Department of Treasury
Internal Revenue Service

Attention: IRS AGENT

Dear Mr. AGENT:

Thank you very much for your DATED response to my correspondence directed to the Internal Revenue Service concerning the government’s position that I am required to file an income tax return.

Insomuch as your letter speaks both in detail and generalities I would appreciate further explanation based on the following research I have done.

You first state in your letter that Section 6109 of the Internal Revenue Code sets forth the requirements of social security numbers and clarifies that the identifying number for an individual shall be his social security number.  Section 6109 is far from clear as it continually refers to “any person required” or any person with respect to who a return, statement, or other document required . . .”

Section 6109(d) attempts to clarify how the social security number is to be used.  However, this Section clearly states that ” The social security number issued to an individual . . . shall, except as shall otherwise be specified under regulations of the Secretary, be used as the identifying number for such individual for purposes of this title.”

This section must then, as a matter of necessity be clarified by regulation.  26 CFR 301.6109-1 “(a) In general – (1)  .  .  .  There are two types of taxpayer identifying numbers: social security numbers and employer identification numbers  .  .  .  Both types of taxpayer identifying numbers are used by individuals who are employers or who are engaged in trade or business as sole proprietors, as required by returns, statements or other documents and their related instructions.”

I am not an employer engaged in a trade or business, nor am I a sole proprietor.  Therefore, it would appear there is no requirement for me to disclose a social security number which in turn, would be used as a taxpayer identification number.

You go on to state that liability for a tax is determined under Chapter 1 of the Internal Revenue Code, Subchapter A, Determination of Tax Liability.  You continue on and state that Part 1, Section 1 imposes the tax on the taxable income of every individual.

Your statement appears to be correct in that Section 1 clearly imposes a tax on taxable income.  However, under this Section and Chapter there is no subsection or section which makes one liable for the tax imposed.  The title “Determination of Tax Liability,” as you know, is not necessarily descriptive of what the sections under Chapter 1 contain, and has no legal effect whatsoever.  To this end, what section specifically makes someone liable for the tax imposed under Section 1?

Section 61, under Chapter 1, Subchapter B, entitled Computation of Taxable Income regardless of its title, i.e., Gross Income Defined, defines gross income as follows:

“[G]ross income means all income from whatever source derived, including (but not limited to) the following items.”

The section then goes on to list various items.  The question is, what does the list of items represent?  The subject of the items is the word “source” as it is the last noun which precedes the enumerated list.  The subject of the list of items cannot be “income”, since that subject precedes the subject — “source”.  The subject of the list of items cannot be “gross income” as gross income precedes both the subjects “income” and “source”.   By the very language and construction of the statute, which appears to be clear, the items listed are a description of the various sources of income, from which gross income is ascertained.  Simply, the list found under Section 61 does not describe income or gross income, rather it describes the sources of income — and, as you know, the source cannot be taxed.

Section 62 defines adjusted gross income as gross income, minus deductions.  But as previously discussed, section 61 defined gross income as income, from any of the listed sources.  What is peculiar at this point is that the term “income” has yet to be defined.  It would seem this would defeat the very definitions of all other types of income, gross or otherwise, until the term “income” is defined.  Nevertheless, the items listed under Section 61 still only enumerates sources of income, and not gross income.

Section 63 purports to define taxable income as gross income minus deductions.  Again, as previously discussed, section 61 defined gross income as income, from any of the listed sources.  What is peculiar at this point is that the term “income” has yet to be defined.  It would seem this would defeat the very definitions of all other types of income, gross or otherwise, until the term “income” is defined.  Nevertheless, the list under Section 61 still only lists sources of income, and not gross income.

Perhaps it is Section 64 which holds the key.  Here we find the definition of “Ordinary income.”  Ordinary income is defined as a gain, from the sale or exchange of property which is neither a capital asset nor property described in section 1231(b).  Reading this definition in conjunction with Section 61, we find that gross income and taxable income constitute a gain derived from one of the sources listed under section 61.  In short, if I take the money I receive through compensation from personal services (the source) and invest that money into something which makes more money for me — I may have a gain.  Since the source, compensation for services, cannot be taxed, only the gain I receive after investing my compensation can be taxed.

Let me give you a quick example —  I go and work 8 hours for $10.00 an hour.  I receive an equal exchange, (not a gain), for my labor.  The $80.00 is the source from which a gain, or income can flow.  I take the $80.00 and invest it in stocks.  At the end of the year my $80.00 investment has increased by 100.00 and I sell the stock.  I have had a gain of $100.00 which is taxable income, since it is a gain from a sale of something other than the capital investment of $80.00.  The $80.00 I initially invested of course is not taxable since it was capital, and not a gain.

Sections 65 through 68 do nothing more to assist in interpreting the definitions.

You next state that sections 71 through 90 identify items included in gross income.  Interestingly, compensation for services, and wages and salaries (which are not even included in Section 61) of private individuals are not included as gross income.  The only logical reason is because they are “sources” of income under Section 61.  Based on your analysis, and my analysis, it becomes apparent that I do not have taxable income as contemplated by the Internal Revenue Code, rather I have a source of income, and; since I do not realize a gain from my source, I have no income, taxable or otherwise.

Next you state that the filing requirements fall under Section 6001, 6011, and 6012 of the Code.  However, you fail to point out that under 6001 that only “Every person made liable for any tax imposed under this title, or for the collection thereof,” is required to file a return.  This is consistent with Section 6011 which states that “When required by regulations prescribed by the Secretary any person made liable for any tax imposed under this title, . . . shall make a return or statement according to the forms and regulations prescribed by the Secretary.”

Of course, Section 6012 is absolutely dependent upon Sections 6001 and 6011.  Therefore before a filing requirement can be determined under 6012, an individual must first be made liable for the tax, and he must have earned gross income, from the sources listed under Section 61.

Your letter also states that I do not qualify as a foreign or non-resident alien individual — a statement in which I concur.  Since that is the case it would not appear that I am subject to withholding under Sections 1441, 1442, 1443, or 1461.  Section 1441 pertains to withholding on nonresident aliens — a class you say I do not fall within.  Section 1442 deals with withholding in regard to foreign corporations, again, a class which you explain I do not fall within.  Section 1443 pertains to Foreign tax-exempt organizations, again a class you say I do not fall within.  Finally, Section 1461 makes a withholding agent liable for the tax that he withholds.  Since I am not a withholding agent I am not made liable for the tax.  It is interesting to note that this is the only section of the entire income tax section of the Code which makes someone liable for the income tax.

Since Section 7701(a)(16) explains that a withholding agent only withholds under the above sections, it would appear that I am not subject to withholding.

In closing, your letter, while pointing me to the Internal Revenue Code confirms my research that I am not required to file an income tax return under the IRC.  However, if the above is an incorrect assessment of the income statutes I would appreciate further clariification on your part.