The IRS' own manual says that Revenue Rulings

Think the IRS is NOT out of line?

Examination of the evidence from the Income Tax Law and the IRS.

On March 1, 2004, the IRS issued Revenue Ruling 2004-30:  "United States 
citizens and residents of the United States are not subject to tax on their 
wages and other income earned or derived within the United States."

The 861 Evidence:  The truth,  the facts,  the law.  Not just the assumptions.

On March 1, 2004, the IRS issued Revenue Ruling 2004-30, which mentions the 861 evidence. Most of the "Ruling" consists of threatening nasty consequences (such as warning that the IRS will take "vigorous enforcement action" against those who hold the position), while hardly any of it actually addresses the issue.

The IRS' own manual says that Revenue Rulings "do not have the force and effect of Treasury Department Regulations" (IRM Section While a Revenue Ruling is a step up from an IRS form letter, it is still "outranked" by statutes and regulations.) The Ruling starts with a fairly accurately description of the position, that being that "United States citizens and residents of the United States are not subject to tax on their wages and other income earned or derived within the United States ("the Section 861 position")."

However, the IRS then incorrectly says that the position argues that "taxes are only imposed on income derived from certain foreign-based activities," which is not the case. (If domestic sourced income was never taxable for anyone, there wouldn't BE a Section 861.)

After describing the position, the Ruling only says a few things (in between warnings and insults) about the law itself.  For example, the Ruling says that "there is no authority in sections 861 through 865 that permits an individual to take the position that either the individual or the individual's U.S.-based income is not subject to federal income tax."

Taken literally, that is absolutely TRUE.  Sections 861 and 862 say what count as domestic income and foreign income, respectively, but do not say that ANY income (foreign or domestic) is exempt for ANYONE (American or foreigner).  The Ruling CORRECTLY explains that "Sections 861 through 865 do not limit gross income subject to United States taxation to foreign sourced income."  (Again, there wouldn't BE a Section 861 if domestic income was never taxable.)

It goes on: "The rules of sections 861 through 865 have significance solely in determining whether income is considered from sources within the United States or without the United States, which is relevant, for example, in determining whether a U.S.  citizen or resident may claim a credit for foreign taxes paid."

Taken literally, that is very close to true, as explained above.  However, those sections also state in general terms how to determine the taxable income of a taxpayer from sources within or without the United States (so says 26 CFR 1.861-8).  So to say the SOLE significance is determining geographic origin of income is wrong.  (Compare the above quote from the Ruling with Treasury Decision 6258, which says that 861 and following, and related regs, give the rules for determining gross income and taxable income from sources within and without the U.S.  Why write a "Ruling" that conflicts with a Treasury Decision?)

Notice what the Ruling does NOT say:  it does NOT say whether we should use 861(b) and 1.861-8 to determine our taxable domestic income.  It sort of half implies that we should not, even though the regulations say the exact opposite (see 26 CFR 1.861-1(a)(1), 1.861-1(b), 1.861-8(a)(1), 1.862-1(b), 1.863-1(c)).

But what is really worth noting about the "Ruling" is not the content, which is just the same evasion and insults in a new package.  What I found interesting was that they'd issue a "Revenue Ruling" about it, considering what "Revenue Rulings" ARE.  Revenue Rulings are NOT for general rules for applying the tax laws.  (That's what regulations are for.)  Revenue Rulings are issued for specific facts, telling how the IRS thinks its rules would apply; a sort of interpretation of the regulations as applied to a specific situation.  (Like if taxpayer "A" wanted to apply deduction B against income C, should he use rule D or rule E - that kind of nitpicky technical stuff.)

Don't believe me? "Revenue Rulings (Rev. Rul.) represent the conclusions of the Service on the application of the law to specific facts stated in the ruling."  [IRM Section]

So what are they doing issuing a Revenue Ruling generally whining (and threatening) about a general position people are taking?  This wasn't a Revenue Ruling; it was a "Revenue Threat," containing almost NO substantive legal explanation or conclusion, but instead containing mostly threats and insults.  (The Ruling uses the word "frivolous" 23 times.  Apparently the IRS follows the advice of Hitler's minister of propaganda, regarding that thing about "if you tell a lie often enough...")

Why bother putting their same old garbage in a "Revenue Ruling"?  Probably because "Internal Revenue Service employees must follow rulings and procedures."  Not that they've been providing due process anyway, but expect to hear this a lot:  "Gosh, you mentioned that darn section, and so I have to call you names and run away.  See?  This Revenue Ruling tells me to."  Basically, it's the IRS officially condoning violating due process.  (Usually they just DO it, while "officially" pretending they care what the law is.)

Ultimately, what is the significance of this Revenue Ruling?  None.  You can write lies in whatever format you want;  but, they will still be lies.  No piece of paper is going to save this fraud now. 

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"The income tax is, therefore, not a tax on income as such.  It is an excise 
tax with respect to certain activities and privileges which is measured by 
reference to the income which they produce.  The income is not the subject 
of the tax:  it is the basis for determining the amount of the tax."  
  - written by a former legislative draftsman for the Treasury Department.

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