Subject: The Professor (Part 4) -----BEGIN PGP SIGNED MESSAGE----- Hash: SHA1 Dear Subscriber, I expect this to be my last message in this series regarding the radio debate between myself and Jonathan Siegel (professor of law at GWU). Again, the show is archived at the following site (bottom of the page): http://www.getonyoursoapbox.com/podcast Mr. Siegel's current position can be summed up as: Yes, you CAN use Section 861 and its regulations to determine your taxable domestic income, but your "worldwide" income (foreign and domestic) will show up as taxable anyway. For example, he claims that 26 USC 861(a)(3) means that compensation earned for services performed in the U.S. is taxable for everyone. As you may have notice, I have a habit of trying to jam a million points into one e-mail (along with two million supporting citations), but this time I want to focus on just ONE section. That one section is Section 217 of the Revenue Acts of the 1920's, the "grandfather" of the current Section 861. All by itself, that older statute is very telling. I bet you've all seen signs along the highway that say something along the lines of "trucks must use right lane." When you see those, do you interpret that to mean "EVERYONE must use the right lane"? Of course not. Why would someone make a rule that says CERTAIN PEOPLE must do a certain thing, if they meant EVERYONE must do that certain thing? This painfully obvious concept is really the heart and soul of the legal principle of "inclusio unius." It would be logically moronic for a law to specifically say only that it applied to "A" and "B," if it was supposed to apply to "C" and "D" as well. So it makes sense that, as the Supreme Court put it (in Gould v. Gould), we are NOT supposed to assume that tax laws apply to "matters not specifically pointed out." Why on earth would we? Again, the reason for this is really basic logic. How goofy would our legal system be if the law DIDN'T specifically say what it applied to, and we all had to guess? What would such a law even look like? "Section 1. Somebody--we won't say who--must do the following..." The only thing worse than that would be a law that said "People with red hair must do the following" when it really meant that "EVERYONE must do the following." The idea is obviously absurd. Any idiot knows that when he sees a sign about trucks using the right lane, the rule ISN'T ABOUT HIM, unless he's driving a truck. Now suppose that there was a law that said that CERTAIN people must pay a tax on any income they receive from working inside the United States. Well, there is, and there has been for over ninety years. Here is what it looked like in the 1920's: “Sec. 217. (a) In the case of a NONRESIDENT ALIEN or of a citizen ENTITLED TO THE BENEFITS OF SECTION 262, the following items of gross income shall be treated as income from sources within the United States: (1) Interest on bonds, notes, or other interest-bearing obligations of residents, corporate or otherwise; (2) The amount received as dividends from a domestic corportation...; (3) Compensation for labor or personal services performed in the United States; (4) Rentals or royalties from property located in the United States... (5) Gains, profits, and income from the sale of real property located in the United States; (b) From the items of gross income specified in subdivision (a) there shall be deducted [the allowable deductions]. The remainder, if any, shall be included in full as net income from sources within the United States.” [Section 217, Revenue Act of 1925] So the listed types of domestic income are, after deductions, to be reported as taxable income in the case of foreigners, and in the case of citizens "entitled to the benefits of section 262." For the record, here is what Section 262 back then said: "(a) In the case of citizens of the United States or domestic corporations, satisfying the following conditions, gross income means only gross income from sources within the United States—(1) If 80 per centum or more of the gross income of such citizen or domestic corporation...for the three-year period immediately preceding the close of the taxable year...was derived from sources within a POSSESSION of the United States..." [Section 262, Revenue Act of 1925] So, to summarize a bit, if a person got most of his income from federal possessions (e.g., Guam or Puerto Rico) he could be "entitled to the benefit" of being taxed only on any income he received from inside the states, and NOT on his possessions income. (As a result, certain U.S. citizens COULD have taxable income from inside the U.S.) So now we can easily paraphrase the old Section 217: In the case of FOREIGNERS, and in the case of Americans with POSSESSIONS income, domestic interest, domestic wages, and other domestic income are, after subtracting deductions, to be included as taxable domestic income. Based on the principle mentioned above, all by itself that section should raise some red flags. Aren't wages earned in the U.S. taxable for EVERYONE, including ALL U.S. citizens as well as foreigners? That's what "conventional wisdom" says. So, regardless of what any other section of law might say, why on earth would there be a section of law saying, in essence, that domestic wages are taxable for foreigners and for CERTAIN Americans? I challenge anyone to come up with an explanation for that which doesn't blow "conventional wisdom" out of the water. You might wonder whether some OTHER section said that such domestic income was also taxable "in the case of all OTHER U.S. citizens." Nope, but that shouldn't really come as a surprise. Why on earth would one part of a law say that CERTAIN people must do something, only to have another part of the law say that EVERYONE ELSE must do it as well? (That would be like a traffic sign that said "trucks must use right lane," followed by another sign that said "And everyone else must also use the right lane, too." Why on earth would that ever happen?) There are a lot of different pieces to the income tax "puzzle," and as a result, understanding the big picture takes time and effort. But in some cases just ONE piece, all by itself, blasts a major hole in conventional wisdom. And this is one of those pieces. If "compensation for services performed in the United States" was taxable for anyone who received it, there would be NO REASON for there to have ever been a section of law worded like the old Section 217. While decades of obfuscation and complication have made the truth more difficult to find THAT SECTION is what "evolved" into the current Section 861 and its regulations, which STILL show that income from within the U.S. is taxable for foreigners and for CERTAIN Americans (those with possessions income). Why not say it's taxable for ALL citizens? Why, in 90 YEARS, has the section about U.S.-source income NEVER said that? As I said before, I will be asking Professor Siegel two simple questions regarding his claim that 861 means that domestic income is taxable for all of us. Those questions are: 1) Did Section 217(a)(3) of the Revenue Act of 1925 mean that compensation for services performed in the United States is taxable for ALL U.S. citizens? 2) Did the scope and application of that part of the law CHANGE somewhere along the line, on its way to becoming the current 861(a)(3)? The answer to the first is obviously "no." The answer to the second is also "no," as demonstrated by Treasury Decision 8687, all the regs under Section 119 of the 1939 Code, the "Wodehouse" Supreme Court decision, and Congress' own reports on the different tax codes. So if that 1925 section DIDN'T mean that domestic wages are taxable for all U.S. citizens, and the scope of that part of the law DIDN'T change substantially since then, how could the current 861(a)(3) mean that all domestic wages are taxable? It can't, and it doesn't. Let's see how the professor explains this. Sincerely, Larken Rose www.larkenrose.com -----BEGIN PGP SIGNATURE----- Note: This signature can be verified at https://www.hushtools.com/verify Version: Hush 2.5 wpwEAQECAAYFAkZPhEYACgkQGmVFo/iGj33QawP/aWw3nIbCO7XNZ35/r3SsnRJoIir6 WEECishpryBMDBcaT1dMMbdstK4SslZCz6h13kflvvJfYb/R74yfTYqQDSY/gyM39853 MSzTiXJ9XbLnXmq9FyHxy25p9z8fA8q+n6o/9FxRnfC28ikQdUpqMtM5cnFVAWz7IbUO UheRJXY= =r1+a -----END PGP SIGNATURE----- -------------------------------------------------------------------- To subscribe, send a blank message to 861-on@mail-list.com To contact the list owner, send your message to 861-list-owner@mail-list.com