Nothing scares the IRS like: Questions about section 861

Published 15 years ago -  - 15y ago 33


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When I last reported on the Section 861 income tax issue, I stated that the IRS and the Justice Department had ignored over 300 requests from various citizens to answer some valid questions concerning federal income taxes and their proper application to many citizens.

Since that time a new flurry of letters were mailed to the Treasury Department and the IRS – over one thousand at the latest count, sent via certified mail. I know, because I participated in the effort and mailed two letters myself.

Once again, some concerned citizens have asked their government to answer a few simple questions regarding the law of the land. And again, those persons have not received anything in return except a notice from the post office that the correspondence was received and signed for.

Comes now, Ken Evans, and an interesting lawsuit vs. the IRS / United States of America, filed in Federal District court, and decided by Federal judge Charles Weiner on Friday, October 3, 2003. Although the Judge ruled against tax honesty advocate, and plaintiff Ken Evans, some eye opening events occurred that seem to place this court squarely in the pouch wearing, outback hopping, marsupial category.

Evans suit was based almost entirely on the proper application of Section 861 of the Internal Revenue Code. The complaint, which can be read online at Evans’ web site, stated that he did not engage in any of the specific sources or activities that generate taxable income, which are detailed in federal statutes, and are found listed in the regulations under Section 861. Mr. Evans sued to recover monies unlawfully withheld for years 2001 and 2002.

So the case was specifically centered on Section 861 and its proper application. (See Section 861: The Law They Hope You Never Read .)

From Mr. Evan’s press release:

“The law, though confusing is specific,” states Evans, “The federal income tax is imposed under Section 1 on ‘taxable income.’ Other sections of the law generally define the terms ‘gross income’ and ‘taxable income.’ But, these definitions can easily be misread as if they apply to all money earned by everyone in the world. Which we all know isn’t true. Section 861 and its related regulations, along with what the law calls other ‘operative sections,’ spell out exactly when income is taxable. The federal regulations state repeatedly that these are the sections of law to use to determine when income earned within the United States is taxed. Anyone can look them up on the internet.”  

So the argument before the court was: “Is Section 861 applicable in determining whether or not Evans received taxable income?”

Again from the press release:

The Department of Justice, representing the government, chose not to file any response to Evans’ memorandum. This is odd because normal procedure in most lawsuits is to provide the court with reasoning as to why they believe the argument is either wrong or inapplicable to that situation. In fact, during a pre-trial conference ordered by the judge, an attorney for the government stated that a response would be filed, however none ever was.

But, the oddities don’t stop there.

Evans also filed Interrogatories with the government. Interrogatories are specific questions related to the suit that one party asks of the other in order to clarify the case. The very first question Evans asked of the government was: “Are 26 USC § 861 and the related regulations beginning at 26 CFR § 1.861-8, applicable in determining Plaintiff’s taxable income from sources within the United States in the instant case?” 

The judge ordered a hearing for oral arguments on the parties cross motions for summary judgment. The hearing was held on August 22, 2003 and a transcript of the hearing is also available on Evans’ web site. From the transcript it is apparent that Evans was arguing that federal law, specifically section 861, once properly applied, does not show that he has any liability for income tax.

“The hearing was very interesting,” said Evans, “it seemed to me that the judge wasn’t very familiar with the specifics of the case. Every time I brought up the issue of the proper application of Section 861 and Subchapter N (which contains Section 861), the judge would change the subject by asking me what appeared to be argumentative questions. It was if the judge was more of my opponent than was the Department of Justice. Plus, there were two law clerks observing the hearing. They were giggling like school children, not paying much attention while the statements were being given. It wouldn’t surprise me if the opinion was actually written by the law clerks, as is sometimes the case.”

“One good thing did come out of the hearing, or so I thought,” said Evans, “The judge instructed the Department of Justice to provide me with answers to my interrogatories. It’s in the record. So, I thought to myself, ‘Great! I can finally get something in writing from the government about the proper application of Section 861.’ I even filed a motion to compel an answer to the interrogatories. The court accepted my written motion, which I also provided to the DOJ, but for some unknown reason, it mysteriously never showed up on the docket.”

So, directed by the court to answer Evans’ Interrogatories, the DOJ has failed to do so. And since the court didn’t wait for or force an answer from the DOJ, then ruled in the government’s favor, it is not likely that any answer will be forthcoming.

To add further insult to injury, the court totally disregarded the specific argument brought by Evans. That is, the proper application of Section 861. The three-page opinion, filed this past Friday does not mention the application of Section 861 even once.

It seems that the government has set the stage, manufactured the props and costumes, distributed the sheet music, brought up the curtain, started the music and kicked the plaintiff out on stage. What’s more the critical revue was pre-written by the judge and the defendant who work for the same employer. They assigned Mr. Evans an argument he did not make, and then sanctioned him $1000.00 for bringing that same “frivolous” argument to the court.

Despite what many non-believers will tell you about this issue, including socialists like David Cay Johnston of the New York Times, if the arguments of folks like Ken Evans and Larken Rose are so frivolous, they can easily be dispelled by the IRS or the Treasury Department or the Department of Justice. They could simply answer the questions and show me the law. Yet they cannot and will not. Not when they receive one hundred letters and not when they receive one thousand. Not even when ordered to do so by a federal judge.

A rational person, (even one who is not familiar with the 861 issue) can draw only one conclusion about this behavior by our government. They have something to hide. But like a teenaged unwed mother, that belly is getting bigger – and people are starting to talk.

Related article:
Section 861: The Law They Hope You Never Read

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