Attorney at Law 
P.O. Box 9337 
Missoula, MT 59807 
First Printing 1990 
Second Printing 2010 
Copyright © 2010 Jeffrey A. Dickstein 
All rights reserved. No part of this book may be reproduced or used 
in  any  form  or  by  any  means--"graphic,  electronic  or  mechanical, 
including  photocopying,  recording,  taping  or  information  storage 
and retrieval systems--"without written permission of the author. 
Library of Congress Catalog Card Number: 90-80744 
ISBN 0-9626379-0-4 
Cover art by Art Fisher 
Cover Design Copyright © 2010 Jeffrey A. Dickstein 
To  Peggy  Christensen,  who 
has kept the flame of freedom 
burning,  often  when  there 
wasn’t even a candle. 
This work is the result of the team effort of many. It would not have 
been  possible  without  the  gracious  assistance  I  received  from  the 
following people: Vern Holland for giving me the motivation to start 
the book and ideas for  publishing. Joni  Arashiro  for giving me the 
motivation  to  finish.  Claude  Heiland  for  his  assistance  in 
researching  and  pulling  cases.  Steve  Johnson  for  technical 
assistance  with  the  computer.  Sue  Johnson  for  assistance  with 
materials, production and advertising. Renee Aldrich for assistance 
with typing. Bill Benson for support, encouragement and publishing 
assistance.  Davis  Mauldin  for  input  on  printing  and  production. 
John Sackett for prepublication art. Art Fisher for cover design and 
art.  Peggy  Christensen  for  making  the  entire  thing  possible;  there 
would be no book if not for her. Larry Becraft for Chapter One, who 
graciously allowed me to use his research and writings. James Hall 
and  Carl  Beery  who  allowed  me  to  represent  them.  A  special  lady, 
whose name must for political reasons be protected, for editing and 
proof  reading.  Judy  Huston  and  the  Correspondent  for  publicity. 
And  Rob  Aldrich,  my  special  friend,  for  editing,  proof  reading, 
research,  writing,  styling,  computer  assistance,  and  for  staying  up 
with  me  during  the  many  nights  we  worked  on  the  book.  There 
aren’t words enough to express my thanks. 

Prior Federal Income Tax Legislation 
Direct or Indirect Tax 
Income and the Internal Revenue Code 
The Law and the Courts 
The Law and the Courts 
The Law and the Courts 
The Law and the Courts 
The Law and the Courts 
The Law and the Courts 
The Law and the Courts 
The Law and the Courts 
Cross Examination of 
Special Agent Knutson 
Cross Examination of 
Special Agent Shaffner 

When people began to live in groups to take advantage of the
mutual benefits such associations provide, they determined the use
of “self-help--� to protect their lives and property was not in their best
interest, and they voluntarily instituted governments and laws. The
philosophy behind government is that certain functions necessary
for the protection of the life, liberty and property of the people can
be best handled by a centralized organization (government) which
is given sufficient power (lawful right to pass laws and to enforce
them) to accomplish those functions. Numerous types of
governments have emerged under this concept, such as democracy,
socialism, fascism, nazism, communism, and one experimental
form of government known as a “Federal Republic,--� now
commencing its third centennial. Some degree of power (force) is
essential to the ability of any government to operate successfully; it
is the manner in which a government obtains the power and how it
uses that power that separates people who are free from those who
are not.
The first government known to each of us is the government
ordained under the Laws of Nature, the parental government under
which we are born. We are thrust into this relationship without any
say whatsoever, and the power exerted over us--"which we are
helpless to protest or abridge--"is total and absolute. Our only
protection from the abuse of this potentially deadly power is the
divinely inspired parental instinct to protect and nourish (love) the
newborn, which creates the environment for us to live and prosper.
It can thus be clearly seen that this power does not originate with
our parents; but is granted to them from Nature’s God, is made
known to them through God’s will (instinct), is essential for life to
exist, and is held in trust by our parents solely for our benefit and
Nature’s God creates each of us equally and endows us with certain
inalienable rights, chief of which are life, liberty and the pursuit of
happiness. The gift of equality, ironically, is one of inequality; we
are each distinct and have different built-in potential than any other
human being. God’s gift to us is the capacity to develop and exert
our own uniqueness in the world for the purpose of maintaining our
life and liberty and being happy; our respective duty is to develop to
our full potential, thereby giving the benefit of our uniqueness to
the world. This input into the universe results in a division of labor,
and creates the basic foundation of all economics. As we are
basically a society oriented species, a sound economic basis is thus
created, for it is also our nature to improve and modify our
environment in order to improve the quality of our lives. By
exchanging unique services or products with others for their unique
services or products, trade flourishes, the quality of life improves,
we acquire more wealth, prosperity and happiness, and society
blossoms. Under the Laws of Nature, our prosperity is also an
inalienable right.
It is a fundamental principle of our uniqueness that only we can
know it fully among our peers. Our duty to God to achieve
maximum development of our potential necessarily prevents other
people from interfering with the development and free exercise of
our potential. It also creates a corresponding duty on us to resist
any attempt by others to destroy the freedom of our will with
respect to our uniqueness. This concept is embodied within the
single word “Liberty.--�
The presence of other members in the family, however, adds yet
another aspect to the parental form of government; the rightful
exercise of the power to place such restraints on our conduct so as
to best conserve the right of each of us to the greatest amount of
personal liberty, taking into account the coequal and coextensive
rights of each of the other family members. This rightful exercise
imposes the corresponding obligation to be so restrained for the
benefit of the rights of all. In order for the power to restrain to be
lawful, it must be exercised so as not to destroy the very liberty it
attempts to protect. The power, delegated in trust and tempered by
love, secures our liberty, as the governed, in the familial society.

There can be no escape from the conclusion that under the Laws of
Nature, government and society were created to benefit us; we were
not created to benefit government and society. The purpose of the
family (society) is to preserve our lives and our liberty; the purpose
of parental power (government) is to preserve the family (society).
When a parent transcends the limitation on the exercise of his or
her delegated power and invades the domain of individual freedom
(gets drunk and beats the kids), the parent usurps an authority
never vested in him or her, and violates the very rights the
protection of which was the only purpose for which the power was
delegated. When a government transcends its limitation, the
usurpation of authority is known as tyranny.
As we mature we learn to infuse our unique mental, moral and
physical endowments with objects existing in Nature’s universe,
and we are thus able to create unique ideas and objects. These
creations contain elements of our very essence, and from the
beginning of time such creations have been referred to as personal
property. The only limitation upon us in this process of acquiring
personal property through our labor is the coexistent and coequal
right of every other person in society to the same process. The
taking of our property, without our consent, is a badge of mastery
over us indicative of slavery, for it is a taking of a cherished
inalienable right, a right essential to our very ability to survive.
When the taking is in the name of the government, either through
direct confiscation or through indirect means, it is a violation of
duty and a usurpation of power akin to the beating of a child by a
drunken parent.1 Self-defense of our life, liberty, property and
happiness from the usurpation of power--"revolution if you dare--"is
an inalienable right pursuant to the Laws of Nature, and the
exercise of this right formed the basis of our Federal Republic:
We hold these truths to be self-evident, that all men
are created equal, that they are endowed by their
Creator with certain unalienable Rights, that among
these are Life, Liberty and pursuit of Happiness. That
to secure these rights, Governments are instituted
among  Men,  deriving  their  just  powers  from  the 
consent of the  governed.  That whenever any Form of 
Government  becomes  destructive  of  these  ends,  it  is 
the Right of the People to alter or to abolish it, and to 
institute  new  Government,  laying  its  foundation  on 
such  principles  and  organizing  its  powers  in  such 
form, as to them shall seem most likely to effect their 
Safety and Happiness.2 
With the signing of the Declaration of Independence, the subjects of 
the  Monarch,  King  George,  declared  themselves  to  be  a  free  and 
independent people. To the extent they, as a society (political body) 
were  operating under governments  already  in  existence  within the 
territory claimed by the thirteen colonies, an additional result of the 
signing  of  the  document  was  the  emergence  of  thirteen  sovereign 
nations.  Both  under  the  common  law  and/or  the  laws  passed  by 
these  new  nations,  inhabitants  who  were  born  in  the  colonies 
became  citizens  thereof,  and  those  who  were  not  so  born,  could 
either  choose  allegiance  to  the  King  or  allegiance  to  the  new 
political  body.  If  they  chose  allegiance  to  the  new  political  body, 
they  were  also  considered  “citizens.--�  These  thirteen  colonies  came 
to  be  known  as  “states,--�  and  as  a  result  of  the  Articles  of 
Confederation,  came  to  be  known  in  the  community  of  nations  as 
the  United  States  of  America.  The  Articles  of  Confederation  soon 
proved to be ineffectual, and were replaced with the Constitution of 
the United States of America. 
The  Constitution  created  a  form  of  government  which  expressly 
recognized  the  people  (us)  as  sovereign,  and  limited  the  power  of 
the  federal  government  to  that  expressly  delegated  to  it  in  the 
Constitution. The Constitution also limited the locations where the 
federal  government  could  exercise  its  power.3  This  concept  is 
known as federal territorial and/or exclusive legislative jurisdiction. 
The principle is that while Mr. Jones may have parental power over 
his  children,  he  cannot  exercise  that  power  over  Mr.  Smith’s 
children  in  Mr.  Smith’s  house;  Mr.  Smith’s  house  is  outside  the 
territorial jurisdiction of Mr. Jones’ parental power. Any attempt by 

Mr. Jones to exercise his power over Mr. Smith’s children in Mr.
Smith’s house is illegal, null and void. Of course the power may
nevertheless be exerted, albeit illegally, and various legal remedies
exist to return the status quo and to compensate for any injury
The power of the new federal government to tax was a power
expressly delegated to the Legislative Branch of the federal
government in Article I, Section 8, Clause 1 of the Constitution. This
power to tax has been held by the United States Supreme Court to
be all inclusive, subject to only two requirements: direct taxes must
be apportioned per Article I, Section 2, Clause 3 and Article I,
Section 9, Clause 4, and indirect taxes must be uniform, per Article
I, Section 8, Clause 1.
Commencing with the earliest tax laws enacted by Congress, great
debates have revolved around the issue of whether the enacted tax
was a direct tax or an indirect tax. This is an important legal issue,
for if Congress does not provide for apportionment of the tax and
the tax is declared by the judiciary to be a direct tax, then a whole
class of intended “taxpayers--� would not be “taxpayers--� as a result of
the unconstitutionality of the tax for lack of apportionment. A law
that is contrary to the Constitution, of course, is no law at all.4
The first income taxes legislated by Congress were enacted during
the Civil War era. The constitutionality of those acts was not
challenged in court. The next income tax was enacted in 1894
during a time of peace, and its constitutionality was challenged in
the Supreme Court. The majority opinion of the Court declared the
income tax to be a direct tax with no provisions for apportionment,
and struck it down as unconstitutional. This court decision is
known as the
“Pollock--�  decision  [Pollock v. Farmers’ Loan & Trust 
157 U.S. 429,  aff. reh ., 158 U.S. 601 (1895)]. The decision of the
Supreme Court was by no means unanimous; a strong dissent was
raised by a minority of Supreme Court justices that the tax was an
indirect tax that did not require apportionment. One of these
“dissenting--� justices was Associate Justice White.
Pollock   opinion  told  Congress  that  if  it  did  not  like  the  result 
reached by the Court, the Constitution could be amended to change 
the result.5 In 1909, Congress took steps to amend the Constitution 
by proposing the Sixteenth Amendment in the following form: 
Sixteenth Amendment: 
The Congress shall have power to lay and collect taxes
on incomes, from whatever source derived, without
apportionment among the several States, and without
regard to any census or enumeration.
This Amendment was certified as ratified6 in 1913, and Congress
passed an income tax act which was virtually identical to the one
held unconstitutional in
Pollock.   This law was also challenged as
unconstitutional, and ultimately went to the Supreme Court where
Justice White was now sitting as the Chief Justice. The resulting
decision, known as the
“Brushaber--�   decision  [ Brushaber  v.  Union 
Pacific  Railroad  Co.,  
240 U.S. 1 (1916)], was written by Chief
Justice White himself, and not surprisingly, the tax was classified as
an indirect tax.7
The income tax was of such a nature that its presence was generally
unknown to the majority of the people from its inception until
World War II. At that time, Congress, claiming the need for
additional revenue, passed the Victory Tax Act, an unapportioned
direct tax on the personal property of United States citizens
residing at home. The Victory Tax, which was collected with the
income tax, was collected through withholding from wages. This
started the erroneous association of the term “wages--� with the term
“income.--� In law, especially at the time of the proffer of the
Sixteenth Amendment by Congress, the terms were not
synonymous. Income for purposes of federal income taxation has
been defined by the Supreme Court as “the
gain   derived from
capital, from labor or from both combined, provided it include
profit  gained through a sale or conversion of capital assets.--� Labor, 
the  contract  to  exchange  labor  for  wages  or  other  compensation, 

and the wages or other compensation itself, have all been declared
by the United States Supreme Court to constitute sacred, inviolable,
personal property. The Sixteenth Amendment only addressed
“income,--� and was thus limited to the gain derived from labor or
capital; neither the Sixteenth Amendment nor the federal personal
income tax law provides any authority for the taxation of labor or
the property for which the labor may be exchanged, most frequently
wages, absent apportionment.
As a result of the
Brushaber   decision,  numerous  courts  have  held 
that  wages  constitute income and  a tax on wages does not have to 
be  apportioned.  There  is  no  question  but  that  the  
decision,  holding  the  income  tax  to  be  an  indirect  tax,  is  in 
irreconcilable  conflict  with  the  decision  of  the  Supreme  Court  in 
Pollock  holding that the income tax is a direct tax.
In Chapter I of this book I have provided an analysis of prior federal
income tax legislation. A study of this legislation is fundamental to
an understanding of today’s Internal Revenue Code and exactly who
and what is taxed under the law.
In Chapter II of this book I have provided an in-depth analysis of
Pollock   and   Brushaber   decisions provided for the purpose of
establishing the true purpose behind the Sixteenth Amendment and
the exact power given to Congress by it.
In Chapter III of this book I have provided a statutory analysis of
the Internal Revenue Code as it applies to the personal income tax,
and an explanation of what is and, more importantly, what is not
In Chapters IV through XI of this book I have provided an in depth,
case-by-case analysis of each and every federal court case that holds
wages constitute income, in an effort to show the ignorance or
intentional, treasonous actions of our federal judiciary in subverting
our Constitution and the laws enacted by Congress. The simple fact
is that no decision of the Supreme Court of the United States has
specifically held that wages constitute income, and as a matter of
law, they do not.
With over a hundred cases purportedly holding that wages
constitute income, at first impression one might believe that I
disagree with the law. I do not. I do believe, however, that the law,
for political and financial motives, has been subverted. I have
attempted in this book, by providing a history of the income tax and
an analysis of the Internal Revenue Code, to establish exactly what
the law is, and to show how it has been undermined by our federal
In Appendix A, I have provided a partial transcript from a federal
criminal trial in the United States District Court for the District of
Alaska, in the case of the
United States v. Carl Beery,  case No. A87-
43CR.  The  transcript  contains  my  cross-examination  of  I.R.S. 
Revenue  Agent  Knutson.  The  subject  matter  of  the  cross-
examination  was  Mr.  Beery’s  liability  for  the  income  tax  and 
whether wages constitute income. The transcript fully discloses the 
Court’s  hostility  to  this  line  of  questioning,  but  more  importantly, 
points  out  the  failure  of  the  Internal  Revenue  Service  to  calculate 
“gain--� in determining income. 
In  Appendix  B,  I  have  provided  a  partial  transcript  from  another 
federal  criminal  trial  in  the  United  States  District  Court  for  the 
Southern District of Indiana, Evansville Division, in the case of the 
United States v. James I. Hall, case  No.  EV  87-20  CR.  The 
transcript  contains  my  cross-  examination  of  I.R.S.  Special  Agent 
Shaffner.  My  cross-examination  established  through  Ms.  Shaffner, 
who  was  qualified  as  an  expert  witness,  that  no  statute  in  the 
Internal  Revenue  Code  made  Mr.  Hall  liable  for  the  income  tax. 
Although not contained in the portion of the transcript reproduced 
in  Appendix  B,  Federal  District  Court  Judge  Gene  E.  Brooks 
threatened to hit me with his gavel when I attempted to repeat Ms. 
Shaffner’s testimony to the jury, and instructed the jury, contrary to 
the evidence and the law, that Mr. Hall was a taxpayer liable for the 

It was not my intention in writing this book to advise people not to
pay income taxes. In fact, in the conclusion, I caution against taking
steps that will most certainly subject you to tremendous
governmental abuse. On the other hand, the truth is the truth, and
armed with the truth, and fueled with the desire to maintain the
cherished, divinely inspired principles of freedom and liberty, the
people of the United States of America, by joining together and
raising their voices in protest, can once again restore our country to
a government of laws as opposed to a government of men. With this
thought in mind, I have written this book for your consideration.
“It is none the less robbery, because it is done under the forms 
of  law,  and  is  called  taxation--�  
Loan  Association  v.  Topeka,   87 
U.S. 655, 664 (1879). 
Declaration of Independence. 
United States Constitution, Article I, Section 8, Clause 17. 
“The  particular  phraseology  of  the  Constitution  of  the  United 
States  confirms  and  strengthens  the  principle,  supposed  to  be 
essential to all written constitutions, that a law repugnant to the 
constitution  is  void,  and  that  courts,  as  well  as  other 
departments,  are  bound  by  that  instrument.--�  
Marbury v.
5 U.S. 137, 180 (1803). 
Pollock v. Farmers’ Loan & Trust, 158 U.S. 601, 634- 635 (1895). 
Bill  Benson,  
The  Law That  Never  Was--"The  Fraud  of  the  16th 
Amendment  and  Personal  Income  Tax,  
Research Assoc., Box 550, South Holland, IL 60473, 1985). Mr.
Benson documents with certified state archive documents from
each state then in the Union that the Sixteenth Amendment was
never properly ratified as part of the United States Constitution.
Mr. Benson also documents with certified U.S. archive
documents that the non-ratification was specifically noted by
the Solicitor General in his written report to the Secretary of
State, Philander Knox, who nonetheless certified the Sixteenth
Amendment as having been properly ratified. While several of
the federal courts have been made aware of this fraud, they have
refused to remedy the fraud by classifying the ratification
process a “political question--� non-reviewable by the Courts.
Even today the debate continues as some of the Federal Courts
of Appeal take the position that the income tax is a direct tax

and some take the position that the income tax in an indirect
Compare,  Ficalora   v.   C.I.R.,   751  F.2d  85  (2nd  Cir.  1984) 
[holding the income tax is an indirect excise tax] with 
v. C.I.R.,
661 F.2d 71 (5th Cir. 1981) [holding the income tax is a 
direct tax]. 
Before  the  adoption  of  the  U.S.  Constitution,  the  original  thirteen 
States  were  leagued  together  under  the  Articles  of  Confederation, 
the Congress of which had no power of taxation. The States, under 
the Articles of Confederation, possessed all powers of taxation and 
had  surrendered  none  to  the  Articles’  Congress,  the  revenue  of 
which  was  derived  solely  through  requisitions  for  money  made  by 
that  Congress  on  the States. This system proved  itself  to  be  highly 
When  the  Philadelphia  Constitutional  Convention  met  in  1787,  it 
was  quickly  determined  that  Congress  should  have  a  power  of 
taxation,  one  which  was  not  broad  and  general  but  one  somewhat 
restrictive.  At  that  time,  the  States  imposed  two  types  of  taxes, 
those  which  were  direct  in  their  operation,  and  those  which  were 
indirect.  The  great  question  in  reference  to  taxation  before  the 
Constitutional  Convention  was  whether  power  would  be  given  to 
Congress  to  impose  only  one  or  both  types  of  taxes,  and  it  was 
eventually  decided  to  give  Congress  authority  to  impose  both  of 
these classes of taxes, under certain restrictions. The States felt that 
Congress  should  rely  primarily  upon  indirect  taxes  for  its  revenue 
and  that  they  would  reserve  for  themselves  direct  taxes  for  their 
revenue. To insure this scheme, Congress was permitted to impose 
indirect taxes, known as duties, imposts and excises, by the rule of 
uniformity, a rule which Congress could easily meet. But, to protect 
the  revenue  of  the  States,  Congress  was  required  to  impose  all 
direct  taxes  by  the  regulation  of  apportionment,  a  very  rigorous 
The agreement of the Convention manifests itself in the body of the 
Constitution. In Article I, Section 8, Clause 1, a power of taxation is 
granted to Congress in this manner: 
Article I, Section 8, Clause 1: 
The Congress shall have power to lay and collect
taxes, duties, imposts and excise ...; but all duties,
imposts and excises shall be uniform throughout the
United States.
This clause clearly shows the rule of uniformity for indirect taxes.
The regulation of apportionment for direct taxes is found in the
Constitution at Article I, Section 2, Clause 3 and Article I, Section 9,
Clause 4:
Article I, Section 2, Clause 3: 
Representatives and direct taxes shall be apportioned 
among the several states. 
Article I, Section 9, Clause 4: 
No capitation, or other direct, tax shall be laid, unless
in proportion to the census or enumeration herein
before directed to be taken.
Few direct tax acts were intentionally imposed by Congress; one
was laid in 1798,8 two were laid during the War of 1812 in 18139 and
1815,10 and several were laid during and immediately following the
Civil War.11 To further finance the Civil War, Congress passed three
income tax acts. The constitutionality of these acts was never
challenged in court, no doubt because they were wartime measures.
The next income tax was not passed by Congress until 1894, and
was passed in a time of peace. The constitutionality of this tax was
challenged in court; in the case of
Pollock v. Farmers’ Loan & Trust 
157 U.S. 429, 15 S.Ct. 673,  aff. reh.,  158 U.S. 601, 15 S.Ct. 912
(1895), the United States Supreme Court struck down the entire tax
because the tax was found to be a direct, but unapportioned, tax. A
review of these former taxes is important to obtain a clear
understanding of the income taxes imposed by law today.

In 1861, Congress adopted an act which imposed both a direct tax
and an income tax.12 This income tax act was repealed the following
year and replaced by another in “An Act to provide Internal
Revenue to support the Government and to pay Interest on the
Public Debt,--� approved July 1, 1862, 12 Stat. 432, ch. 119. Section
86 of this Act, 12 Stat. 472, imposed a salary tax upon people in the
employment or service of the United States. Section 90 of this Act,
12 Stat. 473, imposed an “income duty--� as follows:
That there shall be levied, collected and paid annually,
upon the annual gains, profits or income of every
person residing in the United States ... a duty of three
per centum ... ; and upon the annual gains, profits, or
income ... by any citizen of the United States residing
abroad ... there shall be levied, collected and paid a
duty of five per centum.
These Acts taxed the salary of people working for the United States
government, every “person--� residing in the United States, and
“citizens--� of the United States residing abroad. This Act was
replaced by another Act in 1864, 13 Stat. 223, ch. 173, which was
amended in 1865 by an Act at 13 Stat. 469, ch. 78, and amended
again in 1866 by an Act at 14 Stat. 137, ch. 184. This 1864 Act, as
amended through the 1866 Act, read as follows:
Sec. 116. And be it further enacted, That there shall be
levied, collected, and paid annually upon the annual
gains, profits and income of every person residing in
the United States, or of any citizen of the United
States residing abroad ... a duty of five per centum ...
And a like tax shall be levied, collected, and paid
annually upon the gains, profits, and income of every
business, trade or profession carried on in the United
States by persons residing without the United States
not citizens thereof.
This Act, as amended, taxed every “person--� residing in the United
States, United States “citizens--� residing abroad, nonresident non-
citizens on income derived from business, trades or professions
carried on in the United States, and in Sec. 123, the salary of people
employed by the United States government.
The 1894 income tax act, “An Act to reduce taxation, to provide
revenue for the Government, and for other purposes,--� approved
August 27, 1894, 28 Stat. 509, ch. 349, at Section 27 [28 Stat. 553]
read as follows:
That ... there shall be assessed, levied, collected, and
paid annually upon the gains, profits, and income
received in the preceding calendar year by every
citizen of the United States, whether residing at home
or abroad, and every person residing therein ... a tax
of two per centum ... and a like tax shall be levied,
collected and paid annually upon the gains, profits,
and income from all property owned and of every
business, trade, or profession carried on in the United
States by persons residing without the United States.
This Act taxed every United States “citizen--� whether residing at
home or abroad, every “person--� residing in the United States, and
non-residents on income derived from business, trades or
professions carried on in the United States.
It becomes clear that a distinction was made between the terms
“citizens--� and “persons--� in these early income tax acts. The Act of
1894 specifically taxed “citizens of the United States--� residing at
home [in the United States] or abroad and persons--� residing in the
United States; there could be no reason for the statute to separately
mention citizens and persons if they were in fact the same. The fact
is, they are different. A “person--� “residing in the United States--�
“who is not a citizen--� would be either a resident alien (in the United
States on a visa) or a resident National (an immigrant).

Mr. Pollock, identified by the Supreme Court as “a citizen of the
State of Massachusetts,--�13 was a shareholder of a corporation. He
sought an injunction against the corporation from paying the
corporate income tax14 on the grounds that as to the tax on the real
estate held and owned by the corporation, the tax was a direct tax
by virtue of it being imposed upon the rents, issues, and profits of
the real estate, that the tax was a direct tax as to personal property
held by the corporation, and the taxes not being apportioned, the
tax was unconstitutional. Similar claims were made with respect to
the taxes imposed upon Mr. Pollock’s income, and income derived
from the stocks and bonds of the States of the United States which
he held. The
Pollock  decisions held that a tax on the whole income 
of property was a direct tax in the constitutional sense. In speaking 
of  the purpose  of  the  
Pollock   Court  in  defining  what  a  “direct  tax--� 
was, the Supreme Court said in 
Concluding  that  the  classification  of  direct  was 
adopted for the purpose of rendering it impossible to 
burden by taxation accumulations of property, real or 
personal,  except  subject  to  the  regulation  of 
apportionment,  it  was  held  the  duty  existed  to  fix 
what was a direct tax in the constitutional sense so as 
to  accomplish  this  purpose  contemplated  by  the 
Constitution.--� (157 U.S. 581.) 
Brushaber,  240 U.S. at 15. 
Pollock   Court,  in  its  first  decision,  defined  “direct  taxes--�  as 
Ordinarily,  all  taxes  paid  primarily  by  persons  who 
can  shift  the  burden  upon  someone  else,  or  who  are 
under  no  legal  compulsion  to  pay  them,  are 
considered  indirect  taxes;  but  a  tax  upon  property 
holders  in  respect  of  their  estates,  whether  real  or 
or of the income yielded by such
estates,   and  the  payment  of  which  cannot  be 
avoided, are direct taxes. [Emphasis added.] 
Pollock,  157 U.S. at 558. 
This  definition,  however,  was  applied  only  in  consideration  of  the 
validity of the tax on the income from real estate and income from 
invested personal  property,  as  the  issue  before  the  Supreme  Court 
in  the  first  
Pollock   decision was quite limited. The decision of the
Court rendered after rehearing, however, was more extensive:
We are now permitted to broaden the field of inquiry,
and to determine to which of the two great classes a
tax upon a person’s
entire income,  whether derived 
from rents, or products, or otherwise, of real estate, or 
from  bonds,  stocks,  or  other  forms  of  personal 
property, belongs; and 
we are unable to conclude 
that the enforced subtraction from the yield of 
all  the  owner’s  real  or  personal  property,  in 
the  manner  prescribed,  is  so  different  from  a 
tax  upon  the  property  itself,  that  it  is  not 
direct,  but  an  indirect  tax,  in  the  meaning  of 
the Constitution. 
[Emphasis added.] 
Pollock,  158 U.S. at 618. 
Pollock   Court  found  there  was  no  substantial  difference 
between a tax on property, which was a direct tax, and a tax on the 
income  derived  from  the  property.  The  
Pollock   Court overturned
the income tax act of 1894 by concluding that income taxes were
direct taxes, direct taxes were required by the Constitution to be
apportioned; the tax Congress imposed at 28 Stat. 509, c. 349,
Section 27, p. 553, was not apportioned, and hence contrary to
Article I, Section 2, Clause 3, and Article I, Section 9, Clause 4, of
the United States Constitution. That statute read:

Sec. 27. That from and after the first day of January,
eighteen hundred and ninety-five, and until the first
day of January, nineteen hundred, there shall be
assessed, levied, collected, and paid annually upon the
gains, profits, and income received in the preceding
calendar year by every citizen of the United States,
whether residing at home or abroad, and every person
residing therein, whether said gains, profits, or
income be derived from any kind of property rents,
interest, dividends, or salaries, or from any
profession, trade, employment, or vocation carried on
in the United States or elsewhere, or from any other
source whatever, a tax of two per centum on the
amount so derived over and above four thousand
dollars, and a like tax shall be levied, collected, and
paid annually upon the gains, profits, and income
from all property owned and of every business, trade,
or profession carried on in the United States. And the
tax herein provided for shall be assessed, by the
Commissioner of Internal Revenue and collected, and
paid upon the gains, profits and income for the year
ending the thirty-first day of December next
preceding the time for levying, collecting, and paying
said Tax.--�
In rendering this decision, the
Pollock  Court also stated that: 
We  do  not  mean  to  say  that  an  act  laying  by 
apportionment  a  direct  tax  on  all  real  estate  and 
personal  property,  or  the  income  thereof,  might  not 
also  lay  excise  taxes  on  business,  privileges, 
employments,  and  vocations.  
But  this  is  not  such 
an act; and the scheme must be considered as 
a whole.15 
[Emphasis added.] 
Pollock,  158 U.S. at 637. 
Pollock  Court clearly found that a tax on the entire income of a 
United States  citizen was  a  direct tax  that required apportionment 
to withstand constitutional validity. 
To  overcome  the  opinion  of  the  
Pollock   Court  that  an  income  tax 
was a direct tax which must be apportioned, Congress proposed the 
Sixteenth Amendment. 
After  the  adoption  of  the  Sixteenth  Amendment  in  1913,  Congress 
passed an income tax act; see “An Act to reduce tariff duties and to 
provide  revenue  for  the  Government,  and  for  other  purposes,--� 
approved October 3, 1913, 38 Stat. 114, ch. 16. Section II of this act, 
38 Stat. 166, imposed the following tax: 
A. Subdivision  1. That there shall  be levied, assessed, 
collected  and  paid  annually  upon  the  entire  net 
income  arising  or  accruing  from  all  sources  in  the 
preceding calendar year to every citizen of the United 
States,  whether  residing  at  home  or  abroad,  and  to 
every person residing in the United States, though not 
a citizen thereof, a tax of 1 per centum ... and a like tax 
shall be assessed, levied, collected, and paid annually 
upon  the  entire  net  income  from  all  property  owned 
and of every business, trade, or profession carried on 
in the United States by persons residing elsewhere. 
The Act also taxed the income from corporations at the rate of 1 per 
centum,  and  it  was  the  tax  on  the  corporations16  that  was 
challenged as unconstitutional in 
Suit was instituted by Mr. Brushaber who was a stockholder of
Union Pacific Railroad. The Supreme Court in
Brushaber  was of the 
opinion  that  the  
Pollock   Court  was  wrong  in  classifying  income 
taxes  as  direct  taxes,  and  ruled  as  erroneous  Mr.  Brushaber’s 
contention  that  the  Sixteenth  Amendment  authorized  only  a 
particular character of direct tax without apportionment. The Court 
Indeed in the light of the history which we have given 
and of the decision in the 
Pollock  case and the ground
upon which the ruling in that case was based, there is
no escape from the conclusion that the Amendment
was drawn for the purpose of doing away for the
future with the principle upon which the
Pollock case
was decided, that is, of determining whether a tax on
income was direct not by a consideration of the
burden placed on the taxed income upon which it
directly operated, but by taking into view the burden
which resulted on the property from which the income
was derived, since in express terms the Amendment
provides that income taxes, from whatever source the
income may be derived, shall not be subject to the
regulation of apportionment. From this in substance
it indisputably arises, first, that all the contentions
which we have previously noticed concerning the
assumed limitations to be implied from the language
of the Amendment as to the nature and character of
the income taxes which it authorizes find no support
in the text and are in irreconcilable conflict with the
very purpose which the Amendment was adopted to
accomplish. Second, that the contention that the
Amendment treats a tax on income as a direct tax
although it is relieved from apportionment and is
necessarily therefore not subject to the rule of
uniformity as such rule only applies to taxes which are
classifications which have been recognized and
enforced from the beginning, is also wholly without
foundation since the command of the Amendment
that all income taxes shall not be subject to
apportionment by a consideration of the sources from
which the taxed income may be derived forbids the
application to such taxes of the rule applied in the
Pollock  case by which alone such taxes were removed 
from  the  great  class  of  excises,  duties  and  imposts 
subject  to  the  rule  of  uniformity  and  were  placed 
under the other or direct class. 
Brushaber,  240 U.S. at 18-19. 
This  position  was  reiterated  in  the  opinion  in  
Stanton  v.  Baltic 
Mining Co., 
240 U.S. 103 (1916), which was also written by Justice 
White at the same time he wrote the opinion in the 
Brushaber  case: 
[T]he Sixteenth Amendment conferred no new power 
of  taxation  but  simply  prohibited  the  previous 
complete  and  plenary  power  of  income  taxation 
possessed by Congress from the beginning from being 
taken out of the category of indirect taxation to which 
it inherently belonged. 
Stanton,  240 U.S. at 112. 
Brushaber  case also stated: 
Moreover  in  addition  the  conclusion  reached  in  the 
Pollock  case did not in any degree involve holding that
income taxes generically and necessarily came within
the class of direct taxes on property, but on the
contrary recognized the fact that taxation on income
was in its nature an excise entitled to be enforced as
such unless and until it was concluded that to enforce
it would amount to accomplishing the result which the
requirement as to apportionment of direct taxation
was adopted to prevent, in which case the duty would
arise to disregard form and consider substance alone
and hence subject the tax to the regulation as to
apportionment which otherwise as an excise would
not apply to it. Nothing could serve to make this
clearer than to recall that in the
Pollock  case in so far
as the law taxed incomes from other classes of

property than real estate and invested personal
property, that is, income from “professions, trades,
employments, or vocations--� (158 U.S. 637), its validity
was recognized; indeed it was expressly declared that
no dispute was made upon that subject and attention
was called to the fact that taxes on such income had
been sustained as excise taxes in the past.
Id.,  p. 635. 
Brushaber,  240 U.S. at 16-17. 
Justice  White’s  opinion  in  
Brushaber   upheld the constitutional
validity of the 1913 Act, and without expressly overruling the
Pollock  decision, held, contrary to  Pollock,  that the income tax was 
an  indirect  tax.  The  conflict  between  the  
Pollock   Court  and  the 
Brushaber   Court is the subject of the next chapter and is fully
addressed therein.
Brushaber  Court was thus of the opinion that in order for the
tax imposed by Congress to withstand constitutional scrutiny, the
tax could not be administered as a direct tax within the States;17
such a tax would continue to require apportionment even under the
Sixteenth Amendment.18
On September 8, 1916, Congress adopted another federal income
tax.19 The income tax in this act was imposed by Section l(a), which
read as follows:
That there shall be levied, assessed, collected, and
paid annually upon the entire net income received in
the preceding calendar year from all sources by every
individual, a citizen or resident of the United States, a
tax of two per centum upon such income
The 1916 Act, in Section 24, 39 Stat. 776, repealed the 1913 income
tax act. On October 3, 1917, Congress passed an Act which amended
the 1916 income tax act primarily by increasing the graduated rates
of the additional tax.20
On February 24, 1919, the Revenue Act of 1918 was adopted by
Congress.21 This Act was different from both the 1913 and 1916 Acts
in that it imposed a “lieu--� tax, or a tax merely in substitution of one
previously imposed. This is demonstrated by the plain language of
Section 210, 40 Stat. 1062, which read as follows:
That, in lieu of the taxes imposed by subdivision (a) of
Section 1 of the Revenue Act of 1916 and by Section 1
of the Revenue Act of 1917, there shall be levied,
collected and paid for each taxable year upon the net
income of every individual a normal tax at the
following rates ....
The Revenue Act of 1918 did contain provisions to repeal prior acts.
In Section 1400 of this Act, the income tax title of the 1916 revenue
act was repealed, subject to certain limitations. At Section 1400 (b),
40 Stat. 1150, the last sentence in this Section read as follows:
In the case of any tax imposed by any part of an Act
herein repealed, if there is a tax imposed by this Act in
lieu thereof, the provision imposing such tax shall
remain in force until the corresponding tax under this
Act takes effect under the provisions of this Act.
There can be but one construction given to this provision which can
sustain the tax. If the entire income tax provisions in the 1916 Act
were entirely repealed, then no tax under the 1916 Act would be
imposed, and thus nothing would be imposed by the 1918 Act, the
tax being simply “in lieu of--� the 1916 tax. To sustain the tax itself,
Section 210 of the 1916 Act must have continued in effect, only
amended or modified by the 1918 Act.
The Revenue Act of 1921 was adopted by Congress on November 23,
1921.22 This Act closely followed the Revenue Act of 1918 in that it
also imposed a “lieu--� tax. In Section 210 of this Act, 42 Stat. 233,
the section imposing the tax read as follows:

That, in lieu of the tax imposed by Section 210 of the
Revenue Act of 1918, there shall be levied, collected,
and paid for each taxable year upon the net income of
every individual a normal tax ....
Thus, the 1921 Act was in lieu of the 1918 tax, which was in lieu of
the 1916 tax. Like the similar repeal provision in the 1918 Act, the
1921 act had a Section 1400 which repealed the 1918 income tax act
conditioned as follows at 42 Stat. 321:
In the case of any tax imposed by any part of the
Revenue Act of 1918 repealed by this Act, if there is a
tax imposed by this Act in lieu thereof, the provision
imposing such tax shall remain in force until the
corresponding tax under this Act takes effect under
the provisions of this Act.
The Revenue Act of 1924 was adopted by Congress on June 2,
1924.23 Like its predecessors, this Act imposed a tax in Section 210,
43 Stat. 264, which read as follows:
In lieu of the tax imposed by Section 210 of the
Revenue Act of 1921, there shall be levied, collected,
and paid for each taxable year upon the net income of
every individual (except as provided in subdivision (b)
of this Section) a normal tax ....
Thus, this Act imposed a tax in lieu of the 1921 tax, which was in
lieu of the 1918 tax, which was in lieu of the 1916 tax. Like the prior
acts, the repeal provisions in Section 1100, 43 Stat. 352, repealed
the 1921 income tax provisions subject to this condition:
In the case of any tax imposed by any part of the
Revenue Act of 1921 repealed by this Act, if there is a
tax imposed by this Act in lieu thereof, the provision
imposing such tax shall remain in force until the
corresponding tax under this Act takes effect under
the provisions of this Act.
Some two years later, Congress enacted the Revenue Act of 1926.24
Section 210 of this Act read almost identically with former acts
imposing the tax:
In lieu of the tax imposed by Section 210 of the
Revenue Act of 1924, there shall be levied, collected
and paid for each taxable year upon the net income of
every individual (except as provided in subdivision (b)
of this section) a normal tax ...
Thus, this Act imposed a tax in lieu of the 1924 tax, which was in
lieu of the 1921 tax, which was in lieu of the 1918 tax, which was in
lieu of the 1916 tax. The repeal provisions in this Act were found in
Section 1200, 44 Stat. 125, which repealed the 1924 income tax act,
subject to this limitation:
In the case of any tax imposed by any part of the
Revenue Act of 1924 repealed by this Act, if there is a
tax imposed by this Act in lieu thereof, the provision
imposing such tax shall remain in force until the
corresponding tax under this Act takes effect under
the provisions of this Act.
Again, two years later, Congress enacted another act called the
Revenue Act of 1928.25 By this time, Congress had been enacting
similar legislation for about fifteen years, and it obviously chose to
change the format of the income tax acts as an attempt at
improvement. The format of this Act was decidedly different from
the previous acts, and this format was ultimately used for the 1939
Internal Revenue Code. In this new style, the tax became imposed
under Section 11:

Normal Tax on Individuals. There shall be levied,
collected, and paid for each taxable year upon the net
income of every individual a normal tax ....
It must be noted that, whereas previously the “in lieu of--� feature of
the tax appeared directly in the section imposing the tax, this
Section 11 made no reference to the same, although the act itself
did. Congress took the “in lieu of--� feature out of the section
imposing the tax and placed it in Section 63 of the Act:
Taxes in Lieu of Taxes Under 1926 Act. The taxes
imposed by this title shall be in lieu of the
corresponding taxes imposed by Title II of the
Revenue Act of 1926, in accordance with the following
Taxes under this Title
Taxes under 1926 Act
Secs. 11 and 211
in lieu of
sec. 210
Sec. 12
in lieu of
sec. 211
Thus, this Act imposed an income tax in lieu of the 1926 tax, which
was in lieu of the 1924 tax, which was in lieu of the 1921 tax, which
was in lieu of the 1918 tax, which was in lieu of the 1916 tax.
The repeal provision in this Act was somewhat different from the
previous ones in that there was no section which specifically
defined what was repealed. Instead, Section 714 of this Act, 45 Stat.
882, stated:
The parts of the Revenue Act of 1926 which are
repealed by this Act shall remain in force for the
assessment and collection of all taxes imposed
thereby, and for the assessment, imposition, and
collection of all interest, penalties, or forfeitures
which have accrued or may accrue in relation to any
such taxes.
Due to the fact that this Act made the 1926 Act temporary and of no
effect for tax years 1928 and afterward, the repeal provision meant
Congress did not enact after 1928 another major tax law for four
years; on June 6, 1932, it did enact, however, the Revenue Act of
1932.26 This Act was patterned upon its predecessor, the 1928 Act,
and it thus had a Section 11 which imposed the tax, and a Section 63
providing the “in lieu of--� feature:
Sec. 11. Normal Tax on Individuals. There shall be
levied, collected, and paid for each taxable year upon
the entire net income of every individual a normal tax
Sec. 63. Taxes In Lieu of Taxes Under 1928 Act. The
taxes imposed by this title shall be in lieu of the
corresponding taxes imposed by the sections of the
Revenue Act of 1928 bearing the same numbers.
Since this Act was applicable for tax years 1932 and those
subsequent, the prior acts were thus made temporary, and there
was no need for repeal provisions, which this Act did not contain.
Two years later, Congress enacted the Revenue Act of 1934.27 Like
the 1928 and 1932 Acts, this Act contained a Section 11 and a
Section 63 which read as follows:
Sec. 11. Normal Tax on Individuals. There shall be
levied, collected, and paid for each taxable year upon
the net income of every individual a normal tax ....
Sec. 63. Taxes In Lieu of Taxes Under 1932 Act. The
taxes imposed by this title shall be in lieu of the
corresponding taxes imposed by the Revenue Act of

Since this Act was applicable for tax years after December 31, 1933,
the 1932 Act was thus made temporary and this Act contained no
repeal provisions.
The next major income tax act of Congress was the Revenue Act of
1936.28 Here, Congress continued the same scheme first established
in 1928, with Sections 11 and 63:
Sec. 11. Normal Tax on Individuals. There shall be
levied, collected, and paid for each taxable year upon
the net income of every individual a normal tax ....
Sec. 63. Taxes In Lieu of Taxes Under 1934 Act. The
taxes imposed by this title and Title IA shall be in lieu
of the taxes imposed by Titles I and IA of the Revenue
Act of 1934, as amended.
This Act made the 1934 Act, as amended in 1935, temporary, and
thus there were no repeal provisions.
Finally, on May 28, 1938, Congress enacted the Revenue Act of
1938.29 This Act followed the format of the similar income tax Acts
adopted in 1928, 1932, 1934, and 1936, and this Act established
most of the format of the 1939 Internal Revenue Code. Here again,
there was a Section 11 and a Section 63 which read as follows:
Sec. 11. Normal Tax on Individuals. There shall be
levied, collected, and paid for each taxable year upon
the net income of every individual a normal tax ....
Sec. 63. Taxes In Lieu of Taxes Under 1936 Act. The
taxes imposed by this title and Title IA shall be in lieu
of the taxes imposed by Titles I and IA of the Revenue
Act of 1936, as amended.
Since this Act became effective for years after December 31, 1937,
the 1936 Act became temporary and this Act contained no repeal
On December 31, 1938, there was in existence a federal income tax
which was imposed by the Revenue Act of 1938. But this Act simply
imposed a tax which was in lieu of the 1936 tax, which was in lieu of
the 1934 tax, which was in lieu of the 1932 tax, which was in lieu of
the 1928 tax, which was in lieu of the 1926 tax, which was in lieu of
the 1924 tax, which was in lieu of the 1921 tax, which was in lieu of
the 1918 tax, which was in lieu of the 1916 tax.
At the same time, many other taxes were scattered throughout
various Congressional tax acts, and there appeared to Congress a
need to consolidate these laws all into one book or act. Hence the
effort to enact the 1939 Internal Revenue Code.
On February 10, 1939, the 1939 Internal Revenue Code was
approved and became a law.30 In essence, those various internal
revenue laws then valid, existing and in force on January 2, 1939,
were placed into this one Act which created the Code. Section 4 of
the enacting clause of this Code provided that any prior law codified
in this act was thereby repealed; but, Section 4 did not operate to
repeal any law not so codified. Most of the income tax provisions in
the 1939 Code were from the 1938 Revenue Act, and Section 11 of
the 1938 Act became Section 11 in the 1939 Code. But, while
Sections 1 through 62 of the 1938 Act were placed into the Code,
Section 63, which provided for the lieu tax feature, was not
incorporated into that Code, and therefore was not repealed. Thus,
the 1939 Code was nothing more than an incorporation of the 1938
Act into its provisions, and the unrepealed Section 63 in the 1938
Act operated to make the 1939 Code’s income tax laws an act which
was in lieu of the 1936 tax.
The unrepealed Section 63 in the 1938 Act operated to make that
Code nothing more than a substitute for the 1938 Act. And of
course, the 1954 Internal Revenue Code simply replaced the 1939

Internal Revenue Code. Today, the 1986 Code is merely a
replacement or substitute for the 1954 Code.
Act of July 14, 1798, 1 Stat. 597, ch. 75.
Act of Aug. 2, 1813, 3 Stat. 63, ch. 37.
Act of Jan. 9, 1815, 3 Stat. 164, ch. 21.
Act of August 6, 1861; Act of July 1, 1862; Act of March 3, 1863;
Act of June 30, 1864; Act of March 3, 1865; Act of March 10,
1866; Act of July 13, 1866, Act of March 2, 1867; and Act of July
14, 1870.
See Act of Aug. 5, 1861, 12 Stat. 292, 309, ch. 45.
Pollock,  157 U.S. at 674.
A tax of two percent was imposed upon the net profits of
corporations, companies or associations in the 1894 act at
Section 32.
So, too, the income tax contained in Subtitle A is not such an
act; one need only compare the wording of Section 27 of the
1894 Act with the wording of Section 61 (a) of the 1954 Act to
ascertain that the tax imposed in Subtitle A is not an excise tax
on business, trades or professions.
Brushaber , 240 U.S. at 9.
Attorney General W. M. Evarts concluded as follows in 1871:
“We are of the opinion that a tax on the gross income of an
individual is embraced by the words “capitation, or other direct
tax,--� in the Constitution, and should be assessed and collected
on the principle of apportionment and not of uniformity, and
that the several sections of the Internal Revenue act imposing
such tax are therefore unconstitutional. We are further of
opinion that no decision of the Supreme Court of the United
States precludes this view or discourages the expectation that it 
will receive the sanction of the court. On the contrary, there are 
dicta  and  suggestions  in  the  only  decisions  bearing  upon  the 
subject  which  tend  to confirm  the  opinion  we  have  expressed.--� 
13 Internal Revenue Record 76. 
Relying  upon  this  proposition,  Attorney  Lowell  Becraft  of 
Huntsville, Alabama, has made a powerful territorial/legislative 
jurisdictional argument that under the Supreme Court’s holding 
in  Brushaber,  the  income  tax  cannot  be  imposed  anywhere 
except within those limited areas within the states in which the 
Federal  government  has  exclusive  legislative  authority  under 
Article I, Section 8, Clause 17, of the United States Constitution, 
such  as  on  military  bases,  national  forests,  etc.,  and  within 
United  States  territories,  such  as  Puerto  Rico,  etc.  Indeed, 
Treasury  Department  delegation  orders  and  the  language  of 
Treasury Regulation 26 C.F.R. Section 1.1-l(c) fully supports Mr. 
Becraft’s  scholarly  analysis.  Thus,  whether  one  relies  upon  the 
Supreme Court’s opinion in Pollock or its opinion in Brushaber, 
a  tax  upon  a  States  citizen’s  wages  (personal  property)  falls 
without constitutional authority. 
See “An Act To Increase The Revenue, And For Other Purposes,--� 
39 Stat. 756, ch. 463. 
See “An Act To Provide Revenue To Defray War Expenses, And 
For Other Purposes--�, 40 Stat. 300, ch. 63. 
See “An Act To Provide Revenue, And For Other Purposes--�, 40 
Stat. 1057, ch. 18. 
See  “An  Act  To  Reduce  And  Equalize  Taxation,  To  Provide 
Revenue, And For Other Purposes,--� 42 Stat. 227, ch. 136. 
See  “An  Act  To  Reduce  And  Equalize  Taxation,  To  Provide 
Revenue, And For Other Purposes,--� 43 Stat. 253, ch. 234. 
See “An Act To Reduce And Equalize Taxation, To Provide
Revenue, And For Other Purposes,--� 44 Stat. 9, ch. 27.
See “An Act To Reduce And Equalize Taxation, Provide
Revenue, And For Other Purposes,--� 45 Stat. 791, ch. 852.
See “An Act To Provide Revenue, Equalize Taxation, And For
Other Purposes,--� 47 Stat. 169, ch. 209.
See “An Act To Provide Revenue, Equalize Taxation, And For
Other Purposes,--� 48 Stat. 680, ch. 227.
See “An Act To Provide Revenue, Equalize Taxation, And For
Other Purposes,--� 49 Stat. 1648, ch. 690.
See “An Act To Provide Revenue, Equalize Taxation, And For
Other Purposes,--� 52 Stat. 447, ch. 289.
See 53 Stat., part 1.

The distinction between direct and indirect taxation is fundamental 
to the federal  government’s  constitutional power to  lay  and  collect 
taxes  from  the  citizens  of  the  several  states  which  comprise  the 
United  States  of  America.  However,  some  200  years  after  the 
ratification  of  the  United  States  Constitution,  it  remains  unsettled 
whether the federal income tax is a direct or an indirect tax. 
Pollock   case  is  the  leading  decision  from  the  United  States 
Supreme  Court  which  supports  the  proposition  that  the  federal 
income  tax  is  a  direct  tax.  The  
Brushaber   case is the leading
decision from the Supreme Court which supports the proposition
that the federal income tax is an indirect tax.
By virtue of the legislative history regarding the proffer of the
Sixteenth Amendment, it cannot be denied that Congress intended
to tax incomes. The question thus becomes, is the income tax a
direct tax that is relieved from the requirement of apportionment by
ratification of the Sixteenth Amendment or did the Amendment
serve to define a tax on income as an indirect, excise tax? This
analysis answers that question.
In 1894, Congress passed an income tax, and its constitutional
validity was challenged. In
Pollock,   the United States Supreme
Court held the income tax, as enacted and administered, was an
unapportioned direct tax, and struck it down as repugnant to
Article I, Section 2, Clause 3, and Article I, Section 9, Clause 4, of
the Constitution.
In 1909, during a special session of Congress called by President
Taft, the Sixteenth Amendment was proposed and sent to the
States for ratification; it was certified as ratified in 1913.
Congress then enacted the Tariff Act of October 3, 1913, which
contained income tax provisions, and those provisions were
challenged as unconstitutional. In
Brushaber,   the United States
Supreme Court upheld the income tax provisions as
constitutional. In the process, however, it held the income tax to
be an indirect tax by virtue of the operation of the Sixteenth
Pollock   Court  used  the  following  language  in  defining  a 
direct tax: 
Ordinarily,  all  taxes  paid  primarily  by  persons  who 
can  shift  the  burden  upon  someone  else,  or  who  are 
under  no  legal  compulsion  to  pay  them,  are 
considered  indirect  taxes;  but  a  tax  upon  property 
holders  in  respect  of  their  estates,  whether  real  or 
or  of  the  income  yielded  by  such 
and  the  payment  of  which  cannot  be 
avoided, are direct taxes. [Emphasis added.] 
Pollock,  157 U.S. at 558. 
On rehearing, however, the Supreme Court enlarged the definition 
of a direct tax: 
We are now permitted to broaden the field of inquiry, 
and  to  determine  to  which  of  the  two  great  classes  a 
tax  upon  a  person’s  entire  income,  whether  derived 
from rents, or products, or otherwise, of real estate, or 
from  bonds,  stocks,  or  other  forms  of  personal 
property, belongs; and 
we are unable to conclude 
that the enforced subtraction from the yield of 
all  the  owner’s  real  or  personal  property,  in 
the  manner  prescribed,  is  so  different  from  a 
tax  upon
the property itself, that it is not
direct, but an indirect tax, in the meaning of
the Constitution.
 [Emphasis added.] 
Pollock,  158 U.S. at 618. 
In direct contravention to the 
Pollock  opinion that income taxes are 
direct within the meaning of the Constitution, the 
Brushaber  Court 
(T)he  conclusion  reached  in  the  
Pollock   case  did  not 
in  any  degree  involve  holding  that  income  taxes 
generically  and  necessarily  came  within  the  class  of 
direct taxes on property .... 
Brushaber,  240 U.S. at 16-17.
It is interesting to note that this alleged conclusion of the
Court is not in  quotes,  nor is there a page reference to the   Pollock 
decision. The absence of such a page reference is because the
Pollock  Court never stated such a conclusion. 
Brushaber   Court was of the opinion that Mr. Brushaber was
raising the issue that the Sixteenth Amendment provided for a
power to tax not previously in existence:
We are of the opinion, however, that the confusion is
not inherent, but rather arises from the conclusion
that the Sixteenth Amendment provides for a hitherto
unknown power of taxation, that is, a power to levy an
income tax which although direct should not be
subject to the regulation of apportionment applicable
to all other direct taxes.
Brushaber,  240 U.S. at 10-11.
The Court then listed the several contentions made by Mr.
Brushaber, and said:
But it clearly results that the proposition and the
contentions under it, if acceded to, would cause one
provision of the Constitution to destroy another; that
is, they would result in bringing the provisions of the 

apportionment  into  irreconcilable  conflict  with  the 
general  requirement  that  all  direct  taxes  be 
apportioned.  Moreover,  the  tax  authorized  by  the 
Amendment, being direct, would not  come under the 
rule  of  uniformity  applicable  under  the  Constitution 
to other than direct taxes, and thus it would come ‘ to 
pass  that  the  result  of  the  Amendment  would  be  to 
authorize  a  particular  direct  tax  not  subject  either  to 
apportionment  or  to  the  rule  of  geographical 
uniformity,  thus  giving  power  to  impose  a  different 
tax  in  one  State  or  States  than  was  levied  in  another 
State or States. 
Brushaber,  240 U.S. at 11-12. 
The Court was, however, aware of the fact that the requirement as 
to apportionment of a direct tax was regulatory: 
In  fact  the  two  great  subdivisions  embracing  the 
complete  and  perfect  delegation  of  the  power  to  tax 
and  the  two  correlated  limitations  as  to  such  power 
were  thus  aptly  stated  by  Mr.  Chief  Justice  Fuller  in 
Pollock v. Farmers’ Loan & Trust Company, supra,  at
page 557: “In the matter of taxation, the Constitution
recognizes the two great classes of direct and indirect
taxation, and lays down two rules by which their
imposition must be governed, namely: The rule of
apportionment as to direct taxes, and the rule of
uniformity as to duties, imposts and excises.--� It is to
be observed, however, as long ago pointed out in
Veazie  Bank  v.  Fenno,  8   Wall 533, 541, that the
requirement of apportionment as to one of the great
classes and of uniformity as to the other class were
not so much a limitation upon the complete and all
embracing authority to tax,
but  in  their  essence 
were  simply  regulations  concerning  the  mode 
in which the plenary power was to be exerted. 
[Emphasis added.] 
Brushaber,  240 U.S. at 13. 
Recognizing  that  the  two  requirements  were  but  regulations 
prescribed  in  the  Constitution,  nothing  prevented  Congress  from 
amending the Constitution to change one or both of the regulations. 
In fact, this is exactly what the 
Pollock  Court specifically suggested 
as the proper course for Congress to take if it did not like the result 
of the 
Pollock  decision:
In these cases our province is to determine whether
this income tax on the revenue from property does or
does not belong to the class of direct taxes. If it does,
it is, being unapportioned, in violation of the
Constitution, and we must so declare.
Differences have often occurred in this court--"
differences exist now--"but there has never been a time
in its history when there has been a difference of
opinion as to its duty to announce its deliberate
pertaining to the case in hand.
If it be true that the Constitution should have
been so framed that a tax of this kind
[a direct 
income tax] 
could be laid  [without apportionment], 
the  instrument  defines  the  way  for  its 
 [Emphasis added.] 
Pollock,  158 U.S. at 634-635. 
At pages 14 and 15 of its opinion, the 
Brushaber  Court discussed the 
case  of  
Hylton   v.   United  States,  2   U.S.  171  (1796),  wherein  the 
Supreme Court found that the carriage tax was valid because it was 
an excise tax. The two 
Pollock  decisions discussed this case in great 
detail.  Some  interesting  and  extremely  important  points  are 
It  will  be  perceived  that  each  of  the  justices,  while 
suggesting doubt whether anything but a capitation or 
a  land tax was  a direct tax within the  meaning  of  the 
constitution, distinctly avoided expressing an opinion 
upon  that  question  or  laying  down  a  comprehensive 
definition, but confined his opinion to the case before 
the court. 
The  general  line  of  observation  was  obviously 
influenced  by  Mr.  Hamilton’s  brief  for  the 
government,  in  which  he  said:  “The  following  are 
presumed  to  be  the  only  direct  taxes:  Capitation  or 
poll  taxes,  taxes  on  lands  and  buildings,  general 
assessments,  whether  on  the  whole  property  of 
individuals, or on their whole real or personal estate. 
All  else  must,  of  necessity,  be  considered  as  indirect 
taxes.--� 7 Hamilton’s Works (Lodge’s Ed.) 332. 
Mr.  Hamilton  also  argued:  “If  the  meaning  of  the 
word “excise--� is to be sought in a British statute, it will 
be  found  to  include  the  duty  on  carriages,  which  is 
there  considered  as  an  “excise--�.  *  *  *  An  argument 
results  from  this,  though  not  perhaps  a  conclusive 
one,  yet,  where  so  important  a  distinction  in  the 
constitution  is  to  be  realized,  it  is  fair  to  seek  the 
meaning  of  terms  in  the  statutory  language  of  that 
country  from  which  our  jurisprudence  is  derived.--�  7 
Hamilton’s Works (Lodge’s Ed.) 333. 
If  the  question  had  related  to  an  income  tax,  the 
reference  would  have  been  fatal,  as  such  taxes  have 
been  always  classed  by  the  law  of  Great  Britain  as 
direct taxes. 
Pollock,  157 U.S. at 571-572.
After discussing the direct tax acts of Congress (Act of July 9, 1798;
Act of July 14, 1798; Act of July 22, 1813; Act of August 2, 1813; Act
of January 9, 1815) attributable to the War of 1812, and the direct
tax acts of Congress (Act of August 6, 1861; Act of July 1, 1862; Act
of March 3, 1863; Act of June 30, 1864; Act of March 3, 1865; Act of
March 10, 1866; Act of July 13, 1866, Act of March 2, 1867; Act of
July 14, 1870) attributable to the Civil War, the Court said:
The differences between the latter acts and that of
August 15, 1894, call for no remark of this connection.
These acts grew out of the war of the Rebellion, and
were, to use the language of Mr. Justice Miller, “part
of the system of taxing incomes, earnings, and profits
adopted during the late war, and abandoned as soon
after that war was ended as it could be done safely.--�
Railroad Co. v. Collector,  100 U.S. 595, 598. 
Pollock,  157 U.S. at 573. 
The Court then went on to say: 
From  the  foregoing  it  is  apparent  (1)  that  the 
distinction  between  the  direct  and  indirect  taxation 
was well understood by the framers of the constitution 
and  those  who  adopted  it;  (2)  that,  under  the  state 
systems of taxation, all taxes on real estate or personal 
property or the rents or income thereof were regarded 
as  direct  taxes;  (3)  that  the  rules  of  apportionment 
and  of  uniformity  were  adopted  in  view  of  that 
distinction  and  those  systems;  (4)  that  whether  the 
tax  on  carriages  was  direct  or  indirect  was  disputed, 
but the tax was sustained as a tax on the use and as an 
excise;  (5)  that  the  original  expectation  was  that  the 
power  of  direct  taxation  would  be  exercised  only  in 
extraordinary  exigencies;  and  down  to  August  15, 
1894,  this  expectation  has  been  realized.  The  act  of 
that date was passed in a time of profound peace, and 
if  we  assume  that  no  special  exigency  called  for 
unusual  legislation,  and  that  resort  to  this  mode  of 
taxation is to become an ordinary and usual means of 
supply,  that  fact  furnishes  an  additional  reason  for 
circumspection and care in disposing of the case. 
Pollock,  157 U.S. at 573-574. 
On rehearing, the 
Pollock  Court had this to say regarding  Hylton:
In this connection it may be useful, though at the risk
of repetition, to refer to the views of Hamilton and
Madison as thrown into relief in the pages of the
Federalist, and in respect of the enactment of the
carriage tax act, and again to briefly consider the
Hylton   case ,   3 Dall. 171, so much dwelt on in
The Act of June 5, 1794, c. 45, 1 Stat. 373, laying
duties upon carriages for the conveyance of persons,
was enacted in a time of threatened war.
The bill passed the House on the twenty-ninth of May,
apparently after a very short debate. Mr. Madison and
Mr. Ames are the only speakers on that day reported
in the Annals. “Mr. Madison objected to this tax on
carriages as an unconstitutional tax; and, as an
unconstitutional measure, he would vote against it.--�
Mr. Ames said: “It was not to be wondered at if he,
coming from so different a part of the country, should
have a different idea of this tax from the gentleman
who spoke last. In Massachusetts, this tax had been
long known; and there it was called an excise. It was
difficult to define whether a tax is direct or not. He
had satisfied himself that this was not so.--� Annals, 3d 
Cong. 730. 
On the first of June, 1794, Mr. Madison wrote to Mr. 
Jefferson: “The carriage tax,  which only struck at  the 
Representatives.--�  3  Madison’s  Writings,  18.  The  bill 
then  went  to  the  Senate,  where,  on  the  third  day  of 
June,  it  “was  considered  and  adopted,--�  Annals,  3d 
Cong.  119,  and  on  the  following  day  it  received  the 
signature of President Washington... 
It  appears  then  that  Mr.  Madison  regarded  the 
carriage  tax  bill  as  unconstitutional,  and  accordingly 
gave  his  vote  against  it,  although  it  was  to  a  large 
extent, if not altogether, a war measure. 
Where  did  Mr.  Hamilton  stand?  At  that  time  he  was 
Secretary  of  the  Treasury,  and  it  may  therefore  be 
assumed,  without  proof,  that  he  favored  the 
legislation.  But  upon  what  ground?  He  must,  of 
course, have come to the conclusion that it was not a 
direct  tax.  Did  he  agree  with  Fisher  Ames,  his 
personal  and  political  friend,  that  the  tax  was  an 
excise? The evidence is overwhelming that he did. 
In  the  thirtieth  number  of  the  Federalist,  after 
depicting  the  helpless  and  hopeless  condition  of  the 
country  growing  out  of  the  inability  of  the 
confederation  to  obtain  from  the  States  the  moneys 
assigned  to  its  expenses,  he  says:  “The  more 
intelligent  adversaries  of  the  new  Constitution  admit 
the  force  of  this  reasoning;  but  they  qualify  their 
admission,  by  a  distinction  between  what  they  call 
internal   and   external   taxation.  The  former  they 
would  reserve  to  the  state  governments;  the  latter, 
which they explain into commercial imposts, or rather 
duties  on  imported  articles,  they  declare  themselves 
willing to concede to the Federal Head.--� In the thirty-
sixth  number,  while  still  adopting  the  division  of  his 
opponents,  he  says:  “The  taxes  intended  to  be 
comprised under the general denomination of internal 
taxes, may be subdivided into those of the 
direct  and
those of the
indirect   kind. ... As to the latter, by 
which  must  be  understood  duties  and  excises 
on  articles  of  consumption,  
one  is  at  a  loss  to 
conceive,  what  can  be  the  nature  of  the  difficulties 
apprehended.--�  Thus  we  find  Mr.  Hamilton,  while 
writing  to  induce  the  adoption  of  the  Constitution, 
first, dividing the power of taxation into 
external  and 
internal,   putting  into  the  former  the  power  of 
imposing  duties  on  imported  articles  and  into  the 
latter all remaining powers; and, 
second  dividing the
latter into
direct   and   indirect,   putting  into  the 
latter, duties and excises on articles of consumption. “ 
It  seems  to  us  to  inevitably  follow  that  in  Mr. 
Hamilton’s  judgment  at  that  time  all  internal  taxes, 
except duties  and  excises  on  articles  of  consumption, 
fell into the category of direct taxes. 
Did he, in supporting the carriage tax bill, change his 
views in this respect? His argument in the 
Hylton  case  
in support of the law enables us to answer this
question. It was not reported by Dallas, but was
published in 1851 by his son in the edition of all
Hamilton’s writings except the Federalist. After saying
that we shall seek in vain for any legal meaning of the
respective terms “direct and indirect taxes,--� and after
forcibly stating the impossibility of collecting the tax if
it is to be considered a direct tax, he says, doubtingly:
“The following are presumed to be the only direct
taxes. Capitation or poll taxes. Taxes on lands and
buildings. General assessments, whether on the whole
property  of  individuals,  or  on  their  whole  real  or 
personal  estate;  all  else  must  of  necessity  be 
considered as indirect taxes.--� 
“Duties, imposts and 
appear  to  be  contradistinguished  from 
taxes.--�   “If the meaning of the word excise   is to be
sought in the British statutes, it will be found to
include the duty on carriages, which is there
considered as an
excise.--�   “Where  so  important  a 
distinction  in  the  Constitution  is  to  be  realized,  it  is 
fair  to  seek  the  meaning  of  terms  in  the  statutory 
jurisprudence  is  derived.--�  7  Hamilton’s  Works,  848. 
Mr.  Hamilton  therefore  clearly  supported  the  law 
which Mr. Madison opposed, for the same reason that 
his  friend  Fisher  Ames  did,  because  it  was  an  excise, 
and  as  such  was  specifically  comprehended  by  the 
Constitution.  Any  loose  expressions  in  definition  of 
the  word  “direct,--�  so  far  as  conflicting  with  his  well-
considered  views  in  the  Federalist,  must  be  regarded 
as  the  liberty  which  the  advocate  usually  thinks 
himself  entitled  to  take  with  his  subject.31  He  gives, 
however,  it  appears  to  us,  a  definition  which  covers 
the question before us. A tax upon one’s whole income 
is  a  tax  upon  the  annual  receipts  from  his  whole 
property, and as such falls within the same class as a 
tax  upon  that  property,  and  is  a  direct  tax,  in  the 
meaning of the Constitution. And Mr. Hamilton in his 
report  on  the  public  credit,  in  referring  to  contracts 
with  citizens  of  a  foreign  country,  said:  “This 
principle,  which  seems  critically  correct,  would 
exempt  as  well  the  income  as  the  capital  of  the 
property.  It  protects  the  use,  as  effectually  as  the 
thing. What, in fact, is property, but a fiction, without 
the  beneficial  use  of  it?  In  many  cases,  indeed,  the 
income  or  annuity   is  the  property  itself.--�  
Hamilton’s Works,  34.  
We think there is nothing in the
Hylton   case in 
conflict with the foregoing. The case is badly reported. 
[Emphasis in original.] 
Pollock,  158 U.S. at 623-626. 
Commencing  on  page  15,  the  
Brushaber   Court discussed the tax
acts passed from 1861 and continuing through the Civil War period,
and erroneously stated that these were excise taxes. As quoted
above, the
Pollock   Court  considered  these  taxes  in  detail,  found 
there  was  no  substantial  difference  between  these  taxes  and  the 
income  tax  of  1894,  held  that  because  an  income  tax  was  now 
attempted to be levied in times of profound peace the issue had to 
be  examined  carefully,  and  held  the  tax  to  be  an  unapportioned 
direct tax and therefore unconstitutional. 
Brushaber   Court  then  stated  that  the  act  of  1894  was 
assumed32  to  come  within  the  classification  of  excises,  duties  and 
imposts which were subject to the rule of uniformity but not to the 
rule  of  apportionment;  that  the  constitutional  validity  of  the  law 
was challenged as levying a tax that was direct in the constitutional 
sense, and the 
Pollock  Court was obliged to determine whether the 
tax was direct or indirect. The 
Brushaber  Court stated:
Coming to consider the validity of the tax from this
point of view,
while not questioning at all that in 
common  understanding  IT  WAS  DIRECT 
merely  on  income  and  only  indirect  on 
it was held that considering the substance 
of  things,  it  was  direct  on  property  in  the 
constitutional  sense  since  to  burden  an  income  by  a 
tax  was  from  the  point  of  substance  to  burden  the 
property from which the income was derived and thus 
accomplished the very thing which the provision as to 
apportionment of direct taxes was adopted to prevent. 
[Emphasis added.] 
Brushaber,  240 U.S. at 16. 
This quote shows that the 
Brushaber  Court completely ignored the 
reasoning behind 
Pollock. Pollock  held that there was no distinction
between a tax on property and a tax on the income yielded
therefrom; the tax on property was a direct tax, and the tax on
income was a direct tax. The question of “source--� was raised by the
parties to the
Pollock   case in their legal briefs, and disposed of by
the Court as follows:
But if, as contended, the interest when received has
become merely money in the recipient’s pocket, and
taxable as such without reference to the source from
which it came, the question is immaterial whether it
could have been originally taxed at all or not. This was
admitted by the Attorney General with characteristic
candor; and it follows that, if the revenue derived
from municipal bonds cannot be taxed because the
source cannot be, the same rule applies to revenue
from any other source not subject to the tax; and the
lack of power to levy any but an apportioned tax on
real and personal property equally exists as to the
revenue therefrom.
Admitting  that  this  act  taxes  the  income  of 
property  irrespective  of  its  source  
still we
cannot doubt that such a tax is necessarily a direct tax
in the meaning of the Constitution.
In England, we do not understand that an income tax
has ever been regarded as other than a direct tax. In
Dowell’s History of Taxation and Taxes in England,
admitted to be the leading authority, the evolution of
taxation in that country is given, and an income tax is
invariably classified as a direct tax. 3 Dowell, (1884),
103, 126. The author refers to the grant of a fifteenth
and tenth and a graduated income tax in 1435, and to
many  subsequent  comparatively  ancient  statutes  as 
income tax laws. 1 Dowell, 121. It is objected that the 
taxes  imposed  by  these  acts  were  not,  scientifically 
speaking, income taxes at all, and that although there 
was a partial income tax in 1758, there was no general 
income  tax  until  Pitt’s  of  1799.  Nevertheless,  the 
income  taxes  levied  by  these  modern  acts,  Pitt’s, 
Addington’s,  Petty’s,  Peel’s  and  by  existing  laws,  are 
all classified as direct taxes; and, so far as the income 
tax  we  are  considering  is  concerned,  that  view  is 
concurred in by the cyclopaedists, the lexicographers, 
and  the  political  economists,  and  generally  by  the 
classification  of  European  governments  wherever  an 
income tax obtains. [Emphasis added.] 
Pollock,  158 U.S. at 630-631.
In addition, Justice White accidentally admitted the falsity of his
position that an income tax is an excise when he said that the
income tax of 1894 was indirect on property, but “direct on
income,--� thereby admitting an income tax is a direct tax.
Brushaber  Court continued:
As this conclusion but enforced a regulation as to the
circumstances, it did not in any way dispute the all
embracing taxing authority possessed by Congress,
including necessarily therein the power to impose
income taxes if only they conformed to the
constitutional regulations which were applicable to
Brushaber,  240 U.S. at 16. 
Here  the  
Brushaber   Court  recognized  that  income  taxes  must  be 
apportioned, a result that requires the conclusion that income taxes 
are direct taxes. 
Brushaber   Court  then  made  another  erroneous  finding  about 
what the 
Pollock  Court held: 
Moreover  in  addition  the  conclusion  reached  in  the 
Pollock  case did not in any degree involve holding that
income taxes generically and necessarily came within
the class of direct taxes on property but on the
contrary recognized the fact that taxation on income
was in its nature an excise entitled to be enforced as
such unless and until it was concluded that to enforce
it would amount to accomplishing the result which the
requirement as to apportionment of direct taxation
was adopted to prevent, in which case the duty would
arise to disregard form and consider substance alone
and hence subject the tax to the regulation as to
apportionment which otherwise as an excise would
not apply to it. Nothing could serve to make this
clearer than to recall that in the
Pollock  case in so far 
as the law taxed income from other classes of property 
than  real  estate  and  invested  personal  property,  that 
is, income from “professions, trades, employments, or 
vocations--� (158 U.S. 637), its validity was recognized; 
indeed  it  was  expressly  declared  that  no  dispute  was 
made  upon  that  subject  and  attention  was  called  to 
the fact that taxes on such income had been sustained 
as excise taxes in the past. 
Id.,  p. 635 
Brushaber,  240 U.S., at 16-17. 
This  statement  by  the  
Brushaber   Court  attributed  to  the   Pollock 
Court  is  false.  What  the   Pollock   Court  actually  stated  at  page  635 
We have considered the act only in respect of the tax 
on income derived from real estate, and from invested 
personal  property,  and  have  not  commented  on  so 
much of it as bears on gains or profits from business, 
privileges, or employments, in view of the instances in 
employments has assumed the guise33 of an excise tax 
and been sustained as such. [Emphasis added.] 
Pollock,  158 U.S. at 635. 
Pollock  Court was acutely aware that the facts before it did not
allow the Court to decide the issue of whether the statute, as it
applied to the taxation of income from professions, trades,
employments or vocations was constitutional,34 and avoided
making a finding. But the Court had to consider whether it should
declare the entire law unconstitutional or leave those sections not in
issue in the case to stand:
[I]t is evident that the income from realty formed a
vital part of the scheme for taxation embodied
therein. If that be stricken out, and also the income
from all invested personal property, bonds, stocks,
investments of all kinds, it is obvious that by far the
largest part of the anticipated revenue would be
eliminated, and this would leave the burden of the tax
to be borne by professions, trades, employments, or
vocations; and in that way what was intended as a tax
on capital would remain in substance as a tax on
occupations and labors. We cannot believe that such
was the intention of Congress. We do not mean to say
that an act laying by apportionment a direct tax on all
real estate and personal property, or the income
thereof, might not also lay excise taxes on business,
privileges, employments, and vocations.
But this is
not such an act;
and  the  scheme  must  be 
considered as a whole. [Emphasis added.] 
Pollock,  158 U.S. at 636-637.
This quote raises an interesting point. No more tax would be
collected from those engaged in business, vocations, occupations or
employments than if the other provisions were not struck down in
that the amount of revenue that could be collected from business,
privileges, employments and vocations was specifically set by the
statute. The government would only collect less revenue. Thus the
Pollock   Court must have had an ulterior motive in making its
statement, and I submit it did not want to see occupations and labor
burdened with a tax disguised as an excise when it knew full well
that such taxes were direct, and would be levied without
apportionment. The
Pollock  Court was precluded from coming right
out and saying the statute imposing such taxes was unconstitutional
because the case did not involve that issue, so it said instead that
such taxes had been sustained in the past having
assumed  the 
of an excise tax, and ruled the entire law unconstitutional,
thus prohibiting the levying and collection of the tax on business,
privileges, employments and vocations due to its inherent
unconstitutionality. I submit the language “assumed the guise--� of
an excise tax does not support the conclusion attributable to it by
Brushaber   that a tax on the income derived from business, trades
and professions is to be legally classified as an excise tax.
Brushaber   Court, after quoting the Sixteenth Amendment,
It is clear on the face of this text that it does not
purport to confer power to levy income taxes in a
generic sense--"an authority already possessed and
never questioned--"or to limit and distinguish between
one kind of income taxes and another, but that the
whole purpose of the Amendment was
to relieve all 
income  taxes  
when  imposed  from  apportionment 
from a consideration of the source whence the income 
was derived. [Emphasis added.] 
Brushaber,  240 U.S. at 17-18. 
Brushaber   Court  stated  that  the  Sixteenth  Amendment 
required all income to be treated alike without any distinction to be 
made between one kind of income tax and another. The 
Court recognized income taxes as direct taxes, but held that if the
source is not considered, which it could no longer be because of the
Sixteenth Amendment, then the income tax would once again be
considered an indirect tax which would not have to be apportioned.
The Court continued:
Indeed, in the light of the history which we have given
and of the decision in the
Pollock  case and the ground
upon which the ruling in that case was based, there is
no escape from the conclusion that the Amendment
was drawn for the purpose of doing away for the
future with the principle upon which the
Pollock  case  
was decided, that is, of determining whether a tax on
income was direct not by a consideration of a burden
placed on the taxed income upon which it directly
operated, but by taking into view of the burden which
resulted on the property from which the income was
derived, since in express terms the Amendment
provides that income taxes, from whatever source the
income may be derived, shall not be subject to the
regulation of apportionment.
Brushaber,  240 U.S. at 18.
This sentence needs careful analysis. It states the purpose of the
Amendment was to do away with a principle allegedly laid down in
Pollock  decision by Chief Justice Fuller in determining if the tax
on income was a direct tax, thereby precluding the resort to that
principle in the future. The next part of the sentence identifies the
principle in two parts:
1. NOT CONSIDERING the  burden  placed  on  the 
taxed income, but; 
2. CONSIDERING the burden which resulted on
the property from which the income was derived.
In other words, the purpose of the amendment was to direct the
Supreme and lower courts to only consider the burden on the
income itself in determining if a subsequent income tax act imposed
a direct or an indirect tax. Having determined this to be the purpose
of the Sixteenth Amendment, the Court reached its ultimate
conclusion that the income tax is not a direct tax which is relieved
from the requirement of apportionment:
From this in substance it indisputably arises ... that
the contention that the Amendment treats a tax on
income as a direct tax although it is relieved from
apportionment and is necessarily therefore not
subject to the rule of uniformity as such rule only
applies to taxes which are not direct, thus destroying
the two great classifications which have been
recognized and enforced from the beginning, is also
wholly without foundation since the command of the
Amendment that all income taxes shall not be subject
to apportionment by a consideration of the sources
from which the taxed income may be derived, forbids
the application to such taxes on the rule applied in the
Pollock  case by which alone such taxes were removed 
from  the  great  class  of  excises,  duties  and  imposts 
subject  to  the  rule  of  uniformity  and  were  placed 
under the other or direct class. 
Brushaber,  240 U.S. at 18-19. 
Thus the 
Brushaber  Court thought that in holding income taxes to 
be direct taxes, the 
Pollock  Court used the principle of “considering 
the source from which the taxed income was derived--� as the key in 
its analysis, and that by removing this key, the income tax would be 
classified as an indirect tax. However, in using the language pattern 
“not by... but by...,--� it suggested that the determination be made by 
considering the burden imposed on the income, and that is exactly 
the  principle  upon  which  the  
Pollock   case  was  determined.  The 
Pollock   Court  did  not  resort  to  a  consideration  of  the  source  to 
reach its conclusion, but found that from the earliest enactment of 
income  taxes  in  England  and  other  European  Countries,  and  in 
enactments  imposing  state  income  taxes  prior  to  the  adoption  of 
the Constitution, such taxes were always deemed to be direct taxes. 
Pollock   also relied upon the definition of direct taxes given by
Hamilton in the
Federalist  Papers,   the fact that incomes are
personal property of general distribution, the candid admission of
the Attorney General, and the views of cyclopaedists,
lexicographers, and political economists. In stating that it was
unable to conclude that the enforced subtraction from the yield of
all the owner’s real or personal property, in the manner prescribed,
was not any different than a tax on real or personal property, the
Pollock   Court  was  merely  stating  that  any  tax  on  real  or  personal 
property,  including  income,  was  considered  by  the  framers  of  the 
Constitution  to  be  a  direct  tax  and  subject  to  the  rule  of 
Brushaber  Court then reiterated the reason for its opinion: 
We say this because it is to be observed that although 
from  the  date  of  the  
Hylton   case because  of 
statements  made  in  the  opinions  in  that  case  it  had 
come  to  be  accepted  that  direct  taxes  in  the 
constitutional  sense  were  confined  to  taxes  levied 
directly  on  real  estate  because  of  its  ownership,  the 
challenging  the  ruling  in  the  
Pollock   case that  the 
word  direct  had  a  broader  significance  since  it 
embraced  also  taxes  levied  directly  on  personal 
property  because  of  its  ownership,  and  therefore  the 
Amendment  at  least  impliedly  makes  such  wider 

significance a part of the Constitution--"a condition
which clearly demonstrates that the purpose was not
to change the existing interpretation except to the
extent necessary to accomplish the result intended,
that is, the prevention of the resort to the sources
from which a taxed income was derived in order to
cause a direct tax on the income to be a direct tax on
the source itself and thereby to take an income tax out
of the class of excises, duties and imposts and place it
in the class of direct taxes.
Brushaber,  240 U.S. at 19. 
Brushaber   Court  first  stated  that  the  Sixteenth  Amendment 
impliedly  recognized  the  broader  classification  of  direct  taxes 
propounded  in  
Pollock,   which  classification  encompassed   all 
personal  and  real  property.  
The   Brushaber   Court next stated
the purpose of the Sixteenth Amendment was limited to changing
existing interpretations [a clear reference to
Pollock]   to  the  extent 
necessary to accomplish the result necessary, and identified what it 
believed the intended result was to be: 
[T]he  prevention  of  the  resort  to  the  sources  from 
which a taxed income was derived in order to cause 

direct tax  on  the  income  
to be a direct tax on the 
source itself and thereby to take an income tax out of 
the class of excises, duties and imposts and place it in 
the class of direct taxes. [Emphasis added.] 
Brushaber, id. 
After stating the income tax is a direct tax, how could Justice White
contend it belonged in the class of excises, duties and imposts? Only
by claiming the purpose of the Sixteenth Amendment was to change
an admittedly direct tax into an indirect tax. He tells us this can be
done because the only way it became a direct tax in the first place
was by the
Pollock   Court’s  consideration  of  the  source.  However, 
Pollock  Court never once said that an income tax was anything 
but a direct tax, clearly showing that the 
Pollock  Court did not take
the income tax out of the class of indirect taxes as claimed by the
Brushaber   Court.  According  to   Pollock,   income taxes had always
been considered to be direct taxes in their own right because they
operated directly on the ownership of personal property [including
income], a result reached when considering the burden on the
income itself. Since the
Pollock  Court used the correct principle, the 
position expressed by the 
Brushaber  Court as to the purpose of the 
Amendment is clearly incorrect. 
The  absurd  result  of  the  
Brushaber   Court’s  reasoning  as  to  the 
application  of  the  alleged  
Pollock   principle  is  shown  as  follows:  1) 
Brushaber  Court stated the tax is direct on income but indirect
on the source, 2) by considering the burden on the income, the
burden on the source is changed from indirect to direct, 3) this
process somehow “causes--� the direct tax on income to become an
indirect tax.
(Brushaber,  240 U.S. at 19.) 
Now compare what the Supreme Court in 
Eisner v. Macomber,  252
U.S. 189 (1920), stated was the intended result of the Sixteenth
The Sixteenth Amendment must be construed in
connection with the taxing clauses of the original
Constitution and the effect attributed to them before
the Amendment was adopted. In
Pollock  v.  Farmers’ 
Loan  and  Trust  Co.,  
158 U.S. 601, under the Act of
August 27, 1894, c. 349, Section 27, 28 Stat. 509, 553,
it was held that taxes upon rents and profits of real
property were in effect direct taxes upon the property
from which such income arose,35 imposed by reason
of ownership; and that Congress could not impose
such taxes without apportioning them among the
States according to population, as required by Art. I,
section 2, cl. 3, and section 9, cl. 4, of the original
Afterwards,  and  evidently  in  recognition  of  the 
limitation  upon  the  taxing  power  of  Congress  thus 
determined,  the  Sixteenth  Amendment  was  adopted, 
in  words  lucidly  expressing  the  object  to  be  
accomplished:  “The  Congress  shall  have 
power  to  lay  and  collect  taxes  on  incomes, 

apportionment  among  the  several  States,  and 

enumeration.--� As repeatedly held, this did not 
extend  the  taxing  power  to  new  subjects,  but 
merely removed the necessity which otherwise 
might  exist  for  an  apportionment  among  the 
States  of  taxes  laid  on  income.
Brushaber,  240 U.S. at 17-19, and other cases.]
A proper regard for its genesis, as well as its very clear
language, requires also that this Amendment shall not
be extended by loose construction, so as to repeal or
modify, except as applied to income, those provisions
of the Constitution that require an apportionment
according to population for direct taxes upon
property, real and personal. This limitation still has
an appropriate and important function, and is not to
be over ridden by Congress or disregarded by the
In order, therefore, that the clauses cited from Article
I of the Constitution may have proper force and effect,
save only as modified by the Amendment, and that the
latter also may have proper effect, it becomes essential
to distinguish between what is and what is not
“income--� as the term is there used; and to apply the
distinction, as cases arise, according to truth and
substance, without regard to form. Congress cannot
by any definition it may adopt conclude the matter,
since it cannot by legislation alter the Constitution,
from which alone it derives its power to legislate, and 
within  whose  limitations  alone  that  power  can  be 
lawfully exercised. [Emphasis added.] 
Eisner,  252 U.S. at 205-206.
It is legally significant to note that in stating the purpose of the
Sixteenth Amendment the
Eisner   Court  found  no  necessity  to  add 
additional  words,  but  the  
Brushaber   Court  did,  in  clear 
contravention to established legal principles: 
The words of the Constitution are to be taken in their 
obvious sense, and to have a reasonable construction. 
Gibbons v. Ogden,  Mr. Chief Justice Marshall, with 
his  usual  felicity,  said:  “As  men,  whose  intentions 
require  no  concealment,  generally  employ  the  words 
which  most  directly  and  aptly  express  the  ideas  they 
intend to convey, the enlightened patriots who framed 
our Constitution, and the people who adopted it must 
be  understood  to  have  employed  words  in  their 
natural  sense,  and  to  have  intended  what  they  have 
said.--� 9 Wheat. 1, 188. 
Pollock,  158 U.S. at 619. 
I submit that the 
Brushaber  Court had to use extra words in stating 
the  purpose  of  the  Sixteenth  Amendment  because  
misstates  the  intent  of  Congress  in  proposing  the  Sixteenth 
Amendment.  To  support  the  
Brushaber   decision,  it  would  have  to 
be  shown  that  Congress  wanted  to  overturn  the  
Pollock   decision
that income taxes are direct taxes. This follows because it is clear
that the
Brushaber   Court believed the Sixteenth Amendment
prevented income taxes from being classed as direct taxes by
reference to the source, thereby placing them in the only other
possible class, indirect taxes. Yet the
Brushaber   Court  proves  the 
invalidity of its decision when it stated in its opinion that Congress 
obviously did not challenge or repudiate the holding of the 

Court that a tax on real and personal property, imposed by reason
of its ownership, was a direct tax in the constitutional sense. The
Sixteenth Amendment was not proposed in the form: Income taxes
are indirect taxes and do not require apportionment! It was
proposed that Congress shall have the power to lay and collect taxes
on incomes without apportionment. If income taxes were not direct
taxes, why did the Sixteenth Amendment remove the need to
apportion them, when even
Brushaber   recognized that indirect
taxes do not have to be apportioned? I submit the
decision  fails  to  recognize  that   Pollock   did consider the burden
imposed on the income itself, and reached the conclusion that
income taxes were direct taxes in the constitutional sense.
No other case in the history of income taxation went into such
depth on the issue of what is and is not a direct tax as did
This  issue  was  extensively  researched  and  briefed  by  the  parties 
involved in the case and by the Supreme Court. Justice White, being 
unable  to  refute  this  fact  of  law  neither  overruled  the  
holding nor disputed it; instead Justice White held that the purpose 
of the Sixteenth Amendment was to prevent the use of the 
principle.--� It is my opinion that Justice White’s indirect attempt to 
Pollock  is wholly unpersuasive; he clearly failed to state a
historical, factual or legal basis for his conclusion that a tax on
income is an indirect, excise tax.
It is clear that Mr. Brushaber and his attorneys correctly stated the
proposition to the Supreme Court that the Sixteenth Amendment
relieved the income tax, which was a direct tax, from the
requirement of apportionment, and that the
Brushaber  Court failed
miserably in attempting to refute Mr. Brushaber’s legal position.
A tax imposed on all of a person’s annual gross receipts is a direct
tax on personal property that must be apportioned. A tax imposed
on the “income--� derived from those gross receipts is also a direct
tax on property, but as a result of the Sixteenth Amendment,
Congress no longer has to enact legislation calling for the
apportionment of a tax on that income. As stated in
Eisner,   the 
issue does indeed become, “What is and what is not income?--� That 
question is answered in the next chapter. 
It appears that Mr. Hamilton was a forerunner of today’s typical 
politician, saying one thing to be elected and doing the complete 
opposite once in office. 
Who  made  this  assumption  is  not  stated  in  the  
The  word  “guise--�  is  defined  in  Webster’s  Third  New 
International Dictionary as: “A superficial seeming: an artful or 
simulated  appearance  (as  of  propriety  or  worth)<that  such 
misconduct should take the guise of religious ritual is shameful> 
<tricked the widow in the guise of a friend of her late husband>“ 
Pollock,  157 U.S. at 687, quoting from the case of  Cohens v.
6  Wheat.  264,  399:  “It  is  a  maxim  not  to  be 
disregarded that general expressions, in every opinion, are to be 
taken in connection with the case in which those expressions are 
used.  If  they  go  beyond  the  case,  they  may  be  respected,  but 
ought not to control the judgment in a subsequent suit when the 
very point is presented for decision. The reason of the maxim is 
obvious.  The  question  actually  before  the  court  is  investigated 
with  care,  and  considered  in  its  full  extent.  Other  principles 
which  may  serve  to illustrate  it  are  considered in  their  relation 
to the case decided, but their possible bearing on all other cases 
is seldom completely investigated.--� 
This is not what 
Pollock  held, but unlike  Brushaber  which held
the income tax was an excise tax,
Eisner   correctly  found  the 
purpose  of  the  Sixteenth  Amendment  was  to  remove  the 
requirement  for  apportionment  from  the  income  tax,  which 
Pollock  did hold was direct in the constitutional sense. 
Any analysis of the federal tax laws requires a basic understanding 
of the arrangement of the Internal Revenue Code. Although not yet 
officially  codified  within  the  United  States  Code  due  to 
“inconsistent,  redundant  and  obsolete  provisions,--�36  the  Internal 
Revenue Code of 1986, as amended, is nonetheless often referred to 
as  “Title 26--�  of the United  States Code.  The “title--� is broken  down 
into  subtitles,  which  are  further  broken  down  into  chapters, 
subchapters,  parts,  subparts  and  sections.  Sections  can  be  further 
subparagraphs  and  sub-sub-subparagraphs.  The  primary  Subtitles 
Subtitle  A 

Income Taxes 
Subtitle  B 

Estate and Gift Taxes 
Subtitle  C 

Employment Taxes and Collection of 
Income Tax at Source 
Subtitle D 

Miscellaneous Excise Taxes 
Subtitle  E 

Alcohol,  Tobacco  and  Certain  Other 
Excise Taxes 
Subtitle  F 

Procedure and Administration 
Subtitle G 

The Joint Committee on Taxation 
Subtitle H 

Financing  of  Presidential  Election 
The Internal Revenue Code (1988 edition) defines the term
“taxpayer--� as used in Title 26 as follows:
The term “taxpayer--� means any person subject to any
internal revenue tax.
26 U.S.C. Section 7701(a)(14). 
The term “internal revenue tax--� is not defined in the Internal
Revenue Code, but I submit the Internal Revenue Code contains the
only federal “internal revenue taxes.--� Thus if one is subject to any
particular tax imposed in the Internal Revenue Code, one is a
taxpayer. A person may be a taxpayer with respect to more than one
tax at a time, but may not therefore necessarily be a taxpayer with
respect to a different tax. Whether or not one is a taxpayer is a
mixed question of law and fact.
In the case of
Long v. Rasmussen,  281 F. 236 (1922), the collector
of Internal Revenue assessed certain excise taxes against Mr. Wise,
and sought to collect the tax through seizure of certain property.
Mr. Long brought a suit against the collector to prevent the sale of
the property--"claiming ownership of it--"and to recover its
possession. The collector argued that the anti-injunction statute,
Section 3224 of the Internal Revenue Code, prevented Mr. Long
from suing to challenge the collection of the tax. In refusing to
dismiss the suit under the provisions of the anti-injunction statute,
the Court held that as to the taxes assessed against Mr. Wise, Mr.
Long was not the taxpayer of that tax, and therefore, Section 3224
did not apply to him:
The instant suit is not to restrain assessment or
collection of taxes of Wise, but is to enjoin trespass
upon property of plaintiff, and against whom no
assessment has been made, and of whom no collection
is sought. Note, too, the taxes are not assessed against
the property. This presents a widely different case
than wherein the person assessed, or whose property

is assessed, seeks to restrain assessment or collection
on the theory that he or it is exempt from taxation, or
that for any reason the tax is illegal.
The distinction between persons and things within the
scope of the revenue laws and those without them is
vital. See
DeLima v.   Bidwell,   182 U.S. 176, 179, 21
Sup.Ct. 743, 45 L.Ed 1041. To the former only does
section 3224 apply (see cases cited in
Violette  v. 
(D.C.) 272 Fed. 1016), and the well-
understood exigencies of government and its revenues
and their collection do not serve to extend it to the
latter. It is a shield for official action, not a sword for
private aggression.
Long v. Rasmussen , 281 F. at 238. 
First National Bank of Emlenton, Pa. v. United States,  161 F.Supp. 
844 (1958), also discusses this issue in 
dicta ,37 the suit having been
dismissed because the United States was named as a party as
opposed to the District Director. The purchaser of certain tools
obtained a loan from the First National Bank, and as security for
the loan gave the bank a chattel mortgage on the tools. The I.R.S.
issued a lien for non-payment of employment taxes under Subtitle
C of the Internal Revenue Code, and then seized the tools. The bank
brought suit claiming an ownership interest in the tools as a result
of its chattel mortgage. While the case was dismissed for lack of
jurisdiction, the Court nonetheless discussed whether the bank was
a nontaxpayer as to the tax assessed against the purchaser of the
tools, and found that it was.
Stuart v. Chinese Chamber of Commerce of Phoenix,  168 F.2d 709
(1948), is similar to the above cases. Mr. Thet was arrested for
narcotics violations and a search uncovered $32,000 in a safe. The
money was taken by the Narcotics Bureau and then it was seized by
the I.R.S. for payment of Thet’s tax liability. Suit was brought by the
Chinese Chamber of Commerce alleging the $32,000 was theirs,
and that Thet was just holding the money for them in his safe. The
Court found that the Chinese Chamber of Commerce was not a
taxpayer in the strict sense of the word;
i.e.,  they had no obligation
as to Thet’s taxes, which were the only taxes in question. The Court
ordered the money to be returned to the Chinese Chamber of
Commerce, and denied a motion by the I.R.S. for dismissal on the
grounds the Chinese Chamber of Commerce did not follow the steps
outlined in the Internal Revenue Code to recover their property.
The Court specifically found that Section 3772 was not applicable to
nontaxpayer third parties to the tax.
Economy Plumbing & Heating Co., Inc. v. U.S.  case, [470 F.2d 
585 (1972)], was limited to the issue of whether or not the plaintiffs 
were  entitled  to  interest  
(Economy, 470  F.2d  at  587),  and  the 
comments  about  nontaxpayers  are  
dicta.   As a nontaxpayer
Economy Plumbing & Heating would not receive interest on the
money illegally seized by the I.R.S., so it was their attempt to be
declared taxpayers. The Court stated:
We agree with the defendant that the plaintiffs are not
taxpayers in this case with respect to these funds
within the meaning of the revenue laws. Lieb was the
taxpayer and it is not a party to this action. While it is
true that there was a misapplication of plaintiffs’
funds to the payment of Lieb’s taxes, this wrongful act
did not result in plaintiffs becoming taxpayers to the
extent of misapplied funds. Neither was there any
over payment of plaintiffs’ taxes.
Economy,  470 F.2d at 588.
These cases lead to the conclusion that whether or not one is a
taxpayer is dependent upon the particular tax in question. The
Internal Revenue Service specifically recognizes that not everyone
must file a federal income tax return. On page 4 of the instruction
booklet for preparing the 1989 Form 1040, under the hearing “Who
Must File,--� the I.R.S. tells us: “Use Chart A below to see if you must 
file a return.--� 
Congress  has  enacted  two  laws,  the  Privacy  Act,  5  U.S.C.  Section 
552a(e)(3),  and  the  Paperwork  Reduction  Act,  44  U.S.C.  Section 
3504(c)(3)(C),  which  directs  the  government  to  advise  you  if  you 
are required to file a federal income tax return. 
The Privacy Act states that an agency [the Internal Revenue Service 
is such an agency]38 requesting information from a citizen must: 
(3)  inform  each  individual  whom  it  asks  to  supply 
information,  on  the  form  which  it  uses  to  collect  the 
information  or  on  a  separate  form  that  can  be 
retained by the individual--" 
the  authority  which  authorizes  the 
solicitation  of  the  information  and 
the principal purpose or purposes for 
which the information is intended to 
be used; 
the routine uses which may be made 
of  the  information,  as  published 
pursuant  to paragraph  (4)(D)  of this 
subsection; and 
the  effects  on  him,  if  any,  of  not 
providing  all  or  any  part  of  the 
requested information ... 
The Paperwork Reduction Act states that the Director of the Office 
of  Management  and  Budget  must  include  with  his  information 
[A]  statement  to  inform  the  person  receiving  the 
request why the information is being collected, how it 
is  to  be  used,  and  whether  responses  to  the  request 
are  voluntary,  required  to  obtain  a  benefit,  or 
mandatory ... 
The Privacy Act and Paperwork Reduction Act statements which the 
Internal Revenue Service currently uses with respect to the federal 
income tax state: 
Our  legal  right  to  ask  for  information  is  Internal 
Revenue Code Sections 6001, 6011, 6012(a) and their 
regulations.  They  say  that  you  must  file  a  return  or 
statement with us for any tax you are liable for. Your 
response is mandatory under these sections. 
Sections 6001 and 6011 are set forth for your information: 
Section 6001: 
Every person liable for any tax imposed by this title,
or for the collection thereof, shall keep such records,
render such statements, make such returns, and
comply with such rules and regulations as the
Secretary may from time to time prescribe. Whenever
in the judgment of the Secretary it is necessary, he
may require any person, by notice served upon such
person or by regulations, to make such returns, render
such statements, or keep such records as the Secretary
deems sufficient to show whether or not such person
is liable for tax under this title. The only records
which an employer shall be required to keep under
this section in connection with charged tips shall be
charge  receipts,  records  necessary  to  comply  with 
Section 6053(c) and copies of statements furnished by 
employees under Section 6053(a). 
Section 6011: 
(a) General Rule. When required by regulations
prescribed by the Secretary any person made liable for
any tax imposed by this title, or for the collection
thereof, shall make a return or statement according to
the forms and regulations prescribed by the Secretary.
Every person required to make a return or statement
shall include therein the information required by such
forms or regulations.
* * *
(f) Income, estate, and gift taxes. For requirement that
returns of income, estate, and gift taxes be made
whether or not there is tax liability, see subparts B
and C.
As to Sections 6001 and 6011 it is important at this point to make
the observation that in several places in the Internal Revenue Code
Congress was quite specific in identifying those made liable for a tax
and the fact that a return was required. For example, in Subtitle E
pertaining to alcohol, tobacco and other excise taxes are found
these provisions:
Section 5005: 
(a) The distiller or importer of distilled spirits shall be 
liable  for  the  taxes  imposed  thereon  by  section 
Section 5061: 
(a)  The  taxes  on  distilled  spirits,  wines,  and  beer 
shall be collected on the basis of a return.  
Section 5703: 
(a)(l)  The  manufacturer  or  importer  of  tobacco 
products  and  cigarette  papers  and  tubes  
shall be
for the taxes imposed therein by section 5701. 
(b)(l)  ...  Such  taxes  shall  be  paid  on  the  basis  of 
In Subtitle D, pertaining to miscellaneous excise taxes, we find 
Section 4374: 
The  tax  imposed  by  this  chapter  
shall be paid, on 
basis of a return, by any person who makes,
signs, issues, or sells any of the documents and
instruments subject to the tax, or for whose use or
benefit the same are made, signed, issued, or sold.
There is, however, no section in Subtitle A pertaining to
stating  that  one  is   liable   for  the  income  tax,39  that  one  is 
required   to  make  a  return  or  that  one  must  pay  the  income  tax, 
nor  are  there  any  cross  references  to  any  of  the  provisions  in 
Subtitle  F  where  Sections  6001  or  6011  are  found.  The  only 
exception  to  this  is  found  in  Section  1461  which  pertains  to  the 
withholding of taxes on nonresident aliens. Under the legal doctrine 
“expressio  unius  est  exclusio  alterius,--�40  it  appears  that  Congress 
could  have,  but  specifically  chose  not  to  create  an  automatic, 
statutory liability for Subtitle A Income Taxes. 
Liability for  income  taxes  is  established through  an  administrative 
action known as an assessment: 

The statute prescribes the rule of taxation. Some
machinery must be provided for applying the rule to
the facts in each taxpayer’s case, in order to ascertain
the amount due. The chosen instrumentality for the
purpose is an administrative agency whose action is
called an assessment. The assessment may be a
valuation of property subject to taxation which
valuation is to be multiplied by the statutory rate to
ascertain the amount of tax. Or it may include the
calculation and fix the amount of tax payable, and
assessments of federal estate and income taxes are of
this type.
Bull v. United States,  295 U.S. 247, 259 
The assessment procedure for taxes shown on returns is contained 
in Sections 6201, 6203 and 6303 of the Internal Revenue Code: 
Section 6201: 
(a)(l)  The  Secretary  is  authorized  and  required  to 
make  the  inquiries,  determinations,  and  assessments 
of  all  taxes  (including  interest,  additional  amounts, 
additions to the tax and assessable penalties) imposed 
by  this  title,  or  accruing  under  any  former  internal 
revenue law, which have not been duly paid by stamp 
at the  time and in the  manner provided by law. Such 
authority  shall  extend  to  and  include  the  following: 
The Secretary shall assess all taxes determined by the 
taxpayer  or  by  the  Secretary  as  to  which  returns  or 
lists are made under this title. 
Section 6203: 
The  assessment  shall  be  made  by  recording  the 
liability of the taxpayer in the office of the Secretary in 
accordance with rules or regulations prescribed by the
Secretary. Upon request of the taxpayer, the Secretary
shall furnish the taxpayer a copy of the record of the
Section 6303: 
Where  it  is  not  otherwise  provided  by  this  title,  the 
Secretary 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. 
Sections 6001 and 6011 clearly apply to those taxpayers specifically 
made liable by statutes such as Sections 5005, 5061, 5703 and 4374, 
or  to  those  who  have  been  assessed.  With  respect  to  the  personal 
federal  income  tax,  and  absent  an  assessment  having  been  made, 
only the withholding agents described in Section 1441 fall within the 
requirement to file returns under Sections 6001 and 6011. 
Section  6011(f)  makes  reference  to  subparts  B  and  C.41  Subpart  C 
involves  estate  and  gift  taxes.42  Subpart  B  involves  federal  income 
taxes and  consists of Sections 6012 through 6017A.43 Section 6013 
pertains to the election to file a joint return if married; Section 6014 
pertains  to  the  election  to  have  the  government  compute  the  tax; 
Section  6017A  requires  those  required  to  file  returns  to  provide 
information with respect to residence. Only Sections 6012 and 6017 
are relevant to the determination of a statutory requirement to file; 
they are discussed below. 
Section 6012(a): 
(a) General rule. Returns with respect to income taxes 
under subtitle A shall be made by the following: 
(1)(A)  Every  individual44  having  for  the 
taxable  year  gross  income  which  equals 
or  exceeds  the  exemption  amount  or 
more, ...45 
Section 6017: 
Every individual (other than a nonresident alien
individual) having net earnings from self-employment
of $400 or more for the taxable year shall make a
return with respect to the self-employment tax
imposed by chapter 2.
The self-employment tax mentioned in Section 6017 is the “Tax on
Self-Employment Income--� as contained in Chapter 2 of Subtitle A,
Sections 1401 through 1403. The definition of the term “net
earnings from self-employment--� is found at Section 1402(a) which
states in pertinent part:
Section 1402: 
(a)  The  term  “net  earnings  from  self-employment--� 
means the gross income derived by an individual from 
any trade or business carried on by such individual, ... 
Both Sections 6012 and 6017 require the understanding of the term 
“gross income.--� It is defined in the Internal Revenue Code: 
Section 61: 
Except  as  otherwise  provided  in  this  subtitle,  gross 
income  means  all  income  from  whatever  source 
derived,  including  (but  not  limited  to)  the  following 
Compensation for services, including 
fees,  commissions,  fringe  benefits, 
and similar items; 
Gross income derived from business; 
Gains  derived  from  dealings  in 
Alimony  and  separate  maintenance 
Income  from  life  insurance  and 
endowment contracts; 
Distributive  share  of  partnership 
Income in respect of a decedent; and 
Income from an interest in an estate 
or trust. 
Congress is unable to define the word “income--� due to its inclusion 
in the Sixteenth Amendment,46 and Congress acknowledges that the 
word “income--� as contained in the Internal Revenue Code is to have 
the meaning attributable to it in the Sixteenth Amendment.47 While 
Section  61  states  that  
“gross--�  income   means “all--�  income, 
Congress  did  not  define  the  term   “income--�   in  the  Internal 
Revenue Code.48 
As was pointed out in Chapter II, the decision of the United States 
Supreme  Court  in  
Brushaber   is  in  irreconcilable  conflict  with  the 
decisions of the United States Supreme Court in 
Pollock  and  Eisner. 
The   Brushaber   Court  took  the  position  that  the  purpose  of  the 
Sixteenth Amendment was to cause the income tax to be considered 
an indirect, excise tax, while the 
Eisner  Court took the position that 
the purpose of the Sixteenth Amendment was to amend the United 
States  Constitution  to  relieve  the  direct  income  tax  from  the 
requirement  of  apportionment.  As  a  result  of  these  conflicting 
Supreme  Court  opinions  there  is  a  conflict  between  the  United 
States Courts  of Appeal;  the  Second Circuit takes  the position that 
the income tax is an excise tax and the remaining circuits take the 
position that the income tax is a direct tax. 
“Income Taxes--� are contained in Subtitle A of the Internal Revenue 
Code. Excise taxes are contained in Subtitles D and E of the Internal 
Revenue Code, with excise taxes on “employers--� being contained in 
Subtitle  C. One could conclude, therefore, that Congress  chose  not 
to  impose  in  Subtitle  A  an  [indirect]  excise  tax  on  business, 
professions or vocations, but instead chose to impose an income tax 
on all income regardless of the source of the income, just as it had 
imposed  under  the  1894  Act.  The  conflict  between  the  Circuit 
Courts  of  Appeal  together  with  the  irreconcilable  conflict  between 
Pollock, Brushaber  and  Eisner  cases will have to be determined
by the United States Supreme Court in an appropriate case.
There is no question but that the taxes imposed by Subtitle A are
not apportioned, so if the Sixteenth Amendment has not been
properly ratified,49 the taxes imposed by Subtitle A are not
constitutional under the
Pollock   decisions. One would not be a
taxpayer as to the income tax if the Sixteenth Amendment was
never ratified.
Assuming, for further analysis, that the Sixteenth Amendment has
been properly ratified, for purposes of Section 6012 of the Internal
Revenue Code, one would be required to file a personal federal
income tax return (Form 1040) only if one were an “individual--�50 as
that term is used in Section 6012(a)(l), and one had more than the
threshold amount of “gross income.--�
Inasmuch as the term “income--� is not defined in the Internal
Revenue Code but is used in Section 61 (a), one must resort to the
intent of Congress in enacting Section 61 in order to determine the
meaning of the term “gross income.--� The intent of Congress is set
forth in both the Senate and House Reports which accompanied the
Internal Revenue Code of 195451 as follows:
Section 61 (a) provides that gross income includes “all
income from whatever source derived.--� This
definition is based upon the 16th Amendment and the
word “income--� is used in its constitutional sense.
House Report No. 1337; Senate Report
No. 1622;
U.S.  Code  Cong,  and  Admin. 
83rd  Congress,  2nd  Session, 
pages 4155 and 4802 respectively, 1954. 
The  United  States  Supreme  Court  has  provided  us  with  the 
constitutional  definition  of  income  based  upon  the  Sixteenth 
Income  may  be  defined  as  the  gain  derived  from 
capital, from labor or from both combined, provided it 
include  profit  gained  through  a  sale  or  conversion  of 
capital assets. 
Stratton’s  Indep.  v.  Howbert, 231 U.S.
399 (1913);
Doyle  v.  Mitchell, 247 U.S.
179 (1920);
So. Pacific v. Lowe, 247 U.S.
330 (1918);
Eisner  v.  Macomber,   252 
U.S.  189  (1920);  
Merchant’s  Loan  v. 
 255 U.S. 509 (1921). 
and  in  order  for  wages,  salaries,  compensation  for  services,  etc. 
received for labor to constitute income, there must be a gain derived 
from that labor. The procedure to determine whether there is or is 
not a gain also has its foundation in decisions of the United States 
Supreme Court: 
It  has  been  well said that,  “The property which  every 
man  has  in  his  own  labor,  as  it  is  the  original 
foundation  of  all  other  property,  so  it  is  the  most 
sacred and inviolable.--� 
Butchers’  Union  Co.  v.  Crescent  City 
, 111 U.S. 746, 757 (1883) (concurring 
opinion of Justice Fields). 
Not only does one’s labor constitute property, but the employment 
contract also constitutes property: 
The  principle  is  fundamental  and  vital.  Included  in 
the  right  of  personal  liberty  and  the  right  of  private 
property--"partaking of the nature of each--"is the right 
to  make  contracts  for  the  acquisition  of  property. 
Chief  among  such  contracts  is  that  of  personal 
employment,  by  which  labor  and  other  services  are 
exchanged for money or other forms of property. 
Coppage  v.  Kansas,   236  U.S.  1,  14 
Thus a contract for labor is a contract for the sale of property: 
In  our  opinion  that  section,  in  the  particular 
mentioned,  is  an  invasion  of  the  personal  liberty,  as 
well  as  of  the  right  of  property,  guaranteed  by  that 
Amendment  (Fifth  Amendment).  Such  liberty  and 
right  embraces  the  right  to  make  contracts  for  the 
purchase of the labor of others and equally the right to 
make contracts for the sale of one’s own labor; ... 
Adair v. United States,  208 U.S. 161, 172 
Internal  Revenue  Code  Sections  1001,  1011  and  1012,  and  their 
regulations,  26  C.F.R.  Sections  l.1001-l(a)  1.1011-1  and  1.1012-l(a), 
provide the method for determining the gain derived from the sale 
of property: 
Section 1001(a): 
The gain from the sale or other disposition of property 
shall  be  the  excess  of  the  amount  realized  therefrom 
over  the  adjusted  basis  provided  in  section  1011  for 
determining gain, ... 
Section 1001(b): 
The  amount  realized  from  the  sale  or  other 
disposition of property shall be the sum of any money 
received  plus  the  fair  market  value  of  the  property 
(other than money) received. 
Section 1011: 
The  adjusted  basis  for  determining  the  gain  or  loss 
from  the  sale  or  other  disposition  of  property, 
whenever  acquired,  shall  be  the  basis  (determined 
under section 1012...), adjusted as provided in section 
Section 1012: 
The basis of property shall be the cost of such
property ...
The cost of property purchased under contract is its fair market
value as evidenced by the contract itself, provided neither the buyer
nor seller were acting under compulsion in entering into the
contract, and both were fully aware of all of the facts regarding the
Terrance  Development  Co.  v.  C.I.R .52 345 F.2d 933
Bankers  Trust  Co.   v.   U.S.,   518  F.2d  1210  (1975);   Bar  L 
Ranch, Inc. v. Phinney, 
426 F.2d 995 (1970);  Jack Daniel Distillery 
v.  U.S.,  
379  F.2d  569  (1967);   In  re  Williams’  Estate,   256 F.2d 217
(1958). In other words, if an employer and employee agree that the
employee will exchange one hour of his time in return for a certain
amount of money, the cost, or basis under Section 1012, of the
employee’s labor is the pay agreed upon. By the same token, if an
attorney, doctor or other independent contractor agrees to perform
a certain service for an agreed upon amount of compensation, the
value of the service to be performed is the amount agreed upon as
payment for the service.
In the case of the sale of labor, none of the provisions of Section
1016 are applicable, and the adjusted basis of the labor under
Section 1011 is the amount paid. Therefore, when the employer pays
the employee the amount agreed upon, or the professional is paid
for his or her services, there is no excess amount realized over the
adjusted basis, and there is no gain under Section 1001. There being
no gain, there is no “income--� in the constitutional sense, and no
“gross income--� under Section 61 (a).
If one has no gain, one would not have sufficient “gross income--� to
require the filing of a federal personal income tax return under
Section 6012. Likewise, without gain, there can be no “self-
employment income,--� and one who is self-employed would not be
required to file a federal personal income tax return under Section
If one has no income, one would also not be subject to many of the
provisions of Subtitle C dealing with employment taxes, nor would
one be required to file a Form W-4:
a) The Federal Insurance Contributions Act (FICA) tax
contained in Subtitle C, Subchapter A of Chapter 21 at Section 3101
is imposed on the “individual’s--� income; if there is no income, there
can be no tax.
b) The corresponding FICA tax on employers contained in
Subtitle C, Subchapter B of Chapter 21 at Section 3111 is clearly
identified as a separate excise tax on employers.
c) The Railroad Retirement Tax on employees contained in
Subtitle C, Subchapter A of Chapter 22 at Section 3201 is also a tax
on the employee’s income; with no income there is no tax.
d) The corresponding Railroad Retirement Tax on
employers contained in Subtitle C, Subchapter C of Chapter 22 at
Section 3221 is a separate excise tax on employers.
e) The Federal Unemployment Tax contained in Subtitle C,
Chapter 23 at Section 3301 is another excise tax on employers.
f) The Railroad Unemployment Repayment Tax contained
in Subtitle C, Chapter 23A at Section 3321 is also a separate excise
tax on employers.
g) The provisions for withholding of wages at the source
under Chapter 24 of Subtitle C is also an income tax, but the
amount of tax withheld is computed upon the amount of wages
received.53 Section 3402(m) makes it clear that if one anticipates a
lower year-end income tax liability, one is entitled to additional
withholding allowances. Each withholding allowance serves the
function of lowering the amount of wages upon which the
withholding is computed. And if one had no income tax liability for
the preceding year and expects to have no income tax liability for

the current year, Section 3402(n) authorizes filing a W-4 claiming
The history of the federal income tax, decisions of the United States
Supreme Court, and the Internal Revenue Code itself, all lead to the
conclusion that wages do not constitute income. Notwithstanding
the legal correctness of this proposition, many Federal Courts of
Appeal have ruled that wages do constitute income. The next
several chapters analyze these cases in detail, and, in my opinion,
conclusively establish the erroneous and unconstitutional nature of
those cases.
Preface to United States Code, 1982 edition, p. xv, contained in
volume 26 U.S.C.A. Sections 1-100 (May 1988 supplement).
“Opinions of a judge which do not embody the resolution or
determination of the court. Expressions in court’s opinion which
go beyond the facts before court and therefore are individual
views of author of opinion and not binding in subsequent cases.--�
Black’s Law Dictionary,  p. 408 (5th Ed. 1988).
See 5 U.S.C. Section 551.
See Appendix B in which this was confirmed by the testimony of
an I.R.S. expert witness during a criminal trial.
“The express mention of one thing means the implied exclusion
of another.--�
26 U.S.C., Subtitle F, Chapter 61, Part II, Subparts B and C.
This subpart will not be analyzed in that estate and gift taxes
have nothing to do with the federal income tax.
Sections 6015 and 6016 have been repealed.
Section 6012 also applies to corporations [6012(a)(2)J, estates
[6012(a)(6)] and homeowners’ associations [6012(a)(7)].
Section 6151(a) of the Internal Revenue Code provides that if a
tax return is required, the amount of taxes shown on the return,
if any, should be paid with the return when it is filed, and
irrespective of any assessment, notice or demand.
Eisner  v.  Macomber,   252 U.S. 189, 206 (1920), [“In order,
therefore, that the clauses cited from Article I of the

Constitution may have proper force and effect save only as
modified by the Amendment, and that the latter also may have
proper effect, it becomes essential to distinguish between what
is and what is not “income,--� as the term is there used; and to
apply the distinction, as cases arise, according to truth and
substance, without regard to form. Congress cannot by
legislation alter the Constitution, from which alone it derives its
power to legislate, and within whose limitations alone that
power can be lawfully exercised.--�].
50 Cong. Rec., 63rd Cong., 1st Session, p. 3844.
The term “ordinary income--� is defined in Section 64 as the gain
from the sale or exchange of property.
See note 6.
The term “individual--� which is used not only in Section
6012(a)(l) but also in Section 1 as the subject upon whose
income the tax is imposed, is not defined in the Internal
Revenue Code. It is, however, defined in the treasury regulations
accompanying Section 1. The regulations make a distinction
between “citizens--� and “residents--� of the United States, and
define a “citizen--� as every person born or naturalized in the
United States
and   subject  to  its  jurisdiction  [see  26  C.F.R. 
Section l.l-l(a)-(c)]. An extremely strong argument can be made 
that  the  federal  income  tax  as  passed  by  Congress  and  as 
implemented  by  the  Treasury  Department  was  only  meant  to 
apply  to  individuals  within  the  “territorial  or  exclusive 
legislative jurisdiction of the United States,--� as those individuals 
would be subject to the “jurisdiction of the United States.--� These 
exclusive areas, per Article I, Section 8, Clause 17, of the United 
States Constitution, are Washington, D.C., federal enclaves and 
United  States  possessions  and  territories.  Outside  of  these 
exclusive areas, state law controls, not federal law. Thus a State 
citizen, residing in a State, would not meet the two part test for 
being an “individual--� upon whose income the tax is imposed in 
Section 1 of the Internal Revenue Code, and would not have the
“status--� of a “taxpayer.--� It is the official policy of the I.R.S.
[Policy P-(11)-23] to issue, upon written request, rulings and
determination letters regarding status for tax purposes prior to
the filing of a return. On August 29, 1988, I requested such a
“status determination--� from the I.R.S. on behalf of one of my
clients. The I.R.S. responded that the argument was “frivolous.--�
No change was made in the 1986 Tax Reform Act, PL 99-514,
with respect to the intent of Congress. See 2 U.S. Code, Cong.
and Admin. News, 99th Congress, 2nd Session, 1986.
“C.I.R.--� is the abbreviation for Commissioner of Internal
This may account for the common misconception of today’s
citizens that the terms “wages--� and “income--� have the same
Of course, one who does not have the status of a taxpayer would
not be subject to Subtitle C taxes at all, and would have no
requirement of filing a Form W-4. Thus one must determine if
he is a taxpayer, and if so, the amount of his anticipated income
tax liability. The filing of a Form W-4 could be considered as an
admission of status as a taxpayer of the Subtitle A income tax, in
which case one would probably be subject to additional income
taxes under Subtitle C and subject to wage withholding. The
I.R.S. imposes severe penalties for filing documents the contents
of which are disagreeable to them, such as admitting status as a
taxpayer and then claiming exempt. I suggest consultation with
a competent professional any time you are asked to fill out any
government form associated with your employment.

A court decision is one or more judges’ interpretation of the law
written by Congress. The theory behind “case law--� is that once a
specific issue or statute has been litigated and decided upon, it
should be considered finally settled unless in error. Thus litigants in
an action often cite in their arguments prior case law in which the
issue was previously determined. This concept is known as
If there is no case law previously determining the issue,
then the litigants look for cases that tend to support their position,
and analogize those cases to the specific issue to be decided in order
to persuade the Court that their position is legally correct. A court
decision will usually state a principle of law and cite to prior cases
which it has relied upon in deciding in favor of one litigant over the
In my analysis of the case law which holds that wages constitute
income, I have analyzed not only those cases regarding that specific
issue, but every case cited in the Court’s written decision. I have
arranged all of these cases by date in an attempt to provide an
historical analysis of the subject.
Stratton’s  Independence,  Ltd.  v.  Howbert,  231  U.S.  399 

Stratton’s Independence, Ltd., was a British corporation carrying
on mining operations in the State of Colorado upon mining lands
owned by itself. Suit was brought by the corporation to recover
taxes paid under protest. The issue presented in the trial court was
whether the value of the ore in place that was extracted from the
mining property was properly allowable as depreciation in
estimating the amount of net income of the corporation which was
subject to taxation under the Corporation Tax Act of August 5,
1909.55 Three questions were certified by the Court of Appeals to the
United States Supreme Court:
Does Section 3856 of the Act of Congress, entitled “An Act to
provide revenue, equalize duties, and encourage the industries of
the United States, and for other purposes,--� approved August 5,
1909 (36 Stat., p. 11), apply to mining corporations?
II. Are the proceeds of ores mined by a corporation from its own
premises income within the meaning of the aforementioned Act of
III. If the proceeds from ore sales are to be treated as income, is
such a corporation entitled to deduct the value of such ore in place
and before it is mined as depreciation within the meaning of
Section 38 of said Act of Congress?
As pertinent to the issue of what is and is not income, the
corporation argued that the proceeds of its mining operation
resulted only from the conversion of the capital represented by real
estate into capital represented by cash; the corporation thus argued
that it had no income but a mere change in the form of its capital
assets, and hence argued that it was not actually engaged in
business as that term was used in the 1909 Act.
The Supreme Court distinguished between the mere selling of the
land with the ore not extracted, calling this a conversion of capital
from one form to another, and the selling of the ore which had been
extracted from the land through a mining operation,57 and called
this engaging in business for a profit:
The very process of mining is, in a sense, equivalent in
its results to a manufacturing process. And, however
the operation shall be described, the transaction is
indubitably “business--�  within the fair meaning of the 
act of 1909; and the gains derived from it are property 
and  strictly  the  income  from  that  business;  for 
“income--�  may  be  defined  as  the  gain  derived  from 
capital, from labor, or from both combined, and here 
we have combined operations of capital and labor. 
Stratton’s,  231 U.S. at 414-415. 
The Court went on to say: 
As  to  the  alleged  inequality  of  operation  between 
mining  corporations  and  others,  it  is  of  course  true 
that  the  revenues derived  from  the  working  of  mines 
result to some extent in the exhaustion of the capital. 
But  the  same  is  true  of  the  earnings  of  the  human 
brain  and  hand  when  unaided  by  capital,  yet  such 
earnings  are  commonly  dealt  with  in  legislation  as 
Stratton’s, id. 
It is too bad that the Supreme Court failed to specifically identify
the legislation to which it was referring. To the extent the Court is
referring to the prior income tax acts passed by Congress, it must be
remembered that these first acts each included a separate provision
for the taxation of the salary of persons employed by the United
States Government; others were taxed in these acts upon the profit
and gain derived from business, vocations and professions, an
altogether different tax than a direct tax on a civilian’s salary. Also,
at the time of the passage of the 1909 Corporation Excise Tax Act,
no income tax act was in effect, so the gratuitous comments about
earnings from the human brain were not made with respect to any
then existing income tax legislation.58
Also, in discussing income, the Court distinguished between the
type of income by which the corporation excise tax was measured
and the type of income that can be taxed under the Sixteenth
As to what should be deemed “income--� within the
meaning of Section 38, it of course need not be such
an income as would have been taxable as such, for at
that time (the Sixteenth Amendment not having been
as yet ratified), income was not taxable as such by
Congress without apportionment according to
population, and this tax was not so apportioned.
Evidently Congress adopted the income as the
measure of the tax to be imposed with respect to the
doing of business in corporate form because it desired
that the excise should be imposed, approximately at
least, with regard to the amount of benefit presumably
derived by such corporations from the current
operations of the Government. In
Flint v. Stone Tracy 
220  U.S.  107,  165,  it  was  held  that  Congress  in 
exercising  the  right  to  tax  a  legitimate  subject  of 
taxation as a franchise or privilege, was not debarred 
by  the  Constitution  from  measuring  the  taxation  by 
the  total  income,  although  derived  in  part  from 
property which, considered by itself, was not taxable. 
It was reasonable that Congress should fix upon gross 
income,  without  distinction  as  to  source,  as  a 
convenient  and  sufficiently  accurate  index  of  the 
importance of the business transacted. And from this 
point  of  view,  it  makes  little  difference  that  the 
income may arise from a business that theoretically or 
practically involves a wasting of capital. 
Strattons,  231 U.S. at 416-417. 
Finally, the Court recognized that the wasting of capital assets had 
to somehow figure into the computation of income: 
corporations,  amongst  others,  were  doing  business 
with  a  wasting  capital,  and  for  such  wastage  they 
made  due  provision  in  declaring  that  from  the  gross 
income  there  should  be  deducted  
(inter  alia)   “all 
losses actually sustained within the year,--� including “a 
reasonable  allowance  for  depreciation  of  property,  if 
any,--� etc. 
Stratton’s,  231 U.S. at 417-418.
The Supreme Court, based upon this analysis, answered the first
two questions certified to it in the affirmative, and then turned its
attention to the third question.
Stratton’s  case had come to the Supreme Court upon an agreed
statement of facts, one of which was that the gross proceeds of the
sale of the ores during the year were diminished by the moneys
expended in extracting, mining, and marketing the ores, and the
precise difference was taken to be the “value of the ores when in
place in the mine.--� The Supreme Court concluded that the
definition of the “value of the ore in place--� was intentionally
adopted to exclude all allowance of profit upon the process of
mining, and to attribute the entire profit upon the mining
operations to the mine itself. Thus, the amount of profit, if any,
would be reduced to zero through depreciating the value of the
mine dollar for dollar. Of course, the Court concluded that this
would serve to exempt mining companies from the corporate excise
tax, and the Court, earlier in its opinion, had specifically decided
that Congress had intended to tax them.
Accordingly, the Court had to answer the third question certified to
it in the negative. The Court then declared that it was powerless to
change the definition of “value of the ore in place--� which definition
was included within the third question certified for answering, and
therefore the Court was precluded from adjudicating exactly how
much depreciation should be deducted from the gross receipts to
compensate  for the  wasting  of the  capital  asset--"the  original  value 
of the ore [and to continue the analogy of the Court, the earnings of 
the human brain] in place. 
Stratton’s  Independence,  Ltd.,   decision thus stands for the
proposition that “income--� for purposes of measuring an excise tax
is different than the “income--� that can be taxed under the Sixteenth
Amendment; gives us a broad definition of “income,--� and for the
decision of the case, adjudicates that the definition of “net income--�
in the Corporate Excise Tax Act of 1909 is gross receipts [called
gross income by the Court] less the actual expenses of producing
the gross receipts [this would result in determining the profit or
gain except for the consideration of the wasting capital] less some
unsettled amount as depreciation for the reduction of capital59 [thus
determining net income], such depreciation not to exceed the total
amount of the gross receipts less the actual expenses of producing
the gross receipts, where the ore is sold for many times more than
its original cost/market value.
One can easily conclude from this that if the property is sold at a
cost which approximates its intrinsic value, then a deduction of that
amount from the gross receipts [or as called by the Court, from the
gross income] is required prior to the calculation of the amount of
the tax. Applying this same principle to wages, they would not
constitute income.
Stanton v. Baltic Mining Co., 240 U.S. 103 (1916): 
A stockholder of the Baltic Mining Company instituted a lawsuit to
enjoin the corporation and its officers from voluntarily paying the
tax assessed against it under the Income Tax Section of the 1913
Tariff Act, c. 16, Section 2, 28 Stat. 166, 181 applying to
corporations. This particular statute contained a provision allowing
the mining company to deduct, as a depreciation for the depletion
of its ore deposits, up to 5% of the gross value at the mine of the
output during the year. Mr. Stanton contended that “the 5 per cent
deduction permitted by the statute was inadequate to allow for the

depletion of the ore body and therefore the law to a large extent
taxed not the mere profit arising from the operation of the mine,
but taxed as income the yearly product which represented to a large
extent the yearly depletion or exhaustion of the ore body from
which during the year ore was taken.--�
Stanton,  240 U.S. at 109-110. 
This argument was phrased by the Supreme Court that Mr. Stanton 
was contending the statute under which the corporation was being 
taxed deprived the stockholders of equal protection and due process 
“[b]ecause  [among  other  reasons]  by  reason  of  the  differences  in 
the  allowances  which  the  statute  permitted,  the  tax  levied  was 
virtually a net income tax on other corporations and individuals and 
a gross income tax on mining corporations.--�60 
Stanton,  240 U.S. at 
111. The Court referred back to its opinion in the 
Brushaber  case for 
the resolution of this issue. 
A  review  of  the  
Brushaber   decision,  however,  shows  that  the 
specific  issue  raised  in  the  
Stanton   case  was  not  raised  in  the 
Brushaber   case, although Mr. Brushaber did claim that several
other aspects of the taxing act were violative of the due process
clause. The Court disposed of these issues as follows:
So far as the due process clause of the Fifth
Amendment is relied upon, it suffices to say that there
is no basis for such reliance since it is equally well
settled that such clause is not a limitation upon the
taxing power conferred upon Congress by the
Constitution; in other words, that the Constitution
does not conflict with itself by conferring upon the
one hand a taxing power and taking the same power
away on the other by the limitations of the due
process clause.
Brushaber,  240 U.S. at 25. 
Brushaber   opinion  cites  the  following  cases  to  support  this 
Treat  v. White,  181 U.S. 264 (1901);  Patton v. Brady, 
184 U.S. 608 (1902); 
McCray v. United States,  195 U.S. 27 (1904); 
Flint v. Stone Tracy Company,  220 U.S. 107 (1911); and  Billings v. 
United States, 
232 U.S. 261 (1914).
Inasmuch as the history of the United States Constitution discloses
that the first ten amendments were added after the original
Constitution had been ratified, and because the people demanded
that the protection enunciated in the Bill of Rights be set forth, it is
absurd for the Court to take the position that the people did not
intend the government to impose and collect taxes (provisions for
which were contained in the original Constitution) in accordance
with due process. A review of the cases cited by the Court in
Brushaber  clearly shows the unconstitutional position of the Court: 
Treat v. White: 
Section 25 of Schedule “A--� of the War Revenue Act of June 13,
1898, 30 Stat. 448, provided for a stamp tax of two cents on each
hundred dollars of face value on the sale, agreement to sell,
memoranda of sale, delivery or transfer of shares or certificates of
stock. Mr. White was a stock broker who sold “calls--� for 30,200
shares of stock, upon which calls a tax was imposed and paid under
protest. The issue decided by the Court was whether or not a “call--�
was an “agreement to sell--� under the statute; Mr. White’s argument
was that if Congress intended the tax to apply to “calls,--� it would
have specified the same in the statute. The Court discussed the
several rules of statutory construction which Mr. White believed
were controlling, decided against applying them, and then stated:
The power of Congress in this direction is unlimited.
It does not come within the province of this court to
consider why agreements to sell shall be subject to
stamp duty and agreements to buy not. It is enough
that Congress in this legislation has imposed a stamp
duty upon the one and not upon the other.
In  conclusion,  we  may  say  that  the  language  of  the 
statute seems to us clear. It imposes a stamp duty on 
agreements to sell. “Calls--� are agreements to sell. We 
see  nothing  in  the  surroundings  which  justifies  us  in 
limiting  the  power  of  Congress  or  denying  to  its 
language its ordinary meaning. 
Treat,  181 U.S. at 269.
No due process challenge was made to the fact that Congress chose
to tax agreements to sell (“calls--�) and did not choose to tax
agreements to buy (“puts--�), nor was any other constitutional
challenge made to the validity of this tax. Thus any reliance upon
this case for the proposition that Congress can violate the Bill of
Rights at will in legislating taxes is wholly without foundation.
Patton v. Brady: 
In May of 1898, Mr. Patton purchased over 100,000 pounds of
tobacco on the open market and paid all the taxes which to that
point in time were due. In June of 1898 Congress passed a taxing
act which imposed an additional tax on the tobacco. Mr. Patton
refused to pay the tax, was threatened by seizure by the Collector,
and paid the tax under protest. Mr. Patton contended the act passed
by Congress was repugnant to the Constitution. The Court stated
unconstitutionality of the act,
Patton,  184 U.S. at 611, and found: 
It is true other counsel in their brief have advanced a 
very  elaborate  and  ingenious  argument  to  show  that 
this  is  a  direct  tax  upon  property  which  must  be 
apportioned  according  to  population  within  the  rule 
laid  down  in  the  
Income  Tax  Cases,   but, as we have
seen, it is not a tax upon property as such but upon
certain kinds of property, having reference to their
origin and their intended use. It may be, as Dr.
commodities--�; an opinion evidently shared by Black
stone, who says, after mentioning a number of articles
that had been added to the list of those excised, “a list
which no friend to his country would wish to see
considerations of policy and to be determined by the
legislative branch, and not of power, to be determined
by the judiciary. We conclude, therefore, that the tax
which is levied by this act is an excise, properly so
called, and we proceed to consider the further
propositions presented by counsel.
Patton,  184 U.S. at 618-619.
Thus far, the Court is stating that Congress has the power to
determine the articles, the consumption ,or manufacture of which
will be subject to an excise tax; the Court does not state that
Congress can ignore the provisions of the Fifth Amendment in
imposing the tax.
Mr. Patton next challenged the right of Congress to pass a tax which
levied an excise tax on articles which had once before been
subjected to an excise tax. This issue was disposed of by the Court
under the doctrine that Congress passed the legislation under
wartime exigencies and it was not the Court’s function to interpose
its policy opinions over the policy opinions of the Legislature. But in
direct opposition to the position elaborated in the
opinion [that the due process clause of the Constitution does not
apply to taxation], quoting Mr. Justice Cooley in his work on
Taxation at page 34, the
Patton  Court stated:
But so long as the legislation is not colorable merely,
but is confined to the enactment of what is in its
nature strictly a tax law, and so long as none of the
constitutional rights of the citizen are violated in the
directions prescribed for enforcing the tax, the
legislation is of supreme authority.61
Patton,  184 U.S. at 621.
It was also contended by Mr. Patton that the power granted to
Congress to impose excises was an arbitrary, unrestrained power.
The Court responded:
[B]ut the Constitution, art. 1, sec. 8, provides that “all
duties, imposts and excises shall be uniform
throughout the United States.--� The exercise of the
power is, therefore, limited by the rule of uniformity.
The framers of the Constitution, the people who
adopted it, thought that limitation sufficient, and
courts may not add thereto.
Patton,  184 U.S. at 622. 
Patton  clearly states the Court cannot change the Constitution
by expanding on specific limitations which are contained in it. In
Brushaber  quote above, the Court contends it has authority to
remove the limitations of due process in the imposition and
collection of federal taxes. No court has the power to destroy the
Constitution or any part thereof.
McCray v. United States: 
Mr. McCray, a licensed retail dealer in oleomargarine, bought fifty
pounds of oleomargarine which was yellow colored because of the
use of yellow coloring in butter, and butter was an included
ingredient of the oleomargarine. Congress had imposed an excise
tax on oleomargarine manufactured to look like butter at a higher
rate than the excise tax imposed on oleomargarine manufactured
not to look like butter. The government sought to collect from Mr.
McCray the excise tax at the higher rate because of the yellow
appearance of the oleomargarine he had purchased for resale under
his license. Mr. McCray objected, alleging that despite the fact that
the oleomargarine he had purchased looked like butter, it was not
manufactured to look like butter by the introduction of artificial
coloring during the manufacturing of the oleomargarine. Therefore, 
he argued that the higher rate did not apply to the oleomargarine he 
had purchased, and having paid the excise tax at the lower rate, he 
argued that he had fully complied with the law. 
McCray,  195 U.S. at
Mr. McCray also argued that if the proper construction of the law
required him to pay the higher tax, then the law was repugnant to
the Constitution because; 1) requiring the payment of the higher
rate of tax would drive the price of oleomargarine up to the point
where it could no longer compete with butter, and would thus
destroy the oleomargarine industry, and deprive him of his
property without due process of law; 2) the levy of such a burden (of
the higher tax) was beyond the constitutional power of Congress; 3)
the act was an unwarranted interference by Congress with the
police powers reserved to the several States and to the people of the
United States by the Tenth Amendment; 4) the act was
unconstitutional because the statute left the determination of what
constituted artificial coloration of oleomargarine with an executive
officer thereby investing him with judicial authority;62 and 5) the
tax discriminated against oleomargarine in favor of butter, which
would result in a government-caused destruction of the
oleomargarine industry in favor of the butter industry, violating
fundamental principles of equality and justice which are inherent in
the Constitution of the United States.
McCray,  195 U.S. at 29-30. 
This case was decided by Mr. Justice White63 who first summarized 
the  statutes  in  question.  The  first  section  defined  butter  as 
including or not including “additional coloring matter.--� The second 
section  defined  oleomargarine  as  including  that  manufactured 
partially  from  butter.  Mr.  Justice  White  then  recognized  that  the 
law had been amended in 1902,64 and that the title of the act was: 
An  act  to  make  oleomargarine  and  other  imitation 
dairy  products  subject  to  the  laws  of  any  State  or 
Territory or the District of Columbia in which they are 
transported,  and  to  change  the  tax  on  oleomargarine 
McCray,  195 U.S. at 44.
The first section of the amended act provided that immediately
upon importation into a State, Washington D.C., or a Territory, the
product was to be subject to their respective laws as if produced
within the jurisdiction itself, and this was so regardless of the
oleomargarine having been introduced into the jurisdiction in its
original packages.65 The third section amended section eight of the
original act, and provided that “[w]hen oleomargarine is free from
artificial coloration that causes it to look like butter of any shade of
yellow, said tax shall be one-fourth of one cent per pound.--� The tax
on colored oleomargarine was ten cents per pound under the
amended act.
McCray,  195 U.S. at 44-45. 
The  Court  first  found  that  Congress  clearly  intended  to  tax 
oleomargarine that was colored to look like butter at a higher rate, 
that  Mr.  McCray  admitted  the  product  was  oleomargarine  which 
contained  a  coloring  to  make  the  product  yellow  like  butter,  and 
therefore  concluded  the  product  fell  within  the  statute.  The  Court 
was not impressed with the argument that the yellow coloring was 
used to make the butter look like butter66 and was not used to make 
the oleomargarine look like butter. 
McCray,  195 U.S. at 47-50.
The Court next determined the issue of whether Congress exerted a
power not granted to it in the Constitution when it passed this tax
on oleomargarine. The Court concluded that the tax was a valid
excise tax, and found invalid the following more detailed arguments
raised by Mr. McCray:
That the purpose of the tax was not to raise revenue,
but to suppress the manufacture of the taxed article.
That the power to regulate oleomargarine belonged in
the States and not with the federal government.
That the tax was so high [thereby suppressing the
oleomargarine industry] that it was not a legitimate tax authorized
by law.
That the tax was discriminatory [on artificially colored
oleomargarine] and thus acted to suppress the industry.
That the tax was repugnant to the Fifth Amendment
because the amount of the tax was so out of proportion to the value
of the property taxed as to destroy that property, and thus
amounted to a taking thereof without due process of law; and that
the tax was repugnant to the Tenth Amendment because the
necessary operation and effect of the acts would be to cause the
destruction of the oleomargarine industry and thus exert a power
not delegated to Congress, but reserved to the several States.67
That notwithstanding that the congressional power to
tax was unlimited except as otherwise expressed in the
Constitution, the tax was so onerous and so unjust as to be
confiscatory, and therefore it amounted to a violation of those
fundamental rights which was the duty of every free government to
McCray,  195 U.S. at 50-53.
The Court contended that all of the propositions raised by Mr.
McCray rested only on inferences and deductions as to the motives
and purposes of Congress, and disposed of the case by looking into
the constitutional power of the Court to inquire into the purposes or
motives of Congress in considering the power of that body to enact
the laws in question.
McCray,  195 U.S. at 53. Mr. McCray asked the 
Court  to  examine  whether  the  tax  fell  within  or  without  the 
mandates  of  constitutional  limitations,  and  the  Court  decided  to 
address the issue of whether or not Congress can impose an excise 
tax, two entirely different issues. 
Mr. Justice White also had this to say: 

Whilst, as a result of our written constitution, it is
axiomatic that the judicial department of the
government is charged with the solemn duty of
enforcing the Constitution, and therefore in cases
properly presented, of determining whether a given
manifestation of authority has exceeded the power
conferred by that instrument, no instance is afforded
from the foundation of the government where an act,
which was within a power conferred, was declared to
be repugnant to the Constitution, because it appeared
to the judicial mind that the particular exertion of
constitutional power was either unwise or unjust. To
announce such a principle would amount to declaring
that in our constitutional system the judiciary was not
only charged with the duty of upholding the
Constitution but also with the responsibility of
correcting every possible abuse arising from the
exercise by the other departments of their conceded
authority. So to hold would be to overthrow the entire
distinction between the legislative, judicial and
executive departments of the government, upon which
our system is founded, and would be a mere act of
judicial usurpation. [Emphasis added.]
McCray,  195 U.S. at 53-54. 
With this thought in mind, Justice White, relying upon other cases 
for authority, further stated: 
As  quite  recently  pointed  out  by  this  court  in 
Knowlton v. Moore,  178 U.S. 41, 60, the often quoted 
statement  of  Chief  Justice  Marshall  in  
McCulloch  v. 
that  the  power  to  tax  is  the  power  to 
destroy,  affords  no  support  whatever  to  the 
proposition  that  where  there  is  a  lawful  power  to 
impose a tax its imposition may be treated as without 
the  power  because  of  the  destructive  effect  of  the 
exertion of the authority. 
McCray,  195 U.S. at 56.
Justice White was very adept at quoting the Constitution and
subverting it at the same time. The very purpose of our system of
government was to prevent abuse, the idea being if one department
became abusive, the other two would prevent the abuse from
harming the people:
To what expedient, then, shall we finally resort, for
maintaining in practice the necessary partition of
power among the several departments as laid down in
the Constitution. The only answer that can be given is
that as all these exterior provisions are found to be
inadequate the defect must be supplied, by so
contriving the interior structure of the government as
that its several constituent parts may, by their mutual
relations, be the means of keeping each other in their
proper places.
* * *
But the great security against a gradual concentration
of the several powers in the same department consists
in giving to those who administer each department
the necessary constitutional means and
to resist encroachments of the others. The
provision for defense must in this, as in all other
cases, be made commensurate to the danger of the
attack. Ambition must be made to counteract
ambition. The interest of the man must be connected
with the constitutional rights of the place. It may be a
reflection on human nature that such devices should
be necessary to control the
abuses of government. 

But what is government itself but the greatest of all
reflections on human nature? [Emphasis added.]
James Madison, The Federalist Papers,
No. 51.
When the Constitution was proposed to the American people as the
foundation of a form of government designed to 1) promote the
maximum liberty for the people and 2) provide the maximum
protection from government encroachment, Founding Father
James Madison stated it was a mandated duty for members of one
branch of government to examine the motives of those in the other
branches of government and to stop abuses of government when
found. Just a little over one hundred years later, Supreme Court
Justice White declared it to be a mandated duty for members of the
other branches of government not to stop abuse, especially when
the abuse is founded under the guise of lawful constitutional
All of the cases cited by Justice White support the position that the
other branches of government cannot interfere with a legitimate
exercise of the taxing power by Congress. With that principle there
is no argument. However, when the taxation becomes destructive,
as Justice White readily admits it can, then the power exerted by
Congress is not legitimate. The power to tax under the Constitution
doesn’t change, but the exercise of the power can be either lawful or
not. And when the power is exercised unlawfully, the other two
branches of government are obligated to stop the abuse.
Justice White concluded here in the opinion that neither the motive
nor the purpose of Congress in enacting the oleomargarine statutes
could be inquired into,68 and then proceeded to analyze whether
Congress had exceeded its powers within the framework of its
totally unfettered power. In this context, Justice White easily found
that Congress had not exceeded its powers:
1. Undoubtedly, in determining whether a particular
act is within a granted power, its scope and effect are
to be considered. Applying this rule to the acts
assailed, it is self-evident that on their face they levy
an excise tax. That being their necessary scope and
operation, it follows that the acts are within the grant
of power. The argument to the contrary rests on the
proposition that, although the tax be within the
power, as enforcing it will destroy or restrict the
manufacture of artificially colored oleomargarine,
therefore the power to levy the tax did not obtain.
This, however, is but to say that the question of power
depends, not upon the authority conferred by the
Constitution, but upon what may be the consequence
arising from the exercise of the lawful authority.69
McCray,  195 U.S. at 59.
The other contentions of Mr. McCray were also swiftly disposed of,
leaving only the last argument that: “the taxing laws are void,
because they violate those fundamental rights which it is the duty of
every free government to safeguard, and which, therefore, should be
held to be embraced by implied though none the less potential
guaranties, or in any event to be within the protection of the due
process clause of the Fifth Amendment.--�
McCray,   195  U.S.  at  62-
63.  Justice  White  believed  this  principle  did  not  apply  in  Mr. 
McCray’s case. Justice White reasoned that the Supreme Court had 
found  oleomargarine  could  be  mistaken  for  butter  and  hence  the 
opportunity for deception existed. Thus, the Court had found that a 
State  could,  under  its  police  powers,  completely  prohibit  the 
manufacture  of  oleomargarine  within  its  jurisdiction,  and 
specifically found that such state legislation did not violate “the due 
process  clause  of  the  Fourteenth  Amendment.--�  The  conclusion  of 
the  Court  was  that  Congress  could  impose  a  federal  tax  that  is 
destructive of the manufacture of oleomargarine70 [
McCray, id. ], a
position contrary to the very principle that the Constitution is the
Supreme Law of the Land and must be adhered to by the courts in

determining if a law passed by Congress is in conflict with its
express provisions:
The question whether an act, repugnant to the
constitution, can become the law of the land, is a
question deeply interesting to the United States; but
happily, not of an intricacy proportioned to its
interest. It seems only necessary to recognize certain
principles, supposed to have been long and well
established, to decide it.
That the people have an original right to establish, for
their future government, such principles, as, in their
opinion, shall most conduce to their own happiness is
the basis on which the whole American fabric has
been erected. The exercise of this original right is a
very great exertion; nor can it, nor ought it, to be
frequently repeated. The principles, therefore, so
established, are deemed fundamental. And as the
authority from which they proceed is supreme, and
can seldom act, they are designed to be permanent.
The original and supreme will organized the
government, and assigns to different departments
their respective powers. It may either stop here, or
establish certain limits not to be transcended by those
The government of the United States is of the latter
description. The powers of the legislature are defined
and limited, and that those limits may not be
mistaken, or forgotten, the constitution is written. To
what purpose are powers limited, and to what purpose
is that limitation committed to writing, if these limits
may, at any time, be passed by those intended to be
restrained? The distinction between a government
with limited and unlimited powers is abolished, if
those limits do not confine the persons on whom they
are imposed, and if acts prohibited and acts allowed,
are of equal obligation. It is a proposition too plain to
be contested, that the constitution controls any
legislative act repugnant to it; or, that the legislature
may alter the constitution by an ordinary act.
Between these alternatives there is no middle ground.
The constitution is either a superior paramount law,
unchangeable by ordinary means, or it is on a level
with ordinary legislative acts, and, like other acts, is
alterable when the legislature shall please to alter it.
If the former part of the alternative be true, then a
legislative act contrary to the constitution is not law; if
the latter part be true, then written constitutions are
absurd attempts, on the part of the people, to limit a
power in its own nature illimitable.
Certainly all those who have framed written
constitutions contemplate them as forming the
fundamental and paramount law of the nation, and,
consequently, the theory of every such government
must be, that an act of the legislature, repugnant to
the constitution, is void.
This theory is essentially attached to a written
constitution, and, is consequently, to be considered,
by this court, as one of the fundamental principles of
our society. It is not therefore to be lost sight of in the
further consideration of this subject.
If an act of the legislature, repugnant to the
constitution, is void, does it, notwithstanding its
invalidity, bind the courts, and oblige them to give it
effect? Or, in other words, though it be not law, does it
constitute a rule as operative as if it was a law? This

would be to overthrow in fact what was established in
theory, and would seem, at first view, an absurdity too
gross to be insisted on. It shall, however, receive a
more attentive consideration.
It is emphatically the province and duty of the judicial
department to say what the law is. Those who apply
the rule to particular cases, must of necessity expound
and interpret that rule. If two laws conflict with each
other, the courts must decide on the operation of
So if a law be in opposition to the constitution; if both
the law and constitution apply to a particular case, so
that the court must either decide the case conformably
to the law, disregarding the constitution, or
conformably to the constitution, disregarding the law,
the court must determine which of these conflicting
rules governs the case. This is of the very essence of
judicial duty.
If, then, the courts are to regard the constitution, and
the constitution is superior to any ordinary act of the
legislature, the constitution, and not such ordinary
act, must govern the case to which they both apply.
Those, then, who controvert the principle that the
constitution is to be considered, in court, as a
paramount law, are reduced to the necessity of
maintaining that courts must close their eyes on the
constitution, and see only the law.
This doctrine would subvert the very foundation of all
written constitutions. It would declare that an act
which, according to the principles and theory of our
government, is entirely void, is yet, in practice,
completely obligatory. It would declare that if the
legislature shall do what is expressly forbidden, such
act, notwithstanding the express prohibition, is in
reality effectual. It would be given to the legislature a
practical and real omnipotence, with the same breath
which professes to restrict their powers within narrow
limits. It is prescribing limits, and declaring that those
limits may be passed at pleasure.
That it thus reduced to nothing what we have deemed
the greatest improvement on political institutions, a
written constitution, would of itself be sufficient, in
America, where written constitutions have been
viewed with so much reverence, for rejecting the
construction. But the peculiar expressions of the
constitution of the United States furnish additional
arguments in favour of its rejection.
The judicial power of the United States is extended to
all cases arising under the constitution.
Could it be the intention of those who gave this power,
to say that in using it the constitution should not be
looked into? That a case arising under the constitution
should be decided without examining the instrument
under which is arises?
This is too extravagant to be maintained.
In some cases, then, the constitution must be looked
into by the judges. And if they can open it at all, what
part of it are they forbidden to read or to obey?
There are many other parts of the constitution which
serve to illustrate this subject.
It is declared that “no tax or duty shall be laid on
articles exported from any states.--� Suppose a duty on

the export of cotton, of tobacco, or of flour, and a suit
instituted to recover it. Ought judgment to be
rendered in such a case? Ought the judges to close
their eyes on the constitution and see only the law?
The constitution declares “that no bill of attainder or
ex post facto law shall be passed.--�
If, however, such a bill should be passed, and a person
would be prosecuted under it, must the court
condemn to death those victims whom the
constitution endeavors to preserve?
“No person,--� says the constitution, “shall be convicted
of treason unless on the testimony of two witnesses to
the same overt act, or on confession in open court.--�
Here the language of the constitution is addressed
especially to the courts. It prescribes, directly for
them, a rule of evidence not to be departed from. If
the legislature should change that rule, and declare
one witness, or a confession out of court, sufficient for
conviction, must the constitutional principle yield to
the legislative act?
From these, and many other selections which might
be made, it is apparent, that the framers of the
constitution contemplated that instrument as a rule
for the government of courts, as well as of the
Why otherwise does it direct the judges to take an
oath to support it? This oath certainly applies in an
especial manner, to their conduct, in their official
character. How immoral to impose it on them, if they
were to be used as the instruments, and the knowing
instruments, for violating what they swear to support!
The oath of office, too, imposed by the legislature, is
completely demonstrative of the legislative opinion on
this subject. It is in these words: “I do solemnly swear
that I will administer justice without respect to
persons, and do equal right to the poor and to the
rich; and that I will faithfully and impartially
discharge all the duties incumbent on me as

, according to the best of my abilities and
understanding agreeably to the constitution and laws
of the United States.--�
Why does a judge swear to discharge his duties
agreeable to the constitution of the United States, if
that constitution forms no rule for his government? If
it is closed upon him, and cannot be inspected by
If such be the real state of things, this is worse than
solemn mockery. To prescribe, or to take this oath,
becomes equally a crime.
It is also not entirely unworthy of observation, that in
declaring what shall be the supreme law of the land,
the constitution itself is first mentioned, and not the
laws of the United States generally, but those only
which shall be made in pursuance of the constitution,
have that rank.
Thus, the particular phraseology of the constitution of
the United States confirms and strengthens the
principle, supposed to be essential to all written
constitutions, that a law repugnant to the constitution
is void; and that courts, as well as other departments,
are bound by that instrument.
Marbury  v.  Madison,   5  U.S.  137,  176-
180 (1803). 
Flint v. Stone Tracy Company: 
On August 5, 1909, Congress approved “The Corporation Tax--� law, 
36 Stat. c. 6, 11. Section 38 of the act provided: 
That  every  corporation,  joint  stock  company  or 
association  organized  for  profit  and  having  a  capital 
stock  represented  by  shares,  and  every  insurance 
company  now  or  hereafter  organized  under  the  laws 
of the United States or of any State or Territory of the 
United States or under the acts of Congress applicable 
to  Alaska  or  the  District  of  Columbia,  or  now  or 
hereafter  organized  under  the  laws  of  any  foreign 
country  and  engaged  in  business  in  any  State  or 
Territory  of  the  United  States  or  in  Alaska  or  in  the 
District of Columbia, shall be subject to pay annually a 
special  excise  tax  with  respect  to  the  carrying  on  or 
doing  business  by  such  corporation,  joint  stock 
company  or  association  or  insurance  company 
equivalent  to  one  per  centum  upon  the  entire  net 
income over and above five thousand dollars received 
by  it  from  all  sources  during  such  year,  exclusive  of 
amounts  received  by  it  as  dividends  upon  stock  of 
other  corporations,  joint  stock  companies  or 
associations or insurance companies subject to the tax 
hereby imposed; or if organized under the laws of any 
foreign country, upon the amount of net income over 
and  above  five  thousand  dollars  received  by  it  from 
business  transacted  and  capital  invested  within  the 
United  States  and  its  Territories,  Alaska  and  the 
District  of  Columbia,  during  such  year,  exclusive  of 
amounts so received by  it as  dividends  upon stock of 
other  corporations,  joint  stock  companies  or 
associations or insurance companies subject to the tax 
hereby imposed. 
Flint,  220 U.S. at 143-144. 
Several  companies  brought  suit  to  have  Section  38  declared 
unconstitutional  on  several  grounds,  and  the  
Flint   case  was  a 
consolidation of those various suits. One of those grounds was that 
the act was void as lacking in due process of law. 
Flint,  220 U.S. at
167. The Court disposed of this issue by referencing what it had said
as to the power of Congress to lay the excise tax in question.
The Supreme Court first analyzed Section 38 and stated that it was
the intent of Congress to impose a special excise tax with respect to
the carrying on or doing business by corporations, joint stock
companies or associations, or insurance companies; that the tax
was not imposed upon the franchises of the corporation irrespective
of their use in business, nor upon the property of the corporation,
but upon the doing of corporate or insurance business and with
respect to the carrying on thereof, in a sum equivalent to one per
centum upon the entire net income over and above $5,000 received
from all sources during the year.
Flint,  220 U.S. at 145-146.
In other words, the tax is imposed upon the doing of
business of the character described, and the measure
of the tax is to be the income, with the deduction
stated, received not only from property used in
business, but from every source.
Flint,   220  U.S.  at  146.  The  Court stated 
This  interpretation  of  the  act,  as  resting  upon  the 
doing  of  business,  is  sustained  by  the  reasoning  in 
Spreckles  Sugar  Refining  Co.  v.  McClain,   192 U.S.
397, in which a special tax measured by the gross
receipts of the business of refining oil and sugar was
sustained as an excise in respect to the carrying on or
doing of such business.
Flint,  220 U.S. at 147. 

Another allegation of those seeking a declaration that Section 38
was unconstitutional was so far as the tax was measured by the
income of bonds non-taxable under Federal statutes, and of
municipal and state bonds beyond the Federal power of taxation,
and so far as the tax was measured by the income from real and
personal estates, Section 38 must fall under the holding of
Flint, id.
In disposing of this contention, the Court stated: 
The  act  now  under  consideration  does  not  impose 
direct  taxation  upon  property  solely  because  of  its 
ownership,  but  the  tax  is  within  the  class  which 
Congress is authorized to lay and collect under Art. I, 
section  8,  cl.  1,  of  the  Constitution,  and  described 
generally  as  taxes,  duties,  imposts  and  excises,  upon 
which  the  limitation  is  that  they  shall  be  uniform 
throughout the United States. 
Within  the  category  of  indirect  taxation,  as  we  shall 
have further occasion to show, is embraced a tax upon 
business  done  in  a  corporate  capacity,  which  is  the 
subject-matter  of  the  tax  imposed  in  the  act  under 
consideration.  The  
Pollock   case construed the tax
there levied as direct, because it was imposed upon
property simply because of its ownership. In the
present case the tax is not payable unless there be a
carrying on or doing of business in the designated
capacity, and this is made the occasion for the tax,
measured by the standard prescribed. The difference
between the acts is not merely nominal, but rests
upon substantial differences between the mere
ownership of property and the actual doing of
business in a certain way.
Flint,  220 U.S. at 150. 
The  Court  next  cited  to  
Thomas  v.  United  States,   192  U.S.  363, 
regarding the terms “duties, imposts and excises,--� and said: 
We  think  that  they  were  used  comprehensively  to 
cover  customs  and  excise  duties  imposed  on 
importation,  consumption,  manufacture  and  sale  of 
certain  commodities,  privileges,  particular  business 
transactions, vocations, occupations and the like. 
Duties  and  imposts  are  terms  commonly  applied  to 
levies  made  by  governments  on  the  importation  or 
exportation  of  commodities.  Excises  are  “taxes  laid 
upon  the  manufacture,  sale  or  consumption  of 
commodities  within  the  country,  upon  licenses  to 
pursue  certain  occupations,  and  upon  corporate 
privileges.--� Cooley, 
Const. Lim. , 7th ed., 680. 
The tax under consideration, as we have construed the 
statute,  may  be  described  as  an  excise  upon  the 
particular  privilege  of  doing  business  in  a  corporate 
i.e.,   with  the  advantages  which  arise  from 
corporate  or  quasi-corporate  organization;  or,  when 
applied  to  insurance  companies,  for  doing  the 
business  of  such  companies.  As  was  said  in  the 
Thomas case 192 U.S. 363 supra,  the requirement to 
pay such taxes involves the exercise of privileges, and 
the  element  of  absolute  and  unavoidable  demand  is 
lacking.  If  business  is  not  done  in  the  manner 
described in the statute, no tax is payable. 
Flint,  220 U.S. at 151-152.
Another contention made by some of the insurance companies was
that they had large investments in municipal bonds and other non-
taxable securities, and in real estate and personal property not used
in the business, and therefore the selection of the measure of the
income from all sources is void, because it reaches property which
is not the subject of taxation. The insurance companies relied upon
Pollock  decision.  Flint,  220 U.S. at 162. The Court stated: 
But  this  argument  confuses  the  measure  of  the  tax 
upon the privilege, with direct taxation of the estate or 
thing taxed. In the 
Pollock  case as we have seen, the
tax was held unconstitutional, because it was in effect
a direct tax on the property solely because of its
* * *
There is nothing in these cases contrary, as we shall
have occasion to see, to the former rulings of this
court which hold that where a tax is lawfully imposed
upon the exercise of privileges within the taxing
power of the State or Nation, the measure of such tax
may be the income from the property of the
corporation, although a part of such income is derived
from property in itself non-taxable. The distinction
lies between the attempt to tax the property as such
and to measure a legitimate tax upon the privileges
involved in the use of such property.
It is therefore well settled by the decisions of this
court that when the sovereign authority has exercised
the right to tax a legitimate subject of taxation as an
exercise of a franchise or privilege, it is no objection
that the measure of taxation is found in the income
produced in part from property which of itself
considered is non-taxable. Applying that doctrine to
this case, the measure of taxation being the income of
the corporation from all sources, as that is but the
measure of a privilege tax within the lawful authority
of Congress to impose, it is no valid objection that this
measure includes, in part at least, property which as
such could not be directly taxed.
Flint,  220 U.S. at 162-165. 
With respect to due process, the Court further stated: 
It  is  urged  that  this  power  can  be  so  exercised  by 
Congress  as  to  practically  destroy  the  right  of  the 
States  to  create  corporations,  and  for  that  reason  it 
ought  not  to  be  sustained,  and  reference  is  made  to 
the declaration of Chief Justice Marshall in 
v. Maryland 
that the power to tax involves the power 
to  destroy.  This  argument  has  not  been  infrequently 
addressed to this court with respect to the exercise of 
the powers of Congress. Of such contention this court 
said in 
Knowlton v. Moore, supra:
This principle is pertinent only when there is no
power to tax a particular subject, and has no relation
to a case where such right exists. In other words, the
power to destroy which may be the consequence of
taxation is a reason why the right to tax should be
conditioned to subjects which may be lawfully
embraced therein, even although it happens that in
some particular instance no great harm may be
caused by the exercise of the taxing authority as to a
subject which is beyond its scope. But this reasoning
has no application to a lawful tax, for if it had there
would be an end of all taxation; that is to say, if a
lawful tax can be defeated because the power which is
manifested by its imposition may when further
exercised be destructive, it would follow that every
lawful tax would become unlawful, and therefore no
taxation whatever could be levied.
Veazie Bank v. Fenno, 8 Wall. 533, supra,  speaking 
for the court, the Chief Justice said: 
It is insisted, however, that the tax in the case before 
us  is  excessive,  and  so  excessive  as  to  indicate  a 
purpose  on  the  part  of  Congress  to  destroy  the 
franchise  of  the  bank,  and  is,  therefore,  beyond  the 
constitutional power of Congress. 
The  first  answer  to  this  is  that  the  judicial  cannot 
prescribe  to  the  legislative  department  of  the 
government  limitations  upon  the  exercise  of  its 
acknowledged  powers.  The  power  to  tax  may  be 
exercised  oppressively  upon  persons,  but  the 
responsibility  of  the  legislature  is  not  to  the  courts, 
but to the people by whom its members are elected. So 
if a particular tax bears heavily upon a corporation, or 
a class of corporations, it cannot, for that reason only, 
be pronounced contrary to the Constitution. 
Flint,  220 U.S. at 168-169. 
Flint  Court next cited to the   McCray  case which was analyzed 
hereinabove. In deciding the due process question in the 
Flint  case
there can be little  question but that the justices  departed from  the 
principle enunciated in 
Marbury v. Madison.  
Billings v. United States:  
Section 37 of the Tariff Act of August 5, 1909, c.6, 36 Stat. 11, 112,
levied a tonnage tax of seven dollars per gross ton upon the use of
every foreign-built yacht, not used for trade, owned or chartered for
more than six months by any citizen or citizens of the United States.
Section 37 went into effect on August 6, 1909, and the collector of
the port of New York made a demand upon Mr. Billings, as the
owner of a foreign-built yacht weighing 1,091.71 tons, for payment
of $7,644.00. Mr. Billings failed to pay the tax, the United States
brought suit and Mr. Billings raised three defenses:
1) That the vessel was not enrolled, registered, or documented
as a vessel of the United States and enjoyed no privileges from the
United States. Also that the yacht had only been used outside of the
waters and territorial limits or jurisdiction of the United States;
2) That the tax imposed by the statute was intended by
Congress to be “an annual tax, that it should be prospective and
operate only upon the future use of any such foreign-built yacht,
and that said annual tax had not yet accrued and could not be duly
levied and collected prior to the first day of September in the year
1910.--�; and
3) After averring that there were within the United States many
pleasure yachts not foreign-built which were virtually identical to
Mr. Billings’ yacht, charged that the law imposing the burden
sought to be enforced was void because repugnant to the due
process clause of the Fifth Amendment.
Billings,  232 U.S. at 278.
The lower court found the sum claimed was due by Mr. Billings as
an excise or duty upon the use of his yacht and that the act
imposing the tax was not repugnant to the Constitution, but found
the government was not entitled to recover interest.
In order “to avoid if it may be the necessity of determining the
constitutional question--�
(Billings,   232  U.S.  at  279),  the  Court 
assumed the Tariff Act in question was adopted by Congress in the 
light  of  the  ruling  in  
Pollock  v.  Farmers  Loan  &  Trust  Company, 
stated it was certain that Congress intended Section 37 to be an
excise tax, and stated that this was not seriously disputed in
argument, with the controversy turning first upon the period when
the tax provided for was to take effect and the nature and character
of the use which was taxed.
Billings,  232 U.S. at 279. The Court also
stated the two issues were so interwoven that they would be
considered and disposed of together.
The Court found that the word “annually--� was used not for the
purpose of postponing the time of payment, but rather as provision

for continuity, and found the tax could be imposed in September of
1909. The Court next addressed the issue of upon what the tax was
The Court stated the issue of upon what the tax was assessed was
clearly addressed in the statute:
[T]he recurrence of the tax is annual and depends
upon two elements, ownership or charter rights, as
specified in the act, and the use for any time during
the year. It is to be observed that the provision deals
with ownership and distinguishes between ownership
and use, since it bases the tax not upon the former but
upon the latter.
Billings,  232 U.S. at 280. 
The Court, in sophisticated double-talk, then attempted to point out 
that  even  though  ownership  necessarily  entails  and  contemplates 
“use,--� as used in the statute, some other type of “use--� was intended 
than the mere privilege of using which the owner enjoys: 
Let  it  be  conceded  that  the  ownership  of  property 
includes the right to use, plainly we think, as use and 
ownership are distinguished one from the other in the 
provision,  the  word  “use--�  as  there  employed  means 
more  than  the  mere  privilege  of  using  which  the 
owner enjoys, and relates to its primary signification, 
as  defined  by  Webster;  “The  act  of  employing 
anything or of applying it to one’s service; the state of 
being so employed or applied.--� If the use which arises 
from the fact of ownership without more was what the 
statute  proposed,  then  it  is  inconceivable  why  the 
difference between use and ownership was marked in 
the  provision  and  made  the  basis  of  the  tax  which  it 
imposed. While this construction in this case leads to 
the  same  conclusion  as  does  that  which  the  court 
below affixed to the statute, that is, that it taxed the
privilege of use, or, in other words the potentiality of
using involved in ownership, inherently there is this
fundamental difference between the interpretation we
give and that which the lower court adopted, since the
privilege of use is purely passive (or subjective), a
right which necessarily pertains to ownership and
must exist where there is ownership, as one may not
obtain ownership without acquiring the privileges of
use which ownership gives. The other, on the
contrary, that is, use in the statutory sense, although it
arises from ownership, is active (objective), that is, it
is the outward and distinct exercise of a right which
ownership confers but which would not necessarily be
exerted by the mere fact of ownership. The contention
that inequality must be the result of making the tax
depend upon mere use without reference to the extent
of its duration, addresses itself not to the question of
power, and is therefore beyond the scope of judicial
Billings,  232 U.S. at 281.
The author of this opinion is none other than Justice White! On
page 279 the Justice tells us he is going to do his best to avoid
answering the constitutional questions. To do this, first he assumes
Congress knows the distinction between a direct tax and an indirect
tax,71 and then without examining the nature and effect of the tax in
operation, found it to be an excise tax. And to conclusively establish
that the tax was an excise, Justice White merely distinguished the
“use--� derived from ownership from the “use--� derived from
ownership, the former being “passive (or subjective)--� and the latter
being “active (objective).--�
With respect to the due process issue of inequality of operation
between citizens who own American-made yachts and citizens who
own foreign-made yachts, Justice White disposed of it by stating,
without  quoting  any  authority  for  the  proposition,  that  the  issue 
was  “beyond  the  scope  of  judicial  cognizance,  and  besides,  the 
“excise--� tax is levied uniformly among all of those it taxes, and thus 
is not violative of Article I, Section 8, Clause 1 nor the due process 
clause of the Fifth Amendment.--� 
Billings,  232 U.S. at 282-284.
Finding the tax to be valid in all respects, Justice White ruled that
the government was entitled to interest even though there was no
provision for the collection of interest applicable to Section 37 taxes
in the Tariff Act in question.
The above analysis of
Treat,  Patton,  McCray,  Flint   and   Billings 
shows  that  those  cases  cannot  support  the  proposition  of  Justice 
White  as  stated  in  the  
Brushaber   case  that  the  due  process 
provisions of the United States Constitution have no applicability to 
the  levying  and  collection  of  federal  taxes.  And,  notwithstanding 
Justice  White’s  closing  his  eyes  to  the  Constitution,  the  
case cannot be cited as authority for the proposition that wages
constitute income.
Edwards v. Keith, 231 F. 110 (2nd Cir. 1916): 
Mr. Edwards was an insurance salesman who received commissions
when he first sold an insurance policy, and again whenever the
policy was renewed. Mr. Edwards paid his income tax under protest
and sued the collector, Mr. Keith, for its recovery. Mr. Keith filed a
demurrer to the complaint which the lower court sustained and the
Court then dismissed the case on its merits. This appeal followed on
the single question of:
[W]hether or not the commissions payable to
complainant under the contracts with the Assurance
Society annexed to the complaint, upon renewal
premiums paid on policies obtained through the
instrumentality of appellant prior to March 1, 1913,
but which commissions were not actually paid to and
received by complainant until after March 1, 1913, and
between that date and December 31, 1913, constitute a 
part of the “entire net income--� of complainant “arising 
or accruing from all sources--� between those dates. 
Edwards,  231 F. at 111. 
The issue presented to the Court was not whether the commissions 
constituted income; that question was not raised by the parties. The 
Court  was  asked  to  consider  the  commissions  as  income,  and 
determine in what year they were to be taxed: 
[B]ut the question seems to us a very simple one and 
one  absolutely determined  by  the provision in  all  the 
contracts  that  “commissions  shall  accrue  only  as  the 
premiums are paid in cash.--� 
Edwards,  231 F. at 112.
One can only speculate as to how this Court would rule if the
question as to what is and is not income were presented to it, for the
Court stated in the last lines of the opinion:
[T]he statute and the statute alone determines what is
income to be taxed. It taxes only income “derived--�
from many different specified sources; one does not
“derive income--� by rendering services and charging
for them.
Edwards,  231 F. at 113. 
Doyle v. Mitchell Brothers Co., 247 U.S. 179 (1918): 
Mr. Doyle, the Collector of Internal Revenue, assessed additional
taxes against Mitchell Brothers Company under the Corporation
Excise Tax Act of August 5, 1909, c. 6, 36 Stat. 11, 112, Section 38.
Mitchell Brothers paid the tax under protest and sued for its
recovery. It won in both the District Court and Court of Appeals.
Doyle,  247 U.S. at 180. 

Mitchell Brothers was a lumber manufacturing corporation. In 1903
it purchased land with timber on it for $20.00 per acre. In 1908 the
land was valued at $40.00 per acre. When the corporation filed
returns under the 1909 tax act, it deducted from gross receipts the
market value of the land from which trees were cut at the $40.00
per acre value. The I.R.S. thought the land should have been valued
at $20.00, and sought the difference.
Doyle,  247 U.S. at 181-182. As 
stated by the Court: 
[T]he  question  is  whether  this  difference  (made  the 
basis of the additional taxes) was income for the years 
in  which  it  was  converted  into  money,  within  the 
meaning of the act. 
Doyle,  247 U.S. at 182. 
The Court stated the position of the Collector as follows: 
Starting from this point, the learned Solicitor General 
has submitted an elaborate argument in behalf of the 
Government,  based  in  part  upon  theoretical 
definitions  of  “capital,--�  “income,--�  “profits,--�  etc.,  and 
in part upon expressions quoted from our opinions in 
Flint  v.  Stone  Tracy  Co. , 220 U.S. 107, 147, and
Anderson  v.  Forty-two  Broadway  Co.,   239 U.S., 69,
72, with the object of showing that a conversion of
capital into money always produces income, and that
for the purposes of the present case the words “gross
income--� are equivalent to “gross receipts--�; the
insistence being that the entire proceeds of a
conversion of capital assets should be treated as gross
income, and that by deducting the mere cost of such
assets we arrive at net income.
Doyle,  247 U.S. at 183-184. 
While the only issue before the Court was whether the $20 or $40 
valuation should be  used, based upon the government’s argument, 
the Court felt compelled to respond: 
Yet  it  is  plain,  we  think,  that  by  the  true  intent  and 
meaning  of  the  act  the  entire  proceeds  of  a  mere 
conversion  of  capital  assets  were  not to  be  treated  as 
Whatever difficulty  there  may be  about a precise and 
scientific  definition  of  “income,--�  it  imports,  as  used 
here,  something  entirely  distinct  from  principal  or 
capital either as a subject of taxation or as a measure 
of  the  tax;  conveying  rather  the  idea  of  gain  or 
increase arising from corporate activities. As was said 
Stratton’s Independence v. Howbert,  231 U.S. 399, 
415: “Income may be defined as the gain derived from 
capital, from labor, or from both combined.--� 
Understanding  the  term  in  this  natural  and  obvious 
sense,  it  cannot  be  said  that  a  conversion  of  capital 
assets invariably produces income. If sold at less than 
cost, it produces rather loss or outgo. Nevertheless, in 
many  if  not  in  most  cases  there  results  a  gain  that 
properly  may  be  accounted  as  a  part  of  the  “gross 
income--�  received  “from  all  sources--�;  and  by  applying 
to  this  the  authorized  deductions  we  arrive  at  “net 
income.--�  In  order  to  determine  whether  there  has 
been gain or loss, and the amount of the gain, if any, 
we must withdraw from the gross proceeds an amount 
sufficient  to  restore  the  capital  value  that  existed  at 
Doyle,  247 U.S. at 184-185. 

The Court determined that the $40 per acre was the correct amount
to restore the capital value of the land for the cutting of the timber,
and sustained the judgment of the Court of Appeals. Applying the
same principle to labor, and deducting the cost of the labor from the
wages received in exchange therefore, wages would not constitute
“As has been repeatedly remarked, the Corporation Tax Act of
1909 was not intended to be and is not in any proper sense an
income tax law. This court had decided in the
Pollock  case that
the income tax law of 1894 amounted in effect to a direct tax
upon property, and was invalid because not apportioned
according to population as prescribed by the Constitution. The
act of 1909 avoided this difficulty by imposing not an income
tax, but an excise tax upon the conduct of business in a
corporate capacity, measuring, however, the amount of tax by
the income of the corporation, with certain qualifications
prescribed by the Act itself.--�
Stratton’s,  231 U.S. at 414. 
Sec. 38 imposed a tax on every corporation, joint stock company 
or  association,  organized  for  profit  and  having  a  capital  stock 
represented by shares, and every insurance company, organized 
under the laws of the United States or of any State or Territory 
of the United States, or organized under the laws of any foreign 
country and engaged in business in any State or Territory of the 
United States or in Alaska or in the District of Columbia. 
“[E]mploying  capital  and  labor  in  transmuting  a  part  of  the 
realty  into  personalty,  and  putting  it  into  marketable  form.--� 
Stratton’s,  231 U.S. at 415. 
There was no income tax between  the years 1895 when  
held the Act of 1894 unconstitutional, and 1913, when Congress
enacted an income tax law after the alleged ratification of the
Sixteenth Amendment.
“It was of course contemplated that the income might be derived
from the employment of property in business, and that this
property might become more or less exhausted in the process;
and because of this, a reasonable allowance was to be made for
depreciation of it, if any. But plainly, we think, the valuation of

the property and the amount of the depreciation were to be
determined not upon the basis of latent and occult intrinsic
values, but upon considerations that affect market value and
have their influence upon men of affairs charged with the
management of the business and accounting of corporations
that are organized for profit and are engaged in business for
purposes of profit.--�
Stratton’s,  231 U.S. at p. 421. 
It is interesting to note that the gross receipts of the corporation 
was called gross income by the Court. In 
Doyle v. Mitchell,  247
U.S. 179 (1918), the Supreme Court specifically held that the
government’s contention that gross receipts were the same as
gross income was erroneous (see p. 128).
The clear distinction between this quote upholding the
fundamental principles of a federal republic and the
quote  declaring  that  citizens  have  no  constitutionally  protected 
rights is indicative of our government today. 
This argument was not contained in the “assignment of errors,--� 
and  was  thus  not  considered  by  the  Supreme  Court.  
195 U.S. at 46. 
Thus Mr. Justice White cites himself in the 
Brushaber decision
for his legal authority to excise the Fifth Amendment from the
Constitution with respect to income taxation.
32 Stat. 193.
It is clear that Congress here specifically ceded jurisdiction to
the States and the governments of Washington D.C. and of the
United States Territories to tax and otherwise regulate the
oleomargarine industry within their respective jurisdictions.
Mr. McCray advised the Court that depending upon the season
of the year, the color of natural butter went from pale yellow to
dark yellow, and that consumers preferred the darker yellow
The argument was worded such that it appears it is being argued
that under the Tenth Amendment, the States have the power to
destroy an industry. An interpretation of the Tenth Amendment
as a grant from the people to the States to destroy industries
defies reality.
Thereby eliminating from consideration whether the motive of
Congress in enacting the legislation was merely the return of a
political favor to the dairy lobby. If it was, then any legislation
passed would be null and void as contrary to constitutional
principles, and the Court would be without jurisdiction due to
the lack of a statute imposing the tax.
Justice White again refused to recognize that the lawfulness of
the authority ceases when the power becomes abusive. This
includes not only the abuse arising at the time of enacting the
statute, but each and every time an American is injured by the
abuse. The injury resulting from an unlawful exertion of power
includes having one’s due process violated. It is clear, then, that
Justice White used the
McCray case  to  lay  the  foundation  for 
the policy he announced in 
Brushaber,  the complete eradication
of the Fifth Amendment from proceedings involving taxation.
See note 68. This may explain why Congress gave concur rent
jurisdiction to the States to tax oleomargarine when it amended
the 1886 Act. Rather than challenging this nebulous quantum
leap of jurisdiction, Justice White treacherously used it to avoid
the one fundamental limitation on the exercise of governmental
power over the American people--"the lack of jurisdiction of the
federal government in the States. The very fact that Justice
White recognized the principle in light of a complaint of injury
resulting from the violation of that principle shows that his
destruction of the separation of powers doctrine was deliberate.

A highly suspect assumption in light of the fact the Supreme
Court in
Pollock  had less than ten years before struck down a tax
that Congress thought to be an indirect excise tax, but was in
actuality a direct tax.
Eisner v. Macomber, 252 U.S. 189 (1920): 
Justice Pitney, the author of the Court’s majority opinion, stated
that the question presented in the case was “whether, by virtue of
the Sixteenth Amendment, Congress had the power to tax, as
income of the stockholder and without apportionment, a stock
dividend made lawful and in good faith against profits accumulated
by the corporation since March 1, 1913.--�
Eisner,  252 U.S. at 199. 
Justice Pitney stated the statute in question was the Revenue Act of 
September  8,  1916,  c.  463,  39  Stat.  756  
et  seq.,   Sec. 2(a), which
statute provided that the net income of a taxable person72 shall
include, among other things, dividends. The statute also defined a
dividend as any distribution made by a corporation out of its
earnings or profits accrued since March 1, 1913, and payable to its
shareholders, whether in cash or in stock of the corporation, said
stock to be considered income to the amount of its cash value.
Eisner,  252 U.S. at 199-200.
The facts were that on January 1, 1916, the Standard Oil Company
of California had approximately $50,000,000 worth of $100 par
value shares of stock outstanding. It also had surplus and undivided
profits invested into the corporation worth approximately
$45,000,000, of which about $20,000,000 had been earned prior
to March 1, 1913. In January, 1916, in order to readjust the
capitalization, it was decided to issue additional shares sufficient to
constitute a stock dividend of fifty per cent of the outstanding stock,
and to transfer from surplus account to capital stock account an
amount equivalent to such issue.
Eisner,  252 U.S. at 200.
Ms. Macomber had been the owner of 2,200 shares of the old stock,
and received certificates for 1,100 additional shares, of which 18.07
percent, or 198.77 shares, par value $19,877, were treated as
representing surplus earned between March 1, 1913, and January 1,
Eisner,  252 U.S. at 200-201.
Ms. Macomber paid, under protest, a tax under Section 2(a) of the
1916 Act on the $19,877, filed an administrative appeal, and then
brought suit against the Collector to recover the tax. She contended
that the 1916 tax act was in violation of Article I, Section 2, Clause 3,
and Article I, Section 9, Clause 4, requiring direct taxes to be
apportioned according to population, and that the stock dividend
was not income within the meaning of the Sixteenth Amendment.
Eisner,  252 U.S. at 201.
The Defendant, Mr. Eisner, filed a general demurrer to the
complaint which was overruled, and he did not file any pleadings
thereafter. Judgment was issued in favor of Ms. Macomber, and the
case came to the United States Supreme Court on a writ of error.
Eisner, id.  In a split decision, the Court held that neither under the
Sixteenth Amendment nor otherwise did Congress have power to
tax without apportionment a true stock dividend made lawfully and
in good faith, or the accumulated profits behind it, as income of the
stockholder. The Court held the Revenue Act of 1916 contrary to
Article I, Section 2, Clause 3, and Article I, Section 9, Clause 4, with
respect to the tax imposed on such true stock dividends.
Eisner,  252 
U.S. at 219. 
The Court relied upon the decision in 
Towne v. Eisner,  245 U.S. 418
(1918), where the question was whether a stock dividend made in
1914 against surplus earned prior to January 1, 1913, was taxable
against the stockholder under the Act of October 3, 1913, c. 16, 38
Stat. 114, 166, which provided that net income should include
“dividends,--� and also “gains or profits and income derived from any
source  whatever.--�  In  
Towne the  Supreme  Court  relied  upon  the 
definition of a stock dividend given in 
Gibbons v. Mahon,  136 U.S. 
549 (1890), to find that a stock dividend made against surplus did 
not constitute income as that word was used in the October 3, 1913, 
tax  act.  
Eisner,   252 U.S. at 252. This was so because “[a] stock
dividend takes nothing from the property of the corporation, and
adds nothing to the interest of the shareholders. Its property is not
diminished, and their interests are not increased... . The
proportional interest of each shareholder remains the same. The
only change is in the evidence which represents that interest, the
new shares and the original shares together representing the same
proportional interest that the original shares represented before the
issue of the new ones.--�
Gibbons,   136  U.S.  at  559-560.  The  Court 
went on to distinguish  between the types of dividends represented 
by this issuance of stock, and the types of dividends represented by 
a distribution in specie of a portion of the assets of the corporation. 
Eisner,  252 U.S. at 204. 
The Court, however, was not content to rely upon the mere holding 
that the stock dividend did not constitute income because Congress 
had stated that a “stock dividend shall be considered income, to the 
amount of its cash value.--� 
Eisner,  252 U.S. at 205. The Court then 
went into an analysis of the Sixteenth Amendment, defined the very 
“income--�  which  is  discussed  in  the  Sixteenth  Amendment, 
discussed  the  nature  of  corporations  and  stock,  and  held  that  a 
stock  dividend  did  not  constitute  income  under  the  Sixteenth 
Amendment.  With  respect  to  the definition  of  “income,--� the  Court 
The  Sixteenth  Amendment  must  be  construed  in 
connection  with  the  taxing  clauses  of  the  original 
Constitution  and  the  effect  attributed  to  them  before 
the  Amendment  was  adopted. In  
Pollock  v.  Farmers’ 
Loan  and  Trust  Co.,  
158 U.S. 601, under the Act of
August 27, 1894, c. 349, section 27, 28 Stat. 509, 553,
it was held that taxes upon rents and profits of real
property were in effect direct taxes upon the property
from which such income arose, imposed by reason of 
ownership;  and  that  Congress  could  not  impose  such 
taxes  without  apportioning  them  among  the  States 
according to population, as required by Art. I, section 
2, cl.3, and section 9, cl.4, of the original Constitution. 
Afterwards,  and  evidently  in  recognition  of  the 
limitation  upon  the  taxing  power  of  Congress  thus 
determined,  the  Sixteenth  Amendment  was  adopted, 
in  words  lucidly  expressing  the  object  to  be 
accomplished:  “The  Congress  shall  have power  to  lay 
and  collect  taxes  on  incomes,  from  whatever  source 
derived,  without  apportionment  among  the  several 
States,  and  without  regard  to  any  census  or 
enumeration.--� As repeatedly held, this did not extend 
the taxing power to new subjects, but merely removed 
the  necessity  which  otherwise  might  exist  for  an 
apportionment  among  the  States  of  taxes  laid  on 
income.  [Citing  
Brushaber,   240 U.S. at 17-19, and
other cases.]
A proper regard for its genesis, as well as its very clear
language, requires also that this Amendment shall not
be extended by loose construction, so as to repeal or
modify, except as applied to income, those provisions
of the Constitution that require an apportionment
according to population for direct taxes upon
property, real and personal.73 This limitation still has
an appropriate and important function, and is not to
be overridden by Congress or disregarded by the
In order, therefore, that the clauses cited from Article
I of the Constitution may have proper force and effect,
save only as modified by the Amendment, and that the
latter also may have proper effect, it becomes essential
to distinguish between what is and what is not

“income--� as the term is there used; and to apply the
distinction, as cases arise, according to truth and
substance, without regard to form. Congress cannot
by any definition it may adopt conclude the matter,
since it cannot by legislation alter the Constitution,
from which alone it derives its power to legislate, and
within whose limitations alone that power can be
lawfully exercised.
The fundamental relation of “capital--� to “income--� has
been much discussed by economists, the former being
likened to the tree or the land, the latter to the fruit or
the crop; the former depicted as a reservoir supplied
from springs, the latter as the outlet stream, to be
measured by its flow during a period of time. For the
present purpose we require only a clear definition of
the term “income,--� as used in common speech, in
order to determine its meaning in the Amendment;
and, having formed also a correct judgment as to the
nature of a stock dividend, we shall find it easy to
decide the matter at issue.
After examining dictionaries in common use (Bouv.
L.D.; Standard Dict.; Webster’s Internat. Dict.;
Century Dict.), we find little to add to the succinct
definition adopted in two cases arising under the
Corporation Tax Act of 1909
(Stratton’s Independence 
v. Howbert, 
231 U.S. 399, 415;  Doyle v. Mitchell Bros. 
247  U.S.  179,  185)--"--�Income  may  be  defined  as 
the  gain  derived  from  capital,  from  labor,  or  from 
both combined,--� provided it be understood to include 
profit  gained  through  a  sale  or  conversion  of  capital 
assets, to  which it was applied in  the  
Doyle  case (pp. 
183, 185). 
Brief  as  it  is,  it  indicates  the  characteristic  and 
distinguishing  attribute  of  income  essential  for  a 
correct  solution  of  the  present  controversy.  The 
Government,  although  basing  its  argument  upon  the 
definition  as  quoted,  placed  chief  emphasis  upon  the 
word  “gain,--� which was  extended to include a variety 
of  meanings;  while  the  significance  of  the  next  three 
words  was  either  overlooked  or  misconceived. 
“Derived  --"  from  --"  capital;--�  --"  “the  gain  --" 
derived --" from --" capital,--�
 etc. Here we have the 
essential  matter:  
not  a  gain  accruing  to   capital, 
not  a  growth  or  increment of value in the
but   again,   a  profit ,  something  of 
exchangeable  value  proceeding  from  the  property, 
severed  from  the  capital   however  invested  or 
employed,  and  
coming  in,  being  “derived,--�  that 
is,  received,  or  drawn  by
  the  recipient  (the 
taxpayer)  for  his  
separate   use,  benefit  and 
disposal;--"that  is  income  derived  from  property. 
Nothing else answers the description. 
The same fundamental conception is clearly set forth 
in  the  Sixteenth  Amendment--"
“incomes,  from 
whatever  source  derived--�
--"the essential thought
being expressed with a conciseness and lucidity
entirely in harmony with the form and style of the
Constitution. [Emphasis added.]
Eisner,  252 U.S. at 205-206.
After defining the word income, the Court made it very clear that
the Sixteenth “Amendment applies to income only.--�
Eisner,   252 
U.S. at 219. 
Merchants’ Loan & Trust Co. v. Smietanka, 255 U.S. 509

Merchants’ Loan & Trust Co. was the trustee under the will of
Arthur Ryerson who died in 1912. Under the trust, the net income of

the property was to be paid to his widow during her life and used
for the benefit of the children after her death until the age of
twenty-five, at which age each child would receive his or her share
of the trust fund. Under the terms of the trust the trustee could
decide what “net income--� was, except that stock dividends and
accretions of selling values were not to be considered income.
Smietanka,  255 U.S. at 514-515.
In 1917 Ryerson’s widow and four children were alive.
255 U.S. at 515.
Among other assets, the trust received 9,522 shares of capital stock
of Joseph T. Ryerson & Son, a corporation. On March 1, 1913, the
stock was valued at $561,798. On February 2, 1917, the stock was
sold for $1,280,996.64. The Commissioner of Internal Revenue
treated the difference as income for the year 1917, and assessed a
tax under the Income Tax Act of Congress approved September 8,
1916, c. 463, 39 Stat. 756, as amended by the Act approved October
3, 1917, c. 63, 40 Stat. 300. The tax was paid under protest and an
action was filed in the Federal District Court to recover its payment.
Smietanka,  255 U.S. at 514-515.
In the lower court, the Collector, Mr. Smietanka, filed a demurrer to
the complaint which was sustained. The case then came to the
Supreme Court under a writ of error, in which the trustee
contended that the sum charged as “income--� represented
appreciation in the value of the capital assets of the estate which
was not “income--� within the meaning of the Sixteenth Amendment
and therefore could not, constitutionally, be taxed without
Smietanka, id.  
The Court first addressed the language of the statute and found that 
the  trustee  was  a  taxable  person,  and  if  the  sum  charged  as 
“income--�  was  indeed  income  within  the  meaning  of  the  Sixteenth 
Amendment,  it  was  taxable  under  the  statute.  Whether  or  not  the 
over $700,000 gain was such income, the Court felt, was a question 
of  definition,  the  answer  to  which  could  be  found  in  recent 
decisions  of  the  Court  itself.  
Smietanka,   255  U.S.  at  516-517.  The 
Court stated that while the Corporation Excise Tax Act of August 5, 
1909 was not an income tax law, a definition of the word “income--� 
was essential in its early administration, and an early case defined 
the word as “the gain derived from capital, from labor, or from both 
combined,--�  and  cited  to  
Stratton’s  Independence  v.  Howbert,   231
U.S. 399, 415. The Court then referenced its “latest income tax
Eisner,  and gave the latest definition of the word income:
“Income may be defined as the gain derived from capital, from
labor, or from both combined, provided it be understood to include
profit gained through a sale or conversion of capital assets.--�
Smietanka,  255 U.S. at 517-518.
The Court then reviewed two cases under the Corporation Excise
Tax Act wherein it was held that the profit made on the sale of stock
of another corporation was income to the selling corporation under
the above definition, and thought it was obvious that these two
decisions in principle ruled the case under consideration if the word
“income--� had the same meaning in the Income Tax Act of 1913 that
it had in the Corporation Excise Tax Act of 1909. It then cited to
Southern  Pacific  Co.  v.  Lowe,   247  U.S.  330,  335  (1918),  where  it 
was assumed for the purposes of decision in that case that there was 
no difference. The Court then unequivocally stated: 
There  can  be  no  doubt  that  the  word  must  be  given 
the same meaning and content in the Income Tax Acts 
of 1916 and 1917 that it had in the Act of 1913. When 
to  this  we  add  that  in  
Eisner  v.  Macomber,  supra,  a 
case  arising  under  the  same  Income  Tax  Act  of  1916 
which  is  here  involved,  the  definition  of  “income--� 
which  was  applied  was  adopted  from  
Independence  v.  Howbert,  
supra,  arising  under  the 
Corporation Excise Tax Act of 1909, with the addition 
that it should include “profit gained through a sale or 
conversion  of  capital  assets,--�  there  would seem  to  be 
no  room  to  doubt  that  the  word  must  be  given  the 
same  meaning  in  all  of  the  Income  Tax  Acts  of 
Congress  that  was  given  to  it  in  the  Corporation 
Excise Tax Act and that what that meaning is has now 
become definitely settled by decisions of this court. 
In  determining  the  definition  of  the  word  “income--� 
thus  arrived  at,  this  court  has  consistently  refused  to 
enter  into  the  refinements  of  lexicographers  or 
economists  and  has  approved,  in  the  definitions 
quoted,  what  it  believed  to  be  the  commonly 
understood  meaning  of  the  term  which  must  have 
been  in  the  minds  of  the  people  when  they  adopted 
the  Sixteenth  Amendment  to  the  Constitution.  
v. Mitchell Brothers  
Co., 247 U.S.  179, 185;  Eisner v.
252  U.S.  189,  206-207.  Notwithstanding 
the full argument heard in this case and in  the series 
of cases now under consideration we continue entirely 
satisfied with that definition, and, since the fund here 
taxed  was  the  amount  realized  from  the  sale  of  the 
stock  in  1917,  less  the  capital  investment  as 
determined  by  the  trustee  as  of  March  1,  1913,  it  is 
palpable that it was a “gain or profit--� “produced by--� or 
“derived  from--�  that  investment,  and  that  it 
“proceeded,--�  and  was  “severed--�  or  rendered 
severable,  from,  by  the  sale  for  cash,  and  thereby 
became that “realized gain--� which has been repeatedly 
declared  to  be  taxable  income  within  the  meaning  of 
the  constitutional  amendment  and  the  acts  of 
Doyle v.  Mitchell  Brothers  Co.,   and   Eisner 
v. Macomber, supra.
Smietanka,  255 U.S. at 519-520.
Finding that the amount received on the sale of the
stock over the basis, the gain or profit, fell within the
definition of the word “income--� as used in the
Sixteenth Amendment, the Court affirmed the
decision  of  the  lower  court.  
Smietanka,   255 U.S. at
Section 2(a) was contained in Part I [pertaining to the income
tax on “individuals--�] of Title I [pertaining to the Income Tax].
This is the exact argument which was raised by Mr. Brushaber
Brushaber,  240 U.S. at 11] and rejected by the  Brushaber  Court 
[240 U.S. at 12]. There is an irreconcilable conflict between the 
Brushaber   case, which holds the income tax is an indirect tax
not requiring apportionment, and the
Eisner   case,  which  holds 
the income tax is a direct tax relieved from apportionment. 
Lucas v. Earl, 281 U.S. 111 (1930): 
In 1901 Mr. Earl entered into a contract with his wife in which it
was agreed that any. property either of them then had or might later
acquire, including salaries or fees, would be held in joint tenancy
with each other.74 Thereafter, Mr. Earl filed an income tax return in
which he claimed one-half of his salary as gross income. Mr. Lucas,
the Commissioner of Internal Revenue, caused a tax to be imposed
upon the whole of Mr. Earl’s salary, and the Board of Tax Appeals
sustained this action. The Circuit Court of Appeals, however,
reversed, and the case came to the Supreme Court by a writ of
certiorari. Lucas, 281 U.S. at 113-114.
The Supreme Court cited Section 213(a) of the Revenue Act of 1918
approved February 24, 1919, c. 18, 40 Stat. 1065, which, it stated,
imposed a tax upon the net income of every individual including
“income derived from salaries, wages, or compensation for personal
service ... of whatever kind and in whatever form paid.--�
Lucas,  281
U.S. at 114.
The Court next stated that Mr. Lucas made a very strong argument
that by virtue of the contract with his wife, the salary and fees
became the joint property of himself and his wife immediately upon
receipt. To escape this effect under California law which should be
controlling, the Court said that the case was to be determined upon
the import and reasonable construction of the taxing act.
Lucas,  281 
U.S. at 114-115. The Court then said that: 
There is no doubt that the statute could tax salaries to 
those who earned them and provide that the tax could 
not  be  escaped  by  anticipatory  arrangements  and 
contracts  however  skillfully  devised  to  prevent  the 
salary when paid from vesting even for a second in the 
man who earned it. 
Lucas, id. 
The Court then, without any legal reasoning, stated that what
Congress could have done, but did not do, was the “import--� of the
statute Congress did pass and reversed the Court of Appeals.
It is of critical significance to note that unlike Ms. Macomber who
challenged the constitutionality of the tax on the stock dividend
notwithstanding the clear language of the statute imposing the tax
on that stock dividend, Mr. Lucas failed to object to the tax being
imposed directly on his salary and fees as opposed to being imposed
on the “income derived from [his] salaries, wages, or compensation
for personal service ... of whatever kind and in whatever form paid.--�
The issue of whether or not salaries, wages or compensation for
personal service constitutes income taxable under the Sixteenth
Amendment was not litigated nor discussed by the Court, and the
Lucas  case is not authority for that proposition.75 
Bass v. Hawley, 62 F.2d 721 (5th Cir. 1933): 
Mr. Bass, the Collector of Internal Revenue, appealed a judgment
against him and in favor of Mr. Hawley who sought a recovery of an
income tax he paid in 1925. The question was whether $16,250
received by Hawley was a gift or additional compensation for
services. Bass, 62 F.2d at 721-722.
Mr. Hawley had for twenty-two years worked for the El Paso &
Southwestern Railroad Company. During a corporate buy-out of the
stock of that company, in order to “recognize the long and faithful
service of the officers and employees,--� the directors authorized the

payment of “additional compensation.--� Mr. Hawley received the
$16,250, and based upon certain lower court cases, argued that
since the payments were “over and above the wages and salaries
due--� and there was no obligation on the part of the railroad to pay
the additional money, that the money was a gift.
Bass,   62 F.2d at
The Court cited to cases holding to the contrary,76 and then stated
that “whether a payment in a given case shall be deemed taxable
compensation or a gift exempt from tax depends on the intention of
the parties and particularly that of the payer, to be determined from
the attending facts and circumstances.--�
Bass,  62 F.2d at 722-723.
In order to distinguish a gift from taxable income, the Court
correctly cited to the holding in
Eisner  that “[i]ncome that may be 
taxed includes gain derived from labor.--� 
Bass , 62 F.2d at 723. The
Court went on to say:
One who in the peace and under the protection of the
United States gainfully exercises his faculties of mind
or body may be called on to share the gain with the
public treasury. Section 213 of the Revenue Act of
1926 (26 USCA Section 954) here applicable includes
in gross income to be taxed “gains, profits and income
derived from salaries, wages, or compensation for
personal service * *
*   of  whatever  kind  and  in 
whatever form paid.--� 
Bass , 62 F.2d at 723.
The Court cites no authority for its first sentence quoted above, so
the reader is left to guess at what is meant. It appears the Court is
saying that working in a situation where the government provides
certain safeguards is a privilege and the tax is an excise on that
privilege.77 That would explain the reference to “receiving the
protection of the United States,--� but would exclude workers not
receiving such protection; that is, the privilege of working under
this protection would only exist where the United States has lawful
authority to give such protection, and that is in Washington D.C.,
the United States territories and other federal enclaves.78 The Court
went on to say:
It [the statute] excludes property acquired by “gift,
bequest, devise or inheritance.--� The intent is that all
receipts in whatever form that come because of labor
and service, whether payment could be compelled or
not, shall be taxed as arising from labor.
Bass , 62 F.2d at 723. 
Bass Court, in choosing the language quoted above, appears to
be stating that a conversion of labor into money always produces
income. In
Doyle,   the government contended that a conversion of
“capital--� into money always produces income, and the Supreme
Court held this was not necessarily so; it had to be determined
based upon the facts, after deducting from gross receipts an amount
sufficient to restore the capital value, whether there was a gain or
loss (see p. 128). Since “income--� is defined as “the gain derived
from capital, from labor, or from both combined,--� then by merely
substituting the word “labor--� for the word “capital--� in the
case one can easily see that the Bass   Court’s  wording,  if  taken 
literally, would be contrary to the theory of law as expressed by the 
United States Supreme Court. 
In  that  the  $16,250  was  over  and  above  the  employment  contract 
price  Mr.  Hawley  was  charging  the  railroad  for  his  services,  the 
bonus payment was indeed a “profit or gain derived from his labor,--� 
and  as  “income,--�  was  taxable  under  the  Sixteenth  Amendment. 
Thus  the  Bass  Court  reached  the  proper  conclusion  in  the  case 
before  it,  obviously  had  a  correct  understanding  of  the  applicable 
law, and it would appear clear that it did not intend to hold that an 
unapportioned  direct  tax  on  labor  was  authorized  under  the 
Sixteenth Amendment. 
A joint tenant holds an undivided interest in the whole property 
subject to an identical interest of each of the other joint tenants. 
The  Court  recognized  the  validity  of  the  contract  under 
California community property laws, 
Lucas,  281 U.S. at 114, thus
again confirming that salaries and fees constitute property.
It is the policy of the Supreme Court of the United States not to
address an opinion upon an issue not before it unless its
determination is necessarily involved in the adjudication of the
Sullivan  v.  Iron  Silver  Mining  Co.,   109  U.S.  550,  553 
On page 722 the Court admits that the Board of Tax Appeals and 
the Court of Claims had reached opposite conclusions as to the 
taxability of this type of payment. 
Brushaber  Court found the tax to be an indirect excise tax, 
Pollock  and  Eisner  found the income tax to be a direct tax. 
See United States Constitution, Article I, Section 8, Clause 17. 
Ward v. C.I.R., 159 F.2d 502 (2nd Cir. 1947): 
Ward is another case in which “additional compensation--� was
litigated. On a tax return filed in 1941, the Commissioner
determined a deficiency and issued a notice therefor. Mr. Ward
petitioned the Tax Court, lost the case, and filed an appeal.
159 F.2d at 502. 
Mr.  Ward  was  the  president  of  Fairchild  Engine  and  Airplane 
Corporation.  In  1941  a  deferred  refund  annuity  policy  was 
purchased  and  delivered  to  Mr.  Ward  as  additional  compensation 
for  services.  Prior  to  purchasing  the  annuity,  an  attorney  advised 
Fairchild  that  if  the  annuity  was  non-assignable,  Mr.  Ward  would 
not be taxed until he started to receive payments under it. In other 
words,  the  value  of  the  annuity  given  to  Mr.  Ward  as  additional 
compensation would not constitute income. 
Ward,  159 F.2d at 503-
Unfortunately, the annuity policy was not made nonassignable until 
1945 when the parties learned the Commissioner claimed the value 
of  the  annuity  policy  was  taxable  as  again  derived  from 
compensation  for  services.  At  that  time  it  was  “reformed--�  to 
conform to the original arrangement anticipated at the time of the 
purchase  of  the  annuity  policy.  
Ward,   159 F.2d at 503-504. The
Court clearly defined the issue of the case to be one of law as
On  these facts the decisive issue presented  on review 
is one of law. It is whether the policy which was not in 
1941  in  terms  restricted  as  to  assignability  was 
nevertheless non-assignable by the taxpayer from the 
date  of  delivery  because  his  employer  had  an 
enforceable  interest  in  it  which  would  have  enabled 
Fairchild  to  prevent  any  attempt  by  the  taxpayer  to 
“realize--� its assignable value in the taxable year of the 
policy’s receipt by him.79 
Ward, 159 F.2d at 504.
The Court pointed out that Mr. Ward had made no agreement to
continue to work for Fairchild after receipt of the policy, and that
the terms of his employment contract were unaffected by the terms
of the annuity policy.
Ward, id.
The Court concluded that since the annuity policy was assignable,
Mr. Ward could do with it as he liked, and the value of the policy
was taxable to Mr. Ward when he received it.
Ward, id.
This case in essence confirms that a receipt of something worth
value over and above payment as compensation for services as set
forth in an employment contract is a gain derived from
compensation for services, and is taxable as income. Whether or not
the compensation for services can be taxed or only the gain derived
from the compensation for services can be taxed was not in issue
and was not litigated.
With Fairchild as the owner of an assignable policy, it could
have asked Ward to return it and the policy could have been
given to someone else. Because of this option, Fairchild still had
an interest in the policy which precluded Ward from “realizing--�
the policy for his own separate use.
C.I.R. v. Glenshaw Glass Co., 348 U.S. 426 (1955): 
The issue involved in the 
Glenshaw Glass  case was whether money
received as exemplary damages for fraud or as the punitive two-
thirds portion of a treble-damage antitrust recovery had to be
reported by a taxpayer as gross income under Section 22(a) of the
Internal Revenue Code of 1939.
Glenshaw  Glass,   348 U.S. at 427.
The Glenshaw Glass Company did not raise any constitutional
objections to the imposition of a tax on punitive damages, so the
question before the Supreme Court was one of statutory
construction: Did the punitive damages that the Glenshaw Glass
Company received after suing the Hartford-Empire Company fall
within the definition of gross income as defined in Section 22(a)?
Glenshaw Glass,  348 U.S. at 426.
The Court quoted Section 22(a), and emphasized the following
bold-faced words: “Gross income includes ... gains or profits and
income80 derived from any source whatever .... The Court stated
that this language was used by Congress to exert “the full measure
of its taxing power,--� and stated that the Court had given a liberal
construction to this broad phraseology in recognition of the
intention of Congress to tax all gains except those specifically
exempted. The Court found that the punitive damage payments
were noncompensatory in nature, they constituted an undeniable
accession to wealth, clearly realized, and were such that the
taxpayer had complete dominion over them. Finding such
payments to thus constitute a “gain,--� the Court held that the gain
fell  within  the  provisions  of  Section  22(a)  above  bold-faced. 
Glenshaw Glass, id.  
Glenshaw  Glass   case does not stand for the proposition that
wages constitute income--"the case did not involve wages; the case
stands for the direct proposition that punitive damages constitute a
gain which falls within the definition of gross income, and for the
indirect proposition that Congress intended to tax all receipts
constitutionally taxable. With respect to the Sixteenth Amendment,
those taxable receipts are those which represent a profit or a gain,
not an equal exchange.
It is interesting to note that under the Internal Revenue Code of 
1939,  the  definition  of  gross  income  used  the  words  “gains  or 
profits and income.--� When the 1954 Internal Revenue Code was 
enacted,  the  words  “gains  or  profits--�  were  omitted  from  the 
definition of gross income as being unnecessary. 
Penn Mutual Indemnity Company v. C.I.R., 277 F.2d 16
(3rd Cir. 1960):

This case involved an insurance company which had filled out a
Form 1120M reporting an income tax due of $12,566.76. Attached
to the form was a letter from an attorney advising the I.R.S. that the
company was taking the position that the imposition of an income
tax against it was invalid and unconstitutional.
Penn Mutual, 277
F.2d at 17. The tax was imposed by Section 207(a)(2) of the Internal
Revenue Code of 1939, and the relevant portion of that section was
one which imposed a one percent tax upon the taxpayer’s “gross
amount of income from interest, dividends, rents, and net
premiums,--� minus dividends to policyholders and tax-exempt
interest; “net premiums--� were defined as the total premiums
written or received less return premiums.
Penn Mutual,  277 F.2d at
Penn Mutual, for the year in question, did not make a profit. In fact,
it had underwriting losses of $206,198.12 in excess of its “gross
amount of income from interest, dividends, rents, and net
premiums.--� It argued, therefore, that there being no profit or gain,
there could be no “income tax--� due. Accordingly, it did not pay the
tax shown as due on the Form 1120M.
Penn Mutual,  277 F.2d at 17-
In support of this argument Penn Mutual contended that since the 
tax-imposing  provisions  relied  on  [Section  207(a)(2)]  occurred  in 
the middle of an income tax statute and were labeled by Congress as 
“income tax--� provisions, the sole  test of their validity was whether 
the provisions of the statute taxed “income--� within the meaning of 
the Sixteenth Amendment. 
With respect to this argument the Court stated: 
We  think  petitioner’s  argument  imposes  tighter 
restrictions on the federal taxing power than a century 
and a half of court decisions warrant. 
Perm Mutual,  277 F.2d at 19.
The Court did not identify the “court decisions--� it contended
allowed for an income tax on something other than income.
Instead, the Court first stated that the taxing power of Congress
granted by Article I of the Constitution was exhaustive and
embraced every conceivable power of taxation subject only to the
requirement of apportionment for direct taxes, uniformity for
indirect taxes and the prohibition of placing export duties on
articles exported from the States, citing
Brushaber  and the United 
States  Constitution  as  authority  for  these  statements.  The  Court 
then stated that it did not take a constitutional amendment to allow 
Congress to impose an income tax citing to 
Pollock,  and then stated 
that  the  Sixteenth  Amendment  removed  the  requirement  for 
apportionment  of  the  income  tax,  citing  to  the  Sixteenth 
Amendment.  Finally,  the  Court  stated  that  the  requirement  for 
apportionment  was pretty well strictly limited to taxes on real and 
personal  property  and  capitation  taxes,  citing  to  
Hylton  v.  United 
3 U.S. 171 (1796); Springer  v.  United  States,   102 U.S. 586
(1880); and
Pollock. Penn Mutual,  277 F.2d at 19.
All of these contentions are correct, but do not add up to the
proposition that Congress can tax as income something that is not a
profit or gain. The United States Supreme Court made it abundantly
clear in
Smietanka,   255 U.S. at 519-520, that the word “income--�
was to have the same meaning in all of the income tax acts passed
by Congress as it had in the Act of 1909. As previously set forth

hereinabove (see p. 144), that definition of income is a profit or
The failure of the Court in
Penn Mutual to abide by the Supreme
Court’s decisions defining income renders its decision fatally
defective as contrary to established law. In any event, the case did
not involve wages and hence, does not stand for the proposition
that wages constitute income.
C.I.R. v. Daehler, 281 F.2d 823 (5th Cir. 1960): 
The  issue  before  the  Court  in  
Daehler   was whether a real estate
salesman’s commission on the sale of a house that the salesman
bought for himself constituted taxable income under Section 22(a)
of the Internal Revenue Code of 1939.
Daehler, id. Mr. Daehler
made an offer to purchase certain real estate for himself. After the
sale was consummated, the brokers for the seller and the buyer (the
real estate broker for whom Mr. Daehler worked) split a ten percent
commission, and Mr. Daehler’s employer paid Mr. Daehler his
proportionate share which he did not include in his tax return as
income. The Tax Court held that since Mr. Daehler bought the
house for himself, he was not acting as a salesman, and the amount
that he received was a reduction in the purchase price as opposed to
a commission.
Daehler,  281 F.2d at 824.
The Court of Appeals reversed holding that the amount Mr. Daehler
received from his employer was compensation for the actions he
performed growing out of the employer-employee relationship, and
that compensation for such services is taxable income81 of whatever
kind and in whatever form it is received.
Daehler,  281 F.2d at 824-
Mr. Daehler did not contest whether such commissions constituted 
income from the perspective of gain or profit, and the case did not 
involve the issue of whether wages constitute income. The issue not 
being raised in the case, 
Daehler  does not constitute precedent for 
the issue of whether wages constitute income. 
C.I.R. v. Mendel, 351 F.2d 580 (4th Cir. 1965): 
Dr. Mendel was a physician who, at the request of his employer,
moved from Newark, New Jersey, to Richmond, Virginia. He had
been employed in New Jersey for four years prior to the move. He
incurred moving expenses in the amount of $558.99 for which he
was reimbursed $316.00 by his employer. Dr. Mendel “deducted--�
the difference from his gross income, and the deduction was not
allowed by the Commissioner. The issue was taken to the Tax Court
where it was held the deduction was permissible under Rev. Ruling
54-429, 1954-2 Cum.Bull. 53.
Mendel,  351 F.2d at 581-582. 
The Court of Appeals held that the Tax Court had proceeded upon 
an  erroneous  basis.  The  Tax  Court  had  interpreted  the  Revenue 
Ruling as meaning that reasonable expenses incurred in relocating 
were  business  expenses,  and  could  be  deducted  from  total  gross 
income.  The  Court  of  Appeals  felt  Revenue  Ruling  54-429  did  not 
stand  for  the  proposition  that  moving  expenses  were  a  business 
expense,  but  stood  for  the  proposition  that  reimbursed  moving 
expenses  did  not  constitute  gross  income.  Under  this  analysis,  the 
$361.00  would  not  be  taxed  as  gross  income,  but  no  deduction 
would  be  allowed  for  the  difference  between  the  amount 
reimbursed and the total cost of the move. 
Mendel,  351 F.2d at 582.
As the basis for its ruling, the Court of Appeals first cited to the
theory expressed in
United  States  v.  Woodall,   255  F.2d  370  (10th 
Cir. 1958), that: 
[A]ny  economic  or  financial  benefit  conferred  on  an 
employee  as  compensation  is  gross  income,  and  that 
there  may be deducted  from gross income only those 
expenditures  expressly  made  deductible  by  statute. 
Ordinarily,  reimbursement  for  moving  expense  to  an 
existing  employee  would  constitute  gross  income 
under  the  comprehensive  definition  in  Section  61  (a) 
of the Revenue Code of 1954 that, “* * * gross income 
means  all  income  from  whatever  source  derived, 
including (but not limited to) 
* * *  Compensation for 
services,  including  fees,  commissions,  and  similar 
items * 
* *.--�  
Mendel,  351 F.2d at 582 
and then indicated its belief that: 
Rev.Ruling  54-429,  
supra,   sought  to  alleviate  the 
rigors  of the application of the statutory  definition of 
gross  income  to  reimbursement  for  moving  expenses 
to an existing employee. An examination of the ruling 
discloses  that  its  rationale  is  that  reimbursement  for 
moving  expenses  does  not  constitute  gross  income, 
not,  as  the  Tax  Court  determined,  that  expenses  of 
relocation are per se deductions for the employee. 
Mendel,  351 F.2d at 582.
That Section 61 (a) does not include compensation for services in
gross income, only the profit or gain derived from compensation for
services has been established above. Thus Revenue Ruling 54-429
was not for the purpose of alleviating the rigors of the application of
the statutory definition of gross income as contended by the Court,
but for the purpose of bringing the administration of the law into
conformity with the statutory definition. This is the only possible
conclusion based not only upon the law, but from the long-standing
Constitutional principle that the I.R.S. cannot change legislation by
revenue rulings.82
United States v. Rochelle, 384 F.2d 748 (5th Cir. 1967): 
Mr.  Addison  was  a  promoter.  He  and  his  associates  obtained 
“loans--�  to  finance  various enterprises from  people  based  upon  the 
assurance  that  the  loaners  would  get  their  money  back  together 
with a part interest in the enterprise which would produce a profit. 
No  such  enterprises  existed,  and  an  involuntary  petition  in 
bankruptcy was filed by the creditors who had loaned the money.
The I.R.S. asserted that the money loaned constituted income, and
filed a claim against the bankruptcy estate for income taxes.
Rochelle,   384 F.2d at 749-750. The issue before the Court was
stated as follows:
When an individual secures money from many third
parties by false representations, and when such funds
constitute his sole source of support for several years,
do these sums constitute taxable income, under
notwithstanding the fact that the transactions are in
the form of loans.
Rochelle,  384 F.2d at 751.
The Court stated:
The proper labeling for tax purposes of various kinds
of ill-gotten gains has long been a vexing question for
the federal courts. In dealing with it, we keep in mind
the admonition that in enacting what is now section
61 of the tax code, Congress meant “to use the full
measure of its taxing power--� under the Sixteenth
Helvering v. Clifford,  309 U.S. 331, 334. 
The  Supreme  Court,  after  many  years  of  hesitation, 
has  now  firmly  concluded  that  the  economic  benefit 
accruing  to  the  taxpayer  is  the  controlling  factor  in 
determining  whether  a  gain  in  “income.--�  
Rutkin   v. 
United  States,   343  U.S.  130  [1952];   Commissioner  v. 
Glenshaw  Glass  Co.,  
248 U.S. 426; James  v.  United 
366  U.S.  213.  A  loan  does  not  in  itself 
constitute  income  to  the  borrower,  because  whatever 
temporary  economic  benefit  he  derives  from  the  use 
of  the funds is offset by the corresponding obligation 
to repay them.  See,  
James v. United  States,  266 U.S.
at 219. Where the loans are obtained by fraud, and
where  it  is  apparent  that  the  recipient  recognizes  no 
obligation  to  repay,  the  transaction  becomes  a 
“wrongful  appropriation--�  [and  comes]  within  the 
broad  sweep  of  “gross  income.--�  [Emphasis  in 
Rochelle,  384 F.2d at 751. 
The  “economic  benefit--�  mentioned  in  
Glenshaw  Glass   was  the 
punitive damages awarded to the Glenshaw Glass Company, which 
the Court concluded were a “gain--� (see p. 159). The issue before the 
Supreme  Court  in  
Rutkin,   was  whether  money  obtained  by 
extortion is income taxable to the extortioner under Section 22(a) of 
the  Internal  Revenue  Code.  
Rutkin,   343 U.S. at 131. The Supreme
Court found that extorted funds do constitute a gain and are
includible within the statutory definition of gross income.
343 U.S. at 137. The issue before the Supreme Court in  James was
whether embezzled funds were to be included in the gross income
of the embezzler in the year in which the funds were
misappropriated under Section 22(a) of the 1939 Internal Revenue
Code and Section 61(a) of the 1954 Internal Revenue Code.
266 U.S. at 213-214. The Supreme Court, relying upon Rutkin, 
found that embezzled funds were a gain, and hence taxable.  James, 
266 U.S. at 218-219.
These cases may be cited for the proposition that unlawful gains are
as taxable as lawful gains, but in that none of them addressed the
issue as to whether wages constitute income,
Rochelle   does  not 
constitute legal precedent for that issue. 
Marks v. United States, 391 F.2d 210 (9th Cir. 1968): 
Mr. Marks was convicted of federal income tax evasion for the year
1961; his tax return showed no taxable income while the
government contended the return should have shown a taxable
income. Mr. Marks contended that four specific items were not
gross income but rather loans. The Court recognized that the
defendant presented evidence that showed on its face that the four 
transactions  were  loans,  but  also  found  that  the jury  had evidence 
in  front  of  it  to  conclude  the  transactions  were  not  loans.  The 
government  contended  that  the  amounts  received  were  either 
compensation for services or money obtained by Marks under false 
Marks,  391 F.2d at 210-211.
With respect to the government’s contentions, the Court stated that:
“[e]ither is taxable--� and footnoted to 26 U.S.C. Section 61 and
Rochelle.  Marks,   391  F.2d  at  211.  It  has  already  been  shown  that 
compensation  for  services  does  not  constitute  gross  income  under 
Section 61; rather, the profit or gain derived from compensation for 
services  constitutes  gross  income  under  Section  61.  And  as  shown 
above, the 
Rochelle  case did not involve the issue of whether wages 
constitute  income.  Thus,  the  
Marks   case  does  not  support  the 
conclusion that wages constitute income. 
Wilson v. United States, 412 F.2d 694 (1st Cir. 1969): 
Mr. Wilson, a police officer, ate one meal per day, during his work
period, in a restaurant away from home. He was reimbursed the
cost of these meals by his employer. Mr. Wilson contended these
amounts were excluded from gross income by virtue of Section 119
which excluded from gross income the value of any meals furnished
by an employee by the employer for the convenience of the
employer if the meals are furnished on the business premises of the
Wilson,  412 F.2d at 695.
The entire case turned around the wording of Section 119 and the
legislative intent of Congress in enacting it. However, the Court
made one statement, wholly unsupported by any citation to case
law or statute, that:
We start with the proposition that all remuneration
received for services is gross income unless it falls
within a specific exclusion.
Wilson,  412 F.2d at 695.
This is the exact contention that the Supreme Court found
untenable in
Doyle,  247 U.S. at 183-184 (see p. 128). Remuneration
for services can only constitute gross income if there is a profit or
gain derived from that remuneration. The
Wilson   case stands for
the principle that reimbursement for meals off the premises of the
employer is not deductible as a business expense, not for the
principle that remuneration for services constitutes income. The
dicta   of  the   Wilson   Court is not supported by case law and is
contrary to the
Doyle  decision by the United States Supreme Court. 
Wilson   case  does  not  support  the  proposition  that  wages 
constitute income. 
The use of the term “taxable income--� by the Court of Appeals
was technically incorrect. Taxable income is adjusted gross
income less certain statutory deductions, and adjusted gross
income is gross income less certain statutory deductions.
Morrill v. Jones,  106 U.S. 466, 467 (1882);  U.S. v. 
200 Barrels of Whiskey, 
95 U.S. 571, 576 (1887). 
United States v. Silkman, 543 F.2d 1218 (8th Cir. 1976): 
Mr. Silkman, representing himself, appealed an order of the District
Court directing his compliance with an I.R.S. summons seeking
certain records with respect to the 1973 and 1974 tax years. One of
his contentions in seeking not to comply with the summons was
that he was not an individual required to pay taxes because he was
engaged in the common law occupations of farming and ranching.
In rejecting this contention, the Court stated:
Finally, we find no merit in the taxpayer’s contention
that he is not an individual required to pay taxes
because he is engaged in the common law occupations
of farming and ranching. The Sixteenth Amendment
broadly grants Congress the power to collect an
income tax regardless of the source of the taxpayer’s
Silkman,  543 F.2d at 1220.
The basis for Mr. Silkman’s legal argument, if he made any, was not
set forth in the opinion, nor did the Court cite to any case law or
give any hint as to the basis of the Court’s legal analysis of Mr.
Silkman’s argument. In any event, the case does not stand for the
proposition that wages constitute income, as “wages--� are not even
mentioned in the case. As to the Court’s statement that the
Sixteenth Amendment broadly grants Congress the power to collect
an income tax regardless of the source of the taxpayer’s income,
there is no argument. A tax on one’s labor, however, as has been
shown herein, is not a tax on income!
Reading v. C.I.R., 70 T.C. 730 (1978): 
Mr. Reading, representing himself and his wife in Tax Court, argued 
that  Congress,  by  denying  deductions  for  personal,  living,  and 
family  expenses  in  the  computation  of  taxable  income,  had 
exceeded  its  authority  under  the  Sixteenth  Amendment  to  the 
Constitution  to  lay  and  collect  taxes  on  “incomes.--�  Citing  the 
definition of income in 
Eisner,  he argued that the “gain--� from labor 
could not be determined until their “cost of doing labor,--� 
i.e.,  their
expenditures at issue, had been subtracted from the amount
received from the sale of labor. He attempted to support this
contention by making an analogy between the “living expenses--� of
one who depends upon the sale of his services for his livelihood
with the “cost of goods sold--� concept in certain business contexts.
Reading,  70 T.C. at 732. The Court stated: 
Nevertheless, accepting the conclusion that some kind 
of “gain--� must be realized for there to be income, the 
flaw in petitioners’ analogy of what they call the “cost 
of  doing  labor--�  to  the  “cost  of  goods  sold--�  concept--"
essentially  its  failure  to  acknowledge  the  difference 
between  people  and  property--"may  be  shown.  The 
“cost  of  goods  sold--�  concept  embraces  expenditures 
necessary  to  acquire,  construct  or  extract  a  physical 
product  which  is  to  be  sold;  the  seller  can  have  no 
gain  until  he  recovers  the  economic  investment  that 
he  has  made  directly  in  the  actual  item  sold. 
[Citations.]  Labor,  on  the  other  hand,  is,  in  the 
current context, behavior performed by human beings 
in  exchange  for  compensation.  One’s  living  expenses 
simply  cannot  be  his  “cost--�  directly  in  the  very  item 
i.e.,   his labor, no matter how much money he
spends to satisfy his human needs and those of his
family. Of course we recognize the necessity for

expenditures for such items as food, shelter, clothing,
and proper health maintenance. They provide both
the mental and physical nourishment essential to
maintain the body at a level of effectiveness that will
permit its labor to be productive. We do not even deny
that a certain similarity exists between the “cost of
doing labor--� and the “cost of goods sold--� concept. But
the sale of one’s labor is not the same creature as the
sale of property, and whether the distinction comports
with petitioners’ philosophical rationalization for their
argument, it is recognized for Federal income tax
purposes. See
Hahn  v.  Commissioner,   30 T.C. 195
(1958), affd. per curiam 271 F.2d 739 (5th Cir. 1959).
One’s gain, ergo his “income,--� from the sale of his
labor is the entire amount received therefor without
any reduction for what he spends to satisfy his human
needs. [Emphasis in original.]
Reading,  70 T.C. at 733-734. 
Hahn,  the sole issue before the Tax Court was whether Mr. Hahn 
could  claim  his  parents  as  dependents  in  1952.  
Hahn,   30 T.C. at
195. Mr. Hahn claimed a $600 deduction for each of his parents on
his income tax return, having paid more than half of their support
during the year. The deduction was only permissible if each of his
parent’s gross income was under $600. The I.R.S. reviewed his
parents tax return, where at Schedule C, it was shown that the
senior Mr. Hahn was a blacksmith, and that he had deducted a
certain amount for costs of goods sold. The I.R.S. contended that
inasmuch as the senior Mr. Hahn was a blacksmith he had no
merchandise to sell; therefore, the expenses would not be deducted
from gross receipts in computing gross income, but would be
deducted from gross income in the computation of adjusted gross
income. The I.R.S. disallowed the deductions as “cost of goods sold,
such that each of the parents had more than $600 of gross income
under the Texas community property laws.
Hahn,   30  T.C.  at  197. 
The Tax Court found that the senior Mr. Hahn was not engaged in 
manufacturing but in providing services, and agreed with the I.R.S. 
that the expenses were deductible as business expenses from gross 
Hahn case  did  not  involve  the  issue  of  whether  wages 
constitute  income.  While  the  Court  did  distinguish  between  those 
expenses  which  are  deducted  from  gross  receipts  to  obtain  gross 
income  when  manufacturing  is  involved  from  those  business 
expenses  deducted  from  gross  income  to  arrive  at  adjusted  gross 
income,  the  conclusion  of  the  
Reading Court  that  everything  that 
comes in  to a wage earner  constitutes income  does  not  necessarily 
follow. This conclusion was rejected by the Supreme Court in 
(see p. 128). 
Reading  Court then quoted from the Supreme Court as follows:
For income tax purposes Congress has seen fit to
regard an individual as having two personalities: “one
is [as] a seeker after profit who can deduct the
expenses incurred in that search; the other is [as] a
creature satisfying his needs as a human and those of
his family but who cannot deduct such consumption
and related expenditures.--�
United  States  v.  Gilmore , 372 U.S. 39,
44 (1963).
Gilmore,  the question before the Court involved the deductibility
for federal income tax purposes of that part of the husband’s legal
expense incurred in such proceedings as was attributable to his
successful resistance of his wife’s claims to certain of his assets
asserted by her to be community property under California law.
Gilmore,  372 U.S. at 40. 
The  bulk  of  Mr.  Gilmore’s  property  consisted  of  controlling  stock 
interests  in  three  corporations,  each  of  which  was  a  franchised 
General Motors automobile dealer. Mr. Gilmore was president and 

principal managing officer of the three corporations. His overriding
concern in the divorce litigation was the protection of those assets
against the claims of his wife because he believed that if he lost
controlling interest by transferring one-half of the shares to his
wife, he might lose his corporate position which was the main
source of his livelihood.
Gilmore,  372 U.S. at 41-42.
Mr. Gilmore won the divorce action. He claimed his legal fees as a
deduction on his income tax return as an expense “incurred ... for
the ... conservation ... of property held for the production of
income--� under Section 23(a)(2) of the 1939 Internal Revenue Code.
Gilmore,   372  U.S.  at  43.  The  government  contended  that  the  test 
under Section 23(a)(2) as to whether the expenses were personal or 
for the conservation of income-producing property turned not upon 
consequences   of  Mr.  Gilmore’s  failure  to  defeat  his  wife’s 
community  property  claims,  but  upon  the  
origin   and   nature of
the claims themselves. The government contended that the expense
of defeating his wife’s claim against the stock must be deemed
nondeductible “personal--� or “family--� expense under Section
24(a)(l) of the Code, not deductible expense under Section 23(a)(2)
of the Code.
Gilmore,  372 U.S. at 43-44.
It was in this context that the
Gilmore   Court  made  the  statement 
quoted  by  the  
Reading Court. In resolving the issue against Mr.
Gilmore, the Supreme Court stated:
A basic restriction upon the availability of a Section
23(a)(l) deduction is that the expense item involved
must be one that has a business origin. That
restriction not only inheres in the language of Section
23(a)(l) itself, confining such deductions to “expenses
... incurred ... in carrying on any trade or business,--�
but also follows from Section 24(a)(l), expressly
rendering nondeductible “in any case ... [p]ersonal,
living, or family expenses.--�
Gilmore,  372 U.S. at 46. 
The Court also said: 
[T]he characterization, as “business--� or “personal,--� of 
the  litigation  costs  of  resisting  a  claim  depends  on 
whether or not the claim 
arises in connection with 
the  taxpayer’s  profit-seeking  activities.  It  does  not 
depend  on the  
consequences   that might result  to a 
taxpayer’s  income-producing  property  from  a  failure 
to defeat the claim, ... [Emphasis in original.] 
Gilmore,  372 U.S. at 48. 
Gilmore   case did not adjudicate the issue of whether or not
wages constitute income.
Mr. Reading attempted to deduct personal expenses from his gross
receipts to arrive at his gross income, and the decision of the
Reading Court was that such deductions from gross receipts were
not permissible. The issue of whether wages constitute income was
not before the Court, and its unsupported statement that gross
receipts is the same as income was
dicta.   The   Reading Court also
stated that the sale of one’s labor is not the same creature as the
sale of property. It is interesting to note that in the case of
Adkins v. 
Children’s  Hospital,  
261 U.S. 525 (1922), involving the
constitutionality of a law providing for the fixing of minimum wages
for women and children in the District of Columbia, the Supreme
Court stated, although not in discussing income taxes:
In principle, there can be no difference between the
case of selling labor and the case of selling goods.
Adkins,  261 U.S. at 558.
Perhaps as to the deductibility of personal expenses being on the
same footing as the deductibility of cost of goods sold, the Court is
correct. But the Supreme Court has specifically stated that the sale
of one’s labor constitutes personal property (see p. 85). And while

personal expenses may not be deductible from gross income, the
Internal Revenue Code specifically provides that only the amount
received in excess of the fair market value of personal property
upon its sale constitutes gain. (See 26 U.S.C. Sections 1001
et seq. )
And even the
Reading Court  recognized  that  only  gain  constitutes 
United States v. Russell, 585 F.2d 368 (8th Cir. 1978): 
Mr. Russell, representing himself, appealed his conviction on two
counts of failing to file federal income tax returns. As part of his
appeal, he challenged the constitutionality of the entire tax law; the
Court used the following language in stating Mr. Russell’s
In addition, Russell’s constitutional challenge of the
entire tax law,
i.e.,   earnings  from  the  exercise  of  his 
“common  law  right  to  work--�  cannot  be  taxed  under 
the  Sixteenth  Amendment,  also  fails,  because  “[t]he 
Sixteenth  Amendment  broadly  grants  Congress  the 
power  to  collect  an  income  tax  regardless  of  the 
source  of  the  taxpayer’s  income.--�  
United  States  v. 
Silkman, supra, 
543 F.2d at 1220. 
Russell,  585 F.2d at 370. 
Russell   case  relies  entirely  upon  the   Silkman   case,  which  as 
shown immediately above, does not stand for the legal proposition 
that  wages  constitute  income.  Both  
Russell   and   Silkman,   to the
extent they warrant consideration as binding opinions, only stand
for the proposition that income can be taxed even if the income is
derived from certain occupations that were recognized in the
common law. The cases do not stand for the proposition that the
source of the income can be taxed.
Adams v. United States, 585 F.2d 1060 (Ct. Cls. 1978): 
The Adams case involved a tax refund suit in which the issue was
whether the fair rental value of a Japanese residence furnished to
Mr. Adams by his employer was excludable from Mr. Adams’ gross
income. Adams, 585 F.2d at 1061. Mr. Adams was the president of a
corporation located in Japan, which corporation was wholly owned
by his employer, Mobil Oil Corporation. In order to maintain
prestige in the Japanese business community, Mobil thought it
important that Mr. Adams live in an appropriate house. Therefore,
the corporation of which Mr. Adams was the president purchased a
house in Japan and required that Mr. Adams live in it. The house
was also designed so that it could accommodate the business
activities of Mr. Adams, and he frequently conducted business
there. The policy of Mobil, in order to attract qualified employees
for foreign service and to maintain an equitable relationship
between its domestic and American foreign-based employees, was
to calculate a “U.S. Housing Element--� for each American foreign-
based employee, and to subtract that amount from the employee’s
salary. If Mobil provided housing to the employee, the employee
would include in his gross income for federal tax purposes the U.S.
Housing Element amount.
Adams,  585 F.2d at 1062.
Mr. Adams included in his gross income for federal tax purposes, as
the value of the housing furnished him by his employer, the U.S.
Housing Element amounts which had been subtracted from his
gross salary, totaling $4,439 for 1970 and $4,824 for 1971.
However, because the cost of housing in Tokyo those years was
considerably higher than that in the United States, the fair rental
value of the residence furnished to Mr. Adams, it was agreed
between the parties, was $20,000 in 1970 and $20,599.09 in 1971.
The I.R.S., after auditing Mr. Adams for 1970 and 1971, increased
his gross income by the difference in the amounts between the U.S.
Housing Element and the fair market value of the house, and
assessed an additional $914.24 plus interest. Mr. Adams paid the
tax and sought a refund.
Adams,  585 F.2d at 1062-1063. 

Mr. Adams did not contest whether the difference between the U.S.
Housing Element and the fair market value of the residence
constituted income to him, but contended that since the house was
furnished to him by his employer for the convenience of the
employer, the amount was specifically excluded from gross income
under Section 119 of the Internal Revenue Code of 1954, and the
Court of Claims agreed.
Adams,  585 F.2d at 1063.
While the Court of Claims cited Section 61(a)(l) of the Internal
Revenue Code and Section 1.61-2(d)(l) of the Treasury Regulation
for the proposition that “[i]f services are paid for other than in
money, the fair market value of the property or services taken in
payment must be included in income,--� the statement of the Court
dicta.  The issue as to whether wages constitute income was not
before the Court; and because that issue was not litigated, the
Adams case is not binding precedent for the contention that wages 
constitute income. 
United States v. Francisco, 614 F.2d 617 (1980): 
Mr. Francisco was charged with three counts of failure to file
income tax returns and was convicted. On appeal, his first
contention was that the government failed to prove the receipt of
gross income sufficient to require the filing of a return under
Section 6012.83 The Court found this argument to be without merit
in that Mr. Francisco had stipulated to receiving “gross
compensation on sales--� for each year in question, which figures
were calculated by subtracting the cost of goods sold from total
sales. Citing
United States v. Ballard,  535 F.2d 400, 404-405 (8th 
Cir. 1976), the Court stated that gross income for merchants is the 
amount  representing  gross  receipts  less  the  cost  of  goods  sold. 
Francisco,  614 F.2d at 618.
Mr. Francisco also raised a constitutional challenge to his
conviction based upon two theories: 1) the income tax was an
indirect tax; and (2) income received in exchange for labor or
services was not income within the meaning of the Sixteenth
Francisco,   614  F.2d  at  619.  As  to  the  first  argument, 
the Court stated: 
The cases cited by Francisco clearly establish that the 
income tax is a direct tax, thus refuting the argument 
based  upon  his  first  theory.  See,  
Brushaber  v.  Union 
Pacific  Railroad  Co.,  
240  U.S.  1,  19  (1916)  (the 
purpose of the Sixteenth Amendment was to take the 
income tax “out of the class of excises, duties and
imposts and place it in the class of direct taxes.--�)
Francisco,  614 F.2d at 619. 
The  Court,  unfortunately,  did  not  elucidate  in  its  opinion  what 
theory  Mr.  Francisco  raised.  However,  the  Court’s  statement  as  to 
the purpose of the Sixteenth Amendment is exactly the opposite of 
what the 
Brushaber  Court stated was the purpose of the Sixteenth
Second, that the contention that the Amendment
treats a tax on income as a direct tax although it is
relieved from apportionment and is necessarily
therefore not subject to the rule of uniformity as such
rule only applies to taxes which are not direct, thus
destroying the two great classifications which have
been recognized and enforced from the beginning, is
also wholly without foundation since the command of
the Amendment that all income taxes shall not be
subject to apportionment by a consideration of the
sources from which the taxed income may be derived,
forbids the application to such taxes of the rule
applied in the
Pollock   case by which alone such 
taxes  were  removed  from  the  great  class  of 
excises, duties and imposts subject to the rule 
of uniformity and were placed under the other 
or direct class. 
[Emphasis added.] 
Brushaber,  240 U.S. at 18-19.
It is thus beyond peradventure that the
Francisco   case  can  carry 
any credibility whatsoever when the Court of Appeals so completely 
disregarded the holding of the United States Supreme Court in the 
Brushaber  case. 

The Court of Appeals next held that Mr. Francisco’s argument
based upon his challenge that income received from labor or
services was not income that was taxable under the Sixteenth
Amendment was inappropriate because Mr. Francisco stipulated to
receiving “gross compensation on sales.--� The Court also stated that
Mr. Francisco’s argument was invalid because Congress intended to
tax income from whatever source derived.
Francisco,   614 F.2d at
619. The Court of Appeals was correct in its assertion that Congress
did intend to tax income from whatever source derived, including
labor or personal services, but that is not the same as saying money
received in exchange for labor or services is income. To constitute
income, there must be a profit or gain.
Hayward v. Day, 619 F.2d 717 (8th Cir. 1980): 
Mr. Hayward was convicted by a jury of four counts of failure to file
income tax returns. The Eighth Circuit Court of Appeals affirmed
that conviction in an unpublished opinion. Thereafter, and
representing himself, he sought post-conviction relief through a
petition under 28 U.S.C. Section 2255. That petition was dismissed
without a hearing, and he filed this appeal from that denial. Mr.
Hayward represented himself.
Hayward,  619 F.2d at 717.
On appeal, he contended that an income tax on wages was illegal as
a direct tax on the source of income. The Court of Appeals, citing
Brushaber  and  Francisco,  held the appeal to be frivolous because: 
Congress clearly intended to tax income regardless of 
the Source. 
Hayward,  619 F.2d at 717. 
Mr.  Hayward,  in  contending  that  an  income  tax  on  wages  was 
illegal  as a direct tax on the source of income, never contested the 
fact that Congress did clearly intend to tax income regardless of the 
source.  But  that  does  not  automatically  change  gross  receipts  into 
gross income, as recognized by the Supreme Court in 
Doyle  (see p. 
128).  The  
Hayward case cannot constitute legal precedent for the
conclusion that “wages--� are income because not only did the Court
not address that issue, but it relied upon the flawed opinion
rendered by the
Francisco  Court. 
Broughton v. United States, 632 F.2d 707 (8th Cir. 1980): 
Michael A. Broughton filed a lawsuit in Federal District Court
seeking a refund of income taxes paid in 1976 and 1977. The basis of
his claim for refund in the District Court was identical to the single
issue he raised on appeal:
He is not a person required to pay taxes because the
wages he received as compensation for services in
1976 and 1977 are not subject to tax, and taxing those
wages would be unconstitutional as a direct tax that is
not apportioned among the states.
Broughton,  632 F.2d at 707.
The District Court had granted the government’s motion to dismiss
Mr. Broughton’s complaint such that no trial on the merits would
take place, and Mr. Broughton filed an appeal to challenge the
validity of the dismissal of his complaint. In upholding the District
Court’s dismissal, the Court of Appeals, citing
Brushaber,   stated 
that  the  Sixteenth  Amendment  authorizes  the  imposition  of  an 
income  tax  without  apportionment  among  the  States.  
As pointed out in detail above,  Brushaber  stated the income tax
was an excise tax that did not require apportionment. However,
Eisner   stated the Sixteenth Amendment authorized the imposition
of an income tax without apportionment among the States; the
statement of the
Broughton   Court,  although  wrongly  cited,  is 
The Court then went on to say: 
Income  includes  wages  or  compensation  received  for 
services  performed,  and  taxpayer’s  contention  is 
frivolous and totally devoid of merit. 
Broughton,  632 F.2d at 707. 
To  support  this  conclusion,  the  Court  cited  to  
Hayward and  to 
Francisco.   As  has  been  demonstrated  above  at  pages  185  and  183 
respectively,  those  cases  do  not  constitute  valid  legal  authority  for 
the proposition that  wages or compensation for services  constitute 
income.  Section  61(a)(l)  of  the  Internal  Revenue  Code  clearly 
includes  the  income  [profit  or  gain]  “derived  from--�  compensation 
for  services  in  “gross  income,--�  but  equally  as  clearly,  does  not 
discuss  wages  or  include  compensation  for  services  itself  in  gross 
income. Having relied entirely on unsupported case law as binding 
legal  precedent,  the  
Broughton   opinion  cannot  constitute  legal 
United States v. Buras, 633 F.2d 1356 (9th Cir. 1980): 
Mr. Buras was convicted on four counts of willful failure to file
income tax returns under 26 U.S.C. Section 7203. For eight years
preceding 1974, he filed income tax returns in which he listed his
wages as income. During this period of time he also had income
taxes withheld from his wages. After concluding that he was not
obligated under the tax laws to report his wages as income, Mr.
Buras did not file tax returns for the years 1974 through 1978, and
filed withholding exemption certificates (Form W-4E) such that no
taxes would be withheld from his wages.
Buras,  633 F.2d at 1358. 
Prior to trial, Mr. Buras filed a pretrial motion asking for a judicial 
hearing to determine whether wages were income. The motion was 
denied. Mr. Buras then stipulated that during the period in question 
he had earned wages in excess of the amount of gross income which 
would obligate an individual to file a return, and further stipulated 
that he did not file any returns. 
Buras, id.  
The Court considered these stipulations to be an admission of proof 
that two out of the three elements of the offense of failure to file84 
were conceded: 
Thus, the  only disputed element  under I.R.C. Section 
7203 was whether Buras’ failure to file was willful. 
Buras, id. 
On appeal Mr. Buras argued, among other things, that it was error
for the Court to instruct the jury that wages constitute income.
Representing himself, he argued that only gain or profit can
constitute income. He also argued that the income tax was an excise
tax, and as a wage earner, he was not engaged in any privileged
activity, such as employment by a government agency, subject to an
excise tax. Mr. Buras also argued that Treasury Regulation Section
1.61-2(a)(l), which includes wages within the definition of income,
was invalid for being inconsistent with the constitutional definition
of income.
Buras,  633 F.2d at 1361. As stated by the Court: 
According  to  Buras,  income  must  be  derived  from 
some source. Wages cannot be taxed because the wage 
earner  enjoys  no  gain  from  that  source.  Since  the 
wage earner exchanges his labor and personal time for 
its  equivalent  in  money,  he  derives  no  gain  and 
therefore cannot be taxed. 
Appellant’s argument is refuted by one of the cases he 
cites.  In  
Stratton’s  Independence,  Ltd.  v.  Howbert, 
231 U.S. 399, 415, 34 S.Ct. 136, 140, 58 L.Ed. 285
(1913), the Court did define income as gain derived
from labor. The Court went on to explain, however,
that “the earnings of the human brain and hand when
unaided by capital--� are commonly treated as income.
Buras,  633 F.2d at 1361. 
Stratton’s Independence  was fully briefed herein. As pointed out at 
page  95,  the  Supreme  Court  did  not  say  that  earnings  from  the 
human  brain  and  hand  when  unaided  by  capital  are  commonly 
treated  as  income,  but  stated  that  such  earnings  are  commonly 
dealt  with  in  legislation  as  income.  The  only  federal  legislation 
treating such earnings as income was legislation for the taxation of 
the  salary  of  persons  employed  by  the  United  States  government, 
the exact privilege mentioned by Mr. Buras.85 
Stratton’s  Independence   case was sent to the United States
Supreme Court on three specific issues which had been certified to
it, none of which involved the issue of whether wages constitute
income (see p. 93), and thus the case cannot be cited as controlling
for that principle.86
The Court of Appeals also stated:
As for Buras’ argument that he may not be taxed
because he is a wage earner, the Sixteenth
Amendment is broad enough to grant Congress the
power to collect an income tax regardless of the
source of the taxpayer’s income.
Buras,  633 F.2d at 1361.
There is no quarrel with this legal position. Congress can tax
income regardless of the source. Wages, however, are not income,
so they are not reached by the Sixteenth Amendment. Having relied
on a prior Supreme Court case to support its position, which case
did not even address the issue, the Court of Appeal’s decision in
Buras  lacks legal credibility. 
United States v. Romero, 640 F.2d 1014 (9th Cir. 1981): 
Mr. Romero, representing himself, was convicted on five counts of
willful failure to file income tax returns. Among other issues on
appeal, Mr. Romero alleged bias and error on the part of the trial
judge  based  upon  the  judge’s  comments  and  instructions 
concerning the legal meaning of the terms “income--� and “person--� in 
26 U.S.C. Sections 61 and 7203. 
Romero,  640 F.2d at 1016. Neither 
the  basis  of  Mr.  Romero’s  argument  nor  the  trial  court’s 
instructions are set forth in the Court of Appeal’s opinion, thus legal 
analysis of the case is impossible  and it has no  precedential value. 
The Court of Appeals stated: 
Romero’s proclaimed belief that he was not a “person--� 
and that the wages he earned as a carpenter were not 
“income--� is fatuous as well as obviously incorrect. 
Romero,  640 F.2d at 1016.
To support this contention, the Court of Appeals cited to
Lucas v.
281 U.S. at 114-115, and to  Roberts v. C.I.R.,  176 F.2d 221, 225 
(9th Cir. 1949). The 
Lucas  case was analyzed previously, and as set 
forth at page 149, the issue of whether wages constitute income was 
not litigated in that case. In 
Roberts,  the question before the Court
was whether tips received by a taxicab driver constituted income. In
deciding that tips did constitute income, the Court first went to the
definition of income contained in Section 22 of the Internal
Revenue Code of 1939, and found that Congress included in gross
income gains, profits, and income derived from salaries, wages or
compensation for personal service. The Court next went to Treasury
Regulation 111 which included tips within the term “compensation
for services.--� The Court, ignoring the use of the words “derived
from,--�87 determined tips, being compensation for services, were
The essential question for determination is whether
tips are income. The Regulation just cited declares
them such.
Roberts,  176 F.2d at 223. 

The Regulation does nothing more than include tips within the
term “compensation for services.--� According to the Supreme Court
and the intent of Congress, there is no income unless there is a
profit or gain derived from those tips. Whether or not Mr. Roberts
profited from his tips was not litigated, however, because he argued
that tips were a gift that fell without the income tax provisions of
the law. The
Roberts   case also stated on page 225 that “[a]ny
monies which come to the taxpayer as the fruits of his labor are
‘income.’--� It must be pointed out that no case authority is cited for
this conclusion.
Romero Court next went on to say that:
Compensation for labor or services, paid in the form
of wages or salary, has been universally held by the
courts of this republic to be income, subject to the
income tax laws currently applicable.
Romero,  640 F.2d at 1016.
This gratuitous statement on the part of the Ninth Circuit ignores
the fact that the issue has never been directly ruled upon by the
Supreme Court. As pointed out herein, those lower courts that have
ruled on the matter have ignored the express language of the
applicable statutes and/or the intent of Congress, or have cited to
cases for propositions that are not supported by an analysis of those
cases. Certainly the
Romero case does not even attempt to give a
legal analysis of the issue, but merely cites to other cases. As shown,
those cases do not stand for the proposition that wages constitute
Amon v. United States, 514 F.Supp. 1293 (D.C. Col., 1981): 
Mr. Amon paid federal personal income tax for the years 1977, 1978
and 1979, and then sought to recover those taxes. As grounds for
the recovery, Mr. Amon, representing himself, raised the following
three legal arguments: (1) that the compensation for services which
constituted his wages could not be subject to income taxation by the
Internal Revenue Service because wages only represented an even
exchange for labor, and consequently there was no gain or profit
which was taxable income, (2) that with regard to the first
assertion, the Sixteenth Amendment of the Constitution of the
United States was not intended as a direct tax on compensation for
labor, and therefore, the Internal Revenue Service collected taxes in
contravention of the Constitution of the United States and (3) that
the taxes he paid were, in reality, illegally imposed excise taxes
because he did not occupy a status which would ordinarily incur tax
liability. According to the Court’s opinion, Mr. Amon equated an
excise tax with an income tax.
Amon,  514 F.Supp. at 1294. 
The  government  argued  that  (1)  the  Internal  Revenue  Service  had 
the  constitutional  and  statutory  power  to  tax  Mr.  Amon’s  gross 
income which was derived from compensation for services and (2) 
that Mr. Amon was properly taxed. 
Amon, id.  
The  Court  pointed  out  that  the  government’s  brief  addressed  “the 
issue of whether Amon’s income, as derived from compensation for 
services,  and  constituting  wages,  was  properly  taxable  as  income 
tax,--� while Mr. Amon addressed “only the issue of whether he was 
the  proper  subject  for  the  imposition  of  an  excise  tax,  which  he 
asserted  the  government  was  collecting  from  his  income  derived 
from his wages.--� 
Amon, id.
In addressing Mr. Amon’s contention that his compensation for
services was only an even exchange for his labor which did not
constitute a gain or profit from his labor,88 the Court first quoted
United States v. Safety Car Heating & Lighting Co.,  297 U.S.
88, 99 (1936), as follows:
Income within the meaning of the Sixteenth
Amendment is the fruit that is born of capital, not the
potency of fruition. With few exceptions, if any, it is
income as the word is known in the common speech
of men •*. * * when it is that, it may be taxed, though 
it was in the making long before. 
Amon,  514 F.Supp. at 1295.
This is a correct statement of the law to the extent it addresses
capital. In the
Safety Car case,  the  issue  was  the  taxability  of  the 
“profit--� derived from a patent: 
There is no denial that profits owing to a patentee by 
the  infringer  of  a  patent  are  income  within  the 
meaning  of  the  statute,  unless  withdrawn  from  that 
category by the date of the infringement. 
Safety Car,  297 U.S. at 93. 
The  case  nowhere  indicates  that  wages  constitute  a  profit  derived 
from labor. 
The Court next cited to 
Glenshaw Glass,  indicating that exemplary
damages for fraud fell within the definition of Section 22, the
predecessor to the present day Section 61 of 26 U.S.C. As already
analyzed, exemplary damages constitute a profit or gain, and hence
are to be included within gross income. Again, however, there is no
reference to wages constituting a profit or gain in the
case. The Court then cited to  Helvering v. Clifford,  309 U.S.
331 (1940), for the proposition that Congress has the power to
impose an income tax on gross income. That is a true statement of
the law. The
Clifford   case, however, involved the situation of a
husband who declared himself trustee of certain securities he
owned, the net income therefrom to be held for the exclusive
benefit of the wife. The income was distributed to the wife, but the
I.R.S., contending that the income was taxable to the husband,
issued a deficiency notice. The issue before the Supreme Court was:
[W]hether the grantor after the trust has been
established may still be treated, under this statutory
scheme  [referencing  Section  22  defining  gross 
income], as the owner of the corpus. 
Clifford,  309 U.S. at 334. 
Again, no mention whatsoever that wages constitute income. 
The  Court  went  on  to  cite  
C.I.R.   v.   Jacobson,   336  U.S.  28  (1949), 
stating that in that case, the Supreme Court reiterated the purpose 
of the income tax laws as follows: 
The income taxed is described in sweeping terms and 
should  be  broadly  construed  in  accordance  with  an 
obvious purpose to tax income comprehensively. 
Amon,  514 F.Supp. at 1295.
Once again, the Supreme Court correctly states the law, and once
again the
Amon Court cited to a case that has nothing whatsoever to 
do  with  whether  or  not  wages  constitute income.  According  to the 
Supreme Court: 
This  decision  applies  the  federal  income  tax  to  gains 
derived  by  a  debtor  from  his  purchase  of  his  own 
obligations  at  a  discount  and  his  consequent  control 
over  their discharge.  It presents the specific question 
whether  a  solvent  natural  person,  in  straitened 
financial  circumstances,  must  include  in  his  gross 
income for federal income tax purposes the difference 
between  (1)  the  face  amount  of  his  personal 
indebtedness  as  the  maker  of  secured  bonds, 
originally issued by him at face value for cash, and (2) 
a lesser amount paid by him for their purchase. 
Jacobson,  336 U.S. at 29-30. 
The issue of whether or not wages constitute income was clearly not 
addressed in the 
Jacobson  case. 
The  Court  then  cited  to  
United  States  v.  Swallow,   511  F.2d  514 
(10th Cir. 1975), as follows: 
[T]he  Tenth  Circuit  Court  of  Appeals  commented  on 
compensation  for  services  stating  “[w]hen  earnings 
are  acquired,  lawfully  or  unlawfully,  without 
consensual  recognition  of  an  obligation  to  repay  or 
restriction on their disposition, there is income.--� 
Amon,  514 F.Supp. at 1295. 
A  review  of  the  
Swallow case,  however,  shows  that  the  Tenth 
Circuit was not speaking about compensation for services, but was 
speaking about loans: 
The  principal  government  theory  of  a  substantial  tax 
deficiency  argued  to  the jury was that the  loans  were 
not good faith loans to Swallow, and that there was no 
effort,  nor  any  evidence  to  indicate  any  intent  by 
Swallow, to repay the loans. The trial court instructed 
on  this  theory.  When  earnings  are  acquired,  lawfully 
or  unlawfully,  without  consensual  recognition  of  an 
obligation to repay or restriction on their disposition, 
there is income. 
James v. United States,  366 U.S. 213, 
219-220,  81  S.Ct.  1052,  6  L.Ed.2d  246.  And  this 
principle  applies  to  loans  obtained  in  bad  faith  and 
without  an intent  to repay them, as well  as to money 
illegally  obtained  by  embezzlement  as  in  the  
Swallow,  511 F.2d at 519. 
Swallow  case nowhere discusses compensation for services and 
certainly did not involve the issue of wages. 
That the Court was ignorant of federal tax law is clear from the
following quote:
The current statutory guidelines for income tax
assessment are Sections 61 and 63 of the Internal
Revenue Code.
Amon,  514 F.Supp. at 1296. 
Section  61  of  the  Internal  Revenue  Code,  found  in  Subtitle  A, 
merely  defines  “gross  income,--�  and  Section  63  defines  “taxable 
income.--�  The  statutory  guidelines  regarding  income  tax 
assessments  are  found  in  Subtitle  F  at  Sections  6201,  6203  and 
At page 1296 the Court  then quoted from Section 61, and ignoring 
compensation  for  services  with  income.  To  support  this  erroneous 
equation,  the  Court  cited  to  
Robertson  v.  United  States,   343  U.S. 
711,  713-714  (1952).  The  
Robertson   case,  however,  involved  the 
issue of whether a cash prize received by the winner of a contest in 
musical composition constituted gross income under Section 22 of 
the Internal Revenue Code. Once again, the Court cited to a case in 
which  there  was  no  mention  whatsoever  regarding  wages 
constituting income. 
The  Court  next  cited  to  
C.I.R. v. Smith, 324 U.S. 177 (1945),
contending that the Supreme Court held that property which was
transferred to an employee was compensation for services even
though the transfer took the form of an exchange. In the
Smith  case,
Mr. Smith’s employer gave to him, as compensation for his services,
an option to purchase from the employer certain shares of stock of
another corporation at a price not less than the then current market
value of the stock. Two tax years later, when the market value of the
stock was greater than the option price, Mr. Smith exercised the
option. The question before the Supreme Court for decision was
whether the difference between the market value and the option

price of the stock was compensation for personal services of the
employee, taxable as income in the years when he received the
stock, under Section 22(a) of the Internal Revenue Code.
324 U.S. at 177-178. 
The  Supreme  Court  found  factually  that  the  stock  option  was  “in 
consideration  of  services  rendered,--�  and  that  the  stock  option  had 
no  value  at  the  time  it  was  given  to  Mr.  Smith.  The  Court  thus 
concluded  that  at  the  time  of  the  exercise  of  the  option,  the 
difference  between  the  market  value  and  the  option  price  of  the 
stock, which was zero, constituted profit that was derived from the 
compensation  for  services.  This  reasoning  was  in  full  accord  with 
the applicable statute and regulations; and after quoting them, the 
Supreme Court was led to say: 
Section  22(a)  of  the  Revenue  Act  is  broad  enough  to 
include  in  taxable  income  any  economic  or  financial 
benefit  conferred  on  the  employee  as  compensation, 
whatever the form or mode by which it is effected. See 
Old Colony Trust Co. v. Commissioner,  279 U.S. 716,
729. The regulation specifically includes in income,
property “transferred ... by an employer to an
employee, for an amount substantially less than its
fair market value,--� even though the transfer takes the
form of a sale or exchange, to the extent that the
employee receives compensation.
Smith,  324 U.S. at 181. 
If applied to wages, however, the analysis of the Supreme Court in 
Smith   would  not  result  in  taxable  income  because  the  property 
transferred by the employer to the employee would be equal to the 
fair market value of the employee’s labor, not substantially less than 
the fair market value as the stock was under the facts of the 
case. This is borne out by the last paragraph of the  Smith  decision: 
The Tax Court thus found that the option was given to
respondent as compensation for services, and
implicitly that the compensation referred to was the
excess in value of the shares of stock over the option
price whenever the option was exercised. From these
facts it concluded that the compensation was taxable
as such by the provisions of the applicable Revenue
Acts and regulations. We find no basis for disturbing
its findings, and we conclude it correctly applied the
law to the facts found.
Smith,  324 U.S. at 182. 
The Supreme Court, as well as the Tax Court, recognized there was 
excess   over the basis of the stock, and that this excess
constituted a
profit   (income) derived from compensation for
services. As a profit, “the compensation was taxable as such by the
provisions of the applicable Revenue Acts and regulations.--� It
logically and legally follows that compensation for services that
does not constitute income (a profit or gain) is not taxable under
the provisions of the applicable Revenue Acts and regulations. Thus
Smith   case, cited by the Amon Court  for  the  proposition  that 
wages  constitute  income,  actually  supported  the  opposite 
proposition,  that  wages  do  not  constitute  income  unless  the 
employee receives an amount over and above the fair market value 
of his labor. 
Amon Court  next  cited  to   Wilson,   412  F.2d  at  695,  for  the 
proposition  that  “all  remuneration  received  for  services  is  gross 
income unless it falls within a specific exclusion.--� The 
Wilson  case, 
as shown above at page 170, involved the interpretation of the terms 
“business premises--� and “in kind--� with regard to the question of the 
alleged  non-taxability  under  Section  119  of  the  1954  Internal 
Revenue  Code,  as  income,  of  the  reimbursement  by  the  state 
employer to a state police office while on duty, of the cost of a meal 
in a restaurant. 
Mr. Wilson never contended the reimbursement was not income, he 
merely  contended  the  amount  received  was  specifically  excludable 
from gross income by statute. 
The Court also cited to 
Neville v. Brodrick,  235 F.2d 263 (10th Cir. 
1956),  contending  that  “the  Tenth  Circuit  recognized  that 
compensation  for  services  rendered  or  to  be  rendered  is  taxable.--� 
Amon, 514 F.Supp. at 1296. In Neville,   the two issues before the
Court were: 1) whether stock given to an employee and his family
represented gifts or additional compensation for services rendered;
and 2) what was the fair market value of the stock. After discussion
of Section 22(a) defining “gross income--� as including “gains,
profits, and income derived from ... compensation for personal
service--� and Section 22(b)(3) exempting from taxation the value of
property received as a gift, the Court said:
While sometimes difficult of application, the statute
draws a clear distinction between compensation for
services rendered or to be rendered and gifts, the
former being taxable and the latter exempt.89
Neville,  235 F.2d at 265. 
After citing these non-supporting cases, the 
Amon Court concluded 
Notwithstanding the fact that Amon asserts he did not 
receive  any  gain  from  his  labor,  and  that  the 
compensation for services was only a mere exchange, 
in  view  of  the  above  authorities,  his  position  is 
untenable.  Compensation  for  services  is  taxable 
income  and  the  government  properly  taxed  Amon’s 
income for the years in question. 
Amon,  514 F.Supp. at 1296. 
In view of the above authorities, it is clear that a profit or gain
derived from compensation for services is taxable income, but that
the government improperly taxed Mr. Amon’s gross receipts as
opposed to his taxable income.
Lonsdale v. C.I.R., 661 F.2d 71 (5th Cir. 1981): 
Mr.  Lonsdale,  representing  himself,  appealed  from  an  adverse 
determination  of  the  United  States  Tax  Court.  In  its  written 
opinion,  the  Court  of Appeals  openly  admitted that  the  arguments 
of  Mr.  Lonsdale  were  extremely  broad,  consisted  of  interwoven 
legal and theological arguments, and that the  Court’s decision was 
not based upon any consideration of the underlying facts. 
661 F.2d at 72. 
The  Court  believed  the  argument  of  Mr.  Lonsdale  to  be  that  the 
United  States  Constitution  forbids  taxation  of  compensation 
received  for  personal  services  because:  1)  the  exchange  of  services 
for  money  is  a  zero-sum  transaction,  the  value  of  the  wages  being 
exactly that of the labor  exchanged for them  and hence containing 
no element of profit; and 2) that under 
Pollock v. Farmers Loan & 
, 157 U.S. 429 (1895), the income tax is a direct tax that must 
be apportioned among the several states. 
Lonsdale,  661 F.2d at 72. 
As to the first of Mr. Lonsdale’s arguments, the Court stated: 
The  Constitution  grants  Congress  power  to  tax 
“incomes,  from  whatever  source  derived  ...  .--�  U.S. 
Const,  amend.  XVI.  Exercising  this  power,  Congress 
has  defined  income  as  including  compensation  for 
services. 26 U.S.C. Section 61(a)(l). Broadly speaking, 
that  definition  covers  all  “accessions  to  wealth.--�  See 
Commissioner  v.  Glenshaw  Glass   Co.,  348  U.S.  426, 
431 (1955). This definition is clearly within the power 
to tax “incomes--� granted by the sixteenth amendment. 
Lonsdale,  661 F.2d at 72. 
The fallacy of the Court’s reasoning is immediately apparent in that 
at  Section  61(a)(l)  Congress  did  not  define  “income,--�  but  merely 
defined “gross income.--� Congress clearly defined “gross income--� as 
including  “income  derived  from  compensation  for  services,--�  but 
that is not the same thing as defining “income.--� The 
Lonsdale  Court
actually ignored the legislative history accompanying the passage of
Section 61 of the 1954 Internal Revenue Code which specifically
Section 61 (a) provides that gross income includes “all
income from whatever source derived.--� This
definition is based upon the 16th Amendment and the
word “income--� is used in its constitutional sense.
House Report No. 1337; Senate Report
No. 1622;
U.S.  Code  Cong.  and  Admin. 
83rd  Congress,  2nd  Session, 
pages 4155 and 4802 respectively, 1954. 
The  United  States  Supreme  Court  has  provided  us  with  the 
constitutional  definition  of  income  based  upon  the  Sixteenth 
Income  may  be  defined  as  the  gain  derived  from 
capital, from labor or from both combined, provided it 
include  profit  gained  through  a  sale  or  conversion  of 
capital assets. 
Stratton’s  Indep.  v.  Howbert , 231 U.S.
399 (1913);
Doyle  v.  Mitchell , 247 U.S.
179 (1920);
So. Pacific v. Lowe , 247 U.S.
330 (1918);
Eisner  v.  Macomher,   252 
U.S.  189  (1920);  
Merchant’s  Loan  v. 
255 U.S. 509 (1921). 
The  Congressional  legislative  history,  together  with  the  Supreme 
Court  cases  defining  “income--�  and  the  analysis  by  the  Supreme 
Court  in  the  
Glenshaw  Glass   case,  all  show  that  the  Court  in 
Lonsdale  was in error for not looking to the facts to ascertain if Mr. 
Lonsdale had a profit derived from his compensation for services. 
Lonsdale  Court responded to Mr. Lonsdale’s second argument 
by correctly stating that the  Sixteenth Amendment  did remove the 
requirement  of  apportionment  from  the  direct  income  tax. 
Lonsdale, id.  Thus if the “income--� derived from “compensation for 
services--� is taxed, the tax need not be apportioned. However, if the 
tax is applied directly to “compensation for services,--� it must still be 
apportioned pursuant to Article I, Section 2, Clause 3, and Article I, 
Section 9, Clause 4, of the United States Constitution. The failure of 
the  Court  to  distinguish  between  “income  derived  from 
compensation for services--� and “compensation for services--� renders 
the Court’s opinion unreliable as precedent for the proposition that 
wages constitute income. 
Rice,  T.C.  Memo  1982-129,  para.  82,129  P-H  Memo  TC 

Mr. Rice, representing himself in Tax Court, argued that Congress
intended to tax wages as compensation for services in Section
61(a)(l) of the Internal Revenue Code, but claimed that the statute
was an unconstitutional attempt to tax, without apportionment,
something which was not income within the meaning of the
Sixteenth Amendment. He argued that wages were not income
because they were not “gain derived from capital, from labor, or
from both combined.--� Instead, Mr. Rice contended that wages arose
from an equal exchange of labor or services for property, a
transaction in which no gain was derived.
Rice, id.  
The Tax Court first stated: 
The  Supreme  Court  early  established  the  principle 
that the  word  “income,--� as it is used in the Sixteenth 
Amendment,  is  to  be  construed  according  to  its 
common, everyday meaning. In 
Lynch v. Hornby,  247 
U.S. 339, 344 (1918), the Court stated, “* * * Congress 
was  at  liberty  under  the  [Sixteenth]  Amendment  to 
tax  as  income,  without  apportionment,  everything 
that became income, in the ordinary sense of the word 
*.--� Under this principle, the ordinary, and perhaps 
most common, meaning of “income--� has been wages. 
Thus,  when  a  coal  company  argued  before  the 
Supreme Court that the proceeds from its sale of ore, 
which it had dug  from its properties, were the return 
of  depleted  capital,  not  income,  the  Court  dismissed 
the  argument,  observing  “the  same  is  true  of  the 
earnings of the human brain and hand when unaided 
by capital, yet such earnings are commonly dealt with 
in  legislation  as  income.--�  
Stratton’s  Independence  v. 
Howbert,  supra  
note  6,  at  415.  This  quote  illustrates 
that whether or not wages can be characterized as the 
product  of  an  exchange,  they  are  still  income  within 
the Constitutional embrace. 
Rice, id. 
Lynch v. Hornby,  the specific issue before the Court was whether 
that  portion  of  a  stock  dividend  representing  the  conversion  of 
property into money constituted net income under the Income Tax 
Act of 1913. 
Lynch v. Hornby,  247 U.S. at 341-342. The case did not
involve wages. With respect to the quote that “Congress was at
liberty under the Sixteenth Amendment to tax as income, without
apportionment, everything that became income, in the ordinary
sense of the word,--� it was shown at page 144 in the
Smietanka  case
that the term “income--� pertained to what was in the minds of the
people at the time of their ratification of the Sixteenth Amendment.
(See also the legislative history regarding the enactment of Section
61 of the Internal Revenue Code of 1954 at page 84.) The Supreme
Court has held that the term income was meant to be a profit or
gain derived from labor, not the equal amount received in exchange
for labor.
The  quote  attributed  to  the  Supreme  Court  in  
has  been  shown  at  page  95  not  to  have  been  made 
with respect to any then existing income tax legislation. In addition, 
none  of  the  three  issues  before  the  Court  in  
involved  wages,  and  the statement  of  the  Court was 
dicta.   It was also shown in the Stratton’s  Independence   analysis
that the Court recognized the principle of gain by stating that the
wasting of capital assets had to somehow figure into the
computation of income in order to arrive at the gain derived from
the mining process and the sale of the ore (see p. 96).
Rice  Court next stated: 
Mr.  Rice  misconstrues  the  oft-cited  phrase  that 
income  is  “gain  derived  from  capital,  from  labor,  or 
from  both  combined--�  to  mean  that  wages  are  not 
income. Wages are “derived--� from labor or services in 
the  sense  that  they  cannot  be  gained  without  such 
labor.  Although  the  wages  received  by  Mr.  Rice  may 
represent  no  more  than  the  time-value  of  his  work, 
they  are  nonetheless  the  fruit  of  his  labor,  and 
therefore  represent  gain  derived  from  labor  which 
may be taxed as income. 
Rice, id. 
Here the Court recognized the concept of basis; 
i.e.,  that the wages
Mr. Rice received might represent no more than the value of his
labor. The Court then stated:
Even if we were to agree with Mr. Rice’s contention
that wages are, in effect, an exchange of equal value
for value, he would still be taxable upon the wages he
and Mrs. Rice received in 1978. The general doctrine
that receipts representing a return of capital are not
taxed does not apply when a taxpayer has a zero basis
in the property he exchanged for the receipts. See
Wilson v. Commissioner, 27  T.C. 976 (1957),  affd. per
255 F.2d 702 [1 AFTR2d 1851] (5th Cir. 1958); 
Bryan v.  Commissioner,   16  T.C.  972  (1951);   Rains  v. 
38 B.T.A. 1189 (1938). Mr. Rice did
not establish that he had a basis in the services he
rendered to Matanuska, nor did he establish that Mrs.
Rice had a basis in the services she rendered to Alaska
Teamsters. Thus, each had taxable gain upon receipt
of wages from their respective companies. Section
Rice, id. 
Wilson v. Commissioner,  the issue before the Court was whether 
the cancellation of a debt should be considered a long-term capital 
gain  or  ordinary  dividend  income.  Whether  wages  constitute 
income, or  the value  of  one’s  labor established by  the employment 
contract constitutes the basis of that labor, was not an issue before 
the Court. 
In the 
Bryan  case, the Court stated the issue before it as follows:
The issue to be decided is whether certain shares of
stock, which were sold by the petitioner in 1944, were
a gift to petitioner or whether they had been received
by him for adequate consideration. If they were not a
gift, a further issue is presented with respect to the
basis of the stock for computing gain or loss thereon.
Bryan,  16 T.C. at 972.
This case also did not address the issue as to the basis of one’s
labor, but clearly recognized the concept that determination of basis
is an essential part of the computation of gain.
In the
Rains  case the Court stated the issue before it as follows: 
The  issues  are,  first,  whether  respondent  erred  in 
determining  that  an  option  granted  to  petitioner’s 
husband  in  1929,  to  purchase  stock  of  the  Columbia 
Steel  Corporation,  was  community  property  of 
petitioner  and  her  husband,  and  in  including  in  her 
gross  income  for  the  taxable  year  one-half  of  the 
income realized in respect of the option; and, second, 
whether  petitioner  realized  gain  or  loss  in  the 
exchange,  in  the  taxable  year,  of  certain  of  her 
separate property for an interest in the option. 
Rains,  38 B.T.A. at 1190. 
As in 
Wilson  and  Bryan,  this case did not involve the issue as to the
basis of one’s labor.
In ruling adversely to Mr. Rice, the Tax Court relied upon case law
that did not address the specific issues before it, and failed to
acknowledge the Supreme Court’s holding that labor and the
employment contract to sell one’s labor constitutes personal
property. The Court specifically recognized the issue raised by the
Rices that the wages they received were in direct exchange for the
time-value of their labor, but then chose, contrary to law, not to
recognize the fair market value of the labor as the basis of that
labor. Having ignored the law directly on point, the
Rice   case  is 
erroneous, and cannot constitute legal authority for the proposition 
that wages constitute income. 
United States v. Lawson, 670 F.2d 923 (10th Cir. 1982): 
Mr.  Lawson  appealed  his  convictions  for  failing  to  file  federal 
income  tax  returns  and  for  supplying  a  false  and  fraudulent 
withholding  certificate  to  his  employer.  One  of  the  grounds  raised 
on appeal was whether the trial court committed error in denying a 
pretrial  motion  to  dismiss  the  case  because  his  wages  were  not 
income  within  the  meaning  of  the  Internal  Revenue  Code  and  the 
Constitution. Lawson, 670 F.2d at 925. 

With respect to the contention that Mr. Lawson’s wages were not
income within the meaning of the Internal Revenue Code, the Court
cited Section 61(a)(l) as follows:
“[G]ross income means all income from whatever
source derived, including (but not limited to) the
following items: (1) Compensation for services,
including fees, commissions, and similar items “
Lawson, id. 
The Court then stated: 
We must broadly interpret the definition to include all 
gains  not  specifically  exempted.  
Commissioner  v. 
434 U.S. 77, 82-3 (1977). 
Lawson , 670 F.2d at 925. 
Thus, while recognizing that the definition of gross income applies 
to “gains,--� including gains derived from compensation for services, 
it failed to apply the law as stated to the case before it: 
Notwithstanding  Lawson’s  belief  that  his  wages  are 
not gains or profits but merely what he has received in 
an  equal  exchange  for  his  services,  the  Internal 
Revenue  Code  clearly  included  compensation  of  this 
nature within reportable gross income. 
Lawson, id. 
The Court failed to cite any case authority for this statement.
With respect to the contention that Mr. Lawson’s wages were not
income within the meaning of the Constitution, the Court did not
set forth Mr. Lawson’s contentions in the opinion, and disposed of
the issue by stating:
Lawson’s  constitutional  argument  is  specious.  See 
United  States  v.  Russell,   585 F.2d  368,  370  (8th  Cir. 
Kasey  v.  Commissioner,   457  F.2d  369,  370 
(9th  Cir.  1972),  
cert.  denied,   409  U.S.  869  (1972); 
Porth v. Brodrick,  214 F.2d 925, 926 (10th Cir. 1954). 
Lawson,  670 F.2d at 925. 
Russell   case  has  been  previously  analyzed  herein  at  page  179. 
Kasey   case  was  an  appeal  from  a  decision  of  the  Tax  Court 
which  upheld  the  Commissioner’s  denial  of  certain  deductions 
claimed  by  the  Kaseys  for  various  litigation-related  expenses. 
Kasey,   457  F.2d  at  370.  The  case  did  not  involve  the  issue  of 
whether  wages  constitute  income.  The  constitutional  argument 
raised by the Kaseys as to the constitutional validity of the tax was 
dealt with by the Court in one sentence: 
In  arguing  that  the  only  proper  tax  would  be 
something like a sales tax, the taxpayers seem to have 
overlooked  the  Sixteenth  Amendment  to  the 
Constitution, which gives Congress “power to lay and 
collect taxes on incomes.--� 
Kasey,  457 F.2d at 370. 
Porth   case was an action brought by Mr. Porth to recover the
sum of $135 which he alleged was erroneously and illegally paid on
his declaration of estimated income tax for the year 1951. The trial
court dismissed the action upon the government’s motion on the
grounds that Porth’s petition failed to state a claim upon which
relief could be granted, and thereafter, Mr. Porth appealed.
214 F.2d at 925. 
Mr.  Porth  raised  two  contentions:  first,  that  the  Sixteenth 
Amendment was unconstitutional because the taxpayer was placed 
in  a  position  of  involuntary  servitude  contrary  to  the  Thirteenth 
Amendment;  and  second,  that  the  Federal  Tax  legislation  enacted 

after the ratification of the Sixteenth Amendment had given rise to
such a mass of ambiguous, contradictory, inequitable and unjust
rules, regulations and methods of procedure, that he was compelled
to assume unreasonable duties, obligations and burdens in order to
make a just accounting of his income and pay the tax thereon. In
disposing of the case, the Court stated:
The allegations of the petition are very broad and it is
difficult, if not impossible, to determine therefrom
just what the complaint is except that there exists a
strong dislike for the taxing procedure. Apparently the
taxpayer, while recognizing the taxing power of the
United States, attacks both the legality of the
Sixteenth Amendment and the constitutionality of the
Federal tax laws, rules and regulations enacted
pursuant thereto. It is admitted that a federal income
tax may be levied under the Sixteenth Amendment
and no law, rule or regulation is referred to which
impinges upon or destroys any right guaranteed the
taxpayer by the Constitution. The claim is clearly
unsubstantial and without merit.
Porth,  214 F.2d at 926. 
Kasey  and  Porth  cases cited by the Lawson Court 
in  response  to  Mr.  Lawson’s  unspecified  challenge  to 
the  constitutionality  of  a  tax  upon  his  wages  do  not 
address  the  issue  of  whether  or  not  wages  constitute 
income.  The  
Russell   case  cannot  stand  for  the 
proposition  that  wages  constitute  income  for  the 
reasons previously set forth. 
Funk v. Commissioner, 687 F.2d 264 (8th Cir. 1982): 
Mr.  Funk,  representing  himself,  appealed  from  a  decision  entered 
by  the  United  States  Tax  Court  and  argued,  among  other  things, 
that the wages received by him in 1976 and 1977 were not subject to 
federal income tax. Mr. Funk argued that compensation for labor
was not constitutionally subject to the federal income tax, that an
individual’s labor was capital in which he possessed a property
right, that an individual had the right to exchange that property for
other property,
i.e.,   money,  and  that  such  a  transaction  was  an 
equal exchange which did not give rise to any profit. 
Funk,  687 F.2d 
at 265. 
Funk  Court stated it rejected Mr. Funk’s Sixteenth Amendment 
claim  because  the  constitutionality  of  the  Sixteenth  Amendment 
had been upheld by the Supreme Court in 
Brushaber,  and also cited 
Eisner v. Macomber. Funk,  687 F.2d at 265.
The Court then stated that there was no constitutional impediment
to levying an income tax on compensation for a taxpayer’s labors,
and cited to two Tax Court decisions as authority for its statement:
Hanson  v.  Commissioner,   para.  80,197  T.C.M.  (P-H)  at  900 
(1980)90 and 
Brooks  v.  Commissioner, para.   80,206  T.C.M. (P-H) 
at 940 (1980).91 
In  Tax  Court,  Mr.  Hanson,  who  was  representing  himself,  argued 
that wages derived from a God-given, inalienable right to work were 
not  constitutionally subject  to  the  federal income  tax, that  a  wage, 
salary, fee, first-time commission, or compensation for any kind of 
labor was not a gain, and that a tax on compensation for labor was a 
direct  tax  required  to  be  apportioned  under  the  Constitution.  He 
also argued that wages and other compensation for labor were not a 
gain  from  capital  or  labor,  because  the  gain  from  labor 
contemplated  by  the  Supreme  Court  referred  to  gain  derived  by 
labor  contractors  who  contracted  to  provide  the  services  of 
Hanson,  at 900.
The Tax Court stated in its opinion that Mr. Hanson’s arguments
were without merit, because soon after the promulgation of the
Sixteenth Amendment to the Constitution, numerous challenges to
the income tax laws were raised on constitutional grounds. Citing to
Brushaber  and to  Tyee Realty Co. v. Anderson,  240 U.S. 115 (1916), 

the Tax Court stated that in the face of these challenges, the
Supreme Court upheld the income tax law enacted in 1913, which
law levied taxes on salaries and wages received by individuals as
well as on other income items of both corporations and individuals.
Hanson,  at 900.
Neither of the cases cited by the Tax Court, however, involved a
challenge to the constitutionality of a tax on wages, so that issue
was not decided by the Supreme Court.92 Mr. Brushaber, as a
stockholder of the Union Pacific Railroad Company, sought to
enjoin the corporation from complying with the Income Tax
provisions of the 1913 tax act pertaining to corporations.
Brushaber,  240 U.S. at 9. The  Tyee Realty  case involved two cases, 
Tyee Realty case  involving  a  corporation  and  the   Thome v.
case  involving  an  individual.   Tyee Realty was  decided 
less than a month after 
Brushaber;  and the decision was written by 
Justice White, the author of the 
Brushaber  decision, who stated: 
Every  contention  relied  upon  for  reversal  in  the  two 
cases  is  embraced  within  the  following  propositions: 
(a)  that  the  tax  imposed  by  the  statute  was  not 
sanctioned  by  the  Sixteenth  Amendment  because  the 
statute exceeded the exceptional and limited power of 
direct  income  taxation  for  the  first  time  conferred 
upon Congress by that Amendment and, being outside 
of  the  Amendment  and  governed  solely  therefore  by 
the general taxing authority conferred upon Congress 
by the Constitution, the tax was void as an attempt to 
levy a direct tax without apportionment under the rule 
established by  
Pollock  v. Farmers’ Loan & Trust   Co., 
157  U.S.  429;  158  U.S.  601.  (b)  That  the  statute  is 
moreover  repugnant  to  the  Constitution  because  of 
the  provision  therein  contained  for  its  retroactive 
operation  for  a  designated  time  and  because  of  the 
illegal  discriminations  and  inequalities  which  it 
creates,  including  the  provision  for  a  progressive  tax 
on  the  income  of  individuals93  and  the  method 
provided  in  the  statute  for  computing  the  taxable 
income of corporations. 
But  we  need  not  now  enter  into  an  original 
consideration  of  the  merits  of  these  contentions 
because  each  and  all  of  them  were  considered  and 
adversely  disposed  of  in  
Brushaber  v.  Union  Pacific 
R.R., ante, 
p.l. That case, therefore, is here absolutely 
controlling and decisive. It follows that for the reasons 
stated  in  the  opinion  in  the  
Brushaher   case the
judgments in these cases must be and they are
Tyee Realty,  240 U.S. at 117-118.
While both cases stand for the proposition that the Sixteenth
Amendment is constitutional and that as a result of the amendment
a tax levied on an individual’s income need not be apportioned,
Brushaber   nor   Tyee Realty addressed the issue as to
whether wages constitute income. It must be remembered here that
the statute defining gross income does not itself violate the
Constitution. The interpretation of that statute by the lower courts
to the extent the interpretation allows the I.R.S. to collect a tax on
something other than “income--� is what violates the Constitution. All
of the Supreme Court cases that have defined what is meant by the
word “income--� have correctly stated that it must be a profit or a
gain derived from labor.
Hanson Court then cited to  Autenrieth v. Cullen,  418 F.2d 586
(9th Cir. 1969). In
Autenrieth,   one hundred and twenty-four
plaintiffs sought refunds of a percentage of the federal income taxes
paid by each of them on the grounds that the Viet Nam War was
illegal, each was a conscientious objector to the war, and each had a
First Amendment religious right not to pay for the war, claiming a
constitutional exemption from paying the percentage of the tax
necessary to finance the war. The lower court dismissed the
complaints on the grounds that they did not state a valid claim for
Autenrieth,  418 F.2d at 587-588. On appeal, the Ninth Circuit
[W]e hold that nothing in the Constitution prohibits
the Congress from levying a tax upon all persons,
regardless of religion, for support of the general
government. The fact that some persons may object,
on religious grounds, to some of the things that the
government does is not a basis upon which they can
claim a constitutional right not to pay a part of the
Autenrieth,  418 F.2d at 588.
Notwithstanding the fact that the issue as to whether wages
constitute income was not a part of the
Autenrieth  case, the  Hanson
Court said:
It is clear from the facts in
Autenrieth  v.  Cullen, 
that  the  income  being  taxed  was  the  salaries 
and wages of the taxpayers in that case. We therefore 
hold  that  there  is  no  constitutional  impediment 
against  levying  an  income  tax  on  compensation  for 
petitioner’s labor. 
Hanson , at 900.
One can only presume that the author of the
Hanson opinion, 
Administrative Law Judge Fay, chose to ignore the legal principle of 
stare  decisis   and the holdings of the Supreme Court in Cohens v.
6 Wheat 264, 399 (1821);  Carroll v. Lessee,  16 How. 275, 
287  (1953);  
Louisville  R.R.  Co.  v.  Letson,  2   How  497  (1844);   Ex 
Parte Christy, 3 
How. 292 (1845); and  Woodruff v. Parham,  8 Wall
123 (1868). These cases make it clear that the doctrine of
is  a  salutary  one  and  to  be  adhered  to  on  all  proper 
occasions, but it only arises in respect of decisions directly upon the 
point  in  issue.  In  that  the  
Autenrieth   case  did  not  directly  involve 
the  issue  of  whether  wages  constitute  income,  the  
Autenrieth   case 
cannot, legally, stand for the proposition asserted by Judge Fay. 
Hanson Court  then  set  forth  the  definition  of  “gross  income--� 
contained in Section 61 (a) and said: 
This  broad  definition  of  income  has  been  uniformly 
held by the courts to include  amounts received by an 
individual  for  personal  services.  Contrary  to 
petitioner’s contention, payment for personal services 
has in a number of cases been referred to as “gain.--� 
Hanson , at 900. 
The Court, however, failed to cite to any of those alleged cases. 
Hanson Court then stated that Mr. Hanson’s second contention
was that a tax on wages was a direct tax and could not be levied
without apportionment.
Hanson, id. The  Court’s  treatment  of  this 
contention  was  based  upon  its  unsupported  analysis  of  Mr. 
Hanson’s  first  contention,  and  the  Court  failed  to  address  the 
precise issue raised by Mr. Hanson: 
However, even without considering whether the tax is 
a  direct  tax,  petitioner’s  argument  must  fail  with  our 
determination  that  “income--�  subject  to  tax  does 
include petitioner’s wages. It is clear under the terms 
of the 16th Amendment that no apportionment of the 
tax is required. 
Hanson,  at 900-901.
Mr. Brooks also represented himself in Tax Court. He filed Forms
1040 which contained only his name, address, the amount of
federal income tax withheld by his employers, and his signature. To
the remainder of the information asked for on the forms, he
claimed Fifth Amendment protection. In Tax Court, Mr. Brooks
argued that property is not federally taxable; an individual’s labor is 
personal  property;  an  individual  has  the  right  to  exchange  his 
property  (
i.e.,   labor) for other property (money); and concluded
that his wages could not constitutionally be taxable since he
received money in exchange for something of equal value,
i.e.,   his 
labor--"  “property.--�  Mr.  Brooks  called  his  argument  “The  Basis 
Brooks,  at 940. 
The Tax Court, citing to 
Brushaber  and  Tyee Realty,  stated:
It cannot be doubted after all these years since the
ratification of the Sixteenth Amendment that any
receipt of wages in exchange for services rendered is
taxable income.
Brooks , at 940.
The Tax Court next quoted the correct definition of income from
Eisner,  and then, citing to  Glenshaw Glass  stated:
There is also no doubt that sec. 61 encompasses all
realized accessions to wealth. We reject as frivolous
the argument that sec. 61(a)(l) does not withstand
constitutional scrutiny.
Brooks , id. 
Glenshaw  Glass   case, it should be remembered (see p. 159),
involved the issue of whether punitive damages constituted an
element of “gross income.--� These damages, which are over and
above the amount of damages necessary to replace that which was
lost, were truly an “accession to wealth.--� Wages, on the other hand,
are payments for the selling of one’s labor which the Supreme Court
has held is property.94 One only realizes an accession to wealth
upon the sale of property if one receives in excess of the fair market
value of that property. 26 U.S.C. Sections 64 and 1001
et seq.  
In ruling adversely to Mr. Brooks, the Tax Court misapplied
Glenshaw  Glass,   and  ignored  three  rulings  of  the  United  States 
Supreme  Court  and  several  provisions  of  the  Internal  Revenue 
Funk   Court  next  stated  that  Mr.  Funk’s  argument  that  wages 
received  for  services  were  not  taxable  as  income  was  frivolous, 
citing  to  
Broughton,  Hayward   and   Francisco.   As  analyzed  herein 
at pages 186, 185 and 183 respectively, none of those cases are valid 
legal precedent for the proposition that wages constitute income. 
Jones v. United States, 551 F.Supp. 578 (N.D.N.Y. 1982): 
Mr. and Mrs. Jones, representing themselves, commenced an
action to recover income taxes that they had paid for the years 1977
through 1980. The government moved to dismiss the action on the
grounds that it failed to state a valid claim. The Joneses argued that
compensation for services or wages was not income within the
meaning of the Internal Revenue Code because: 1) wages had not
specifically been designated as income in the Internal Revenue
Code; and 2) the taxation of wages violated the prohibition against
direct taxation without apportionment among the several States.
Jones,  551 F.Supp. at 579.
In dismissing the case, the trial court cited to Glenshaw Glass;
Russell; Silkman; Lawson; Buras; Broughton; United States v.
Moore, 627 F.2d 830 (7th Cir, 1980); Francisco; United States v.
Edelson, 604 F.2d 232 (3rd Cir. 1979); United States v. Daly, 481
F.2d 28 (8th Cir. 1973); and United States v. Porth, 426 F.2d 519
(10th Cir. 1970) as its authority enabling it to dispose of the Jones’
claim that wages do not constitute income. Glenshaw Glass (see p.
159), Russell (see p. 179), Silkman (see p. 173), Lawson (see p. 206),
Buras (see p. 187), Broughton (see p. 186) and Francisco (see p.
183) have been analyzed hereinabove and shown to be legally
insufficient to sustain the proposition that wages do constitute
The  issues  raised  in  
Daly   were:  1)  whether  Defendant’s  filing  of 
returns  containing  no  information  relating  to  income  or  expenses 
was sufficient to comply with the Section 7203 requirement that he 
“make  a  return--�;  2)  whether  the  Fifth  Amendment  excuses 
defendant  from  answering  all  questions  on  the  return  relating  to 
income  and  expenses;  3)  whether  a  subpoena  directed  against  the 
I.R.S.  was  erroneously  quashed;  4)  whether  the  District  Court 
erroneously refused to instruct the jury on the definition of a dollar; 
and  5)  whether  defendant’s  criminal  prosecution  was  illegal 
because  it  should  have  been  preceded  by  some  form  of 
administrative action. 
Daly,  481 F.2d at 29. 
The issues addressed in 
Edelson  were: 1) the validity of his claim of 
privilege  under  the  Fifth  Amendment  on  his  tax  returns;  2)  the 
correctness  of  his  interpretation  of  “constitutional  dollars--�;  and  3) 
whether he was entitled to have the question of his subjective “good 
faith--�  exercise  of  the  Fifth  Amendment  privilege  put  to  the  jury. 
Edelson,  604 F.2d at 233-234. 
The  issues  raised  in  
Moore   were: 1) whether the District Court
allowed the introduction of irrelevant and prejudicial evidence; 2)
whether the District Court judge participated excessively in the
trial, particularly in questioning the defendant while he was
testifying; 3) whether the jury instructions adequately informed the
jury of the defendant’s good faith defense; and 4) whether the
District Court usurped the jury’s function in deciding the issue of
whether or not a return had been filed.
Moore,  627 F.2d at 832. 
The  issues  raised  in  
Porth   were: 1) whether his prosecution was
barred by the statute of limitations; 2) whether there was a fatal
variance between the allegations of the indictment and the proof on
counts I and II of the indictment; 3) whether the return he did file
constituted a valid return under the Fifth Amendment; and 4)
whether he should be granted a new trial because of alleged bias
and prejudice of one of the jurors.
Porth,  426 F.2d at 521-523. 
Daly,  Edelson,  Moore   nor   Porth   involved  the  issue  of 
whether wages constitute income. 
Donovan v. Maisel, 559 F.Supp. 171 (D.Del. 1982): 
Five plaintiffs, each representing himself, filed substantially
identical complaints, each seeking an injunction against the I.R.S.
to prevent it from enforcing levies against the plaintiffs’ wages for
alleged past due income taxes. The issue before the Court was
whether or not the government was entitled to a dismissal of the
suit under the anti-injunction statute, 26 U.S.C. Section 7421 (a),
which prohibits lawsuits for the purpose of restraining the
assessment or collection of any tax.
Donovan, 559 F.Supp. at 172-
The Court recognized that there was an exception to the anti-
injunction statute where the government had made no disclosure as
to whether the assessment had a basis in fact, citing to
Commissioner v. Shapiro,  424 U.S. 614 (1976). The Court held that 
Shapiro  was  not applicable in  the plaintiffs’ case  because  the facts 
in the case showed that the plaintiffs were earning income and that 
the I.R.S. was not required to accept the taxpayers’ unsubstantiated 
allegations  that  they  were  exempt  from  taxes  on  their  wages. 
Donovan,  559 F.Supp. at 174. 
Donovan Court did not address whether wages constitute
income, but merely held that the plaintiffs failed to provide
evidence that they were exempt from income on their wages. The
plaintiffs’ argument on this issue was not set forth in the opinion
and was not addressed by the Court. Therefore, the case cannot,
and does not, stand for the proposition that wages constitute
Knighten v. C.I.R., 702 F.2d 59 (5th Cir. 1983): 
Mr. Knighten, representing himself, appealed from the Tax Court’s
grant of summary judgment in favor of the I.R.S. The Court of
Appeals  stated  it  was  difficult  to  determine  precisely  what  points 
Mr.  Knighten  was  attempting  to  raise  on  appeal,  
Knighten,   702 
F.2d at 60, and further stated: 
The  Tax  Court  understood  one  of  Knighten’s 
arguments  to  be  that his  wages  were  not income.  On 
appeal, he avers that the Tax Court misunderstood the 
issue:  the  argument  was  that  only  “gain--�  is  taxable, 
and the Commissioner’s deficiency assessment did not 
accurately reflect Knighten’s “gain.--� The problem with 
this  argument  is  that  the  burden  of  proving  any 
inaccuracy  in  the  Commissioner’s  assessment  was  on 
Knighten.  [Citations.]  Knighten  has  not  even 
attempted to carry that burden: he has failed to allege 
any  fact  or  legal  theory  that  would tend to  show  that 
the  computation  was  incorrect.  His  unsupported 
claim of error  was not  enough to withstand a motion 
for summary judgment. 
Knighten, id. 
Knighten   Court  did  not  rule  that  wages  do  not  constitute 
income, and hence the case cannot be cited for the proposition that 
they do. 
Lively v. Commissioner, 705 F.2d 1017 (8th Cir. 1983): 
In 1977, Mr. & Mrs. Lively filed a Form 1040 together with Wage
and Tax Statements showing the receipt of a little more than
$30,000 in wages. Rather than putting this amount on their Form
1040, it was put on a Schedule C95 as a “receipt,--� from which was
subtracted approximately $23,000 for personal expenses, said
calculations being made on a separate sheet of attached paper. The
difference, $7,918, was shown on the Schedule C as “net profit,--� and
tax was paid on that amount. The Commissioner sent a notice of
deficiency disallowing the “deductions--� for personal expenses, and
the Tax Court upheld the Commissioner. On appeal from that
decision,  the  Livelys  claimed  error  because  they  did  not  claim  the 
amount  subtracted  from  wages  as  deductions,  and  further  argued 
that the income tax was unconstitutional because it was a direct tax 
which  was  not  apportioned,  that  there  was  no  law  imposing  an 
income tax on them for 1977, that 26 U.S.C. Sections 3101, 3102 and 
3402  were  unconstitutional,  that  income  could  not  be  defined  or 
measured,  and  that  an  individual’s  “gross  receipts--�  could  not  be 
Lively,  705 F.2d at 1018. 
The  Court  of  Appeals  stated  that  the  Lively’s  arguments  were 
without merit and that the appeal was frivolous, but failed to either 
set forth the details of the Lively’s arguments or to respond to them. 
No case law was cited by the Court of Appeals, rendering the 
case valueless as legal precedent for the issue of whether wages
constitute income.
United  States  v.  Stillhammer,  706  F.2d  1072  (10th  Cir. 

Mr. and Mrs. Stillhammer were each convicted on four counts of
failure to file income tax returns and one count of filing a false
withholding exemption certificate, Form W-4. Their tax returns,
other than containing their names, address and social security
numbers, contained no other information; they had claimed Fifth
Amendment protection as to the other requested information on
the Forms 1040. Their Forms W-4 claimed they had no tax liability.
Stillhammer,  706 F.2d at 1073-1074. 
On  appeal,  among  other  issues,  the  Stillhammers  argued  that  the 
income  tax  statutes  could  not  be  construed  to  apply  to  them 
because  Congress intended  the Sixteenth  Amendment to authorize 
taxation  of  the  income  of  business  enterprises  only.  
706 F.2d at 1077.
The Court first stated that such a limited purpose of taxing only
such business organizations was not apparent from the language of
the Sixteenth Amendment. The Court noted that following the
ratification  of  the  Sixteenth  Amendment,  the  Supreme  Court 
observed that the Amendment  granted  no new power to  Congress, 
but merely freed it to exercise the taxing power granted in Article I, 
Section  8  to  tax  income  without  the  restriction  of  apportionment, 
citing  to  
Brushaber,   240 U.S. at 17-19. Stillhammer,   706 F.2d at
The Court next observed that prior to the ratification of the
Sixteenth Amendment, an income tax act had been held partially
invalid because of the Article I conditions of apportionment for
direct taxes, and the finding by the
Pollock  Court that the tax was a
direct tax as applied to income, such as rents, derived from real
Stillhammer,  706 F.2d at 1077. The Court then stated: 
It is unnecessary to delve into the difficult question of 
the  distinction  between  direct  and  indirect  taxes 
because  even  a  cursory  study  of  these  early  cases 
teaches  that  the  power  of  Congress  to  impose  an 
income  tax  on  salaries  and  wages  has  never  been 
seriously doubted. In 
Pollock  the Court stated:
[T]he power of Congress to tax is a very
extensive power. It is given in the
Constitution, with only one exception
and only two qualifications. Congress
cannot tax exports, and it must impose
apportionment, and indirect taxes by the
rule of uniformity. Thus limited, and
thus only, it reaches every subject, and
may be exercised at discretion.
157 U.S. at 557, 15 S.Ct. at 680 (quoting
The License
Tax Cases, 72
U.S.  (5  Wall.)  462,  471,  18  L  Ed.  497 
(1866).  Thus,  prior  to  ratification  of  the  Sixteenth 
Amendment  Congress  could  tax  the  earnings  of 
individuals.  The  Amendment  was  passed  to  overrule 
Pollock  (see  Brushaber,   240 U.S. at 18, 36 S.Ct. at
241-242) and to remove the apportionment limitation
with respect to the laying and collection of taxes on
Stillhammer,  706 F.2d at 1077. 
There is no question but that  Congress could tax the  “earnings--�  of 
individuals prior to the adoption of the Sixteenth Amendment; the 
tax merely needed to be apportioned. And there is no question but 
that after the adoption of the Sixteenth Amendment, “income of an 
individual--�  could  be  taxed  without  apportionment.  But  unless 
“earnings--�  of  the  individual  constitute  “income,--�  the  “earnings--�  of 
an  individual  must  still  be  taxed  by  apportionment,  because  the 
Sixteenth Amendment only applies to “income.--� Thus the question 
becomes  whether  “earnings--�  constitute  “income.--�  It  is  clear  from 
the  above  quote  that  the  
Stillhammer   Court  equated  “earnings--� 
with “income,--� but it is equally as clear that only the profit or gain 
derived from those  “earnings--�  (labor)  constitute  “income.--�  The 
Stillhammer   Court  quoted  the  definition  of  income  contained  in 
Eisner   and   Doyle   in its  written  opinion   (Stillhammer,   706  F.2d  at 
1077-1078),  but  then  ignored  the  precise  prohibition  contained  in 
Doyle  of equating “gross receipts--� with “gross income.--�97 
The precise holding of the 
Stillhammer  Court was:
We feel it is clearly implicit in these decisions that
Congress has the power to tax the income of
Stillhammer,  706 F.2d at 1078.
That is a correct statement of the law. However, to the extent the
case purports to hold that wages constitute income, the case is at
odds with various decisions of the United States Supreme Court,
and is therefore legally defective.
United  States  v.  Venator,  568  F.Supp.  832  (N.D.N.Y. 

Mr. Venator was charged with five counts of failing to file income
tax returns for the years 1976, 1977, 1978, 1979 and 1980. He filed
pretrial motions, among others, to dismiss the charges against him
on constitutional grounds.
Venator,  568 F.Supp. at 833. He argued
that compensation for services or “wages--� was not income and that
the current income tax on wages was contrary to the Sixteenth
Venator,  568 F.Supp. at 835. The District Court relied 
entirely on the 
Jones  case in denying the motion to dismiss.  Jones
was fully analyzed herein at page 216 and shown to be unreliable
Rowlee v. Commissioner, 80 T.C. 1111 (1983): 
Mr. Rowlee, for the years 1977, 1978 and 1979, filed Forms W-4
with his employers in which he claimed he was exempt from income
taxation, and did not file income tax returns for those years. The
I.R.S. issued letters of deficiency to Mr. Rowlee, and representing
himself, he petitioned the United States Tax Court claiming he was
not required to file any federal income tax returns because he was a
“natural unfranchised individual and freeman--�; that the Sixteenth
Amendment only permitted a tax on income rather than on the
source of income; that the tax laws set forth in the Internal Revenue
Code were unconstitutional because they taxed the source rather
than the income; that gain was a prerequisite to income; and that
he had received no gain or profit because his labor was capital and
the compensation received for his services was equal to the value of
his labor.
Rowlee,  80 T.C. at 1111-1113. 
In ruling against Mr. Rowlee, the Court stated that: 
Pollock v. Farmers’ Loan & Trust Co.,  158 U.S. 601
(1985), the U.S. Supreme Court held unconstitutional
a tax on incomes derived from property. It conceded
at that same time, however, that taxes on income from
“professions, trades, employments or vocations--� were 
valid.  The  entire  statute  was  voided  on  the  ground 
that  Congress  did  not  intend  to  permit  the  entire 
“burden of the tax to be borne by professions, trades, 
employments, or vocations.--� 158 U.S. at 637. 
Rowlee,  80 T.C. at 1119. 
This first part of this statement is patently false; the 
Pollock  Court 
actually said: 
We  do  not  mean  to  say  that  an  act  laying  by 
apportionment  a  direct  tax  on  all  real  estate  and 
personal  property,  or  the  income  thereof,  might  not 
also  lay  excise  taxes  on  business,  privileges, 
employments,  and  vocations.  But  this  is  not  such  an 
act; and the scheme must be considered as a whole. 
Pollock,   158 U.S. at 637; (see pp. 27,
Thus the
Pollock  Court clearly distinguished between an income tax 
on  business,  privileges, employments, and vocations and an excise 
tax on business, privileges, employments, and vocations. 
Rowlee  Court next commented that the Sixteenth Amendment 
had  been  adopted  in  1913,  and  that  the  
Brushaber   Court  held  the 
income tax law to be Constitutional. The 
Rowlee  Court stated: 
The  propriety  of  taxing  incomes  from  professions, 
trades, employments, or vocations was reaffirmed, the 
[Brushaber]  Court stating that in the  Pollock  case “its
validity was recognized; indeed, it was expressly
declared that no dispute was made upon that subject
and attention was called to the fact that taxes on such
income had been sustained as excise taxes in the
past.--� 240 U.S. at 17.
Rowlee,  80 T.C. at 1119.
It was previously pointed out at page 58 that the
Pollock   Court, 
understanding  the  principle  that  the  Supreme  Court  could  only 
address  issues  actually  before  it,  did  not  specifically  address  the 
issue  of  whether  or  not  an  income  tax  on  business,  privileges, 
employments,  and  vocations  would  be  constitutional  absent 
apportionment.  The  
Pollock   Court did state, however, that Section
27 of the 1984 Tax Act did not impose an excise tax on business,
privileges, employments or vocations, and that previous courts had
sustained a tax on business, privileges, employments and vocations
under the “guise--�98 that such taxes were excise taxes. Thus
does not stand for the principle that an income tax on business,
privileges, employments or vocations is constitutional in the
absence of apportionment, and
Brushaber   only holds that such
taxes are excise taxes. It has been pointed out at page 83 that
Congress did not impose an excise tax on business, privileges,
employments or vocations in Subtitle A of the Internal Revenue
Code, but imposed an income tax in Subtitle A.
Rowlee  Court next cited to  Eisner  stating the issue before that
Court was the taxability of stock dividends, and that in
dicta   the 
Court referred to income as “gain derived from capital, from labor, 
or  from  both  combined.--�  
Rowlee,   80 T.C. at 1119. Since the
definition of income was essential to the determination as to
whether stock dividends constituted income under the law, it is not
clear that
Eisner’s  definition of income was merely  dicta.  
Rowlee Court next discussed Section 61 (a) of the Internal
Revenue Code of 1954, and stated:
Petitioner has admitted that he exchanged his labor
for the amounts paid to him by his employers during
the taxable year. He argues that taxation of the
amounts paid to him in exchange for his labor is a tax
on the “source--� of income and not on the income
itself. This “taxation on source--� argument is spurious;
the tax is imposed on the money he receives for his
services, not on the performance of those services... .
Finally, petitioner claims that he did not have any
taxable income or “gain--� because the value of his labor
was the same as (or more than) the payment he
received for it.
Rowlee,  80 T.C. at 1119-1120. 
Rowlee Court ignored the fact that in Section 61 (a) Congress
defined gross income as the gain derived from compensation for
services. To support its position, the
Rowlee Court  relied  upon 
Reading (p.  174),   Lonsdale   (p.  200),   Buras   (p. 187) and Rice (p.
202). Those cases have been previously shown not to be legal
precedent for the contention that wages constitute income.
Contrary to the statement in
Rowlee  that the tax is imposed on the 
money received for services, that tax is imposed at Section 1 of the 
Internal Revenue Code upon taxable income. Taxable income is the 
profit  or  gain  derived  from  compensation  for  services  less  the 
deductions  authorized  by  Sections  62  and  63  of  the  Internal 
Revenue Code. In ruling against Mr. Rowlee, the Tax Court ignored 
the  applicable  decisions  of  the  United  States  Supreme  Court,  the 
legislative history of the enactment of Section 61, and the law with 
respect  to  “basis--�  set  forth  in  Section  1001  
et  seq.   of  the  Internal 
Revenue  Code.  Therefore,  
Rowlee is  not  credible  authority  for  the 
proposition that wages constitute income. 
United States v. Richards, 723 F.2d 646 (8th Cir. 1983): 
Mr. Richards was convicted of failing to file income tax returns for 
the years 1979, 1980 and 1981, and representing himself, appealed 
those  convictions. 
Richards,   723 F.2d at 647. Among other issues,
he contended that wages and salaries were not income within the
meaning of the Sixteenth Amendment, and therefore he had no
duty to file income tax returns.
Richards,   723  F.2d  at  648.  The 
Court stated: 
Although  the  sixteenth  amendment,  giving  Congress 
the  power  to  tax  income,  does  not  define  “income,--� 
the  courts  have  interpreted  the  term  in  its  every  day 
usage  to  mean  gain  derived  from  capital,  from  labor, 
or  from  both  combined.  See  
United  States  v.  Safety 
Car Heating &
Lighting Co.,  297 U.S. 88, 89, 56 S.Ct.
353, 358, 80 L.Ed. 500 (1936);
Helvering  v.  Edison 
Bros.  Stores,  Inc.,  
133  F.2d  575,  579  (8th  Cir.  1943), 
cert. denied,  319 U.S. 752, 63 S.Ct. 1166, 87 L.Ed. 1706 
(1943).  Clearly  wages  and  salaries  fall  within  this 
definition and are therefore constitutionally taxable. 
Richards,  723 F.2d at 648. 
As pointed out at page 193, the issue before the Court in the 
Car  Heating  &  Lighting  Co.  
case  was  the  taxability  of  the  “profit--� 
derived from a patent, and not whether wages constitute income. In 
Edison Bros. Stores,  according to that Court:
The questions presented on these petitions to review a
decision of the United States Board of Tax Appeals are
whether the taxpayer realized taxable income in either
or in both of the years 1935 and 1937 from sales to its
employees of shares of its capital stock, previously
acquired for that purpose, and whether, where the
taxpayer discharged a debt owing to its general
counsel for services rendered, by transfer to him of
shares of its capital stock, it was entitled to deduct as
a business expense the cost of the stock to the
taxpayer at the time of its acquisition, or the fair
market value of the stock at the time of its transfer to
the general counsel, the gain to the taxpayer in the
transaction not having been reported as income.
Edison Bros. Stores , 133 F.2d at 577. 
It is clear that neither of these cases concerned the issue of whether 
wages constitute income. It is equally clear that the 
Richards  Court
ignored the holding of the Supreme Court in
Eisner   (see  p.  137) 
regarding the words “gain derived from labor--� in holding that wages 
and salaries fall within the definition of income. The 
Richards  case 
being contrary to the applicable decisions of the Supreme Court, it 
does  not  constitute  legal  precedent  for  the  contention  that  wages 
constitute income. 
Parker v. Commissioner, 724 F.2d 469 (5th Cir. 1984): 
Mr. Parker filed an income tax return for 1977 in which he failed to 
provide  financial  data,  but  instead  claimed  Fifth  Amendment 
protection. This case was an appeal from an adverse determination 
of the United States Tax Court. 
Parker,  724 F.2d at 470. 
On  appeal,  representing  himself,  Mr.  Parker  maintained  that  “the 
I.R.S.  and  the  government  in  general,  including  the  judiciary, 
mistakenly interpret the Sixteenth Amendment as allowing a direct 
tax  on  property  (wages,  salaries,  commissions,  etc.)  without 
Parker,  724 F.2d at 471. 
The Court of Appeals cited to 
Lonsdale  for the proposition that the 
Sixteenth  Amendment  was  enacted  for  the  express  purpose  of 
providing  for  a  direct income tax,  and  then cited to  
Brushaber   for 
the proposition that the Sixteenth Amendment provided the needed 
constitutional basis for the imposition of a direct, non-apportioned 
Parker,  724 F.2d at 471. 
Mr.  Parker  cited  to  
Flint   in support of his contention that the
income tax was an excise tax applicable only against special
privileges, such as the privilege of conducting a business, and was
not assessable against income in general. The Court correctly
pointed out that
Flint  did not address the personal income tax, but
rather addressed the Corporate Excise Tax Act of 1909, and
was  pre-Sixteenth  Amendment.   Parker,   724  F.2d  at  471-472.  99 
Relying  upon  
Lonsdale,   the Court did not bother to address the
issue of whether or not wages constitute income. The 
Lonsdale  case 
has been shown above (see p. 200) to be insufficient precedent for 
the determination of that issue. 
Pascoe v. I.R.S., 580 F.Supp. 649 (E.D.Mich.S.D. 1984): 
Mr. Pascoe, representing himself, had filed a Form W-4 claiming he
was exempt from taxation. The I.R.S. notified his employer to
withhold the income tax from his wages, and Mr. Pascoe sought to
stop the withholding by filing a court action seeking a preliminary
Pascoe,   580 F.Supp. at 650-651. One of the grounds
asserted by Mr. Pascoe was that the wages that he received from his
employer did not constitute “income--� as that term was used in
Section 61 of the Internal Revenue Code.
Pascoe,   580  F.Supp.  at 
652. The District Court stated: 
Although  Section  61  does  not  by  its  terms  define 
income,  the  courts  have  repeatedly  stated  that  the 
term is broad enough to include as compensation any 
economic  or  financial  benefit  from  any  source, 
conferred in any form on any employee, see e.g. 
v.  United  States,  
393  F.2d  823  (Ct.Cls.  1968),   cert. 
393  U.S.  844,  89  S.Ct.  127,  21  L.Ed.2d  115 
(1968).  Such  a  broad  definition  of  “income--�  certainly 
would  encompass  the  primary  and  perhaps  only 
source of compensation that plaintiff receives from his 
employer, his wages. 
Pascoe,  580 F.Supp. at 652. 
In  the  
Ritter   case, Mr. Ritter filed an action to recover federal
income taxes and interest thereon attributable to certain payments
made to him by his employer in 1958. The issue before the Court
was whether those payments, which were occasioned by a transfer
of Mr. Ritter’s place of employment . for the convenience of his
employer, constituted ordinary income to Mr. Ritter and, if so,
whether Mr. Ritter could deduct as expenses the items for which
payments  were  made.  
Ritter,   393  F.2d  at  824.  More  specifically, 
Mr. Ritter claimed that the reimbursements from his employer were 
not income as defined by Section 61 of the Internal Revenue Code. 
Ritter,  393 F.2d at 826.
In ruling against Mr. Ritter, the Court, citing to
Glenshaw  Glass, 
The  Supreme  Court  has  consistently  given  the  term 
“gross  income--�  as  defined  by  the  Revenue  Code  a 
broad  construction  in  order  “to  tax  all  gains  except 
those specifically exempted.--� [Emphasis added.] 
Ritter,  393 F.2d at 827.
The Court next cited to several cases in which the Supreme Court
held that payments to an employee from an employer constituted
income. The Court first cited to
C.I.R. v. Smith. That case was
analyzed herein at page 196, where it was shown that what was
taxed in that case was the gain recognized when a stock option,
which had no market value at the time of the option, was exercised,
at which time the stock had a positive market value.
The Court next cited to
C.I.R. v. LoBue, 351  U.S.  243  (1956), 
another  stock  option  case.  In  
LoBue,   as a result of the exercise of
the stock option, Mr. LoBue obtained $9,930 worth of stock for
$1,700, realizing a gain in the amount of $8,230, which Mr. LoBue
did not report on his tax return. The issue in Tax Court was whether
the stock option constituted additional compensation for personal
services, in which case the gain would be taxable, or whether the
options were intended to provide Mr. LoBue with “a proprietary
interest in the business, in which case the gain would not constitute
gross income.
LoBue,  351 U.S. at 245.
Mr. LoBue won in both Tax Court and in the Court of Appeals, and
the Supreme Court granted certiorari to consider whether those
tribunals had given Section 22(a) of the 1939 Internal Revenue

Code too narrow an interpretation. The Court held that in enacting
Section 22(a) Congress intended to “tax all gains except those
specifically exempted,--� citing to
Glenshaw  Glass.   The Supreme
Court next held that unless the stock option was a gift, it was
taxable. Finally, the Supreme Court stated that there was not the
slightest indication of the kind of detached and disinterested
generosity which might evidence a gift, finding from the Tax Court
record that the stock option plan was designed to achieve more
profitable operations by providing the employees “with an incentive
to promote the growth of the company by permitting them to
participate in its success.--�
LoBue,   351  U.S.  at  246.  The  Court  also 
When  assets  are  transferred  by  an  employer  to  an 
employee  to  secure  better  services  they  are  plainly 
compensation.  It  makes  no  difference  that  the 
compensation  is  paid  in  stock  rather  than  in  money. 
compensation  “in  whatever  form  paid.--�100  And  in 
another  stock  option  case  we  said  that  Section  22(a) 
“is  broad  enough  to  include  in  taxable  income  any 
economic  or  financial  benefit  conferred  on  the 
employee  as  compensation,  whatever  the  form  or 
mode by which it is effected.--� 
Commissioner v. Smith, 
324  U.S.  188,  188.  LoBue  received  a  very  substantial 
economic  and  financial  benefit  from  his  employer 
prompted by the employer’s desire to get better work 
from him. This is “compensation for personal service--� 
within the meaning of Section 22(a). 
LoBue,  351 U.S. at 247. 
In  both  the  
Smith   case and the LoBue case, only the difference
between the option price and the market value of the stock at the
time the option was exercised was subject to inclusion within “gross
income.--� Thus what was included was the
gain   derived  from 
compensation for services. 
Wages are clearly paid as compensation for services, but only the
gain derived therefrom is includible within the statutory definition
of gross income. This was confirmed by the Supreme Court in
LoBue as follows:
It is true that our taxing system has ordinarily treated
an arm’s length purchase of property even at a bargain
price as giving rise to no taxable gain in the year of
purchase. See
Palmer v. Commissioner,   302 U.S.  63, 
69. But that is not to say that when a transfer which is 
in  reality  compensation  is  given  the  form  of  a 
purchase the Government  cannot  tax the  
gain   under 
Section 22(a). [Emphasis added.] 
LoBue,  351 U.S. at 248.
In ruling against Mr. Ritter, and after citing the Supreme Court
cases of
Glenshaw Glass, Smith  and  LoBue,  the Court, relying upon 
a  Court  of  Appeals  case,  
United  States  v.  Woodall,   255  F.2d  370 
(10th Cir. 1958), stated: 
Economic  gain  does  not  necessarily  require  profit  in 
its usual sense. 
Ritter,  393 F.2d at 832.
This statement is contrary to the precise holdings of
Glass, Smith 
and  LoBue based upon the facts in those cases wherein 
a profit was indeed realized by each of the taxpayers. 
Woodall   case involved the issues of 1) whether an amount
received by an employee as reimbursement for the costs of
relocating himself and his family at the place of his new
employment was gross income for income tax purposes; and 2)
whether such costs were deductible business expenses.
255 F.2d at 371. In ruling in favor of the government, the Court
basically relied upon  
Glenshaw Glass,  Smith  and  LoBue.  Woodall, 
255 F.2d at 372. 
Since the 
Ritter  Court failed to adhere to the law as set forth by the 
Supreme Court, and since the  issue  before the  
Woodall  and  Ritter 
Courts were not whether wages constitute income, the  Pascoe  case
is not legal precedent for the proposition that wages do constitute
Simanonok v. C.I.R., 731 F.2d 743 (11th Cir. 1984): 
Mr. Simanonok filed suit in Tax Court seeking a redetermination of
his tax liability, claiming, among other things, that he had not
received income because his paychecks were received in exchange
for his costs and disbursements of labor. The Tax Court ruled in
favor of the Commissioner’s determination of tax, and Mr.
Simanonok, representing himself, appealed.
Simanonok, 731 F.2d
at 744.
Mr. Simanonok’s legal arguments raised on the appeal were not set
forth in the Court’s opinion. Without citing any case law or other
authority, the Court stated:
The tax court correctly determined that Simanonok’s
contentions are completely without merit; we
therefore affirm the tax court’s decision as to these
Simanonok, id. 
Having failed to set forth the Court’s reasoning or any legal
authority therefor, the case is of no value as legal precedent.
Lovell v. United States, 579 F.Supp. 1047 (W.D.Wis. 1984): 
Mr. and Mrs. Lovell filed Forms 1040 in which they claimed no
income from wages, salaries or tips. During a deposition taken in
the case, Mr. Lovell stated that he did not receive any wages, but
instead received compensation in equal exchange for his labor or a 
Lovell,   579 F.Supp. at 1047-1048. While the nature of
the lawsuit brought by the Lovells, representing themselves, was
not stated in the opinion, it was apparently a suit for refund of
income taxes withheld by their employers through withholding.
In ruling against the Lovells, the Court stated, citing
Kowalski  and 
Glenshaw Glass  that: 
It  is  well  settled,  and  beyond  dispute,  that 
compensation  for  labor  or  service  is  taxable  income, 
and  no  deduction  is  allowed  for  the  value  of  labor 
Lovell,  579 F.Supp. at 1048. 
As previously set forth at pages 202 and 153 respectively, 
and  Glenshaw Glass  stand for the proposition that gain constitutes 
income, not that wages constitute income. 
United States v. Koliboski, 732 F.2d 1328 (7th Cir. 1984): 
Mr. Koliboski was convicted of two counts of willful failure to file
income tax returns for the years 1980 and 1981, and filing four false
W-4 statements in 1980, 1981 and 1982. On Appeal, Mr. Koliboski,
representing himself, raised several issues, none of which involved
the issue of whether wages constitute income.
Koliboski,  id. 
Notwithstanding this fact, the Court stated in a footnote:
Although not raised in his brief on appeal, the
defendant’s entire case at trial rested on his claim that
he in good faith believed that wages are not income
for taxation purposes. Whatever his mental state, he,
of course, was wrong, as all of us already are aware.
Nonetheless, the defendant still insists that no case
holds that wages are income. Let us now put that to
rest: WAGES ARE INCOME. Any reading of tax cases
by  would-be  tax  protesters  now  should  preclude  a 
claim of good-faith belief that wages--"or salaries--"are 
not taxable. [Emphasis in original.] 
Koliboski,  732 F.2d at 1329, n.l.
The Court cites no case law to support this gratuitous statement,
and provides no analysis for consideration. The statement
constitutes pure
dicta,   and  thus  the  case  cannot  constitute  legal 
precedent for the proposition stated. 
Karpowycz  v. United States, 586 F.Supp.  48 (N.D.I11.E.D. 

Mr. Karpowycz was assessed a $500 penalty for filing a frivolous
income tax return and, representing himself, brought suit for a
Karpowycz, 586 F.Supp. at 49-50. He argued that a
substantial portion of his wages earned while employed by Sun
Electric Corporation was non-taxable, since he earned the wages
while he was a “nominee-agent--� for Professional and Technical
Services, a purported trust created by an entity known as American
Dynamics Corporation. He claimed that by virtue of owning a
property interest in his own labor, he could convey his “personal
services property assets--� to the trust in accordance with a personal
service contract executed between himself and the trust.
Karpowycz,  586 F.Supp. at 51.
The trial court, in granting the government’s motion for summary
judgment, relied upon the principle that income must be taxed to
the one who earns it, and pointed out that Mr. Karpowycz had failed
to show the existence of a contract or other agreement between the
trust and his employer, and did not claim that the trust had the
right to direct or control his activities as an engineer.
It does not appear from the Court’s opinion that Mr. Karpowycz
claimed that wages do not constitute income. Nonetheless, the
Court stated:
It is well settled that gross income includes
compensation for services. 26 U.S.C. Section 61. In
addition, the Supreme Court has held that
compensation for labor or services paid in the form of
wages or salaries is income taxable under federal
income tax laws. See
e.g., Commissioner v. Kowalski, 
434 U.S. 77 (1977). 
Karpowycz,  586 F.Supp. at 51. 
Kowalski,  the issue before the Supreme Court was whether cash
payments to state police troopers, designated as meal allowances,
were included in the definition of gross income under Section 61 (a)
of the Internal Revenue Code of 1954, and, if so, were otherwise
excludable under Section 119 of the Code.
Kowalski,  434 U.S. at 78. 
Contrary to the above quote from 
Karpowycz,  the issue of whether
compensation for labor or services paid in the form of wages or
salaries constituted income taxable under federal income tax laws
was not addressed by the
Kowalski  Court.
The Supreme Court stated:
The starting point in the determination of the scope of
“gross income--� is the cardinal principle that Congress
in creating the income tax intended “to use the full
measure of its taxing power.--�
Helvering v. Clifford ,101  
309  U.S.  331,  334  (1940);   accord,  Helvering  v. 
Midland  Mutual  Life  Ins.  Co.
,102  300  U.S.  216,  223 
Douglas  v.  Willcuts,   296  U.S.  1,  9  (1935); 
Irwin   v.   Gavit ,103  268  U.S.  161,  166  (1925).  In 
applying  this  principle  to  the  construction  of  Section 
22(a) of the Internal Revenue Code of 1939 this Court 
stated that “Congress applied no limitations as to the 
source  of  taxable  receipts,  nor  restrictive  labels  as  to 
their  nature  [,  but  intended]  to  tax  all  gains  except 
those  specifically  exempted.--�  
Commissioner  v. 
Glenshaw  Glass  Co.,  
348  U.S.  426,  429-430  (1955), 
Commissioner  v.  Jacobson ,104  336  U.S.  28,  49 
(1949)  and  
Helvering  v.  Stockholms  Enskilda 
,105  293  U.S.  84,  87-91  (1934).  Although 
Congress  simplified  the  definition  of  gross  income  in 
Section 61 of the 1954 Code, it did not intend thereby 
to  narrow  the  scope  of  that  concept.  See 
Commissioner  v.  Glenshaw  Glass  Co.,  supra,   at  432, 
and  n.11;  H.R.  Rep.No.  1337,  83rd  Cong.,  2d  Sess., 
A18 (1954); S. Rep.No. 1622, 83rd Cong., 2d Sess., 168 
(1954).  In  the  absence  of  a  specific  exemption, 
therefore,  respondent’s  meal-allowance  payments  are 
income  within  the  meaning  of  Section  61  since,  like 
the  payments  involved  in  
Glenshaw  Glass  Co.,   the 
payments  are  “undeniabl[y]  accessions  to  wealth, 
clearly  realized,  and  over  which the  [respondent has] 
complete  dominion.--�  
Commissioner  v.  Glenshaw 
Glass  Co.,  supra  
at 431. See also  Commissioner  v. 
351  U.S.  243,  247  (1956);   Van Rosen v.
17 T.C. 834, 838 (1951). 
Kowalski,  434 U.S. at 82-83. 
Commissioner  v.  LoBue,   analyzed herein at page 230, involved a
stock option case, and involved the taxation of a gain. The
case involved the question of whether the receipt by Mr. Van 
Rosen of cash payments by his employer in lieu of subsistence and 
quarters was to be included in his gross income. 
Van Rosen, 17 T.C.
at 834. Mr. Van Rosen did not challenge whether money or other
consideration, to the extent of the value thereof received by an
employee as consideration for the services rendered by him, was
income taxable to the employee.
Van Rosen, 17 T.C. at 836. The Tax 
Court, despite quoting  Section 22(a)  of  the Internal Revenue Code 
of 1939 which included in gross income “gains, profits and income 
derived from salaries--�, stated: 
We find it difficult to conclude that, for the purpose of 
reporting  income  and  paying  the  tax  thereon,  this 
petitioner  should  be  regarded  in  a  light  more 
favorable,  tax-wise,  than  any  other  civilian  employee 
whose employment is such as to permit him to live at 
home while performing the duties of his employment. 
In  both  instances,  there  is  de  facto  receipt  under  the 
employment  contract  of  x  dollars,  whether  the 
consideration  be  denominated  salary  only,  or  salary 
and  allowances,  or  base  pay  plus  an  allowance  of 
subsistence and quarters, which dollars the employee, 
in  each  instance,  has  as  his  own  and  without  any 
restriction on their use or expenditure. 
Van Rosen, id. 
Under Section  22(a) of  the 1939 Internal Revenue Code it was  not 
the receipt of dollars that was includible in gross income, it was the 
receipt  of  a  profit,  gain  and  income  derived  from  labor 
(employment) that was includible in gross income. 
Thus  contrary  to  the  erroneous  assertion  in  
Karpowycz that the
Supreme Court has held that compensation for labor or services
paid in the form of wages or salaries is income taxable under federal
income tax laws, the Supreme Court in
Kowalski   specifically  held 
that a 
gain  from any source constitutes income includible in gross
income. The Supreme Court even referenced the case of
Jones  v. 
United States, 
60 Ct. Cls. 552 (1925) and stated: 
The  Court  of  Claims,  in  addition,  rejected  the 
argument  that  money  paid  in  commutation  of 
quarters [provided to military officers] was income on 
the ground that it was not “gain derived ... from labor--� 
within the  meaning  of  
Eisner v.  Macomber,  252 U.S.
189 (1920) ....
Kowalski,  434 U.S. at 87. 
Karpowycz  Court’s contentions that wages constitute income is
not supported by the authorities cited, and is thus erroneous as a
matter of law.
Gattuso v. Pecorella, 733 F.2d 709 (9th Cir. 1984): 
Mr. Gattuso, representing himself, filed an action in District Court
to abate the finding of the I.R.S. that he and his wife owed taxes for
the years 1980, 1981 and 1982. He claimed that their wages were
not income within the meaning of the Internal Revenue Code.
Gattuso,  733 F.2d at 709. The Ninth Circuit asserted that this claim 
was frivolous citing to 
Romero, Buras  and  Funk.  Those cases have
been shown herein at pages 184, 181 and 205 respectively to be
deficient precedent for the proposition that wages do constitute
United States v. Burton, 737 F.2d 439 (5th Cir. 1984): 
Mr. Burton appealed his convictions for failing to file income tax
returns and for filing false withholding allowance certificates. His
contentions on appeal were: 1) that the District Court effectively
withheld the essential element of willfulness from the jury by
instructing them that his alleged good faith belief that wages were
not taxable income was not a defense; 2) that the district judge
should have allowed a defense expert to testify concerning the legal
uncertainty over whether wages are income; and 3) that it was error
for the judge to appoint a jury foreman. The Court found in favor of
Mr. Burton’s first argument and reversed his conviction.
737 F.2d at 440. 
The Court, citing to 
Lonsdale,  stated: 
Beyond dispute, wages are income. 
Burton , 737 U.S. at 441.
As shown above at page 200, the
Lonsdale   Court ignored the
precise holdings of the Supreme Court which defined “income,--�
failed to ascertain if Mr. Lonsdale had a profit derived from his
compensation for services, and failed to distinguish between
“compensation for services.--� Thus the contention in
Burton   that
wages constitute income, to the extent it relies wholly on the
erroneous holding of the
Lonsdale  case, is equally erroneous. 
Granzow v. C.I.R., 739 F.2d 265 (7th Cir. 1984):106 
Mr. Granzow appealed an adverse determination of the United
States Tax Court which rejected his contention that wages do not
constitute income. The Seventh Circuit Court of Appeals stated that:
It is well settled that wages received by taxpayers
constitute gross income within the meaning of section
61(a) of the Internal Revenue Code ... and that such
gross income is subject to taxation.
Granzow,  739 F.2d at 267. 
In support of this proposition, the Court cited to the following cases 
which have been previously analyzed herein: 
Koliboski  (see p. 234), 
Lonsdale  (see p. 200),  Knighten  (see p. 218),  Reading  (see p. 174), 
Hayward (see p. 185), Broughton   (see p. 186), Funk   (see p. 209),
Lively   (see p. 219), Buras   (see p. 187) and Romero (see  p.  189). 
Having relied entirely on cases that do not support the proposition, 
Granzow case  does  not  provide  precedent  for  the  proposition 
that wages constitute income. 
Davis v.  United  States  Government, 742  F.2d 171  (5th  Cir. 

Mr.  and  Mrs.  Davis  filed  a  Form  1040  for  the  year  1982  in  which 
they  reported  no  income  from  “wages,  salaries,  [or]  tips,--�  nor  any 
other  “gross  income,--�  even  though  four  Forms  W-2  from  their 
employers  in  1982  attached  to  their  return  indicated  they  had 
received  in  excess  of $60,000  in  wages  or other  compensation  for 
that  year.  Instead,  they  claimed  a  business  loss  of  $3,551  by 
deducting  from  their  gross  receipts  the  “cost  of  labor--�  which 
equaled  the  amount  shown  on  their  Forms  W-2,  and  other 
deductions  for  “materials  and  supplies,--�  “car  and  truck  expenses--� 
and “laundry and cleaning.--� 
Davis,  742 F.2d at 172.
The I.R.S. assessed a “frivolous return--� penalty of $500. The
Davises paid fifteen percent of the penalty, and after their claim for
refund was denied by the I.R.S., filed a suit for refund, additionally
seeking a refund for taxes paid by them from 1979 through 1982
and $50,000,000 in damages for mental and physical suffering.
The lower court dismissed the complaint, and representing
themselves, Mr. and Mrs. Davis filed an appeal, contending: 1) the
income tax is an excise tax applicable only against special privileges
and not assessable against income in general; and 2) an individual
receives no taxable gain from the exchange of labor for money
because the wages received are offset by an equal amount of “costs
of labor.--�
As to the first contention, the Court merely quoted from
724 F.2d at 471 as follows:
At this late date, it seems incredible that we would
again be required to hold that the Constitution, as
amended, empowers the Congress to levy an income
tax against any source of income, without the need ...
to classify it as an excise tax applicable to specific
categories of activities.
Davis,  742 F.2d at 172. 
As to the second contention, the Court stated: 
We  held  this  contention  meritless  in  
Lonsdale  v. 
661 F.2d 71, 72 (5th Cir. 1981). 
Davis , 742 F.2d at 172. 
Having relied entirely upon  
Parker  and  Lonsdale,   which as shown
above at pages 228 and 200 respectively were decided contrary to
the applicable decisions of the United States Supreme Court,
cannot support the legal proposition that wages constitute income. 
Crain v. C.I.R., 737 F.2d 1417 (5th Cir. 1984): 
Mr.  Crain,  representing  himself,  appealed  the  dismissal  of  his  Tax 
Court  petition  in  which  he,  according  to  the  Court,  defied  the 
jurisdiction  of  the  Internal  Revenue  Service  to  levy  taxes  on  his 
Crain,   737  F.2d  at  1417.  The  Court  failed  to  set  forth  Mr. 
Crain’s arguments and cited no case law in its opinion. Accordingly, 
the  case  cannot  constitute  legal  precedent  for  the  contention  that 
wages constitute income. 
Hansen v. United States, 744 F.2d 658 (8th Cir. 1984): 
Hansen,   nineteen people brought an appeal from the dismissal
by the lower court of their action against the United States. The
nineteen people did not report their wages on their respective
income tax returns. After the I.R.S. obtained Tax Court judgments
against them, it started to seize their property, and the nineteen
sought to enjoin the I.R.S. from these seizures. The nineteen argued
on appeal that wages were not income under the Sixteenth
Hansen,  744 F.2d at 659. 
The  Court  of  Appeals  relied  upon  
Richards   in  holding  against  the 
nineteen  on  their  argument  that  wages  did  not  constitute  income, 
and  relied  upon  
Rowlee in  holding  against  the  nineteen  on  their 

argument that labor was a property right given in exchange for
wages, therefore no gain was recognized.
Hansen,  744 F.2d at 660. 
As shown on pages 223 and 219 respectively, neither 
Richards  nor 
Rowlee  is valid legal precedent for the positions for which they were 
relied upon by the 
Hansen Court. 
Cameron v. I.R.S., 593 F.Supp. 1540 (N.D.Ind. Fort Wayne 
Div. 1984): 

In an action in District Court for an injunction against the Internal
Revenue Service, Mr. Cameron, representing himself, raised,
among other issues, that wages did not fall under the statutory
provisions for income because they were part of an equal exchange
of wages for services rendered, and thus had no element of profit or
Cameron,  593 F.Supp.  at 1544. Mr.  Cameron cited to  several 
Supreme Court cases,107 which the Court classified as “old,--� for the 
proposition that income means profit or gain. The Court stated: 
However, none of these decisions were intended to be 
definitive  definitions  of  the  concept;  all  deal  with 
specific questions under specific statutory provisions. 
The  Supreme  Court  rejected  an  argument,  based  on 
Eisner,  that the Code’s definition of income is limited 
to gain in  
Commissioner  v. Glenshaw  Glass Co.,   348 
U.S. 426 (1955). The Court specifically stated that the 
“income as gain--� definition of 
Eisner  “was not meant 
to  provide  a  touchstone  to  all  future  gross  income 
Id.  at 431. 
Cameron,  593 F.Supp. at 1552.
As to the statement by the
Cameron Court that none of these
decisions were intended to be definitive definitions of the concept,
said statement is contrary to the express holding of the Supreme
Court’s opinion in
Smietanka  that: 
[T]here would seem to be no room to doubt that the
word must be given the same meaning in all of the
Income Tax Acts of Congress that was given to it in
the Corporation Excise Tax Act and that what that
meaning is has now become definitely settled by
decisions of this court.
Smietanka,  255 U.S. at 519 (see p. 144).
As to the statement by the
Cameron Court  that  the  definition  of 
income as set forth in 
Eisner  was not meant to provide a touchstone 
to all future gross income questions, that sentence was taken out of 
context. The complete quote was: 
Such  decisions  demonstrate  that  we  cannot  but 
ascribe  content  to  the  catchall  provision  of  Section 
22(a),  “gains  or profits  and  income derived  from  any 
source  whatever.--�  The  importance  of  that  phrase  has 
been  too  frequently  recognized  since  its  first 
appearance in the Revenue Act of 1913 to say now that 
it adds nothing to the meaning of “gross income.--� 
Nor  can  we  accept  respondents’  contention  that  a 
narrower  reading  of  Section  22(a)  is  required  by  the 
Court’s  characterization  of  income  in  
Eisner v.
252  U.S.  189,  207,  as  “the  gain  derived 
from capital, from labor, or from both combined.--� The 
Court  was  there  endeavoring  to  determine  whether 
the  distribution  of  a  corporate  stock  dividend 
constituted  a  realized  gain  to  the  shareholder,  or 
changed  “only  the  form,  not  the  essence,--�  of  his 
capital  investment.  
Id.,   at  210.  It  was  held  that  the 
taxpayer  had  “received  nothing  out  of  the  company’s 
assets for his separate use and benefit.--� 
Id.,  at 211. The 
distribution,  therefore,  was  held  not  a  taxable  event. 
In that context--"distinguishing gain from capital--"the 
definition  served  a  useful  purpose.  But  it  was  not 
meant  to  provide  a  touchstone  to  all  future  gross 
income questions. [Citations omitted.] 
Here  we  have  instances  of  undeniable  accessions  to 
wealth, clearly realized, and over which the taxpayers 
have complete dominion. 
Glenshaw Glass,  348 U.S. at 430-431. 
Court   in   Glenshaw  Glass   was merely distinguishing that
income may be derived from any source, not only from labor or
capital, and did not hold that income was something other than a
gain. The Sixteenth Amendment authorized an unapportioned tax
on income “from whatever source derived,--� and the language of
Section 22(a) of the Internal Revenue Code of 1939 and of Section
61(a) of the Internal Revenue Code of 1954 shows Congress’ intent
to tax income “from whatever source derived.--�
Remembering that the issue in
Glenshaw Glass  was the taxability of 
punitive  damages,  the  holding  in  
Glenshaw  Glass   that punitive
damages falls within the definition of statutory gross income is in
full accord with that part of the definition of gross income as stated
Eisner   and the other “old--� cases cited by Mr. Cameron that
“income--� must be a “profit or gain.--�
Cameron Court next stated that: 
More recently the Court rejected the assumption that 
the  current  statutory  definition  of  income  (in  26 
U.S.C.  Section  61)  incorporated  the  income  as  gain 
definition  of  
Eisner,  See  Commissioner  v.  Kowalski, 
434 U.S. 77, 94 (1977). 
Cameron,  593 F.Supp. at 1552. 
Kowalski,  the Supreme Court said: 
Jones  also rests on  Eisner v. Macomber,  252 U.S. 189
(1920), but Congress had no reason to read
definition of income into  Section 61 and, indeed,  any 
assumption that Congress did is squarely at odds with 
Commissioner  v.  Glenshaw  Glass  Co.,   348 U.S. 426
Kowalski,  434 U.S. at 94. 
As  shown  immediately  above,  the  Supreme  Court  in  
was  merely  indicating  that  income  could  be  derived  from 
sources  other  than  from  labor  or  from  capital.  In  addition,  the 
legislative  history  of  the  enactment  of  Section  61  clearly  discloses 
that the word “income--� was to have the same meaning as it had in 
the Sixteenth Amendment, which has never been interpreted by the 
Supreme Court to include anything other than a profit or gain (see 
p. 84). Also, the Supreme Court in 
Kowalski  explicitly stated, citing 
Glenshaw Glass  as its authority, that: 
Congress  applied  no  limitations  as  to  the  source  of 
taxable  receipts,  nor  restrictive  labels  as  to  their 
nature [, but intended] to tax all 
gains except those 
specifically exempted.--� 
[Emphasis added.] 
Kowalski,  434 U.S. at 82-83. 
Certainly, then, the language of the Supreme  Court  in 
Kowalski   at
page 94 referred only to the source element of the definition of
Eisner,   and not to the profit or gain element of the Eisner 
The Cameron Court next cited to Koliboski, Granzow, Knighten and 
Romero and stated: 
It  is  therefore  unmistakably  clear  that  plaintiff  is 
wrong  in  concluding  that  his  wages  are  not  taxable 
income.  The  initial  assumption  behind  the  argument 
(that income is gain or profit) is incorrect because it is 
not exclusive. 
Cameron,  593 F.Supp. at 1552.
The case law of the United States Supreme Court, including
Glenshaw Glass  and  Kowalski,  makes it clear that the gain or profit 
part of the definition of income is exclusive; only the sources from 
which  the  income  may  be  derived  definition  of  
Eisner   is  not 
Having  ignored  Supreme  Court  decisions  on  point,  the  
case cannot stand as legal authority for the proposition that wages 
constitute income. 
Hallowell v. C.I.R., 744 F.2d 406 (5th Cir. 1984): 
In  appealing  an  adverse  determination  of  the  United  States  Tax 
Court  against  them,  Mr.  and  Mrs.  Hallowell,  representing 
themselves,  argued  that  the  Sixteenth  Amendment  did  not 
contemplate  wages  to  be  includible  in  the  definition  of  income. 
Hallowell,   744 F.2d at 408. The Court disposed of this issue in a
footnote, stating:
We perceive no need to refute these arguments with
somber reasoning and copious citation of precedent;
to do so might suggest that these arguments have
some colorable merit.
Hallowell,  744 F.2d at 408, n.2. 
Having failed to address the issue, the case does not constitute legal 
Snyder v. I.R.S., 596 F.Supp. 240 (N.D.Ind. Fort Wayne
Div. 1984):

Mr. Snyder, representing himself, attempted to sue the I.R.S. and
one of its agents. He claimed that his wages did not constitute
Snyder,  596 F.Supp. at 243. The case was before the same 
judge,  Judge  Lee,  who  decided  the  
Cameron case.  In  disposing  of 
Mr. Snyder’s claim, Judge Lee’s opinion was almost word for word 
identical  to  his  opinion  in  
Cameron. For  that  reason,  reference  is 
made to the 
Cameron analysis hereinabove at page 243. 
Perkins v. C.I.R., 746 F.2d 1187 (6th Cir. 1984): 
Mr. Perkins, representing himself, appealed from an adverse
decision of the United States Tax Court. He argued that wages paid
for his labor were non-taxable receipts and that the Sixteenth
Amendment did not permit an imposition of tax on wages.
746 F.2d at 1188. 
The Court stated, citing to 
Brushaber, Glenshaw Glass  and  Funk:
First, gross income means all income from whatever
source derived including compensation for services.
Second, 26 U.S.C. 61 (a) is in full accordance with
Amendment to the Constitution to impose taxes on
income without apportionment among the states.
Perkins,  746 F.2d at 1188. 
Brushaber   nor   Glenshaw  Glass   involved  the  issue  as  to 
whether  wages  constitute  income.  
Funk   has  been  shown  above  at 
page 209 to be unreliable precedent. There is no question but that 
Section  61  (a)  is  in  full  accordance  with  Congressional  authority 
under  the  Sixteenth  Amendment,  but  the  statute  defines  gross 
income  as  income  derived  from  compensation  for  services.  The 
interpretation of that statute to allow an unapportioned tax directly 

on compensation for services violates the Sixteenth Amendment, as
only a tax on the income derived from that compensation is
embraced within its terms.
Hill  v.  United  States,  599  F.Supp.  118  (M.D.Tenn. 
Nashville Div. 1984): 

Mr. Hill, representing himself, filed an action for a judicial review of
a penalty assessment imposed against him by the I.R.S. for filing a
frivolous income tax return. His argument was that wages did not
constitute income.
Hill,  599 F.Supp. at 119-120. 
Quoting  from  the  unsupported  footnote  in  
Koliboski   (see  p.  234), 
the Court stated: 
[I]f anything in our tax law is clear, it is that: 
“ * * * WAGES ARE INCOME. * * *--� 
Hill,  599 F.Supp. at 120.
The Court next stated that:
The Supreme Court of the United States upheld in
1926 the application of the federal income tax to “* * *
items of income [which] were received by the
taxpayers as compensation for their services as
consulting engineers *
*   *,--�   Metcalf  &  Eddy  v. 
269 U.S. 514, 519 (1926), and no Court of the 
land  has  ever  held  or  suggested  that  the  Congress 
could not tax constitutionally wages as income. 
Hill,  599 F.Supp. at 120-121. 
Metcalf & Eddy it was not contended that wages do not
constitute income. Metcalf & Eddy were consulting engineers who,
either individually or as co-partners, were professionally employed
to advise States or subdivisions of States with reference to proposed
water supply and sewage disposal systems. During 1917 the fees
received by them for these services were paid over to the firm and
became, according to the Court, a part of its gross income. In
seeking a refund of the taxes paid by the partnership, they
contended they were exempt from the tax by a provision of the War
Revenue Act of 1917 (Act of October 3, 1917, c. 63, Section 209, 40
Stat. 300, 307),108 and that Congress had no power under the
Constitution to tax the income in question.
Metcalf  &  Eddy,   269
U.S. at 518. As to the first question, the Court stated:
The War Revenue Act provided for the assessment of
a tax on net income; but Section 201(a) (40 Stat. at
303) contains a provision for exemption from the tax
as follows:
“This title shall apply to all trades or businesses of
whatever description, whether continuously carried
on or not, except--"
“(a) In the case of officers and employees under the
United States, or any State, Territory, or the District
of Columbia, or any local subdivision thereof, the
compensation or fees received by them as such
officers or employees.--�
Metcalf & Eddy,  269 U.S. at 519.
In resolving this question against Metcalf & Eddy, the Court found
that they had failed to sustain their burden of establishing that they
were officers of a State or a subdivision of a State within the
exception of Section 201 (a), and that the facts stated in their bill of
exceptions did not establish that they were employees, but rather
established they were independent contractors.
Metcalf  &  Eddy, 
269 U.S. at 520.
The second issue before the Court was the power of Congress to
impose a tax on the instrumentalities of a State government.
Messrs. Metcalf and Eddy never raised the issue of  whether wages 
constitute income,  and  this issue  was  not  before the  United  States 
Supreme Court in the case. 
Hill   Court’s gratuitous  comment that no court of the land  has 
ever held or suggested that Congress could not tax constitutionally 
wages as income is extremely disingenuous. By the same token, The 
Hill   Court certainly did not cite to any Supreme Court cases in
which the highest court of the land, when presented with the issue,
has stated that Congress could tax wages as income. As has been
repeatedly shown herein, those lower court cases in which it has
been stated that wages constitute income either have ignored the
Supreme Court’s statement that income must be a profit or gain,
have ignored the existence of the words “income derived from any
source whatsoever--� in both Sections 22(a) and 61 (a) of the Internal
Revenue Codes of 1939 and 1954 respectively, have ignored the
legislative history accompanying the passage of Section 61 (a) by
Congress, or have ignored the Supreme Court’s holdings that one’s
labor is personal property and the corresponding provisions of the
Internal Revenue Code, Sections 64 and 1001,
et seq.,  providing the
law with respect to how to compute gain on the sale of personal
Hill   Court  next  cited  to   Perkins   (see p. 248), Romero (see  p. 
Davis   (see p. 241), Funk   (see p. 209), Moore (see p. 216),
Lawson (see p. 206), Lonsdale   (see p. 200), Buras   (see p. 187),
Broughton   (see p. 186), Hayward (see p. 185), Francisco   (see  p. 
Adams (see p. 180),  Russell  (see p. 179),  Wilson  (see p. 170), 
Marks  (see p. 169),  Daehler  (see p. 165),  Lucas v. Earl  (see p. 149)
Stratton’s  Independence   (see p. 93) for the proposition that
wages constitute income. All of these cases has been analyzed
herein and shown not to be valid legal precedent for that
Ficalora v. C.I.R., 751 F.2d 85 (2nd Cir. 1984): 
Mr. Ficalora appealed a determination of the Tax Court regarding
his tax liability for the year 1980. He argued in Tax Court, among
other issues, that wages do not constitute income.
Ficalora,   751 
F.2d at 86. 
The Court first addressed Mr. Ficalora’s contention that neither the 
United States  Congress  nor the United  States Tax  Court possessed 
the constitutional authority to impose on him an income tax for the 
year  1980.  Mr.  Ficalora,  relying  on  
Pollock,   argued on appeal that
an income tax was a “direct--� tax, and that Congress lacked the
constitutional authority to impose such a tax in the absence of
Ficalora,  751 F.2d at 87. The Court stated: 
In  making  his  argument  that  Congress  lacks 
constitutional  authority  to  impose  a  tax  on  wages 
without  apportionment  among  the  States,  the 
appellant  has  chosen  to  ignore  the precise  holding  of 
the  Court  in  
Pollock,   as well as the development of
constitutional law in this area over the last ninety
years. While ruling that a tax upon income from real
and personal property is invalid in the absence of
apportionment, the Supreme Court explicitly stated
that taxes on income from one’s employment are not
direct taxes and are not subject to the necessity of
Pollock  v.  Farmers’s  Loan and Trust 
158 U.S. at 635. 
Ficalora,  751 F.2d at 87.
It has previously been shown at pages 50 and 219 in connection
with the analysis of the
Rowlee  case that the  Pollock  Court did not
hold that taxes on income from one’s employment are not direct
Ficalora  Court continued: 
Finally,  in  the  case  of  
New York ex rel. Cohn v.
300 U.S. 308, 57 S.Ct. 466, 81 L.Ed. 666
(1937), the Supreme Court in effect overruled
and  in  so  doing  rendered  the  Sixteenth  Amendment 
unnecessary,  when  it  sustained  New  York’s  income 
tax  on  income  derived  from  real  property  in  New 
Id.  at 314-15, 57 S.Ct. at 468-469. Hence, there 
is no question but that Congress has the constitutional 
authority to impose an income tax upon the appellant. 
Ficalora,  751 F.2d at 87. 
New York ex rel Cohn v. Graves,  the issue before the Court was
stated as follows:
This case presents the question whether a state may
constitutionally tax a resident upon income received
from rents of land located without the state and from
interest on bonds physically without the state and
secured by mortgages upon lands similarly situated.
New York ex rel Cohn, 300 U.S. at 310.
It thus becomes immediately clear that the case involved the State
of New York’s income tax, and not the federal income tax. The
Supreme Court also stated:
We accordingly limit our review to the question
considered and decided by the state court, whether
there is anything in the Fourteenth Amendment
which precludes the State of New York from taxing
the income merely because it is derived from sources,
which, to the extent indicated, are located outside the
New York ex rel Cohn , 300 U.S. at 312. 
This  statement  makes  it  abundantly  clear  that  the  Supreme  Court 
did not even address the Sixteenth Amendment in its opinion. And 
finally,  with  respect  to  the  alleged  overruling  of  
Pollock,   what  the 
Supreme Court actually stated was: 
Nothing  which  was  said  or  decided  in  
Pollock  v. 
Farmers  Loan  &
Trust Co., 157 U.S. 429, calls for a
different conclusion. There the question for decision
was whether a federal tax on income derived from
rents of land is a direct tax requiring apportionment
under Art. I, Section 2, Cl. 3 of the Constitution. In
holding that the tax was “direct,--� the Court did not
rest its decision upon the ground that the tax was a
tax on the land, or that it was subject to every
limitation which the Constitution imposes on property
taxes. It determined only that for purposes of
apportionment there were similarities in the
operation of the two kinds of tax which made it
appropriate to classify both as direct, and within the
constitutional command.
New York ex rel Cohn , 300 U.S. at 315. 
Rather  than  overruling  
Pollock,   the  Supreme  Court  in  effect 
reaffirmed the 
Pollock  decision. No Court, including the  Brushaber 
Court, has ever taken the position that the Sixteenth Amendment is 
unnecessary to allow an unapportioned tax on income! 
With respect to Mr. Ficalora’s contention that the term “income,--� as 
used  in  the  taxing  statutes,  has  no  defined  meaning  and  is 
unconstitutionally vague and indefinite, the Court stated: 
As  discussed  above,  Section  61  of  the  Code  defines 
gross  income  as  “all  income  from  whatever  source 
derived.--�  Even  if  we  were  to  assume,  
arguendo,   that 
this phrase is somehow vague or indefinite, Section 61 
of  the  Code  specifically  cites  “compensation  for 
services ...--� as a concrete example of what is meant by 
the  term  income.  The  wages  which  the  appellant 
received  for  his  services  rendered  to  New  York 
Telephone  in  taxable  year  1980,  fall  squarely  within 
the definition  of income contained in Section 61(a)(l) 
of  the  Code.  The  appellant’s  argument  that  the  term 
“income,--�  as  used  in  the  Code,  is  unconstitutionally 
vague and indefinite, is totally without merit. 
Ficalora,  751 F.2d at 88. 
It has been previously set forth that Section 61 defines gross income 
as  the  profit  or  gain  derived  from,  among  other  sources, 
“compensation  for  services,--�  and  that  a  tax  on  the  actual 
“compensation  for services--� is  a  direct  tax that  does  in  fact, under 
the law, require apportionment. The 
Ficalora  decision, especially to 
the  extent  it  states  that  
Pollock   was  overruled  and  the  Sixteenth 
Amendment  is  not  necessary  to  empower  the  Congress  to  pass 
legislation imposing a tax upon income without apportionment, is a 
disgrace to the American people. 
The case does not constitute valid legal precedent for the contention 
that wages constitute income. 
Schiff v. Commissioner, 751 F.2d 116 (2nd Cir. 1984): 
Mr. Irwin Schiff appealed from an order of the United States Tax
Court which dismissed his petition for redetermination of income
tax deficiencies for the years 1974 and 1975. Among other issues,
Mr. Schiff argued that a tax on wage income is unconstitutional.
Schiff,  751 F.2d at 116-117.
The Court ruled against Mr. Schiff without addressing any of his
arguments and without citing any case law. Accordingly, the case
has no legal precedent for the proposition that wages constitute
Lovell v. United States, 755 F.2d 517 (7th Cir. 1984): 
Mr. & Mrs. Lovell, representing themselves, were assessed a $500
frivolous return penalty by the I.R.S. The lower court granted
summary judgment in favor of the United States, and the Lovells
Lovell,   755  F.2d  at  518-519.  They  first  argued  that  they 
were  exempt  from  federal  taxation  because  they  were  “natural 
individuals--�  who  have  not  “requested,  obtained  or  exercised  any 
privilege from an agency of government.--� 
Lovell,  755 F.2d at 519.
With respect to this argument the Court stated:
This is not a basis for an exemption from federal
income taxes. See
Holker  v.  United  States.   All 
individuals,  natural  or  unnatural,  must  pay  federal 
income tax on their wages, regardless of whether they 
received any “privileges--� from the government. 
Lovell , 755 F.2d at 519. 
No case law is cited here by the Court for the proposition that wages 
are subject to the federal income tax. 
The Lovells next  argued  that the  Constitution  prohibits imposition 
of a direct tax without apportionment. The Court stated the Lovells 
were wrong citing to the Sixteenth Amendment. 
Lovell, id.  
The  Lovells  next  argued  that  money  received  in  compensation  for 
labor  is  not  taxable.  The  Court  cited  to  
Davis,  Simanonok   and 
Koliboski,   stating  that  these  Courts  had  rejected  the  same 
arguments as raised by the Lovells. Those cases have been analyzed 
herein at pages 241, 233 and 234 respectively and shown not to be 
legal  precedent  for  the  proposition  that  money  received  in 
compensation  for  labor  constitutes  income.  Only  gain  received  in 
compensation for labor constitutes income. 
Knies v. Richardson, 600 F.Supp. 763 (E.D.Wis. 1985): 
Mr.  and  Mrs.  Knies,  representing  themselves,  filed  suit  against 
numerous  State  officials  in  connection  with  assessment  of  state 
income  taxes  against  them.  One  of  the  issues  they  raised  was 
whether  the  Wisconsin  Department  of  Revenue  unconstitutionally 
considered  their  wages  as  income.  
Knies,   600  F.Supp.  at  764.  The 
Court stated: 
Wages  are  properly  considered  taxable  under  both 
state and federal law. 
Kile  v.  C.I.R.,  739 F.2d 265 (7th 
Cir. 1984); 21 [sic] U.S.C. Section 61(a); 
Knies,  600 F.Supp. at 765.
As shown above at page 240, The
Kile/Granzow   Court  relied 
entirely upon case law which lacks legal validity for the proposition 
that wages constitute income. 
United States v. Latham, 754 F.2d 747 (7th Cir. 1985): 
On appeal from conviction on two counts of failing to file income
tax returns and four counts of filing false withholding allowance
Latham,   754  F.2d  at  749,  among  other  issues,  Mr. 
Latham  contended  that  the  District  Court  improperly  refused  his 
requested jury instruction defining “income--� as distinct from “gross 
The Seventh Circuit stated: 
As  we  stated  in  
Koliboski,   a  claim  of  this  nature  is 
without  merit.  
Id.   at  1329  n.  1.  Latham’s  wages   were 
and are income; thus, his proposed jury instruction
was a misstatement of the law and the district court
properly refused to adopt the same in the instructions.
[Emphasis in original.]
Latham,  754 F.2d at 750. 
Having  relied  entirely  upon  
Koliboski,   the   Latham decision  does 
not  constitute  legal  precedent  for  the  proposition  that  wages  are 
Peth V. Breitzmann, 611 F.Supp. 50 (E.D.Wis. 1985): 
Mr. Peth, representing himself, filed a civil rights lawsuit under the
provisions of 42 U.S.C. Section 1983 against several I.R.S.
employees alleging the defendants conspired to deprive him of his
property without due process of law. Among other arguments, Mr.
Peth alleged that he was not a person liable to pay taxes under 26
U.S.C. Section 6001 because the tax imposed by Title 26 was not
apportioned, and further alleged that he had earned no income
because he received a paycheck for his labor equal to the fair market
value of his labor, hence there was no taxable gain.
Peth,   611
F.Supp. at 52-53.
The Court ruled against Mr. Peth as to both of his arguments; the
first by citing to
Brushaber,   and the second by  citing  to   Granzow. 
As  discussed  at  page  240,  the   Granzow case  does  not  support  the 
proposition that wages constitute income. 
Harris v. United States, 758 F.2d 456 (9th Cir. 1985): 
Mr.  Harris,  representing  himself,  moved  to  quash  I.R.S. 
administrative  summonses  on  various  grounds,  one  of  which  was 
that wages do not constitute income. He appealed the denial of his 
motion by the District Court. 
Harris,  758 F.2d at 457. 
The  Court  cited  to  
Gattuso   (see p. 239), Romero (see p. 189) and
Buras   (see p. 187) to dispose of this issue. Those cases have been
shown to not support the lower court’s contention that wages do
constitute income.
United States v. Overton, 617 F.Supp. 5 (W.D.Mich. 1985): 
Mr.  Overton  was  charged  in  an  indictment  with  failure  to  file 
income  tax  returns  and  with  income  tax  evasion.  Representing 
himself,  he  moved  to  dismiss  the  indictment  on  several  grounds, 
one of which was that he had incurred no gain from his labor which 
may properly be accounted as income. 
Overton,  617 F.Supp. at 6. 
The Court denied Mr. Overton’s motion citing to 
Burton, Richards, 
Stillhammer,  Lovell
, 579 F.Supp., Koliboski   and   Glenshaw  Glass. 
As previously shown at pages 237, 223, 216, 231, 231 and 153
respectively, those cases do not support the Court’s conclusion that
wages constitute income.
Olson v. United States, 760 F.2d 1003 (9th Cir. 1985): 
Mr. Olson filed an unsigned Form 1040 for 1982 on which he listed
his wages as zero and cautioned that it was not a return. Attached to
the Form 1040 was a W-2 Form showing payment of wages, on
which he wrote “incorrect.--� He also attached a Schedule C profit or
loss statement in which he offset the wages he received by a greater
amount of “cost of labor--� and other deductions incurred in earning
his wages. He also attached a letter stating he had studied the tax
laws and determined that he owed no taxes because he had not
obtained any privilege from a governmental agency. He stated he
filed the Form 1040 only to obtain a refund and not with the intent
to file a return.
Olson,  760 F.2d at 1004.
The I.R.S. attempted to have Mr. Olson sign the return, which he
refused to do. Thereafter, the I.R.S. assessed a $500 frivolous
return penalty under Section 6702 of Title 26. Mr. Olson paid the
required fifteen percent of the penalty and then filed a claim for
refund. When the I.R.S. denied the claim for refund, he brought suit
to recover the fifteen percent and to have the $500 penalty abated.
The District Court dismissed the suit, and Mr. Olson, representing
himself, appealed.
Olson,  760 F.2d at 1004-1005. 
With respect to Mr. Olson’s attempt to deduct his wages as the “cost
of labor,--� the Court stated that the Court had repeatedly rejected
the argument that wages were not income, citing to
and   Buras.   Those  cases,  analyzed  at  pages  239,  189  and 
187 respectively, have been shown not to constitute legal precedent 
for the proposition that wages do constitute income. 
Stelly v. C.I.R., 761 F.2d 1113 (5th Cir. 1985): 
Upon receipt of a notice of deficiency from the I.R.S., the Stellys
petitioned the United States Tax Court. The Tax Court dismissed
their petition, and representing themselves, they appealed to the
Fifth Circuit Court of Appeals. On appeal they argued that the
Sixteenth Amendment only authorized taxes on “gain,--� not
income,109 asserting that compensation for labor was not gain
because it was an even exchange.
Stelly,  761 F.2d at 1114-1115. 
In ruling that the income tax on wages was constitutional, the Court 
cited  to  numerous  cases,  all  of  which  have  been  previously 
analyzed.  See  
Glenshaw  Glass   (p. 159),  Eisner   (p. 137),  Brushaber 
(see Chapters I and II),  Perkins  (p. 248),  Granzow (p. 240),  Crain 
(p.  242),   Funk   (p.  209),   Lonsdale   (p.  200),   Romero (p.  189), 
Broughton  (p. 186),  Francisco  (p. 183),  Russell   (p. 179) and Porth 
(p. 208). In addition, the Court cited to Acker  v.  C.I.R. ,  258  F.2d 
568 (6th Cir. 1958). That case challenged the constitutionality of the 
Internal Revenue Code on the grounds that: 
(1) the rates are so high as to make the levy not a tax 
but  a  confiscation  of  property  contrary  to  the  Fifth 
Amendment  to  the  Constitution,  (2)  the  progressive 
rates are unconstitutional, and (3) the “income tax law 
considered  as  a  whole  in  its  excessive  rates  and 
arbitrary  provisions  is  openly  subversive  of  the 
fundamental  philosophy  of  the  Constitution  of  the 
United  States  and  repugnant  to  its  continued 
Acker,  258 F.2d at 574.
As none of these cases support the proposition that wages
constitute income, so too, the
Stelly  case is not legal precedent for 
that proposition. 
Hyslep v. United States, 765 F.2d 1083 (11th Cir. 1985): 
Mr. Hyslep filed a 1982 Form 1040 on which he listed wages, and
deducted, as an adjustment to income, the full amount of the wages
received, claiming that he was a “source-exchanger,--� and that
therefore his wages were “non-taxable.--� The I.R.S. assessed a $500
frivolous return penalty, and Mr. Hyslep, representing himself,
brought a civil suit to recover the penalty.
In ruling against Mr. Hyslep, the Court stated that Congress had
defined income as including compensation for services in Section
61(a)(l), citing to
Lonsdale   and to Simanonok. As  stated  above,  in 
Section 61(a)(l) Congress defined gross income as the gain derived 
from compensation for services, and neither the 
Lonsdale  case (see
p. 200) nor the
Simanonok case  (see  p.  233)  supports  the  legal 
proposition that wages constitute income. 
Wheeler v. United States, 768 F.2d 1333 (D.C. Cir. 1985): 
Wheeler  case was a consolidated case brought by Mr. and Mrs.
Wheeler and Mr. and Mrs. McLaughlin who appealed an adverse
decision of the Court of Claims for a refund of income taxes. Mr.
Wheeler and Mr. McLaughlin were employees of the South Bend
Tribune Corporation who entered into a college educational benefit
plan agreement with Educo, Inc., which provided funds for the
college expenses of the children of certain key employees. South
Bend made the arrangement “for the purposes of retaining such
present employees, of attracting future employees, and generally to
increase employee loyalty to Employer.--� Under the plan, annual
payments were made to the children toward their college education.
Wheeler,  768 F.2d at 1334. 
The payments to the children were not included within the
Wheeler’s or the McLaughlin’s respective tax returns, and the I.R.S.
issued notices of deficiencies. The deficiencies were paid, and a suit
for refund was filed. The Court of Claims dismissed the suit, and
this appeal was brought. The Court of Appeals held that despite the
fact that the payments were made to the children, the payments
constituted income earned by the parents.
Wheeler,   768  F.2d  at 
1334-1335. The Court stated: 
Section  61  (a)  of  the  Internal  Revenue  Code  of  1954 
defines  gross  income  to  include  “compensation  for 
services.--�  This  covers  any  economic  or  financial 
benefit conferred in any form on the employee unless 
it  is  specifically  exempted  by  another  section  of  the 
Wheeler,  768 F.2d at 1335.
As pointed out numerous times, Section 61(a) defines gross income
as income derived from compensation for services. In any event, the
case did not involve wages, and the case does not constitute legal
precedent for the principle that wages are income.
Biermann v. C.I.R., 769 F.2d 707 (11th Cir. 1985): 
Mr. Biermann, representing himself, appealed an adverse decision
of the United States Tax Court. He argued, among other issues, that
the monies he received should not be considered income because
the Internal Revenue Code does not define “income,--� and that his
wages were not income.
Biermann,  769 F.2d at 708. 
The  Court  ruled  against  Mr.  Biermann  on  these  issues  without 
providing  any legal analysis or citing to any case  law. Accordingly, 
Biermann case  does  not  constitute  legal  precedent  for  the 
proposition that wages constitute income. 
Connor v. C.I.R., 770 F.2d 17 (2nd Cir. 1985): 
Mr. Connor appealed an adverse determination of the United States 
Tax  Court,  and  representing  himself,  argued  among  other  issues, 
that wages were not income but an exchange of property. He argued 
that since money was property and labor was property, his work for 
wages  was  a  non-taxable  exchange  of  property.  Mr.  Connor  also 
argued  that  because  wages  were  property,  a  tax  on  them  was  a 
property tax that had to be apportioned. 
Connor,  770 F.2d at 20. 
The Court of Appeals ruled against these argument citing to 
which, as shown at page 255, totally failed to provide any legal
analysis of those issues. Neither
Schiff  nor  Connor  qualifies as legal 
precedent for the contention that wages constitute income. 
Cameron v. I.R.S., 773 F.2d 126 (7th Cir. 1985): 
Mr.  Cameron,  representing  himself  in  both  the  District  Court  and 
the  Court  of  Appeals,  brought  an  action  against  the  Internal 
Revenue  Service  seeking  injunctive  relief  and  damages  for  alleged 
bad faith of the I.R.S. in handling his case. Among other issues, he 
argued  that  wages  were  compensation  for  services  rendered  and 
hence  not  profits  in  the  sense  of  windfalls.  
Cameron, 773  F.2d  at 
As to this argument the Court stated: 
This  is  true;  wages--"most  wages  anyway--"are 
compensation,  rather  than  windfalls;  but  the  income 
tax is a tax on income in general, not just on windfall 
Cameron, id. 
Wages are compensation for services rendered, but the general tax 
on  income  taxes  the  gain  derived  from  compensation  for  services, 
not  the  compensation  nor  the  wages  themselves,  as  has  been 
repeatedly shown. The Court did not cite any case law or other
authority on this issue in its opinion, and therefore,
Cameron does
not suffice as legal authority for the proposition that wages
constitute income.
Carter v. C.I.R., 784 F.2d 1006 (9th Cir. 1986): 
Mr. and Mrs. Carter did not file income tax returns for the years
1980 and 1981. The I.R.S. issued notices of deficiency, and the
Carters petitioned the United States Tax Court. Their petition was
dismissed and they appealed. Mrs. Carter did not sign the notice of
appeal, and her appeal was dismissed for lack of jurisdiction.
Carter,   784  F.2d  at  1007-1008.  Mr.  Carter,  representing  himself, 
argued  that  proceeds  received  for  personal  services  could  not  be 
given  a  “zero-basis  for  the purpose  of  the  assessment  of  taxation.--� 
Carter,  784 F.2d at 1009. 
The Ninth Circuit held that this argument was but a variation of the 
“wages are not income theme,--� and ruled against Mr. Carter citing 
Olson, Gattuso  and  Romero. Carter, id.  As shown herein, neither 
Olson   (see p. 259), Gattuso   (see p. 239) nor Romero (see  p.  189) 
constitutes valid legal precedent that wages constitute income. The 
Carter   case totally failed to address the issue of the existence of
Sections 1001
et seq.  in attributing a zero-basis to labor, which the 
United States Supreme Court has held to constitute property. 
Motes v. United States, 785 F.2d 928 (11th Cir. 1986): 
Mr. Motes and several others sued for a refund of income taxes
under the Tucker Act, 28 U.S.C. Section 1346, raising, among other
issues, that their wages were not income subject to tax, that a tax on
wages was a tax on their property (labor), and that they should be
allowed to exclude from the amount of the wages they received the
cost of maintaining their well-being.
Motes, id.  
The  Court  of  Appeals  rejected  these  arguments,  without  legal 
analysis,  citing  to  
U.S. v. Goetz, 746  F.2d  705  (11th  Cir.  1984); 
Simanonok, U.S. v. Vance,  730 F.2d 736, 738 (11th Cir. 1984); and 
Melton  v.  Kurtz,   575 F.2d at 547 (5th Cir. 1978). Simanonok has
been shown at page 233 not to provide legal authority that wages
constitute income.
In the
Goetz   case, two defendants were convicted of failing to file
income tax returns. Both defendants had filed tax returns in which,
rather than reporting an amount of income on the return, they
claimed protection under the Fifth Amendment.
Goetz,  746 F.2d at
707. The trial court instructed the jury that returns without
financial information upon them were not returns and therefore the
returns filed by the two defendants were not returns as a matter of
Goetz,   746 F.2d at 708. In addition, the trial court refused to
allow the defendants the opportunity to present to the jury the
defense that they had claimed Fifth Amendment protection in good
Goetz,   746 F.2d at 710. The Court of Appeals held that the
trial court committed error with respect to these two issues, and
reversed the convictions. No issue as to whether wages constitute
income was present in the
Goetz  case, and therefore the case does 
not support the contention that wages constitute income. 
In the 
Vance  case, Mr. Vance was convicted of failing to file income
tax returns for the years 1977, 1978 and 1979, and appealed. On
appeal he contended that the District Court committed error in
refusing to conduct a pretrial
in camera hearing on his claim of
Fifth Amendment privilege, in improperly admitting certain
evidence, and in improperly instructing the jury, and that his
conviction should be reversed because he was the subject of
selective or vindictive prosecution.
Vance,  730 F.2d at 737. Only the 
second of these issues involved income, and that indirectly. 
The Court stated: 
Vance  next  contends  that  the  district  judge 
improperly  admitted  evidence  showing  that  Vance 
earned  a  substantial  amount  of  income  for  the  years 
in question  and thus was required to file  tax returns. 
Vance contends that this evidence was inadmissible
under Rule 404 of the Federal Rules of Evidence. The
evidence was clearly admissible in this case. First, the
evidence was relevant to show that Vance had a duty
to file tax returns for the years in question; thus, the
evidence cannot be characterized as evidence of bad
character or bad acts to prove that Vance acted “in
conformity therewith on a particular occasion.--�
Fed.R.Evid. 404. In addition, the evidence was clearly
admissible to show that Vance, because he had
incurred a substantial tax liability, had a motive to file
the inadequate returns and did not act in good faith
Booher,   641 F.2d at 220. See Fed.R.Evid. 
Vance,  730 F.2d at 738. 
Vance case did not address what the specific evidence of
income was, and did not involve the issue of whether wages
constitute income. Accordingly, it is not precedent for the
contention that wages do constitute income.
Melton  case was a civil lawsuit against numerous employees of 
the  Internal  Revenue  Service  in  which  Mr.  Melton  sought  a 
declaration  that  certain  federal  tax  statutes  were  unconstitutional 
and an injunction to prevent the Commissioner from assessing and 
collecting taxes from him. 
Melton,  575 F.2d at 548. The contentions
raised by Mr. Melton were that: (1) the graduated or progressive
income tax is unconstitutional because it denies taxpayers equal
Melton,  id.;   (2)  the statutes  establishing  the  Tax  Court 
of  the  United  States  are  unconstitutional,  
Melton,  id. ;  and  (3)  he 
need not fill in the blanks on his federal income tax return because 
to  do  so  would  violate  his  Fifth  Amendment  rights,  
Mel ton, 575 
F.2d at 549. 
Melton  case, like  Goetz  and  Vance,  did not address the issue of 
whether or not wages constitute income. 
Coleman v. C.I.R., 791 F.2d 68 (7th Cir. 1986): 
Coleman case was a consolidation of two appeals, one brought
by Mr. Coleman, and one brought by Mr. Holder. Mr. Coleman
petitioned the United States Tax Court and argued that wages do
not constitute income.
Coleman, 791  F.2d  at  70.  Mr.  Holder  was 
charged  a  $500  frivolous  return  penalty,  paid  fifteen  percent,  and 
brought  suit  in  District  Court  for  a  refund  of  the  payment,  also 
arguing that wages were not taxable. 
Coleman, id.
In ruling against Mr. Coleman and Mr. Holder as to these
arguments, the Court cited to
United  States  v.  Thomas,   788 F.2d
1250 (7th Cir. 1986);
Lovell , 755 F.2d; Granzow;  Koliboski;   and 
Brushaber. Lovell (see p. 256), Granzow (see p. 240),  Koliboski  (p. 
and Brushaber  (see Chapters I and II) have been shown not to 
legally support the contention that wages constitute income. 
Thomas case was an appeal from a conviction for failure to file 
returns and filing false withholding allowance certificates. The only 
issue with respect to wages not constituting income came about as 
Thomas  testified  before  the  grand  jury  that  returned 
the  superseding  indictment.  He  presented  his 
explanations for not paying taxes, including his belief 
that  wages  are  not  income  and  an  assertion  that  “all 
individual  income  tax  revenues  are  gone  before  one 
nickel is spent on the services which taxpayers expect 
from  their  government.--�  In  response  to  questions 
asked  by  the  prosecutor,  Thomas  conceded  that  he 
had  received  technical  training  paid  for  by  the  Navy, 
payment funded by taxes. Thomas maintains that the 
indictment  should  be  dismissed  because  of  these 
questions,  which  he  says  are  improper;  because  the 
prosecutor  failed  to  present  the  grand  jury  with 
exculpatory  evidence  (other  than  Thomas’s  own 
testimony);  and  because  the  prosecutor  advised  the 
grand  jurors  that  Thomas’s  legal  theories  are 
Thomas,  788 F.2d at 1254.
The Court did not adjudicate the question of whether wages
constitute income, and therefore the
Thomas case does not provide 
legal precedent for that proposition. 
Stubbs v. C.I.R., 797 F.2d 936 (11th Cir. 1986): 
determination of the United States Tax Court. One of the issues Mr.
Stubbs raised was the contention that wages do not constitute
Stubbs, 797  F.2d at 938. 
The Court of Appeals ruled against Mr. Stubbs on this issue citing to 
Biermann.   As discussed above at page 262, the Biermann case  is 
not  legal  precedent  for  the  contention  that  wages  do  constitute 
Colson v. United States, 67 B.R. 30 (1986): 
Mr. Colson, representing himself, filed a petition to have his taxes
discharged in bankruptcy. He filed an adversary complaint in which
he argued, among other things, that wages do not constitute
Colson,   67 B.R. at 32. The Court rejected this argument
citing to
Stubbs,   which,  as  shown  immediately  above,  does  not 
support the contention that wages do constitute income. 
Casper v. C.I.R., 805 F.2d 902 (10th Cir. 1986): 
determination of the United States Tax Court in which he argued
that wages do not constitute income.
Casper,  805 F.2d at 904-905. 
The  Tenth  Circuit  sustained  the  Tax  Court’s  determination  that 
wages  do  constitute  income  citing  to  
Lawson,  Rowlee,  Connor, 
Lovell , 755 F.2d., Perkins,  Simanonok,  Funk,  Lonsdale,  Romero, 
Wilson, Mendel, Woodall 
and  Stelly.  Those cases have been shown
at pages 206, 223, 263, 256, 248, 233, 209, 200, 189, 170, 166, 166
and 260 respectively not to be legal precedent for the contention
that wages do constitute income.
Grimes v. C.I.R., 806 F.2d 1451 (9th Cir. 1986): 
Mr. Grimes, representing himself, appealed the dismissal of his Tax
Court petition. Mr. Grimes acknowledged the receipt of wages,
which he referred to as “gross receipts,--� but argued that he was
constitutionally entitled to an exemption for expenditures to
provide his family with the “American Standard of good living.--� He
contended that, applying this purported exemption, he owed no
taxes as his “gross receipts--� were “entirely consumed--� in providing
for his family.
Grimes,  806 F.2d at 1452-1453. 
The Court stated: 
There  can  be  no  doubt  that  the  tax  on  income  is 
constitutional  and  that,  for  the  purpose  of  the 
Sixteenth Amendment, income includes “gain derived 
from  capital,  from  labor,  or  from  both  combined.--� 
Eisner  v.  Macomber,   252 U.S. 189, 207 (1920).
Sections 1 and 61 of the Internal Revenue Code
impose a tax on income, and wages are income. See
Gattuso  v.  Pecorella,   733  F.2d  709,  710  (9th  Cir. 
Grimes,  806 F.2d at 1453. 
Grimes  Court correctly set forth that Section 61 of the Internal 
Revenue  Code  is  constitutional  and  correctly  defined  income  as  a 
“gain  derived  from labor.--�  Section 61  does  not,  however, impose  a 
tax;  the  tax  is  imposed  in  Section  1  on  “taxable  income.--�  The 
Gattuso   case, (see p. 239) does not legally support the contention
that  wages  constitute  income.  Here  again,  an  appellate  court  has 
ignored the very definition it cited. 
McLaughlin v. C.I.R., 832 F.2d 986 (7th Cir. 1987): 
Mr. McLaughlin appealed an adverse determination of the United
States Tax Court. On appeal, and representing himself, he posed
three arguments: (1) that his liability for federal income tax was
contractual in nature and he had rescinded that contract; (2) that
his religious scruples prevented him from “entering into contracts
with the inhabitants of the land--�; and (3) that he received no
benefits from the state and therefore owed nothing to the state.
McLaughlin,  832 F.2d at 987. 
Mr. McLaughlin did not argue that wages do not constitute income; 
nonetheless, the Court stated: 
Furthermore,  case  law  in  this  circuit  is  well-settled 
that individuals must pay federal income tax on their 
wages  regardless  of  whether  they  avail  themselves  of 
governmental benefits or privileges. 
McLaughlin, id. 
The Court cited to 
Coleman (see p. 267) and to  Lovell  (see p. 256) 
to support this contention. Those cases have been shown above not 
to  constitute  legal  precedent  for  the  contention  that  wages 
constitute income. 
Wilcox v. C.I.R., 848 F.2d 1007 (9th Cir. 1988): 
determination of the United States Tax Court. Among other issues, 
he  contended  that  wages  do  not  constitute  income.  
Wilcox,   848
F.2d at 1008.
The Ninth Circuit stated that “wages are income--� and cited to
Carter  as legal authority for its statement. The  Carter  case has been 
shown above at page 264 to have not addressed the issue presented 
before the Court with respect to the proper method of determining 
gain/income.  Having relied upon case law that  does  not  constitute 
valid  legal  authority  for  the  proposition  that  wages  do  constitute 
income,  the  
Carter   case is also not valid legal authority for that
26 U.S.C. Section 6012 imposes a filing requirement on
“individuals--� who receive more than a certain amount of “gross
income--� per tax year.
The three elements of willful failure to file a tax return under
Section 7203 are: (1) the defendant had a legal duty to file a tax
return; (2) he failed to do so; and (3) he acted willfully.
States v. Foster, 
789 F.2d 457, 460 (7th Cir. 1986).
See, “An Act to provide Internal Revenue to support the
Government and to pay Interest on the Public Debt,--� approved
July 1, 1862, 12 Stat. 432, Ch. 119, Section 86 at 12 Stat. 472.
Cohens v.   Virginia,   6 Wheat. 264, 399; and Pollock  v. 
Farmer’s  Loan  &  Trust  Co.,  
157 U.S. at 574, for the principle
that a case cannot be cited as controlling on a legal issue unless
the legal issues in both cases are the same.
The Court also ignored the holding of the Supreme Court in
Eisner  that the three words--" income derived from --"must be
given meaning in determining what is, and what is not, income
(see p. 141).
The Court having stated that Mr. Amon did not brief this issue,
it is unclear exactly what was or was not briefed.
The Court found that the stock constituted a gift and was not
taxable. Thus, the mere presence of the employer-employee
relationship does not mean that all things of value which pass
between them constitute income.
The case actually commences on page 899, not on page 900.
The case actually commences on page 939, not on page 940.
See note 75. 
It is interesting to note that a progressive tax upon individuals is 
the second plank of the 
Communist Manifesto.  
Butchers’  Union  Co.  v.  Crescent  City  Co.,   111  U.S.  746,757 
(concurring  opinion  of  Justice  Fields)  (1883);  
Coppage v.
236 U.S. 1, 14 (1914);  Adair v. United States,  208 U.S.
161, 172 (1908).
A Schedule C is used to report Profit or (Loss) from Business or
Profession (Sole Proprietorship).
This statement by the Court was only partially correct. On
rehearing, the Supreme Court in
Pollock   determined a tax on
income from all of an owner’s real or personal property was a
direct tax within the meaning of the Constitution.
Pollock,   158
U.S. at 618.
See p. 130.
See the definition of “guise--� at note 34.
It is interesting to note that the Court of Appeals read
Brushaber  as removing the requirement of apportionment from 
the  “direct--�  income  tax  when  
Brushaber   stated  the  purpose  of 
the Sixteenth Amendment was to do away with the 
Pollock  rule
which caused the indirect income tax from being classified as a
direct tax by considering the source of the income. Mr. Parker
apparently correctly read
Brushaber,   and  relied  upon   Flint   for
its definition of an excise tax to show that he was not engaged in
any activity taxable as an excise.
The Supreme Court took some liberality with this sentence in
that Section 22(a) merely defined “gross income--�; it did not
impose the tax in that section.
The issue before the Court in 
Clifford  was whether the grantor,
after a trust had been established, may still be treated under
Section 22 as the owner of the corpus (see p. 193).
The issue before the Court in the
Midland  Mutual   case was
whether an amount of accrued interest was to be considered as
gross income where a life insurance company, at a foreclosure
sale, bid the principal of its mortgage loan plus accrued interest
and took over the property in satisfaction of the whole debt
without payment and repayment of any cash.
Midland  Mutual, 
300 U.S. at 220. 
The issue before the Court in the 
Irwin  case was whether sums 
received by a beneficiary under a will which created a trust were 
taxable to the beneficiary. 
Irwin,  268 U.S. at 166. 
The issue before the Court in 
Jacobson  was whether the federal
income tax applied to gains derived by a debtor from his
purchase of his own obligations at a discount and his
consequent control over their discharge (see p. 194).
The issue before the Court in the
Stockholms  Enskilda  Bank 
case was whether interest paid upon the amount of a tax return 
to a foreign corporation fell within the classification of “interest 
on  bonds,  notes,  or  other  interest-bearing  obligations  of 
residents,  corporate  or  otherwise.--�  
Stockholms  Enskilda  Bank, 
293 U.S. at 86. 
This case was consolidated with two others, 
Basic Bible Church 
of America v. C.I.R. 
and  Kile  v.  C.I.R.
Goodrich, Smietanka, Eisner and Stratton’s Independence.
This was a wartime taxing act imposing, in Title I, a “normal--�
tax, and in Title II, in which section 201 (a) was located, a “war
excess profits tax.--�
Income is in fact gain, hence the Stellys were in error in setting 
forth their legal position. 
The  Sixteenth  Amendment  to  the  United  States  Constitution, 
proposed  by  Congress  in  response  to  the  
Pollock   decision,
authorized an unapportioned direct tax on income. Income has
been defined by the United States Supreme Court to be a profit or
gain derived from various sources, such as labor and capital. A tax
directly on the source is a direct tax, and must still be apportioned.
A tax on the income derived from the source need not be
apportioned. Labor, the labor contract, and the right to sell labor
have all been held by the Supreme Court to constitute property. The
procedure to determine if there is a gain derived from the sale of
this property has been set forth by Congress. Gain is derived only if
one receives over and above the fair market value of the cost of the
property. These basic principles are simple to state and simple to
apply. They also lead to one inescapable conclusion:
I want to emphasize that I do not purport to state that the income
tax law is itself unconstitutional. Thus if one has legal status as a
“taxpayer--� and has the threshold amount of “gross income,--� that
“individual--� would have a legal obligation to file a return and to pay
the taxes, if any, shown on the return. However, filing requires the
use of a form prescribed by the Secretary of the Treasury. That form
is the Form 1040. Since the Internal Revenue Service administers
the tax as a gross receipts tax as opposed to an income tax, one
cannot fill out the form in a manner that both complies with the law
and complies with the Internal Revenue Service’s administrative
policy. A Form 1040 filled out and filed based on the concept that
wages do not constitute income would most certainly be classified
as a frivolous return by an Internal Revenue Service employee, and
the filer would be classified as an “illegal tax protester.--� Such an
administrative classification, made without affording one an
administrative hearing or judicial review, is inherently illegal as a
denial of due process of law. Of course, long ago, Chief Justice
White held that Americans have no due process rights with respect
to taxation.
In addition, once a return is classified as frivolous, it is deemed by
the Internal Revenue Service not to be a return, it is not assigned a
document locator number, and the now non-return is sent to the
Criminal Investigation Division for analysis of recommendation for
criminal prosecution for the violation of one or more of the
following statutes: Sections 7201, 7203, 7206 or 7207. (See Trial
Transcript, pages 59-60,
U.S.  v.  Burkhardt,   3-82-Criminal-38,
United States District Court, District of Minnesota, Third Division,
July 19, 1982.)
This is a classic example of when a valid claim under the Fifth
Amendment right not to be a witness against one’s self should be
made if one does not want to waive that right. The Supreme Court
Garner v. United States,  424 U.S. 648 (1976), stated:
The information revealed in the preparation and filing
of an income tax return is, for Fifth Amendment
analysis, the testimony of a “witness--� as that term is
used herein.
Garner, supra  at 662-663. 
The Supreme Court case of 
Sullivan v. United States,  274 U.S. 259
(1927), stated that if one wanted to raise an objection to a particular
question when filling out a personal income tax return, one had to
raise the objection on the return, but could not refuse to file any
return at all.
The Internal Revenue Service, however, takes the position that
returns claiming Fifth Amendment objections are also frivolous,
with the same results as outlined above. Thus under current United
States Government procedure, the exercise of Fifth Amendment
rights leads to criminal prosecution. Additionally, any return filed

with the Internal Revenue Service can be used against the filer
under the Internal Revenue Code itself, Section 6103(i). This
atrocious result was achieved by Federal Judges such as the
dishonorable Learned Hand, who while disobeying his oath of office
to uphold the Constitution of the United States, declared:
Logically, indeed, he (the taxpayer) is boxed in a
paradox for he must prove the criminatory character
of what it is his privilege to suppress just because it is
The only practicable solution is to
be content with the door’s being set a little
nothing better is available.
[Emphasis added.] 
United States v. Weisman , 111 F.2d 260,
262 (1947).
The only practicable solution for Judge Hand was to declare the
requirement of filing an income tax return to be unconstitutional as
repugnant to the Fifth Amendment. This result is mandated by
Marbury  v.  Madison,   5  U.S.  137,  180  (1803)  and  the  only  result 
conceivable  under  law  if  the  United  States  Constitution  is  indeed 
the Supreme Law of the Land. However, and despite the fact that in 
the  landmark  case  of  
Miranda  v.  Arizona,   384  U.S.  436,  the 
Supreme Court stated: 
The  Fifth  Amendment  provision  that  the  individual 
cannot  be  compelled  to  be  a  witness  against  himself 
cannot be abridged. 
Where  rights  secured  by  the  Constitution  are 
involved,  there  can  be  no  rule-making  or  legislation 
which would abrogate them. 
Miranda, supra. 
the federal courts refuse to comply with law as evidenced by the
decisions analyzed in the preceding chapters.
Sullivan   Court recognized that some conditions might exist
requiring the “extreme and extravagant--� position that the Fifth
Amendment allows one otherwise required to file a return to file no
return at all. Inasmuch as the federal government openly admits by
statute that returns can be used against the person in any civil or
criminal matter, and inasmuch as claiming Fifth Amendment
protection on a tax return leads to criminal prosecution, it is my
opinion that the conditions mentioned in
Sullivan  now clearly exist,
and the nonfiling of returns is justified as protected under the Fifth
You must be cautioned that not filing a return with the Internal
Revenue Service could result in the imposition of civil penalties
and/or the recommendation for criminal prosecution. This illegal
conduct on the part of our Executive Department of government is
yet but another in a long line of abuses, similar to those which
resulted in the Declaration of Independence. It is nonetheless my
contention that provisions contained in the United States
Constitution, together with decisions of the United States Supreme
Court, fully support the legal conclusion that wages do not
constitute income as shown in previous chapters, and reinforce the
position that the Internal Revenue Service is violating the law in its
administration of the personal federal income tax, with the full
consent of our federal judiciary.
I have endeavored in this book to set forth the true law with respect
to the federal personal income tax. What any American chooses to
do with that knowledge is a matter of choice.

)  Case No. A87-43CR 

)  Anchorage, Alaska 
)  Thursday, February 4, 1988 
)  9:00 a.m. 




For the Plaintiff: 
701 C Street, Box 9 
Anchorage, Alaska 99513 
(907) 271-5071 
For the Defendant: 
P.O. Box 7306 
Missoula, Montana 59807 
Q Sir, you indicated that it was your function to examine tax
A That’s correct.
Q And where are the tax returns for Mr. Beery?
A To my knowledge, none were filed.
Q You didn’t examine tax returns in this case, did you?
A I received the information from the special agent.
Q And you didn’t examine tax returns in this case, did you?
A No.
Q Isn’t it true that the Code of Federal Regulations limits you to
the examination of tax returns?
MR. EVANS: Objection--"
THE COURT: Sustained.
MR. EVANS:--"foundation.
May I see what you’re handing the witness, please?

MR. DICKSTEIN: It’s Exhibit T, you have a copy.
(Defendant Exhibit T was thereupon marked for
Q Sir, do you recognize Defendant’s Exhibit T?
MR. EVANS: Objection, Your Honor. He’s handed what
appears to be a portion of--"
MR. DICKSTEIN: Treasury regulations which describe this
man’s job function.
THE COURT: Is that the only purpose of this exhibit?
MR. DICKSTEIN: No, its purpose is to show that this man
violated numerous rights in the computation of this tax, that this
isn’t the correct tax determination because Mr. Beery was afforded
none of his due process rights in this determination, which is
coming in as a final--"
THE COURT: Just a moment, sir. I’ve allowed this witness to
testify as an expert witness to a tax computation. You may cross-
examine him on that tax computation.
MR. DICKSTEIN: I am, sir, the illegality of the tax
computation under the regulations that describes this man’s
conduct and the due process rights that are supposed to be afforded
to Mr. Beery.
MR. EVANS: Your Honor, if we’re going to have argument
regarding the law--"
THE COURT: Well, we aren’t going to have any more
MR. DICKSTEIN: I will request the Court to take judicial
notice of the Code of Federal Regulations put out by the Treasury
Department, 26 C.F.R. Section 601.105.
THE COURT: For purposes of jury instructions, I may very
well take a look at that.
MR. DICKSTEIN: No, for purposes of cross--"
THE COURT: For purposes--"
MR. DICKSTEIN:--"examination of this witness as to his
testimony, Judge.

THE COURT: For the purpose of cross-examining this
witness, I do not see any relevancy of this document and it--"
MR. DICKSTEIN: Well, let me develop the relevancy, Judge.
THE COURT: Go ahead, if you can.
Q Are you familiar with these regulations, sir?
A Yes.
Q These are the regulations that govern the examination of
returns, are they not?
A All right. Now --"
THE COURT: Now, stop right there, Mr. Dickstein. This
witness isn’t here for the purpose of examining a tax return and you
will not inquire any further into this subject.
MR. DICKSTEIN: The lack of a tax return is a prerequisite to
the prosecution of Mr. Beery, sir. The secretary is required under
Section 6020(b)(l) to prepare the return--"
MR. DICKSTEIN:--"and that return--"
MR. DICKSTEIN: - goes to him.
THE COURT: Stop. No more argument in front of the jury on
this point. I’ve ruled. Ask another question.
MR. DICKSTEIN: Then, can we have a sidebar so I can argue
to Your Honor?
THE COURT: You may argue to me on this legal aspect later,
when we’ve set up the jury instructions.
MR. DICKSTEIN: Then it’s too late because I can’t cross-
examine him under the law, Judge.
THE COURT: You may cross-examine on anything that he
was asked on direct examination.
MR. DICKSTEIN: This is what he was asked. He computed
the liability. I want to see if he afforded Mr. Beery due process.
Mendoza-Lopez,  we’re entitled to go into that at the time of 
THE  COURT:  Mr.  Dickstein,  enough  of  this  argument.  Ask 
another question, if you’ve got one. 

Q Well, I’ve got one question. Sir, where in the Internal Revenue
Code, and will you please show us where it says Mr. Beery is a
MR. EVANS: Objection.
THE COURT: Sustained.
Q Are you aware of any such section in the code which identifies
Mr. Beery as a taxpayer?
MR. EVANS: Objection.
THE COURT: Sustained.
Q Sir, you made the assumption, did you not, that wages constitute
MR. EVANS: Objection.
THE COURT: I’ll allow that question.
Q And where in the Internal Revenue Code, if anywhere, does it
establish that wages are income?
MR. EVANS: Same objection.
THE COURT: Sustained. I will be instructing on that subject.
MR. DICKSTEIN: We know, Judge.
Q In making your computations you use the word here “statutory
gross income,--� do you not?
A Yes.
Q All right. You also use the word “adjusted gross income,--� do you
A Correct.
Q And you also use the word “taxable income,--� do you not?
A Correct.
Q Now, the words “gross, adjusted and taxable--� are all adjectives
defining the word income, aren’t they, they’re different types of
A That’s correct.
Q And isn’t it true, sir, that the word “income--� is not defined
anywhere in the Internal Revenue Code?
MR. EVANS: Objection.

THE COURT: Sustained.
Q Do you know whether the word “income--� is defined in the code?
THE COURT: Whether he knows or not doesn’t matter,
counsel. You don’t need to answer that question.
MR. DICKSTEIN: No, and we don’t need a trial either,
Judge. May we have a two- or three-minute recess so I can cool
down, please?
THE COURT: Yes, we’ll be in recess for five minute, ladies
and gentlemen.
MR. DICKSTEIN: Thank you, Judge.
(Brief recess.)
(Jury in at 11:32 a.m. Call to order of the Court.)
THE COURT: Mr. Dickstein?
MR. DICKSTEIN: All right, sir.
Q Now, on the form you use the term “statutory gross income,--� is
that correct?
A That’s correct.
Q And that’s statutory gross income under the Internal Revenue
A That’s correct.
Q In fact, all of your computations were based upon your
interpretation of the Internal Revenue Code, is that correct.
A That’s correct.
MR. DICKSTEIN: Your Honor, at this time I move for the
admission of the Internal Revenue Code of 1981 into evidence.
THE COURT: No, sir.
MR. DICKSTEIN: All right. I move for the admission of
Section 61, which is the statutory definition of gross income.
THE COURT: I will instruct on it if it’s appropriate.
MR. DICKSTEIN: I move for the admission of Section 63,
which defines taxable income.
THE COURT: Mr. Dickstein, if this litany needs to go on, I
will consider all of your requests for instructions at the appropriate
time, which will be a little later.

MR. DICKSTEIN: Yes, sir. I believe for the record I have to at
least offer these things into evidence so they can be reviewed at a
later time.
THE COURT: No, sir, you do not have to do it at this time.
You were to file your proposed instructions earlier, which I believe
you did, and we will settle up instructions and take your exceptions
to them on the record before the instructions are read to the jury
and that’s where you preserve your right to appeal on the question
of jury instructions.
MR. DICKSTEIN: I’m not referring to jury instructions. I am
referring to exhibits that go to the jury Judge.
THE COURT: And what you are requesting me now will not
put in exhibit form to the jury. If they are used, they will be used in
MR. DICKSTEIN: All right. Are you specifically instructing
me not to list the exhibits that I would like to have admitted into
evidence at this point in time?
THE COURT: No, sir. I am instructing you not to request me
to take judicial notice of any further statutory provision at this time.
Do you have further cross-examination for this witness?
MR. DICKSTEIN: Yes, sir, I do.
Q Sir, you indicated that the special agent gave you a bunch of
exhibits and told you to compute income--"or compute the taxable
MR. EVANS: Objection, I think he’s mischaracterizing the
testimony. Perhaps he could ask him where he got the figures from.
THE COURT: Would you rephrase the question, please?
Q From where did you get the figures to use in your computations?
A I received them from the special agent.
Q All right. Now, did you conduct an audit in computing these--"
this alleged tax due and owing?
A I did not do an audit.
Q You just took those figures for face value?

A With the exception of reconciling them. Like the W-2 income, I
verified that those amounts were correct.
Q And how did you verify that those were the correct amounts?
A I saw copies of the W-2s.
Q All right. Now, sir, what section, if any, did you rely upon in
determining which tax tables--"did you apply tax tables to this?
A Which one are you referring to--"well, basically, I applied tax
tables only to 1983 because of the--"the amount that was taxable, the
tax tables weren’t--"the taxable income was more than the tax tables
for 1981, or 1980, 1981 and 1982.
Q All right. You had to rely on something, though, to figure out the
tax, right?
A The tax rate schedules, yes.
Q And that’s contained in Section 1 of the code?
A That’s correct.
Q And that imposes a tax on individuals, does it not?
A Yes.
Q And have you ever done any research into what the word
“individual--� means?
MR. EVANS: Objection as to relevancy.
MR. DICKSTEIN: The relevance is whether or not Mr. Beery
is an individual as defined in the Internal Revenue Code. We submit
he’s not, Judge.
MR. EVANS: We’ve already heard testimony from Ms. Vest
that as far as the IRS is concerned an individual is somebody with a
social security number that is kept in a record at the service center
in Ogden, Utah.
THE COURT: I’ll sustain the objection.
MR. DICKSTEIN: And my objection, Judge, is we’ve heard
from the IRS but we’re not getting the other side of the story out.
We can prove Mr. Beery is not a taxpayer if you’ll let us do that,
THE COURT: The objection--"
MR. DICKSTEIN: I’m asking for that right.
THE COURT: The objection has been sustained.

MR. DICKSTEIN: I understand that.
Q Sir, please turn to page 95--"I’m sorry, Exhibit 95. Now, under
this figure of interest income that you have--"
A Yes.
Q --"in computing this were you aware that half of the payments
that this represents was to the original purchaser or the original
owner of the property?
A No, I was not.
Q That would have been something that would have been brought
to your attention had an audit been conducted, wouldn’t it?
A Very possibly.
Q And if Mr. Beery had knowledge that this was your contention,
he could have come in and told you otherwise, couldn’t he?
A That is correct.
Q That’s what an audit process is about, isn’t it?
A Right.
Q And he’s had no opportunity to do that in this case, has he?
MR. EVANS: Objection.
THE COURT: Overruled.
THE WITNESS: Are you speaking to me, at my personal
attempts to contact him, or are you speaking from what I
understand the service tried to contact him?
Q No, I’m talking about--"well, let’s do both. Did you try to
personally contact him?
A No.
Q You were instructed not to, weren’t you?
A No.
Q Then, why didn’t you?
A The attempts, from my understanding, numerous attempts were
made and nobody was able to contact him.
Q Oh? And from where did you get this understanding, sir?
A Just in discussions.
Q With whom?
A The special agent.
Q And when did the special agent tell you that she had attempted
to contact Mr. Beery?

MR. EVANS: This is getting beyond the scope of direct. It has
nothing to do with his computation of the taxes. He’s testified he
was given figures by the special agent.
THE COURT: Sustained.
Q What are capital gains?
A Capital gains is normally sale of capital assets which have been
held more than, it used to be six months and then 12 months and--"
Q What’s--"
A If they’re sold at a gain, they get preferential tax treatment.
Q In fact, gain is what income is, isn’t it? If you sold it at a loss, you
wouldn’t tax it, would you?
A No.
Q And if was a mere equal exchange of property it wouldn’t be
taxed either, would it?
A If it’s a qualified exchange, no.
Q Okay. If I gave Mr. Evans a book worth $10 and he gave me a
book worth $10, there wouldn’t be a taxable--"that wouldn’t be a
taxable event, would it?
MR. EVANS: First of all, that would never happen. Second of 
all, this is irrelevant. 
THE COURT: Sustained on your relevancy side. 
MR. EVANS: Thank you. 
MR. DICKSTEIN: Here, let me give you this, Mr. Evans. 
Q  Sir, in computing a gain, don’t you have to know what the value 
of the property was originally? 
A  That’s correct. 
Q  And that’s known as basis, isn’t it? 
A  That’s correct. 
Q  And how is basis determined? 
A  Basis  would  be  your  cost,  plus  any  improvements,  plus  the 
purchase  costs,  less--"if  it’s  depreciable  property,  then  it  would  be 
less any depreciation claimed while you held the property. 
Q  All  right.  Cost  is  basically  what’s  known  as  fair  market  value, 
isn’t it? 
A  Cost and fair market value can differ. 
Q  In what way? 

A Well, if you got a bargain purchase, maybe fair market value
would exceed cost. Cost is cost.
Q Don’t you often determine fair market value by virtue of the
contract which the property was purchased for?
MR. EVANS: Does this relate--"I don’t think this relates to
the computation of his figures.
MR. DICKSTEIN: It goes to the computation of capital gains,
THE COURT: Well, if you would clarify something for me,
Mr. Dickstein, through a question. I don’t see where fair market
value comes into the computation. If it does--"
MR. DICKSTEIN: I’m trying--"
THE COURT:--"then there may be some relevancy to what
you’re asking.
MR. DICKSTEIN: I’m trying to ascertain what basis this
gentleman gave to the property to determine the amount of the
capital gain.
THE COURT: Fine, you may ask him that.
THE WITNESS: Okay, basically, I received the numbers, like
I stated before, and it’s my understanding that Mr. Beery bought
these two lots for $32,000, and we assigned or it was--"this was
done initially, I guess, by the other, the prior agent, they assigned a
$16,000 cost to each lot.
Q All right. Now, those figures came off the sales contracts, didn’t
A That’s my understanding, they would.
Q And that’s what’s known as an arm’s-length transaction between
the buyer and the seller?
A Correct.
Q Okay. And then you computed how much more than what the
cost was when it was sold, is that correct?
A Well, to that $16,000, Mr. Beery put in a sewer system which
had been capitalized and was depreciated. On lot--"on one of the lots
he placed--"he purchased a trailer house that was--"depreciation was
allowed on, it was a five-year life, with a salvage of 2200, and it was

down to 2200 in the year of--"before it was sold. So, that was the
basis of the trailer. But the land cost remained 16,000.
Q Now, these procedures for determining gain are actually set
forth in the Internal Revenue Code, aren’t they?
A That’s correct.
Q And you followed those procedures, didn’t you?
A That’s right.
Q Okay. Now, will you tell the jury what the cost of Mr. Beery’s
labor was and what basis you assigned to that?
MR. EVANS: Objection. We’re not talking about the
THE COURT: The question was the cost of Mr. Beery’s
MR. DICKSTEIN: The basis of his labor for the purposes of
determining gain, which is what the income tax is all about.
THE COURT: You may answer the question if you
understand it.
THE WITNESS: Well, the way I understand it, personal
services would not increase my basis unless I reported income from
it. For example, on charitable contributions, I can get a deduction
for my out-of-pocket costs for the charity, but if I go down and work
as a cement worker or a carpenter and the value of my services are
20 bucks an hour, I don’t get a deduction for my time. The only way
I would is if the charitable organization paid me the 20 bucks and I
picked it up in income, then I’ve got--"and then I said “Here’s your
money back,--� but then I’ve got income, it’s offsetting and there’s no
tax effect.
Q That’s right, because you’ve got the value of the labor--"
A I’d have--"
Q --"in direct exchange for what you were paid and there’s no profit
or gain there, is there, it’s an equal exchange?
A Well, there wouldn’t be an equal exchange unless I gave my pay
back to the charitable organization.
Q So, the value of your time is zero?
A So, the value turns out, for basis purposes, it would be zero.

Q And do you get paid a salary for what you do?
A Pardon?
Q Do you get paid a salary?
A I don’t know what you’re directing it at now, maybe--"I think--"
A Of my labor, okay.
MR. EVANS: This is irrelevant.
THE COURT: Sustained.
MR. DICKSTEIN: No, it’s extremely relevant, Judge, because
we’re misconstruing the provisions of the code that deal with the
amount of gain from property, and the Supreme Court has defined
labor as property.
THE COURT: Not for purposes of this case, sir.
MR. DICKSTEIN: For any purpose, Judge.
THE COURT: No, not for purposes of this case.
THE COURT: You may ask another question.
Q Sir, in your direct examination you used the term “sources of
income,--� did you not?
A That’s correct.
Q And what’s the difference between a source of income and
A Well, in sources of income, I refer to wages, interest income,
there are different types of income. So, a source would be just a
generic term covering all sources and like interest income is interest
income and capital gains income would be capital gains income.
Q Well, the source of interest income would be money sitting in
the bank, wouldn’t it?
A Well--"
Q For example--"
A --"in this case, it’s a contract. So, it’s not really money sitting in
the bank, it’s payments being made.
Q And the tax isn’t imposed on the source, is it, it’s imposed on the
income derived from the source?
A The one receiving the money, right, the beneficiary of the money
is taxed.
Q The income from the source, right?

A Right.
Q That in fact is what Section 61 talks about, right, gross income
from whatever source derived?
A That’s correct.
Q Right. And that’s the profit or gain derived from the source, isn’t
A Correct.
Q And the source of his wages was his labor, wasn’t it?
A His labor produced the source. The way I would interpret it, the
source would be his employer who paid him the money, that is
where the money came from and he exchanged his services for
Q Exactly. Thank you, sir.




)  No. EV 87-20 CR 






The  following  proceedings  took  place during  a  Jury  Trial  in 
the above entitled cause on Thursday, April 21, 1988 in Evansville, 
Indiana, before the Honorable Gene E. Brooks. 
For the Government:
For the Defendant:
Mr. Larry Mackey
Mr. Jeffrey A. Dickstein
Mr. Robert Barnes
Post Office Box 7306
Assistant U.S. Attorneys
Missoula, Montana 59807
U.S. Courthouse - Room 500
Indianapolis, Indiana 46204
being first duly sworn testified as follows:
Q Mrs. Shaffner, you have a Bachelor’s and a Master’s Degree in
A Yes, sir.
Q Is it safe to assume then that you are fairly knowledgeable about
grammatical patterns and the placement of words?
A Yes, sir.
Q Would it be fair to say that the meaning of specific words are
important for understanding sentences?
A Yes, sir.
Q And that some words may have different meanings?
A I’m sorry - I am not sure that I understand.

Q Isn’t it true that a word might have a different meaning
depending upon how it is used in a sentence?
A That would be true.
Q Now, you indicated that you have a 4.0 grade point average--"
A --"Yes, sir.
Q For your CPA Courses?
A Yes, sir.
Q What was your grade point average for your Bachelor’s courses?
A 3.7.
Q All right. And your GPA for your Master’s courses?
A 3.9.
Q So, you did fairly well in school?
A Yes, sir.
Q Now, you indicated in your Unit One training that you were
taught how to interpret the Code and Regulations. Is that correct?
A That’s correct.
Q Tell the Jury what it means to interpret a code section?
A Sometimes it is difficult to understand exactly what the Code
means by the words that are used in a particular section. Therefore,
we are instructed as to how to research that to the final point of
understanding it. For example, if something in the Code needs to be
explained by going to the Treasury Regulations, and it is really
interpreted in terms of the facts that were presented here and how
the Code would apply--"to those particular facts.
Q Now, you might not only go to the regulations for an
interpretation, but you might also have to go to decisions of the
United States Supreme Court. Isn’t that true?
A That would be true when we are trying to determine how the
code would apply to a particular set of facts.
Q Or even to a particular person?
A It would be the facts that we would be trying to apply to the
code, not to the person.
Q You make no interpretation then as to who is or who isn’t a
taxpayer? Is that what you are telling this Jury?

A We make that determination but I guess I considered that we
made that determination on the facts and circumstances
surrounding that person - not just based upon who that person is. I
guess that I misunderstood you.
Q All right. That is known as “status--�, isn’t it, to determine
whether a person is or isn’t a taxpayer.
A I guess you could say that.
Q You have the regulations there, do you not?
A Yes, sir, I do.
Q Will you look at 26 C.F.R. 602.101, please?
A Would you say that again, please?
Q I’m sorry - It’s 601.201.
THE COURT: 601.201?
MR. DICKSTEIN: Yes, sir, I’ll apologize in advance this time.
A 601.201 - I don’t have that cite.
MR. DICKSTEIN: May I approach the witness, Your Honor?
Q (By Mr. Dickstein) I would like to hand you what has been
marked as Defendant’s Exhibit “AX--�. Do you recognize that as a
regulation of the Treasury Department?
A No, sir, I don’t.
Q You have never seen this?
A No, sir, I haven’t.
Q So, there are numerous regulations that you haven’t seen. Is that
A If this is a Treasury Regulation--"I have not seen it. Obviously,
there would be regulations that I have not seen.
Q You have seen Regulation 601.105, haven’t you?
A No, sir, I haven’t.
Q Now, you were in the Audit Division for a while?
A Yes, sir, the Examination Division.
Q And you are not familiar with the regulations dealing with the
examination of the returns?
A Sir, according to the regulations that I have in front of me,
anything under 601. would have to do with bank affiliates.

Q With what?
A Bank affiliates.
Q I would like to hand you what has been marked as Defendant’s
Exhibit “B--�, Mrs. Shaffner. I would ask you to take a look at that
MR. DICKSTEIN: Let the record reflect that Defendant
Exhibit “B--�, is Treasury Regulation 26 C.F.R. 601.105.
Q (By Mr. Dickstein) Mrs. Shaffner, would you please read the title
of that?
A Yes--"--�Examination of returns and claims for refund, credit, or
abatement; determination of correct tax liability.--�
Q Now, you examine returns, don’t you?
A Yes, sir.
Q And you determine correct liability?
A Correct.
Q And you have never seen your own departmental regulation for
those purposes?
A I have seen the regulations, but apparently, we may have a
numbering system different--"I am sure that I have seen the
regulations, but not by this particular number.
Q Find them in your own regulations, if you can, please? To the
best of my knowledge, they are 26 C.F.R. - 601.
A I want to explain that our regulations--"the way that we have
them printed, the first number in it is based upon the code section
to which it relates, and 601. code section refers to a special
deduction for bank affiliates.
Q In fact, the first number of parts are contained in the code of
Federal Regulations, aren’t they? For example, the regulations
dealing with the Internal Revenue Codes - with Section 1 of the
Internal Revenue Codes in Part One of the Code, Federal
Regulations. That is why it is 1.1-1, pertaining to Section 1 of the
THE COURT: Now, wait a minute, I think we are talking
about two sets of books. She has a book, called “Federal
Regulations--�, and you are talking about C.F.R. You are talking

about a different set of books. She has one set of books, and you
have another one.
MR. DICKSTEIN: They are different titles, Judge, but
Treasury Regulations are contained in the Code of Federal
THE COURT: How about the numbering system?
MR. DICKSTEIN: The numbering system should be the same
in terms of regulations.
THE COURT: They should be, but apparently, they are not.
Q (By Mr. Dickstein) Now, you talked about the code sections, for
example, like the regulations for Section 3401.
A Yes, sir.
Q That is preceded by a number 31, isn’t it?--"That is 31.3401?
A Yes, sir, it would be.
Q And regulations like Section 1 of the Internal Revenue Code is
1.1 something, isn’t it?
A Yes, sir, that would be correct.
Q Doesn’t the One (1.) mean a part of the regulations--"that’s the
part number?
A Yes, sir.
Q And 601. is part 601. of the Code of Federal Regulations?
A It is still a different number system, sir, and that is why I am
having difficulty in finding your cite. That is not the same number
that we are accustomed to research.
Q You have looked at your regulations for examination of returns
and determinations of correct tax liability. Is that your testimony?
A Yes, sir.
Q Did you turn to pages right after that to get the next regulation,
called “Rulings and Determination Letters?--�
A Yes, I see it on yours, but I am at a loss finding it because your
system is very different. I’m sorry, but I am accustomed to
researching these particular regulations or the regulations of the
C.P.A., and not under C.F.R.
Q The Code of Federal Regulations is the official Treasury
Regulations, aren’t they?
A  Yes, sir. 
Q  They are the ones that have been codified? 
A  Yes, sir, that’s correct. 
Q  All right, then you are not using the official volume? 
A  I am using the regulations but I am using them in a form that is 
more easily accessible for me, because that is important to my job. 
Q  All right. But it is not the official volume, is it? 
A  If what you are saying is correct, that would be correct, yes. 
Q  Would  you  examine  601.105  which  I  have  handed  you, 
Defendant’s  Exhibit  “B--�.  Despite  the  difference  in  numbering,  will 
you see  if those aren’t, in fact, the regulations  that pertain to  your 
job in auditing returns and determining correct liability? 
A  Without reading all of them, sir, they would appear to be so. 
Q  All  right.  Do  you  deny  that  it  is  the  policy  of  the  Internal 
Revenue Service to answer inquiries of individuals as to their status 
for  tax  purposes  and  as  to  the  tax  affects  of  their  acts  or 
A  I’m sorry. Will you repeat that question? 
Q Yes. Do you deny that it is the practice of the Internal Revenue
Service to answer inquiries of individuals as to their status for tax
purposes and as to the tax affects of their acts or transactions?
MR. MACKEY: Objection, Judge, as to relevancy.
THE COURT: What is the relevancy?
MR. DICKSTEIN: The relevancy, Judge, is the fact that this
client was not given any opportunity to explain his tax
determination or status as a taxpayer and the I.R.S. has not made
such a determination, despite the fact that it is their policy.
THE COURT: Objection is sustained.
MR. DICKSTEIN: Judge, I would ask the Court to take
Judicial notice of Defendant’s Exhibit AX, please?
THE COURT: Judicial notice of it?
MR. DICKSTEIN: Judicial notice, yes, sir, of the Code of
Federal Regulations, 26 C.F.R. Section 601.201.
MR. MACKEY: The same objection that was made yesterday,
Your Honor, regarding portions of the regulations.
MR. DICKSTEIN: Could I have a ruling, please?

THE COURT: You have already got it.
MR. DICKSTEIN: The Court is refusing to take judicial
notice of 26 C.F.R. 601.201?
THE COURT: I don’t know of any reason to take judicial
notice of it.
MR. DICKSTEIN: The decision under United States vs.
Mendoza- Lopez.
THE COURT: I just don’t think it has any relevancy in this
MR. DICKSTEIN: All right.
Q (By Mr. Dickstein) Now, you testified--"well, let’s go back a little
bit. You also told the Jury that in Unit One, you learned how to
interpret regulations. Is that correct?
A Yes, sir, that’s correct.
Q So, sometimes you have to go to the regulations to determine the
meaning of a Statute?
A That is correct.
Q Sometimes you have to go somewhere else to learn how to
interpret a regulation?
A As it applies to a particular set of facts, yes, sir.
Q Now, when was the first time that you read the regulation 1.1-1,
which you testified to yesterday?
A That probably would have been in 1979, when I first came on
board. That’s the best that I can remember, about 1979.
Q Would you look at that section again, please?
THE COURT: What section?
MR. DICKSTEIN: 26 C.F.R. 1.1-1.
A Yes, sir.
Q Now, under sub-paragraph C, does it tell who a citizen is?
A Yes, sir, it does.
Q There are two parts to that, isn’t there?
A I don’t see that it is separated distinctly into two parts.
Q It’s “born or naturalized in the United States?--�
A I understand what you are saying - yes, sir.
Q All right.

A And “subject to its jurisdiction.--�
Q And with a Master’s in Language, you know that the word,
“and,--� means that it has to be both of those things, don’t you?
A That would be correct, sir.
Q Tell the Jury exactly what you studied with respect to the
language, “subject to its jurisdiction?--�
A “Subject to its jurisdiction,--� the best that we were able to
determine would be that means that you would be--"
Q --"Ma’am, please tell the Jury what you studied with respect to
THE COURT: Do you mean what book, or what are you
talking about?
MR. DICKSTEIN: That is what I am trying to find out from
the witness, Judge.
A No, sir, we do not go to another book for this, because the terms
are commonly used terms as far as being subject to jurisdiction. The
basic understanding is that you would be subject to the laws of our
country, and that would be to be a citizen.
Q  It is called Legislative Jurisdiction, isn’t it? Subject to the law? 
A  That would be correct. 
Q  So, we are talking about Legislative Jurisdiction, aren’t we? 
A  That would be a correct assumption. 
Q  Now,  tell  the  Jury  what  facts  makes  Mr.  Hall  subject  to  the 
Legislative Jurisdiction of the United States, please? 
MR. MACKEY: Objection, Judge. Matters of jurisdiction are 
personal subject matters and--" 
MR.  DICKSTEIN:--"This  was  opened  up  by  direct 
examination when the witness testified from Section 1.1-1, as to the 
determination as to who is or isn’t an individual upon whom the tax 
is imposed. I have a right to cross examine her on that, Your Honor. 
The government opened it up. 
MR.  MACKEY:  Judge,  the  examination  on  direct 
examination  explained  the  fundamental  starting  point  for  her 
determination of taxes. Section 1, she--" 
THE  COURT:--"The  Court  has  already  ruled  on  this. 
Objection is sustained. 

MR. DICKSTEIN: Judge, you aren’t going to let us cross
examine on this?
Q (By Mr. Dickstein) Ma’am, the taxes imposed on an individual is
in Section 1?
A Yes, sir.
Q And you have to determine who an individual is, don’t you?
A Sir--"
Q --"If you are not an individual, the tax is not imposed on you, is
A Sir, I make the distinction as to whether a person is an
individual, corporation, partnership, a trust or an estate.
Q Please turn to Section 7701 (a) of the Internal Revenue Code.
A Yes, sir.
Q I believe it is (a)(14)--"Definition of a Person?
A (a)(14) is the definition of a taxpayer.
Q Definition of a person is (a)(1)?
A Yes, sir.
Q  What is the definition of a person? 
A  The  term,  person,  shall  be  construed  to  mean  and  include  an 
individual,  a trust,  an estate, partnership,  association,  company  or 
Q  All right, so an individual might be a person or an individual is a 
person, is that correct? 
A  That’s correct. 
Q  But a person may not be an individual for purposes of the code. 
Is that correct? 
A  That’s correct, for purposes of the code. 
Q  A person might be a corporation? 
A  That is correct. 
Q  And  all  throughout  the  code,  they  distinguish  between  an 
individual and persons, don’t they? 
A  To the best of my recollection, sir, yes, they do. 
Q  Yesterday, you read Section 6001, did you not? 
A  Yes, sir. 

Q And then you read Section 6012--"well, you didn’t read it, you
said that it means any person with a gross income?
A Yes, sir.
Q But the fact is, it says any individual, doesn’t it? It doesn’t say
person? If you don’t know, please look it up.
A Sir, I will look it up because I know that you are making a
distinction between those terms. 6012 has the heading, “Persons
Required to Make Returns of Any Kind.--�
Q What does the language of the actual statute say though?
A The language of the statute does refer to every individual having
for the taxable year a gross income of some kind.
Q And, when you studied the tax laws they told you, did they not,
that the headings of the codes were meaningless for the purposes of
interpretation purposes?
A No, sir, they did not make that statement.
Q The captions--"that is right in the Internal Revenue Code itself,
isn’t it?
A I don’t know that, sir.
Q You haven’t read the entire code, have you?
A No, sir, I have not read the entire code and I testified to that
Q Okay. So, there is some distinction between individuals and
persons in the Internal Revenue Code? Is that correct?
A That’s correct.
Q Now, will you please tell the Jury exactly what steps you took to
make the determination that Mr. Hall is an individual as defined in
Section 1.1 of the Code--"the regulations?
A Sir, the steps that I took were that I looked at Mr. Hall sitting in
the courtroom--"he is not a corporation. He is not a partnership. I
had the choice of is he a corporation, a partnership, a trust estate
and he is an individual. He is not any of the other entities.
Q Ma’am, Section 1.1-1 of the Regulations defines an individual,
does it not?
A As a citizen, yes, sir.
Q And, also subject to the jurisdiction of the United States?
A Yes.

Q And, you have presumed that Mr. Hall is subject to the
jurisdiction of the United States, haven’t you?
A That would be correct.
Q You did not make an independent factual determination as to
whether or not Mr. Hall was subject to the jurisdiction of the United
A That would be correct.
Q And, we are talking about legislative jurisdiction, are we not?
A That was your term and I agreed to it, yes, sir.
Q Was there some other term that you know of?
A No, sir, not at this point.
MR. DICKSTEIN: Judge, at this time I am going to ask the
Court to take judicial notice of what has been marked as
Defendant’s Exhibit “AZ--�. It is a report of the Inter-Departmental
Committee for the study of jurisdiction over federal areas within the
states. Part I being the facts and Committee recommendations; Part
II being a text of the law on legislative jurisdiction of the United
States  -  these  are  government  documents presented  by  the United 
States government printing office in Washington in 1956. 
THE  COURT:  I  don’t  know  what  it  is.  Can  you  explain  it in 
three sentences--"what it is? 
MR. DICKSTEIN: Yes, sir, I can. This is the document from 
the  report  of  the  United  States  government  which  specifically 
defines  the  limited  area  of  federal  jurisdiction--"legislative 
jurisdiction over Washington, D.C., federal enclaves, and territories. 
THE  COURT:  And,  after  I  take  judicial  notice  what  do  you 
want me to do? 
MR.  DICKSTEIN:  The  next  thing  that  I  want  the  Court  to 
take judicial notice of is Chapter I of Volume 4-21-1-1 of the statutes 
of  Indiana  which  indicates  those  areas  where  federal  legislative 
jurisdiction  is  conceded  to  the  United  States  for  purposes  of 
determining  that  no  such  jurisdiction  has  been  ceded  over  those 
areas where Mr. Hall lives and, therefore he is a--"lives in a foreign 
country as that term is used with respect to foreign jurisdiction, that 
is  being  subject  to  another  government.  We  will  get  into  that 

because that term is also defined in the Code of Federal Regulations
which we will get into in a moment, and the statutes for the State of
Indiana, Defendant’s Exhibit “BA--�. And, I would make an offer of
proof at this time that Mr. Hall is outside the legislative jurisdiction
of the United States and therefore he is not an individual as defined
in the Code. There is no section of the Internal Revenue Code which
imposes a liability on Mr. Hall.
MR. MACKEY: The question as to whether this Court has
jurisdiction over Mr. Hall as an individual in the subject matter of
this criminal prosecution has been ruled on.
MR. DICKSTEIN: We are not denying that this Court has
judicial jurisdiction. We are claiming that Mr. Hall is a nontaxpayer
because of legislative jurisdiction.
THE COURT: What do you want me to do, just take judicial
notice of it?
MR. DICKSTEIN: At this point in time, yes, sir.
THE COURT: All right. I will take judicial notice of it.
MR.  DICKSTEIN:  And,  I  want  to  move  now  that  they  be 
introduced into evidence. 
MR. MACKEY: Objection, Your Honor, as to relevancy. 
THE  COURT:  You  are  asking  me  to  admit  something  and 
take time out and read it for about three hours? 
MR. DICKSTEIN: No, sir. The Court has taken judicial notice 
of it. I am asking the Court to admit it into evidence so that it can go 
to the Jury for their determination as to whether or not Mr. Hall is 
the individual upon whom the tax is imposed. 
THE COURT: What is the government’s response? 
MR.  MACKEY:  The  Court  can  take  judicial  notice  of  any 
statute and question whether those statutes apply and are relevant. 
THE COURT: He wants them admitted into evidence. 
MR. MACKEY: I would object to their admission. 
THE COURT: On what grounds? 
MR. MACKEY: On the grounds that they are irrelevant. 
MR.  DICKSTEIN:  Whether  or  not  Mr.  Hall  is  a  taxpayer, 
Your Honor, is most definitely relevant to this case. 

MR. MACKEY: The question of jurisdiction, Your Honor,
which has been represented by his counsel of this subject matter is
not a question for the Jury. It is a question for the Court to rule
upon. We would object to this going to the Jury as being irrelevant.
MR. DICKSTEIN: Not based upon the testimony of the
witness, Your Honor.
THE COURT: Let’s take a recess. Take the Jury out.
THE CLERK: Please rise. Court is in short recess.
THE COURT: What is your argument, that the Court has no
jurisdiction--"that the Court has no jurisdiction?
MR. DICKSTEIN: No, sir, absolutely not.
THE COURT: Do you want me to dismiss the case or what?
MR. DICKSTEIN: I want the issue--"we have already asked
the Court to dismiss the case and the Court has refused. I am asking
that this go to the Jury.
THE COURT: Be submitted to the Jury for a question about
the fact for them to decide?
MR. DICKSTEIN; Absolutely--"is Mr. Hall or is he not an
individual upon whom the tax is imposed in Section I, which is
THE COURT:--"Wouldn’t that be one of the things that the
Seventh Circuit said you couldn’t do?
THE COURT: What does it say? Is this one of those tired old
arguments again?
MR. DICKSTEIN: No, sir, it is a brand new argument.
THE COURT: Brand new?
MR. DICKSTEIN: Absolutely.
THE COURT: Brand new where?
MR. DICKSTEIN: Brand new right here. There is no case law
on point, Judge.
THE COURT: I have had it a half dozen times myself.

MR. DICKSTEIN: And probably never presented in this
format or supported by testimony of the witness or the documents
that we are asking the Court to take judicial notice of. We are not
contending the 16th Amendment wasn’t properly ratified. We are
not contending whether or not wages are not income. We are not
contending whether the tax laws are unconstitutional. We are not
contending the filing of an income tax return violates the privilege
against self incrimination and we are not raising the issue of
whether federal notes constitute cash or income. The Court
specifically says as to issues of jurisdiction those would be
preserved for the trial according to the Court’s own order. That is
exactly what we are doing within the Court’s order.
MR. MACKEY: Judge, jurisdiction is a question of law.
Citizenship is a question of fact. That is what Mrs. Shaffner testified
to yesterday. The two combined, no doubt, can be before the Court
to hear this case or the prosecution to prosecute, but the separation
has to remain. The question of law is for the Court and the question
of fact is for the Jury. There has been submitted to this Jury
meaningless, confusing, and very irrelevant information--"
MR. DICKSTEIN:--"It is a frivolous argument, Judge. He
called us frivolous and he is saying whether or not Mr. Hall is a
taxpayer according to regulations is meaningless and that is
frivolous, Judge. He is saying Section 1.1-1 in the Code of
Regulations is frivolous and that it is meaningless. That is frivolous,
and since we have been branded as the tax protestors and we have
been branded as frivolous, I think that I am entitled to a little
chuckle. By the way, Your Honor, my paralegal has brought an anti-
sanction, anti-contempt tool with him. So, I am trying to stay real
calm and cool so that he doesn’t use this over my mouth.
THE COURT: What is it--"tape?
MR. DICKSTEIN: Yes, sir. Sir, we are not talking about
judicial subject matter jurisdiction in this case, Your Honor. We are
talking about whether or not Mr. Hall is a taxpayer. Everybody in
this Courtroom presumes that he is--"even Your Honor, because of
your  experience  in  filing  returns,  which  we  contend  violates  the 
separation of powers In Article III of the Constitution. However,--" 
THE COURT: Are you asking me if I should try it? 
MR. DICKSTEIN: No, sir, because you are a taxpayer subject 
to  jurisdiction  of  the  Executive  Branch.  Originally,  the  Supreme 
Court ruled that Federal Judges were exempt from taxation in order 
to maintain judicial separation of powers. 
THE COURT: Have you ever heard of the rule of necessity? 
MR. DICKSTEIN: Yes, sir, what does that have to do with it? 
THE  COURT:  Sometimes  you  may  decide  to  do  it,  even 
though you may have some conflict in some way. 
MR. DICKSTEIN: No, sir. 
THE COURT: You have never heard of that rule before, have 
MR.  DICKSTEIN:  Yes,  sir,  I  have  heard  of  that.  I  don’t 
believe that it is applicable. If you will give me a moment, I will try 
and explain it. 
THE COURT: How have you heard about the rule? 
MR. DICKSTEIN: I have read it, Judge. I have gone to law
school. But this is not a matter of a rule of necessity. Originally,
Federal Judges were exempt from taxation and the Supreme Court
stated that was necessary in order to maintain the separation of
powers, so Judges could be fairly impartial and not subject to the
Internal Revenue Code.
THE COURT: Just give me the essential facts, Mr. Dickstein.
MR. DICKSTEIN: The essential facts are that the witness
testified that the taxes imposed upon Mr. Hall, pursuant to Section
1 of the Internal Revenue Code, as an individual. The term,
“individual--� is defined in Section 1.1 of the regulations as a person
born or naturalized in the United States and subject to its
jurisdiction. That means legislative jurisdiction. Legislative
jurisdiction is confined to Washington, D.C., Federal enclaves, et
cetera. Those are areas within a State and according to Indiana law,
where there has been accession to the United States, and a plat filed
by the United States. That has not taken place here. This gets right
into the--"Well, I am not going to get into that. The Court says that’s

frivolous, although in this context, I believe that it is non-frivolous.
We are not raising the issue, Your Honor, that Congress cannot tax
Mr. Hall. We are raising the issue that they have not done so in this
particular case.
MR. DICKSTEIN: Why--"because the taxes are imposed in
Washington D.C., Federal enclaves, and territories. The government
has failed to prove that Mr. Hall was within a Federal enclave or
Washington, D.C. The evidence is that he was born in the State of
Indiana. There is a difference in the terms of sovereignty between
the government of Indiana and the government of the United
States. Congress and the United States has jurisdiction in limited
areas pursuant to Article I, Section 8, Clause 17, of the United States
Constitution. There is a procedure for the United States to obtain
jurisdiction over areas in Indiana, as set forth in Indiana Statutes.
They have not yet done so. The government can’t prove that they
have. Mr. Hall is not a taxpayer.
THE COURT: We will take a short recess.
THE CLERK: Court stands in recess.
THE COURT: Show that the Defendant requested that
Defendant’s Exhibits BA and AZ be submitted to the Jury and the
Court denies the same for the reason it is not a question of fact. It is
a question of law. It is not factual in nature and the Court
recognizes that there may be situations where, “subject to the
jurisdiction of the United States.--� It may be a question of fact
concerning whether or not someone is a citizen at the time, certain
fact situations could arise, giving rise to that dispute, which would
be a question for the Jury. But in this particular instance, it is a
question of law and therefore, it is not proper to be submitted to the
Jury. Anything else, gentlemen, before the Jury returns?
MR. MACKEY: No, sir.
THE COURT: Bring in the Jury.

THE COURT: So, the Jury understands, when you were in
Court prior to this time, Defendant had submitted two exhibits in
evidence which I have now denied their submission in evidence.
You may continue.
MR. DICKSTEIN: Your Honor, at this time, I would like to
submit Defendant’s Exhibit BC, which is a 1988 map of Indiana.
This particular map shows those areas of the United States within
the State of Indiana. I would request the Court to take judicial
notice of the fact that Tell City and Rockport is outside of any
designated areas of the United States within the State of Indiana.
MR. MACKEY: I have no objection to the map, Judge. I do
have an objection as to his statement of law concerning conclusions
about whether it is portions of Indiana or the whole State of
THE COURT: All right. I will take judicial notice of the
statement but I don’t know about the map. That is a question of law
about the statement of the portions of Indiana.
MR. DICKSTEIN: I understand. I submit that this map
accurately portrays those areas that conceded to the United States--"
jurisdiction was conceded to the United States.
THE COURT: Is that the purpose for your putting it in
MR. DICKSTEIN: That’s the purpose and the Court’s judicial
notice that Tell City and Rockport falls without those areas.
THE COURT: If that is the purpose, I will deny it.
MR. DICKSTEIN: All right, sir, as long as it is marked and
goes up to the Court of Appeals. We will take exception to the
ruling, sir.
THE COURT: Have the witness take the stand.
Q Now, you testified before that in the examination audit process
that you notified the taxpayer? Do you recall that testimony?
A Yes, I do.
Q Did you notify Mr. Hall?

A I was referring to the fact that I would notify a taxpayer that I
was conducting an examination.
THE COURT: Did you notify Mr. Hall?
A I did not.
Q (By Mr. Dickstein) But you did conduct an examination?
A No, sir, I did not conduct an examination. Under Civil, I cannot
conduct an examination.
Q But you determined it was a tax liability?
A Yes, sir.
Q You are out of the examination division, aren’t you?
A Yes, sir, I am.
Q Did you notify Mr. Hall of his rights to appeal to your
determination of tax liability?
A No, sir, I didn’t.
Q All right. Did you conduct your examination off his substitute
A I did not conduct an examination for civil purposes.
Q Did you make your determination of the correct tax liability off a
substitute return?
A No, sir.
Q And, what do you contend is an examination then as opposed to
what you did in this case?
A An examination is a civil process whereby I notify the taxpayer
that the return they had filed is under examination by me in which I
go back to their original books and records to prove what is on the
Q Can you show me any authority, either in the Internal Revenue
Code or the Regulations that you have on the book, which gives you
the authority to make a determination of tax liability from other
than a tax return?
A Not at this time.
Q The fact is Section 601.105 that you referred to, states that you
should make your determination off the return, doesn’t it?
A Are those what you have presented to me?

Q Yes. Those are the Regulations that pertain to your job and
A Let me see.
A (By Witness) Do you have the exact cite?
Q (By Mr. Dickstein) It is your job. More importantly, you don’t
know what your authority is to do what you did?
A I know that my authority is to do my job, but as far as to do it
from a tax return or not from a tax return, no, I don’t know that at
this time.
Q Would you take a moment to review the Regulations that I have
handed you and see if there is any authority in there for doing it
other than from on a tax return?
A (By Witness) I have not come to that part. I have seen the part
where we are authorized to examine any books, papers, records, or
memorandum bearing upon that as required to be included in
federal tax returns and to take testimony relative thereto.
Q (By Mr. Dickstein) Ma’am, would you accept my representation
that there is no authority set forth in that Regulation?
A I hesitate to do so, but if you could give me the exact cite, then I
Q --"It is not there, ma’am. I can’t give you a cite for something that
is not there.
A It goes on and says that the examiner will check the entire
return filed by the taxpayer and will examine all books, papers,
records, and memorandums dealing with matters required to be
included in the return.
Q In Section 6020(b)(l) of the Code, it indicates that if a taxpayer
doesn’t file a return and one is required the Secretary shall file a
return. Isn’t that correct?
A I believe that is what it states.
Q And, the Secretary didn’t bother to file a return in this case, did

MR. MACKEY: Objection, Your Honor. This matter came up
numerous times yesterday. There have been previous rulings and it
is irrelevant.
MR. DICKSTEIN: This is under a new subject, Judge.
THE COURT: What is the new subject?
MR. DICKSTEIN: The subject is this lady’s authority to make
a determination of tax liability.
MR. MACKEY: Your Honor, I didn’t ask this lady any
questions about a substitute return and it goes beyond the scope of
direct examination.
MR. DICKSTEIN: No, but he did ask her lots of questions
about tax liability and her determination thereof. She is the lady
that supposedly made the determination. That is why she is on the
THE COURT: I will overrule the objection. You may answer
the question.
A (By Witness) Would you repeat the question, please?
Q (By Mr. Dickstein) Yes. The Secretary didn’t file or make a
return in this action, did he?
A That is correct.
Q And, the word, shall, appears there, doesn’t it, - the Secretary
shall make a return?
A Yes, sir.
Q And, we heard--"you were sitting here when you heard Ms.
Elizabeth Jew--"testify that Status Code 06 says that no return is
A It doesn’t say that. It says an acceptable reason for non-filing.
Q For non-filing--"right. One of those acceptable reasons might be
that the person isn’t a taxpayer. Isn’t that correct?
A I don’t know that to be a fact.
Q Nontaxpayers don’t file tax returns do they, ma’am?
A The two terms would seem to coincide, yes, sir.
Q Yes, now as far as the computer is concerned, you folks had a W-
4 and a W-2. Is that correct?
A Yes, sir.

Q And, so the Internal Revenue Service would naturally assume
that somebody who submitted those was a taxpayer, wouldn’t they?
A That would be a reasonable assumption.
Q And, then they might go out and ask where a tax return is from
the person they presumed to be a taxpayer. Isn’t that correct?
A Yes, sir.
Q But, if a person was a nontaxpayer no return would be
required--"yes or no?
A That term nontaxpayer is--"
Q --"Something that you have never considered, have you? You file
your tax returns, don’t you?
A Yes, of course.
Q Of course, and you don’t know what the term, subject to the
jurisdiction of the United States means either, do you?
A I know my understanding of it.
Q Right--"the official IRS understanding?
A I wouldn’t go so far as to call it the official IRS understanding. It
is my understanding of it based upon my experience.
Q Which isn’t based on a study of the law around that section, is
it--"or under that term?
A Do you mean the law outside of the Code?
Q Yes, ma’am.
A No.
Q The law which might explain that?
A That would be correct.
Q Certainly not based upon the Interdepartmental Committee of
Federal Legislative Jurisdiction within the states?
A Certainly not.
Q Certainly not. Ma’am, you heard testimony that Mr. Hall had
picked up a certificate and claimed that he was a minister?
A Yes, sir.
Q And, you are familiar with Sections 1402 of the Code dealing
with the exemptions for ministers?
A Yes, sir.
Q Did Mr. Hall ever claim that he was a minister for purposes of
exception from that Code?

A No, sir, not to my knowledge.
Q In fact, Mr. Hall never claimed any exemptions from federal
taxation based upon being a minister, has he?
A Based upon what has been presented here, sir, I don’t have any
evidence that he did at this time.
Q There are things such as the vow of poverty that could be filed to
take advantage of Section 1402?
A Yes, sir.
Q There is no vow of poverty in this case, is there?
A There has been none presented, sir.
Q And, there had been no application for exemption as a
charitable organization under 501 (c) of the Code either, has there?
A There has been none presented here, sir.
Q And, you don’t know of any either, do you?
A No.
Q All right, ma’am. You testified to Section 6011 during your direct
A Yes, sir.
Q And, would you turn to that section, please?
A All right.
Q By the way, 6011 is in Subtitle F of the Code, isn’t it?
A That’s correct.
Q And, you were qualified as an expert under Subtitle A and
Subtitle C of the Code?
A I can show you exactly which Subtitles I was qualified under, sir.
Q Income taxes under Subtitle A?
A Yes, sir.
Q And, employment taxes under Subtitle C?
A Yes, sir.
Q And, do you claim the same knowledge, training, skill, and
expertise with respect to Subtitle F as you do with respect to
Subtitle A and Subtitle C?
A It would be similar but I have not made reference to it as often
as I have to Subtitle A.
Q Now, Section 6001 deals with any person made liable for any tax
under this title?
A  Sir, are you referring to 6001? 
Q  Yes, 6001. 
A  Yes, sir. 
Q  Requiring him to keep books and records? 
A  Yes, sir. 
Q  And, the statute specifically uses  the term, made  liable,  doesn’t 
A  Every person liable. 
Q  It doesn’t say who is made liable, does it? 
A  No, sir, not in this section. 
Q  How about Section 6011? 
A  No, sir, at that point it doesn’t either. 
Q  How is liability determined then? How is a person made liable? 
A  By the tax imposed by Section I. 
Q  Would you please look at Section 1461 of the Code. 
A  All right. 
Q  Would you read that language to the Jury, please? 
A  Do you want the title on that or not, sir? 
Q Sure.
A Liability for Withheld Tax--"every person required to deduct and
withhold any tax under this chapter is hereby made liable for such
tax and hereby indemnified against the claims and demands of any
person for the amount of any payments made in accordance with
the provisions of this chapter.
Q So, the statute specifically says that the person is made liable. Is
that right?
A Yes, sir.
Q Now, would you find the same section which says that Mr. Hall
is made liable under Subtitle A of the Internal Revenue Code?
A Sir, that would begin in Section 1, but then you need to refer to
the regulations thereunder to find that he would be liable.
Q Ma’am, there is no statute--"no law that says Mr. Hall is made
liable as there is for the person in Section 1461, is there?
A That’s correct, sir. There is nothing within the Code itself.
Q Regulations are binding only on the Internal Revenue Service,
aren’t they?

A Binding, yes, sir, only on the Internal Revenue Service.
Q So, a regulation can’t, as a matter of law, make somebody liable
for a tax, can it?
A Not as a matter of law, sir.
Q There has to be a statute?
A That would be correct.
Q And, there is no statute in Subtitle A which makes Mr. Hall
liable, is there?
A I have never seen one.
Q There is another way that a person can be made liable, isn’t
there--"that is by an assessment?
A Yes, sir.
Q And, the Secretary--"or the IRS make assessments, don’t they?
A Yes, they do.
Q And, under Section 6201, they make assessments from the
returns of the taxpayer or of the Secretary, isn’t that correct? Why
don’t you take a look at 6201, please?
A (By Witness) Yes, sir.
Q (By Mr. Dickstein) So, if a taxpayer files a return or the secretary
files a return under Section 6020(b) then those taxes can be
assessed. Isn’t that right?
A Yes, sir.
Q And, the assessment process is contained in Section 6203, isn’t
A Yes, sir.
Q Would you read that to the Jury, please?
A “Section 6203. Method of Assessment. The assessment shall be
made by recording the liability of the taxpayer in the office of the
Secretary. Upon request of the taxpayer, the Secretary shall furnish
the taxpayer a copy of the record of the assessment.--�
Q Ma’am, where is the record of assessment for Mr. Hall?
A To my knowledge, no assessment has been made at this time.
Q That’s right. So, there is no statute imposing liability and there is
no assessment imposing liability, is there?
A That’s correct.
MR. DICKSTEIN: Thank you, ma’am. That’s all that I have.
Acker v. C.I.R., 
258 F.2d 568 (6th Cir. 1958) .............................................. 260 
Adams v. United States, 
585 F.2d 1060 (Ct. Cls. 1978) .............................................. 180 
Amon v. United States, 
514 F.Supp. 1293 (D.C. Col., 1981) ...................................... 191 
Autenrieth v. Cullen, 
418 F.2d 586 (9th Cir. 1969) ............................................... 212 
Bass v. Hawley, 
62 F.2d 721 (5th Cir. 1933) .................................................. 150 
Biermann v. C.I.R., 
769 F.2d 707 (11th Cir. 1985) ............................................. 262 
Billings v. United States, 
232 U.S. 261 (1914) .............................................................. 123 
Brooks v. Commissioner, 
para. 80,206 T.C.M. (P-H) at 940 (1980) .......................... 210 
Broughton v. United States, 
632 F.2d 707 (8th Cir. 1980)............................................... 186 
C.I.R. v. Daehler, 
281 F.2d 823 (5th Cir. 1960) ............................................... 165 
Page  references  are  to  the  page  where  the  case  is  first 
analyzed even though it may appear earlier in the text. 
C.I.R. v. Glenshaw Glass Co., 
348 U.S. 426 (1955) ............................................................. 159 
C.I.R. v. Jacobson, 
336 U.S. 28 (1949)............................................................... 194 
C.I.R. v. LoBue, 
351 U.S. 243 (1956) ............................................................ 230 
C.I.R. v. Mendel, 
351 F.2d 580 (4th Cir. 1965) ............................................... 166 
C.I.R. v. Smith, 
324 U.S. 177 (1945) .............................................................. 196 
Cameron v. I.R.S., 
593 F.Supp. 1540 
(N.D.Ind. Fort Wayne Div. 1984) ...................................... 243 
Cameron v. I.R.S., 
773 F.2d 126 (7th Cir. 1985) ............................................... 263 
Carter v. C.I.R., 
784 F.2d 1006 (9th Cir. 1986) ............................................ 264 
Casper v. C.I.R., 
805 F.2d 902 (10th Cir. 1986) ........................................... 268 
Coleman v. C.I.R., 
791 F.2d 68 (7th Cir. 1986) ................................................. 267 
Colson v. United States, 
67 B.R. 30 (1986) ............................................................... 268 
Commissioner v. Kowalski, 
434 U.S. 77 (1977) .............................................................. 236 
Connor v. C.I.R., 
770 F.2d 17 (2nd Cir. 1985) ................................................ 263 
Crain v. C.I.R., 
737 F.2d 1417 (5th Cir. 1984) ............................................. 242 
Davis v. United States Government, 
742 F.2d 171 (5th Cir. 1984) ................................................ 241 
Donovan v. Maisel, 
559 F.Supp. 171 (D.Del. 1982) ............................................. 218 
Doyle v. Mitchell Brothers Co., 
247 U.S. 179 (1918) .............................................................. 128 
Edwards v. Keith, 
231 F. 110 (2nd Cir. 1916) .................................................... 127 
Eisner v. Macomber, 
252 U.S. 189 (1920) ............................................................. 137 
Ficalora v. C.I.R., 
751 F.2d 85 (2nd Cir. 1984) ................................................. 252 
Flint v. Stone Tracy Company, 
220 U.S. 107 (1911) ............................................................... 117 
Funk v. Commissioner, 
687 F.2d 264 (8th Cir. 1982) ............................................. 209 
Gattuso v. Pecorella, 
733 F.2d 709 (9th Cir. 1984) .............................................. 239 
Granzow v. C.I.R., 
739 F.2d 265 (7th Cir. 1984) .............................................. 240 
Grimes v. C.I.R., 
806 F.2d 1451 (9th Cir. 1986) ............................................ 269 
Hahn v. Commissioner, 
30 T.C. 195 (1958) ............................................................... 175 
Hallowell v. C.I.R., 
744 F.2d 406 (5th Cir. 1984) ............................................... 247 
Hansen v. United States, 
744 F.2d 658 (8th Cir. 1984) .............................................. 242 
Hanson v. Commissioner, 
para. 80,197 T.C.M. (P-H) at 900 (1980) ........................... 210 
Harris v. United States, 
758 F.2d 456 (9th Cir. 1985) .............................................. 258 
Hayward v. Day, 
619 F.2d 717 (8th Cir. 1980) ................................................ 185 
Helvering v. Edison Bros. Stores, Inc., 
133 F.2d 575, 579 (8th Cir. 1943) ........................................ 227 
Hill v. United States, 
599 F.Supp. 118 
(M.D.Tenn. Nashville Div. 1984) ....................................... 249 
Hyslep v. United States, 
765 F.2d 1083 (11th Cir. 1985) ............................................ 261 
Jones v. United States, 
551 F.Supp. 578 (N.D.N.Y. 1982) ........................................ 216 
Karpowycz v. United States, 
586 F.Supp. 48 (N.D.I11.E.D. 1984) ................................... 235 
Kasey v. Commissioner, 
457 F.2d 369, 370 (9th Cir. 1972) ...................................... 208 
Knies v. Richardson, 
600 F.Supp. 763 (E.D.Wis. 1985) ....................................... 257 
Knighten v. C.I.R., 
702 F.2d 59 (5th Cir. 1983) ................................................. 218 
Lively v. Commissioner, 
705 F.2d 1017 (8th Cir. 1983) .............................................. 219 
Lonsdale v. C.I.R., 
661 F.2d 71 (5th Cir. 1981) ................................................. 200 
Lovell v. United States, 
579 F.Supp. 1047 (W.D.Wis. 1984) ..................................... 233 
Lovell v. United States, 
755 F.2d 517 (7th Cir. 1984) ................................................ 256 
Lucas v. Earl, 
281 U.S. 111 (1930) .............................................................. 149 
Marks v. United States, 
391 F.2d 210 (9th Cir. 1968) ............................................... 169 
McCray v. United States, 
195 U.S. 27 (1904) ............................................................... 103 
McLaughlin v. C.I.R., 
832 F.2d 986 (7th Cir. 1987) ...............................................270 
Melton v. Kurtz, 
575 F.2d at 547 (5th Cir. 1978) ........................................... 266 
Merchants’ Loan & Trust Co. v. Smietanka, 
255 U.S. 509 (1921) ............................................................. 142 
Metcalf & Eddy v. Mitchell, 
269 U.S. 514, 519 (1926) ..................................................... 249 
Motes v. United States, 
785 F.2d 928 (11th Cir. 1986) ............................................. 264 
Neville v. Brodrick, 
235 F.2d 263 (10th Cir. 1956) ............................................. 199 
New York ex rel. Cohn v. Graves, 
300 U.S. 308 (1937) ............................................................ 253 
Olson v. United States, 
760 F.2d 1003 (9th Cir. 1985) ............................................. 259 
Parker v. Commissioner, 
724 F.2d 469 (5th Cir. 1984) .............................................. 228 
Pascoe v. I.R.S., 
580 F.Supp. 649 (E.D.Mich.S.D. 1984) ............................. 229 
Patton v. Brady, 
184 U.S. 608 (1902) ............................................................ 101 
Penn Mutual Indemnity Company v. C.I.R., 
277 F.2d 16 (3rd Cir. 1960) ................................................. 163 
Perkins v. C.I.R., 
746 F.2d 1187 (6th Cir. 1984) ............................................. 248 
Peth V. Breitzmann, 
611 F.Supp. 50 (E.D.Wis. 1985) ......................................... 258 
Porth v. Brodrick, 
214 F.2d 925, 926 (10th Cir. 1954) .................................... 208 
Reading v. C.I.R., 
70 T.C. 730 (1978) ............................................................... 174 
Rice, T.C. Memo 1982-129, 
para. 82,129 P-H Memo TC (1982) .................................... 202 
Ritter v. United States, 
393 F.2d 823 (Ct.Cls. 1968) ............................................... 229 
Roberts v. C.I.R., 
176 F.2d 221, 225 (9th Cir. 1949) ........................................ 190 
Rowlee v. Commissioner, 
80 T.C. 1111 (1983) ..............................................................223 
Schiff v. Commissioner, 
751 F.2d 116 (2nd Cir. 1984) ............................................... 255 
Simanonok v. C.I.R., 
731 F.2d 743 (11th Cir. 1984) .............................................. 233 
Snyder v. I.R.S., 
596 F.Supp. 240 
(N.D.Ind. Fort Wayne Div. 1984) ...................................... 248 
Stanton v. Baltic Mining Co., 
240 U.S. 103 (1916) .............................................................. 98 
Stelly v. C.I.R., 
761 F.2d 1113 (5th Cir. 1985) .............................................. 260 
Stratton’s Independence, Ltd. v. Howbert, 
231 U.S. 399 (1913) ................................................................ 93 
Stubbs v. C.I.R., 
797 F.2d 936 (11th Cir. 1986) ............................................. 268 
Treat v. White, 
181 U.S. 264 (1901) .............................................................. 100 
Tyee Realty Co. v. Anderson, 
240 U.S. 115 (1916) .............................................................. 210 
U.S. v. Goetz, 
746 F.2d 705 (11th Cir. 1984) ............................................. 264 
U.S. v. Vance, 
730 F.2d 736, 738 (11th Cir. 1984) ...................................... 265 
United States v. Buras, 
633 F.2d 1356 (9th Cir. 1980) ............................................. 187 
United States v. Burton, 
737 F.2d 439 (5th Cir. 1984) .............................................. 239 
United States v. Francisco, 
614 F.2d 617 (1980) ............................................................. 183 
United States v. Gilmore, 
372 U.S. 39, 44 (1963) ......................................................... 176 
United States v. Koliboski, 
732 F.2d 1328 (7th Cir. 1984) ............................................ 234 
United States v. Latham, 
754 F.2d 747 (7th Cir. 1985) ................................................ 257 
United States v. Lawson, 
670 F.2d 923 (10th Cir. 1982) ............................................ 206 
United States v. Overton, 
617 F.Supp. 5 (W.D.Mich. 1985) ......................................... 259 
United States v. Richards, 
723 F.2d 646 (8th Cir. 1983) .............................................. 226 
United States v. Rochelle, 
384 F.2d 748 (5th Cir. 1967) ............................................... 167 
United States v. Romero, 
640 F.2d 1014 (9th Cir. 1981).............................................. 189 
United States v. Russell, 
585 F.2d 368 (8th Cir. 1978) ............................................... 179 
United States v. Silkman, 
543 F.2d 1218 (8th Cir. 1976) .............................................. 173 
United States v. Stillhammer, 
706 F.2d 1072 (10th Cir. 1983) .......................................... 220 
United States v. Swallow, 
511 F.2d 514 (10th Cir. 1975) ............................................... 195 
United States v. Thomas, 
788 F.2d 1250 (7th Cir. 1986) ............................................. 267 
United States v. Venator, 
568 F.Supp. 832 (N.D.N.Y. 1983) .......................................223 
United States v. Woodall, 
255 F.2d 370 (10th Cir. 1958) ............................................. 166 
Van Rosen v. Commissioner, 
17 T.C. 834, 838 (1951) ........................................................ 237 
Ward v. C.I.R., 
159 F.2d 502 (2nd Cir. 1947) ............................................... 155 
Wheeler v. United States, 
768 F.2d 1333 (D.C. Cir. 1985) ............................................ 261 
Wilcox v. C.I.R., 
848 F.2d 1007 (9th Cir. 1988) ............................................270 
Wilson v. United States, 
412 F.2d 694 (1st Cir. 1969) ................................................ 170