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taxable income

taxable income

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Published by fredlox
By Larkin Rose
(Revised: 7/4/2000)
By Larkin Rose
(Revised: 7/4/2000)

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Published by: fredlox on Jun 18, 2008
Copyright:Attribution Non-commercial


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(Revised: 7/4/2000)
Larken Rose 
Taxable Income - Larken RoseRevised: 7/4/20001
1) Overview
Despite “common knowledge” to the contrary, the income of most Americans is not subject tothe United States federal income tax. The strict limits on federal power imposed by theConstitution prohibited Congress from imposing a tax on the incomes of United States citizenswho live and work exclusively within the 50 states, and the federal statutes and regulationsdemonstrate that Congress
 did not
impose such a tax. This was not due to an oversight, or tosome technical imperfection in the legislative process. Congress never even
to imposesuch a tax. Instead, a limited income tax was imposed, and was worded in such a way to give theimpression that it was applicable to the income of most Americans. However, a more in-depthstudy of the federal statutes and regulations reveals that the tax is far more limited in scope thanthe public has been led to believe.While following the proof of this may require concentration, it does
require any “leap of faith,” or any questionable “interpretation” of the law. The legal system of the United States is asystem of written law, and the words in the law must inform individuals of exactly what the lawrequires. Therefore, an accurate determination of what the law requires can be accomplishedonly by an examination of the relevant legal documents themselves, without regard forpreconceived assumptions about what the law says. Despite the enormous, complex maze of federal statutes and regulations built up by government lawyers over the years, written in what isvirtually a foreign language to most (sometimes called “legalese”), the truth is still quiteprovable, as will be shown below.Though many have complained about and/or resisted the federal income tax, the truth is thatmost Americans have no reason to “protest” the law at all. The federal income tax is neitherinvalid nor unconstitutional. The tax complies fully with the strict Constitutional limitations onthe power of Congress.What
warrant protest and demand for correction is how the tax has been (and still is) grosslymisrepresented to the American people, and misapplied by federal employees, most of whom areequally ignorant of the truth. Many citizens have been harassed, robbed, and imprisonedunjustly, and the few in government who knew the truth did nothing to stop it. Political powerhas long been associated with dishonesty and deception, but the misrepresentation of the federalincome tax (referred to below as “the Great Deception”) constitutes the most massive fraud in thehistory of the United States. (It is more a conspiracy of ignorance than a conspiracy of secrecy,meaning that most of those involved in the tax industry, including the IRS and tax professionals,are guilty of incompetence and ignorance, rather than intentional deceit.)This report will use the federal statutes and regulations themselves to document that the scope of the federal income tax is far more limited than the public generally believes. It will be shownthat while many types of “income” can be taxable, they can be taxable only if they come fromspecific taxable activities (a.k.a. “sources”), and it will be shown that the taxable “sources” applyonly to those engaged in international or foreign commerce, but do
apply to United Statescitizens living and working exclusively within the 50 states.
Taxable Income - Larken RoseRevised: 7/4/20002
All non-italicized comments (in brackets) within a citation in this report are comments of theauthor, and do not appear in the text itself. Also, all
and underlined emphasis withincitations has been added by the author.(Throughout the report there are several “Questions for Doubters” for tax professionals or otherswho doubt the correctness of this report.)
2) The Basics
The laws enacted by Congress through the legislative process are compiled into
in the50 “Titles” of the United States Code. (Each “Title” deals with a category of law, and Title 26 isthe federal tax title, often called the “Internal Revenue Code.”) A federal agency then has theduty (assigned by Congress) to implement and enforce the statutes by writing and publishing
, which explain that agency’s interpretation of the statutes, as well as setting the ruleswhich govern how the agency will enforce the statutes. The regulations, when published in theFederal Register, are the official notice to the public of what the law requires, and are binding onthe federal agencies (including the IRS). For federal taxes, the Secretary of the Treasury isauthorized to write such regulations.
Sec. 7805. Rules and regulations(a) Authorization - … the Secretary
[of the Treasury]
shall prescribe all needful rules and regulations for the enforcement of this title
[Title 26]
” [26 USC § 7805](The citation “26 USC § 7805” refers to Section 7805 of the
of Title 26, with “USC”meaning “United States Code.” The symbol “§” means “section.” Citations of 
aresimilar, but contain “CFR” instead, meaning “Code of Federal Regulations.”)Section 1 of the Title 26 statutes imposes the “income tax” in five different categories (unmarriedpeople, married people filing jointly, etc.). In each case, the wording reads “
there is herebyimposed on the
 taxable income
The law generally defines
taxable income
” in thefollowing section of the statutes:
Sec. 63.
Taxable income defined 
(a) In general - …the term "
 taxable income
" means
 gross income
minus the deductionsallowed by this chapter…
” [26 USC § 63]In other words, when someone determines his “
gross income
,” and then subtracts all allowabledeductions, the remainder is “
taxable income
.” (So for income to be
taxable income
,” it mustfirst be “
gross income
.”) The following section of the statutes gives a general definition of 
gross income
Sec. 61.
Gross income defined 
(a) General definition - …
 gross income
means all
income from whatever source derived 
 ,including (but not limited to) the following
:(1) Compensation for services...;(2) Gross income derived from business;(3) Gains derived from dealings in property;(4) Interest;(5) Rents;(6) Royalties;(7) Dividends;...
[more items listed]” [26 USC § 61]

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