IRS to Criminals: Report the Value of the property you stole, it's Taxable Income!

Politics
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In regard to income from illegal activities being taxable by the feds, that happens to be true. But, studying this aspect of federal taxation reveals some interesting facts which wage earners need to learn.

According to our Supreme Court ___ EISNER v. MACOMBER , 252 U.S. 189 (1920) ___ all money that comes in is not “income” within the meaning of the 16th Amendment. Income is the gain or profit “severed from the capital, however invested or employed, and coming in.”

Now, let us keep in mind a working person, unlike those who invest money as their “capital”, the working person invests the capital, or property, each has in their own labor, i.e., eight hours of their life which they surrender daily to their employer, the actual sweat and labor provided during working hours, their skills and education are all part of the “investment” made by our laboring class, and according to the Court, it would appear the value of such “capital” or property invested must be severed from money coming in, in order to arrive at the calculated profit and or gain which may then be taxed.

It should also be noted that the income from a business which is wholly illegal was held subject to income tax in United States v. Sullivan, 274 U.S. 259. Nevertheless, it was necessary to determine what that income was, and the cost of an illegal purchase of liquor was subtracted from proceeds of the illegal sale of the liquor in order to arrive at the gain from the illegal transaction which were subjected to income tax in that case.

And, in Sullenger vs. Commissioner, the Court allowed the business owner [who made illegal purchases of meat] to deduct the cost of meat purchased at a higher price then set by the Office of Price Administration, a World War II price control agency, which he then resold for profit. The “income” from those sales was being taxed which was at issue in the case. The Court went on to cite Sullivan and concluded: “No authority has been cited for denying to this taxpayer the cost of goods sold in computing his profit, which profit alone is gross income for income tax purposes.”

The point being, even crooks engaged in illegal and criminal activities are to deduct their outlays and expenses in computing a “profit” which may then be taxed.

So, with regard to the comment that we often hear, “Wages are not income”, and taking into account what our courts have emphatically stated regarding how profit and or gain is calculated in order to arrive at taxable income, one thing seems to be irrefutable . . . all money coming in to a wage earner when investing the property each has in their own labor cannot be reasonably said to be income within the meaning of the 16th Amendment.

Are we not to apply the same rules to a wage earner in calculating an alleged profit and or gain from their “investment”, as we do with those who invest money as their capital in order to realize a gain or profit which is then asserted to be subject to federal taxation?

And let us not forget the very intention of those who promoted the 16th Amendment was . . . “An income tax seeks to reach the unearned wealth of the country and to make it pay its share.” Congressional Record, July 12th, 1909, page 4420, Mr. HEFLIN

Are we to ignore the intended distinction between earned wages and un-earned “incomes” within the meaning of the 16th Amendment?

The bottom line is, the comment that “Wages are not income” ___ assuming it was made in respect of the 16th Amendment and calculating a federal tax ___ seems to have significant merit in my opinion as the “capital” or property invested must be severed from money coming in, in order to arrive at a calculated profit and or gain which may then be taxed. And that is according to the Court.

So, the question seems to present itself . . . what portion of a working person’s earned wage, if any, is considered a profit and or gain within the meaning of “incomes” as the word appears in the 16th amendment?

Additionally, if a federal tax on a working person’s earned wage is a direct tax within the meaning of our Constitution, and it is levied without being apportioned, would it not then violate our Constitution’s protective rule that:

“No Capitation, or other direct, Tax shall be laid, unless in Proportion to the Census or Enumeration herein before directed to be taken.”

JWK

“If the Constitution was ratified under the belief, sedulously propagated on all sides that such protection was afforded, would it not now be a fraud upon the whole people to give a different construction to its powers?”___ Justice Story

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So in other words the government doesn’t really care that much when the criminal element steal from the privileged pee-ons they supposedly represent as long as they get their tax money?

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Hey it’s ascension to wealth

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This is not really anything new - the expectation that this type of income would be reported has been the expectation as long as I’ve been a CPA. There’s a reason that line is there that says “Other Income.”

Now as to whether people are correctly reporting that income - well, I’d say the likelihood is very low. :rofl: :rofl: :rofl:

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I wouldn’t say “the government doesn’t really care”.

I view it as, it may be hard to prove in a court of criminal law that Person A was dealing drugs (or stealing or committing fraud or etc.), but tax evasion on the income resulting from the original activity becomes it’s own separate crime and through forensic accounting easier to prove than the original crime.

In other words, an additional avenue of prosecution. Remember Al Capone finally went to prison for tax evasion.

WW

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There is a more interesting point here. The worker needs to expend capital to be able to labor day after day. A company deducts the cost of production, but a laborer is not allowed to deduct the costs associated with being able to provide one’s self as labor. A worker is taxed on their gross pay for FICA/Medicare and then taxed again with only limited exceptions. They don’t get to deduct the costs of remaining physically viable to provide labor, even though these capital outlays are required to sustain life, which is the basic element required for a worker’s contribution in exchange for payment.

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They should allow people defending their stuff to deduct the cost of bullets and time at the range.

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I’m sure CVS and Walgreens’ is deducting costs to protect their stuff since profit and or gain is that which is taxable income! Have to deduct the cost of all necessary outlays and expenses to arrive at taxable income.

JWK

When Federal Reserve Notes were made a legal tender in violation of our Constitution, and a direct un-apportioned tax was imposed upon the people without their consent, America’s free enterprise, free market system was subjugated, and the tools of oppression and thievery were made available to some very immoral and nefariously evil people.

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federally prosecuting thieves for not paying taxes on their spoils may give them a longer sentence than the theft in the first place… it’s not like the IRS isn’t going to prosecute every personal group of unreported online transactions totaling at least $600.00…

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I wonder if Hunter Biden will fraudulently deduct the value of flights on Air-Force 1 or 2 when going to China and elsewhere to conduct shady business deals.

See: Biden’s trip to China with son Hunter in 2013 comes under new scrutiny

“What wasn’t known then was that as he accompanied his father to China, Hunter Biden was forming a Chinese private equity fund that associates said at the time was planning to raise big money, including from China. Hunter Biden has acknowledged meeting with Jonathan Li, a Chinese banker and his partner in the fund during the trip, although his spokesman says it was a social visit.”

“The Chinese business license that brought the new fund into existence was issued by Shanghai authorities 10 days after the trip, with Hunter Biden a member of the board.”

JWK

Is the “big guy” (Joey open-border Biden) getting 10% of the profits Mexico’s Cartels are making from human trafficking across our border?

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e7alr,

You are absolutely correct about a wage-earning person having to invest and expend “capital” in order to make their labor available to their employer. And when we study the written opinion in EISNER v. MACOMBER , 252 U.S. 189 (1920), in which the court addresses the meaning of income as it is found in the Sixteenth Amendment, it appears the court agrees with you, in that all money coming into the procession of the wage-earner from their employer is not “income”, but only that portion which is a profit or gain. And the Court even tells us how to calculate a person’s “profit” or “gain” in order to arrive at taxable income:

"Here we have the essential matter: not a gain accruing to capital; not a growth or increment of value in the investment; but a gain, 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.”

If I’m reading the Court’s opinion correctly, the wage earner, to arrive at taxable “income” within the meaning of the Sixteenth Amendment, must calculate a “gain” or “profit” by deducting the “capital” they have “invested or employed”, and is “. . . 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.”

So yes, it would appear the wage earner does invest capital in pursuit of earning a wage, e.g., the cost of transportation to and from work; the cost of food which fuels the wage earners body during working hours; the costs involved with housing, medical needs, and even clothing are all expenses incurred by the wage earner and are necessary expenses to make one’s labor available. And this does not even take into account the “investment” of eight hours of life itself which the wage earner makes available to their employer, and that is in addition to the actual physical and mental labor invested and is also made available to their employer.

So, the question to be answered here is, why is the capitalist allowed, and rightly so, to deduct their capital investments from money coming in to arrive at taxable income as per Eisner, while the wage earner is not?

Why is it that those who have money working for themselves get to deduct necessary expenses and outlays which is perfectly understandable, while those who work for their money do not?

Were we not informed in Sullenger vs. Commissioner: “No authority has been cited for denying to this taxpayer the cost of goods sold in computing his profit, which profit alone is gross income for income tax purposes.”

In any event, e7alr, your observations make perfect sense and it appears our nation’s wage earning citizens are not receiving due process of law, nor equal protection under the law.

JWK

“Until you realize how easy it is for your mind to be manipulated, you remain the puppet of someone else’s game.” ― Evita Ochel

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Are you suggesting the likelihood of Hunter and his father, the Big Guy, reporting the $MILLIONS in income from the shady deals they make is “very low”?

JWK

Why is the Democrat Party Leadership filling scarce public housing with illegal aliens when America’s needy Citizens, including U.S. Military Veterans, are going homeless?

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It’s not that Government does not care about criminal activity, it’s that enforcement of law outside of the Tax Code is not within the purview of the IRS. Prosecution by the IRS on tax evasion in no way precludes other government law enforcement agencies from prosecuting for the crimes that produced the illegally gained, but taxable income.

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The federal government has no interest in allowing the masses to deduct the cost of their personal capital expenses.

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That or we just are not valuable, but are merely a cast of expendable resources to the governing elites … who themselves produce nothing of value and are often counter-productive in their day to day affairs. Not merely consumers of resources but inhibitors of others producing.

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I can’t disagree with you that our Republican and Democrat party leaderships have no intention to abide by the terms of our Constitution when it comes to taxing the constituents they allegedly represent.

JWK

If, by calling a tax indirect when it is essentially direct, the rule of protection [apportionment] could be frittered away, one of the great landmarks defining the boundary between the nation and the states of which it is composed, would have disappeared, and with it one of the bulwarks of private rights and private property. POLLOCK v. FARMERS’ LOAN & TRUST CO., 157 U.S. 429 (1895) JUSTICE FULLER

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Or much of anything else.

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If the people are not willing to rise up and defend the terms of the constitution which they agreed to, and they allow those bound by its provisions to ignore it, have the people not become their own worst enemy?

JWK

Why have a written constitution, approved by the people, if those who it is meant to control are free to make it mean whatever they wish it to mean?