File Exempt on a W-4; Put in an affidavit claiming that you are exempt for whatever reason; File a 1040 NR or a 2555; or live on $75.00 a week while you file lawsuits; or waive your Fifth Amendment Rights in response to a First Party Summons by raising any other issue, please do the following:  Ask that individual if he has been successful against the IRS in doing what he is advising you to do.  (Ask for proof in the form of a court decision. Ask that individual if he does what he is asking you to do. Ask if there is an attorney who can advise you what to do.  Realize that you are not judgment proof if you have wages.

 

        If you do all these things, you may not be another statistic on PT Barnum's Chart.  As for me; I have six published wins on my case alone.  And Peggy?  She has helped so many people win that I cannot count them all.  Good luck and look before you leap!

 

(A note of caution (2012):  For thirty five years, I have said that the IRS will get more and more oppressive before the system changes.  Currently congress has given the IRS the power to levy a $5,000 frivolous penalty for the submission of a "frivolous submission."  In other words, if you send the IRS a letter stating your understanding of the law, the IRS can fine you $5,000 and garnish your wages for the balance due.  You cannot challenge the penalty unless you pay it.  THIS PENALTY IS THE LAST DESPERATE ACTION OF A FASCIST CORPORATE CONTROLLED GOVERNMENT TO BEAT THE MIDDLE CLASS INTO SUBMISSION.  A RIDICULOUS PENALTY LIKE THIS ONE SIMPLY SHOWS THE DESPERATION OF THE IRS TO STOP DISSENT.  GENERALLY SUCH TYRANNY RESULTS IN MORE DISSENT.

 

 

 

 

The History of the Jury System

 

 

              The jury system has been in existence for thousands of years. The ancient Greeks used juries as early as the Seventh Century, B.C. (. L. Moore, The Jury (Cincinatti: W.H.  Anderson Co., 1973), p.2..  These juries were called "decuries," and were chosen by lot.  They made decisions on both the fact and the law without an appeal.

 

           The decuries had 200 to 500 members with up to 2,000 jurors in more important trials.  The ancient Romans used a trial system with judices (judges).

 

              In Germany, landholders formed groups to help make decisions in the courts.  They were composed of seven people, or twelve in the most important cases.  Germany was the first country to seclude juries during their deliberations. (M. Bloomstein, Verdict:  The Jury System (New York: Dodd, Mead and Co., 1968), pp. 3-7.  In 788 A.D., the Franks established the "inquisitio."  This system involved interrogation during the "trial," and it became very popular in the Norman Provinces during the Eighth Century (Moore, supra, pp. 13-17).

 

              The Saxons used an "oath of compurgation" instead of a jury during the Ninth and Tenth Centuries (Holdsworth, A History of English Law, vol. 1 (London: Methuen Co., 1903), p. 312).  Under the oath method, the plaintiff swore his innocence in response to interrogation.  Both parties were supported by compurgators, who swore to the truthfulness of the litigants. (Moore, supra p. 39).  After the invasion of William the Conqueror, who came from France's Norman Provinces, the English system began to change into what it is today.

 

              The early juries were composed of a body of neighbors called an "assize," who decided the facts.  By  1350, the functions of the jury and the witness became distinct and the Crown could control juries with the action of "attaint" by which jurors could be held subject to fine and imprisonment for a wrongful verdict.  The process of attaint ended at the end of the Seventeenth Century (Holdsworth, supra, pp. 317, 323, 325-26).

 

              During the Colonial Period in America, it was difficult to find twelve individuals to serve on a jury so smaller numbers were used.  In 1765, Blackstone wrote Commentaries on the Common Law and enthusiasm started in the Colonies for the jury system. (Bloomstein, pp. 21, 24). At the time of the American Revolution, jurors in most of the colonies were still deciding the law and not confining themselves to the facts.  Soon after the American Revolution, the modern jury system was incorporated into the state constitutions and the Federal Constitution.

 

              Juries have historically consisted of twelve individuals.  We don't know why that is so but an English publication from the year 1682, suggests that the number was based on the Biblical twelve prophets and twelve apostles. (Moore, pp. 107).  However, U.S. Supreme Court Justice Byron White stated in the case of Williams v. Florida, that the number twelve was a "historical accident." Williams v. Florida, 399 U.S. 78, 102 (1970). The trend today is to use juries of less than twelve. Twenty six states now allow juries of fewer than twelve. There is no federal statute prescribing the number of jurors.  Rule 48 of the Federal Rules of Civil Procedure states that the parties may stipulate that the jury will consist of fewer than twelve.

 

              In the United States, today, there is increased consciousness about the jury system.  Many realize that the ability of the jury to judge the law as well as the fact is the ultimate safeguard against bad law.  It is the ultimate safeguard against bad government.  There is a movement afoot to teach the people about their rights and to keep oppressive government under control.  That is why you should serve on a jury if called; it may be the only vote you have that makes any difference.

 

The Juries Need to Know the Truth

 

           Years ago, I watched several juries convict innocent patriots of willful failure to file.  I watched the judges misinform the juries and tell them that they had no right to judge the law as well as the fact.  And yet this position flies fully in the face of tradition and the whole purpose of the jury system.  Jury nullification is a long- established and treasured liberty that is well established. John Adams, the second president of the United States said: "it is not only his right, but his duty...to find the verdict according to his own best understanding, judgment, and conscience, though in direct opposition to the direction of the court."  Quoted in Yale Law Journal, 1964:173. Alexander Hamilton (1804) the jurors should acquit even against the judge's instruction "if exercising their judgment with discretion and honesty they have a clear conviction that the charge of the court is wrong."  Quoted in Joseph Sax, Yale Review 57 (June 481-494, 1968).

 

           "The jury has a right to judge both the law as well as the fact in controversy."  John Jay, first Chief Justice, U.S. Supreme Court, Georgia v. Brailsford, 1794:4. "The jury has the power to bring a verdict in the teeth of both the law and fact."  Oliver Wendell Holmes, U.S. Supreme Court Justice, 1920.  "I consider the trial by jury as the only anchor ever yet imagined by man, by which a government can be held to the principles of its Constitution."  Thomas Jefferson, letter to Thomas Paine, 1798.  "In the trial of all criminal cases, the Jury shall be the Judges of Law, as well as of fact, except that the Court may pass upon the sufficiency of the evidence to sustain a conviction." Article XV, Section 5 of the Constitution of Maryland.

 

           "If the jury feels the law is unjust, we recognize the undisputed power of the jury to acquit even if its verdict is contrary to the law as given by a judge, and contrary to the evidence. This power of the jury is not always contrary to the interests of justice." Supreme Court, U.S. v. Maryland, 1969 And for a more recent case:  "the jury has an unreviewable and irreversible power...to acquit in disregard of the instruction on the law given by the trial judge."..."the pages of history shine on instances of the jury's exercise of its prerogative to disregard instructions of the judge; for example, acquittals under the fugitive slave law."  Supreme Court, U.S. v.  Dougherty, 1972.

 

           As you can see, there is plenty of evidence to show that the jury can decide the law as well as the fact. However, the judge simply won't tell the jury about their right.  Instead, the judge is likely to say that the jury can consider "only the facts" of the case and may not let their opinion of the law or the motives of the defendant affect their decision.

 

           Judges don't want ordinary citizens making decision about the law.  This lack of information undermines the concept of a judgment by as jury of one's peers.  Most Americans know that there is a right to trial by jury but few know that the jury has a right to judge according to conscience regardless of the laws and the facts of the case.

 

           If you are reading this article, you will certainly be an informed juror.  You will know that you have a right to judge the law as well as the facts.

 

           As a matter of fact, you might even consider the following approach.  After the judge gives the instructions and asks the jury if they have any questions about the instructions; you might ask the judge if he has any recourse against the jury if they decide to interpret the law through their eyes rather than the judges eyes.  You might be surprised at his answer.  The informed jury is one of the most important components in the fight against tyrannical government.  So hang in there and keep educating your fellow men and women.