"the rules... for determining taxable income": (1 file(s)
found)
These 6 words are found together only once in the entire 26 CFR.
You can confirm this on your own computer. They cannot be confused
with any others. It is written only once.
The following terms also occur in only ONE
regulation within the entire 26 CFR:
Sec. 1 (The Imposition)
"the tax imposed is upon taxable income"
Sec. 861 (The rules, the instructions, the list
for taxable income, and the definition of exempt income.)
"how to determine taxable income"
"the sources of income for purposes of the income tax"
"eliminated income"
"eliminated items"
"the rules contained in this section apply in determining taxable
income of the taxpayer"
"rules" and "prescribing" and "taxable income"
"prescribing" and "excluded" and "taxable income"
"prescribing" and "exempt" and "taxable income"
"Income that is not considered tax exempt"
"the following rules shall apply to... income that is exempt"
"sections of the Code which require the determination of taxable income"
"how to determine taxable income of a taxpayer"
"determining taxable income of the taxpayer"
"taxable income from sources within the United States shall
consist of"
"determine the sources of income for purposes of the income
tax"
"the rules... for determining taxable income"
"the rules... for determining taxable income from sources
within the United States"
"the rules... determining taxable income of the taxpayer from
specific sources"
"determining taxable income from specific sources"
"determine the source of income"
"determine the sources of income"
"determination of sources of income"
"gross income from a specific source"
"specific sources"
These cannot be confused with any other rules. They are written
once, or occur in one, single regulation.
If we read all of these regulations, "the rules" given
"for determining taxable income", they show very clearly
that only "foreign earned income" is taxable
income for a U.S. citizen. Here is the step-by-step analysis (approx.
28 pages long) explaining the computerized search. You can very
easily prove to yourself that the Income tax is a scam; just a
law that is greatly exaggerated.
(It is interesting to note that you are a law breaker (for perjury)
if you have read "the rules", but do not follow them, but
instead do "which he does not believe to be true and correct"
[USC Sec. 7206] - assuming you believe what your own eyes tell
you.)
The rules say the scope of the income tax is very limited,
and according to them, very few of us need to pay any
income tax.
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SOURCE OF LAW
The lawmakers write the
law (statutes), which are codified
in the United States Code (USC).
The Treasury interprets the USC, and then writes the Code
of Federal Regulations (CFR). These are the rules for
the citizens, and the IRS, to follow.
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However, according to Cornell
University Law School, the CFR and the USC should be read
together because the statutes are the authority and limit the
regulations ... and "that courts will, upon occasion, hold that
regulations... are invalid"
Throughout both the USC, and CFR... the titles given to many of
the sections and subsections are often broad in scope, and so
it is difficult to determine the exact meaning of a title.
And , according to the United States Code, any particular section
title means very little.
There are two kinds of titles to discuss here. The first is the
'Construction of title.' The other title(s), which we
are referring to here are the 'descriptive' titles, of the individual
sections or sub-sections. The meaning of a descriptive title is
also determined by:
Title 26 USC Sec 7806, Construction of title
(b) Arrangement and classification
No inference, implication, or presumption of
legislative construction shall be drawn or made by reason
of the location or grouping of any particular section
or provision or portion of this title, nor shall any table
of contents, table of cross references, or similar outline, analysis,
or descriptive matter relating to the contents of this
title be given any legal effect.
So... particular section titles (i.e. descriptive matter relating
to the contents), table of contents, cross references, outlines,
etc. are only tools for the location of a subject. The laws (and
rules) can only be found on the inside of these titles
(the 'matter' within the individual sections and sub-sections).
Note that USC Sec. 7806(b) is showing it does not matter
what any particular description of a title says, or even
where any particular section is located. So, only the words, which
are written under the section titles are given any legal effect.
Both the Statutes, and Regulations of Title 26 discussed here were
copied directly from the source, at the Government Printing
Office website. You can find the United States Code (USC), and the
Code of Federal Regulations (CFR) at:
USC: http://www.gpoaccess.gov/uscode/index.html
or http://uscode.house.gov/
CFR: http://www.gpoaccess.gov/cfr/index.html
Note: The statutes, and regulations are extremely long. To search
through them efficiently, and in order to prove a certain location
or number of code-term occurrences, a computer is required.
See How to Search
and Search
Examples.
As simple as A, B, C, here is exactly what the rules in the
CFR say about taxable income (written only once - as it should be)...
- "The tax imposed is upon taxable income" [26CFR1.1-1]
- "gross income from a specific source... must first be determined
in order to arrive at 'taxable income' ..." [26CFR1.861-8(a)(4)]
- "The taxpayer's taxable income from sources within or without
the United States will be determined under the rules
of Secs. 1.861-8 through 1.861-14T for determining taxable
incomefrom sources within the United States." [26CFR1.863-1 (c)]
Note: "C" includes the only occurrence of this
term in the entire 26 CFR...
"the rules... for determining taxable income"
( 1 file(s) found) (WinMerge required. See How
to Search, or use the eCFR)
"Terms can have different meaning when
used in law... show me the legal definition?" - Law Professor
26CFR1.1-1
The tax imposed is upon taxable income (determined
by subtracting the allowable deductions from gross
income)...
26 USC Sec. 63
(a) In general
Except as provided in subsection (b), for purposes of this subtitle,
the term ``taxable income'' means gross income minus
the deductions allowed by this chapter (other than the standard
deduction)...
CFR:
26CFR1.61-1
Sec. 1.61-1 Gross income.
(a) General definition. Gross income means all income
from whatever source derived, unless excluded
by law.
USC:
'gross income means': (only 2 occurrences found
in Title 26 USC)
26 USC Sec. 61
-HEAD-
Sec. 61. Gross income defined
-STATUTE-
(a) General definition
Except as otherwise provided in this subtitle, gross income
means all income from whatever source derived...
(b) Cross references
For items specifically included in gross income, see part II (sec.
71 and following). For items specifically excluded from gross
income, see part III (sec. 101 and following).
Most people stop here and declare, "Gross income means all income
from whatever source." And this is correct. Only found twice in
26 USC, this is the exact definition of what "Gross... means".
But, Section 61 also says a few more important facts that are usually
ignored, like "unless" and "Except ", and "other
provision[s] shall apply." It's a mystery why almost everyone
glosses over the complete rule and law, only focusing on a small
portion of it. Stop to observe that both the CFR and
USC are showing:
- "whatever source... unless excluded" (CFR 61)
- "Except as otherwise provided...
whatever source" (USC 61)
- These are called "General definitions" (CFR
61 and USC 61), so specific definitions or instructions must
exist.
- USC 63 also says that "In general... the
term 'taxable income' means gross income" (USC
63)
- There are cross references in USC Sec. 61 and
USCA Sec. 61 also referring us to our next Section, 861.
- CFR Sec. 861 contains the only "rules... for determining
taxable income" found in the entire 26 CFR, which makes
Sec. 61 almost completely useless since it's just a "General
definition." Sec. 61-1 only mentions "gross income"
nine times, but Sec. 861-8 mentions it over 200 times. The reason
61 has any value at all is it's real "purpose... to direct
attention"...
- In addition to actual Cross References, CFR Sec. 61 includes
a rule about Cross References, which says, "Cross references
to other provisions of the Code are to be found throughout the
regulations under section 61. The purpose of these cross references
is to direct attention to the more common items which are
included in or excluded from gross income entirely,
or treated in some special manner. To the extent that another
section of the Code or of the regulations thereunder,
provides specific treatment for any item of income, such
other provision shall apply" [CFR Sec. 61-1 (b)]
*See Cross References below
What common items? How common are they?
So, there are at least 7 reasons a more complete definition will
exist, based on just reading these Sections. In fact, the 7th
reason actually does say that more specific sections exist.
It is written into the regulations themselves. A computer-based
search of the CFR and USC will eventually provide you with at
least a dozen more reasons.
Isn't it strange, if "The tax imposed is upon taxable income",
and "the rules... for determining taxable income"
are actually written only once, making them impossible to confuse,
we still end up using "GROSS income... from whatever source"
as a replacement rule. Such logic would make sense if the tax
were imposed upon GROSS income.
WHAT CAN BE EXCLUDED?
The regulations actually tell us "gross income may include
excluded income".
26CFR1.861-8(a)(3)
"gross income... referred to as a ``class of gross income''...
may consist of one or more items of gross income enumerated in section
61, namely:
(i) Compensation for services, including fees, commissions, and
similar items;
(ii) Gross income derived from business;
etc.
and
26CFR1.861-8(b)
"in a taxable year there may be no item of gross income in a class...
and... that... gross income may include excluded income."
So, in CFR Sec. 61, it's not exactly "Gross income... from whatever
source", only a "General definition... from whatever source...
unless excluded."
This proves that the same exact list of items used in Sec. 61, which
is supposed to indicate everything is taxable (e.g. "whatever source"
Sec. 61-1) is also used in a more specific rule (apparently the reason
for "unless excluded" Sec. 61-1) to show the same items of
gross income can actually be excluded "from whatever source."
It also proves there is a difference between items of income,
and sources of items of income, something to keep in mind.
Next... begin searching for a more complete definition of:
A - ' whatever source '
B - ' gross income '
C - ' taxable income '
"EXCEPT AS OTHERWISE PROVIDED..."
26 USC Sec. 61
"(a) General definition
Except as otherwise provided in this subtitle, gross income means
all income from whatever source"
The antonym of general is specific, and
specific is as good as any antonym for whatever.
Why should this matter?
Another "commonplace [rule] of statutory construction" is that the
"specific governs the general." Doe v. National Bd. of Medical Examiners,
199 F.3d 146, 154-55 (3d Cir. 1999) (quoting Morales v.Trans World
Airlines, Inc., 504 U.S. 374,384 (1992)) www.ca3.uscourts.gov/opinarch/024602p.pdf
So we search to see if specifics are provided for 'whatever
source', 'gross income', and 'taxable income'.
There are, and specifically, they are written in ONE regulation.
Here they are - specifics for all 3 - 'whatever source',
'gross income', and 'taxable income', and they are coinciding
exactly with the Cross References given in Sec. 61.
A - ' whatever source ' -
"specific sources": (1 file(s) found)
[because the specific governs the general]
26CFR1.861-8
(a) In general--(1) Scope.
... The rules contained in this section apply in determining
taxable income of the taxpayer from specific sources
and activities under other sections of the Code, referred
to in this section as operative sections. See paragraph
(f)(1) of this section for a list and description of operative
sections.
B - ' gross income ' -
"gross income from a specific source":
(1 file(s) found)
26CFR1.861-8
(a) (4) Statutory grouping of gross income and residual grouping
of gross income. For purposes of this section, the term
``statutory grouping of gross income'' or ``statutory grouping''
means the gross income from a specific source or activity
which must first be determined in order to arrive at ``taxable
income'' from which specific source or activity
under an operative section. (See paragraph (f)(1)
of this section.) Gross income from other sources
or activities is referred to as the ``residual grouping
of gross income'' or ``residual grouping.''
... In some instances, where the operative section so requires,
the statutory grouping or the residual grouping may include,
or consist entirely of, excluded income. See paragraph
(d)(2) of this section with respect to the allocation
and apportionment of deductions to excluded income.
C - ' taxable income ' -
"determining taxable income from specific sources":
(1 file(s) found)
26CFR1.861-8(f)(3)(ii)
Relationship of sections 861, 862, 863(a), and 863(b). Sections
861, 862, 863(a), and 863(b) are the four provisions applicable
in determining taxable income from specific sources. Each
of these four provisions applies independently.
and business owners may find this of some interest...
"determination of source of taxable income": (3
file(s) found)
26CFR1.863-3 (d)
Determination of source of taxable income. Once
the source of gross income has been determined under paragraph
(c) of this section, the taxpayer must properly
allocate and apportion separately under Secs. 1.861-8 through
1.861-14T the amounts of its expenses, losses, and other
deductions to its respective amounts of gross income...
As you can see, gross income can come from whatever source,
however, "gross income from a specific source or activity... must
first be determined in order to arrive at 'taxable income' " [26CFR1.861-8
(a) (4)]. Remember, it is a commonplace rule; statutes are constructed
so that the "specific governs the general".
[Begin to determine what sources of gross
are excluded or to which we can allocate a 'deduction'
(1634 file(s) found)]
A computer search of 'source' produces a definition (in Sec.
861) separating 'source' between 3 categories - within
the U.S., outside U.S., and a combination of both. Shown to be the
most basic groupings of source, we begin from here.
*Cross References
In addition to the search results for 'source' and
'specific sources', there are cross references
in at least USC Sec. 61 (1994 edition) and USCA
Sec. 61 (2002 edition) also referring us to
Sec. 861 (the USCA [annotated version] is much more complete
with additional reference information). These Cross References are
disappearing, and are recently no longer printed in current editions
of the USC.
There are 2 places titled Cross References, in each edition. The 2nd
title, near the end of Sec. 61 lists:
Title 26 USC Sec. 61
Cross references
Income from sources-
Within the United States, see section 861 of this title.
Without the United States, see section 862 of this title.
If you believe the Cross References have no legal effect, you are
right according to USC Sec. 7806(b). They are only tools for the
location of a certain subject. But, the location is itself another
law or rule with its own legal effect. No wonder the cross references
are disappearing, they have "the
purpose... to direct attention" to common items which
are excluded entirely.
26 CFR Sec. 1.61-1 (b)
Cross references. Cross references to other provisions of the
Code are to be found throughout the regulations under section
61. The purpose of these cross references is to direct attention
to the more common items which are included in or excluded from
gross income entirely, or treated in some special manner. To
the extent that another section of the Code or of the regulations
thereunder, provides specific treatment for any item of
income, such other provision shall apply notwithstanding
(meaning in spite of) section 61 and the regulations thereunder.
Did you notice it just told us - if another section of either USC
or CFR provides specific treatment, it shall apply, regardless of
what it said about "whatever source?" If you think Section 861 is
irrelevant because of it's title, the law settles this dispute.
USC Sec. 7806(b) states the law for titles as well. While Sec. 861
is titled "SOURCE RULES AND OTHER GENERAL RULES RELATING TO FOREIGN
INCOME", we know that USC Sec. 7806(b), Construction of title, shows
that particular titles of sections, i.e. descriptive matter relating
to the contents, or table of contents, and cross references, outlines,
etc. are only tools for the location of a subject. The laws (and
rules) are only found on the inside of their labeled sections. So,
we know that "SOURCE RULES AND OTHER..." is indeed about "SOURCE
RULES", and not just "RULES RELATING TO FOREIGN INCOME".
In addition to Sec. 7806(b), Construction of title, and Sec. 61
Cross References referring to Sec. 861 and 862, there are Amendments
given in Subchapter N - Notes, and Subchapter N Part I - Notes,
which show SOURCE RULES AND OTHER GENERAL RULES RELATING TO FOREIGN
INCOME used to be titled DETERMINATION OF SOURCES OF INCOME. It
shows the title substitution occurred in 1988.
Here is the initial wording of the Sections provided in the Cross
References of USC and USCA Sec. 61 ...
USC:
Title 26 USC Sec. 861
Sec. 861. Income from sources within the United
States
(a) Gross income from sources within United States
(b) Taxable income from sources within United States
Title 26 USC Sec. 862
Sec. 862. Income from sources without the United
States
(a) Gross income from sources without United States
(b) Taxable income from sources within United States
CFR:
26CFR1.861-1
Sec. 1.861-1 Income from sources within the United
States.
(a) Categories of income. Part I (section 861 and following),
subchapter N, chapter 1 of the Code, and the regulations
thereunder determine the sources of income for purposes
of the income tax...
(a)(1) Within the United States.
See Secs. 1.861-8 and 1.863-1.
(2) Without the United States.
See Secs. 1.862-1 and 1.863-1.
(3) Partly within and partly without the United States.
See Secs. 1.863-2 to 1.863-5, inclusive.
Note how 'whatever source' must first be separated between
within the United States and without.
The "General definition... whatever source" is true,
but eventually the specific rules must be provided (written).
"General definition... whatever source...
unless excluded" is the rule? So, why does the 861 rule
exist? Because "whatever source" is not the same as
"everyone."
Many tax experts will say, the rules for determining taxable income
are for this or that circumstance, however, for a rule to be effective
and not confusing, it can only be written once. These rules are
written only once, or occur in only one regulation. Remember,
USC Sec. 7806(b) shows that particular titles of sections, i.e.
descriptive matter relating to the contents, or table of contents,
and cross references, outlines, etc. are only tools for the location
of a subject. The laws (and rules) are only found on the inside
of the sections. The rules provided, only once, cannot be confused.
That is what you will find. According to the CFR, we must determine
our taxable income, so we will need "the rules... for determining
taxable income". ARE ANY rules more specific than 861-8
and 863-1? NOT according to a Computer and its best friend
Code.
26CFR1.861-8
(a)(4) ...In some instances, where the operative section
so requires, the statutory grouping or the residual
grouping may include, or consist entirely of, excluded income.
See paragraph (d)(2) of this section with respect to
the allocation and apportionment of deductions to excluded
income.
26CFR1.861-8(b)
Allocation--(1) In general. For purposes of this section, the
gross income to which a specific deduction is definitely
related is referred to as a ``class of gross income'' and
may consist of one or more items of gross income.
The rules emphasize the factual relationship between the deduction
and a class of gross income. See paragraph (d)(1) of this section
which provides that in a taxable year there may be no item of
gross income in a class or less gross income than deductions
allocated to the class, and paragraph (d)(2) of
this section which provides that a class of gross income
may include excluded income.
paragraph (d)(2)
Allocation and apportionment to exempt, excluded,
or eliminated income. [Reserved] For guidance, see
Sec. 1.861-8T(d)(2).
26CFR1.861-8T(d)(2)(ii)
Sec. 1.861-8T Computation of taxable income from sources
within the United States
(d) Excess of deductions and excluded and eliminated
items of income.
(d)(2) Allocation and apportionment to exempt, excluded
or eliminated income--(i)... ...the following
rules shall apply to take account of income that is exempt
or excluded, or assets generating such income, with
respect to allocation and apportionment of deductions.
(d)(2)(ii) Exempt income and exempt asset defined--(A)
In general. For purposes of this section, the term exempt income
means any income that is, in whole or in part, exempt,
excluded, or eliminated for federal income tax
purposes.
26CFR1.861-8T(d)(2)(iii)
Income that is not considered tax exempt. The following
items are not considered to be exempt,
eliminated, or excluded income and, thus,
[are taxable and] may have expenses, losses, or other
deductions allocated and apportioned to them:
(A) In the case of a foreign taxpayer (including a foreign sales
corporation (FSC)) computing its effectively connected income, gross
income (whether domestic or foreign source) which is not effectively
connected to the conduct of a United States trade or business;
(B) In computing the combined taxable income of a DISC or FSC and
its related supplier, the gross income of a DISC or a FSC;
(C) For all purposes under subchapter N of the Code, including the
computation of combined taxable income of a possessions corporation
and its affiliates under section 936(h), the gross income of a possessions
corporation for which a credit is allowed under section 936(a);
and
(D) Foreign earned income as defined in section
911 and the regulations thereunder (however, the rules of Sec.
1.911-6 do not require the allocation and apportionment of certain
deductions, including home mortgage interest, to foreign earned
income for purposes of determining the deductions disallowed under
section 911(d)(6)).
The following terms occur in
only ONE regulation within the entire CFR:
"how to determine tax"
"the sources of income for purposes of the income tax"
"the tax imposed is upon taxable income"
"gross income means only"
"the rules contained in this section apply in determining taxable income of the taxpayer"
"rules" and "prescribing" and "taxable income"
"prescribing" and "excluded" and "taxable income"
"prescribing" and "exempt" and "taxable income"
"Income that is not considered tax exempt"
"the following rules shall apply to... income that is exempt"
"sections of the Code which require the determination of taxable income"
"how to determine taxable income"
"how to determine taxable income of a taxpayer"
"determining taxable income of the taxpayer"
"taxable income from sources within the United States shall
consist of"
"determine the sources of income for purposes of the income
tax"
"the rules... for determining taxable income"
"the rules... for determining taxable income from sources within
the United States"
"the rules... determining taxable income of the taxpayer from specific
sources"
"determining taxable income from specific sources"
"determine the source of income"
"determine the sources of income"
"determination of sources of income"
"gross income from a specific source"
"specific sources"
There is only one section in the whole CFR (Title 26) telling us...
"how to determine tax" (1 file(s) found)
and what "taxable income from sources within the United States shall
consist of": (1 file(s) found)
and what are "the sources of income for purposes of the income
tax": (1 file(s) found)
and the "sections of the Code which require the determination
of taxable income": (1 file(s) found)
Only two locations in 26 CFR have these 3 terms, "rules" and
"prescribing" and "taxable income" in the same section,
and in fact, the same paragraph.
There is more than one place to start. We will start here...
26CFR1.861-1(b)
Taxable income from sources within the United States. The taxable
income from sources within the United States shall consist of
the taxable income described in paragraph (a)(1) of
this section plus the taxable income allocated or apportioned to
such sources, as indicated in paragraph (a)(3) of
this section.
Following this regulation points us to two lists. One list providing
sources of taxable income, and the other list providing
items of income that are taxable. These lists show that
only our foreign sources and items are taxable
for a US citizen. First, we see paragraph (a)(1) as instructed
in 861-1(b).
861-1 paragraph (a)(1)
...taxable income from sources within
the United States... See Secs. 1.861-8 and 1.863-1.
861-1 paragraph (a)(3)
Partly within and partly without the United States. The taxable
income allocated or apportioned to sources within the United States...
shall be determined in accordance with section 863 (a) or (b).
See Secs. 1.863-2 to 1.863-5, inclusive.
26CFR1.863-1
(c) Determination of taxable income. The taxpayer's taxable
income from sources within or without the United
States will be determined under the rules
of Secs. 1.861-8 through 1.861-14T for determining taxable
income from sources within the United States.
If we follow any of the previous references, they
all lead to CFR Sec. 861-8. The regulations are based on the USC "in
accordance with section 863 (a) or (b)." So, we examine 861-8 next.
26CFR1.861-8
"Sec. 1.861-8 Computation of taxable income from sources
within the United States and from other sources
and activities.
(a) In general--(1) Scope.
...how to determine taxable income of a taxpayer from sources
within the United States after gross income from sources
within the United States has been determined...
... This section provides specific guidance for applying
the cited Code sections by prescribing rules for the allocation
and apportionment of expenses, losses, and other deductions (referred
to collectively in this section as ``deductions'') of the taxpayer.
The rules contained in this section apply in determining
taxable income of the taxpayer from specific sources
and activities under other sections of the Code, referred to
in this section as operative sections. See paragraph (f)(1)
of this section for a list and description of operative sections."
Before examining the list in paragraph (f)(1), we see the rule above
says "to determine taxable income... after gross income... has
been determined." A rule below shows "gross income from a
specific source... must first be determined in order to arrive at
'taxable income.' " The rules below also show that "gross
income... is referred to as a class of gross income" and that
"a class of gross income may include excluded income." They
also say that gross income is known as a "statutory grouping
of gross income," and "may include, or consist entirely of,
excluded income."
26CFR1.861-8
(a)(3) Class of gross income.
... gross income ... ...is referred to as a ``class of gross
income'' and may consist of one or more items (or subdivisions
of these items) of gross income enumerated in section 61,
namely:
(i) Compensation for services, including fees, commissions,
and similar items;
(ii) Gross income derived from business;
(iii) Gains derived from dealings in property;
(iv) Interest;
(v) Rents;... (and more items)
26CFR1.861-8
(a) (4) Statutory grouping of gross income and residual grouping
of gross income. For purposes of this section, the term ``statutory
grouping of gross income'' or ``statutory grouping'' means the
gross income from a specific source or activity which
must first be determined in order to arrive at ``taxable income''
from which specific source or activity under an
operative section. (See paragraph (f)(1) of this section.) Gross
income from other sources or activities is referred
to as the ``residual grouping of gross income'' or ``residual
grouping.''
... In some instances, where the operative section so requires,
the statutory grouping or the residual grouping may include, or
consist entirely of, excluded income. See paragraph (d)(2) of
this section with respect to the allocation and apportionment of
deductions to excluded income.
26CFR1.861-8
(b) Allocation--(1) In general. For purposes of this section,
the gross income to which a specific deduction is definitely related
is referred to as a ``class of gross income'' and may
consist of one or more items of gross income. The rules
emphasize the factual relationship between the deduction and a class
of gross income. See paragraph (d)(1) of this section which
provides that in a taxable year there may be no item of gross
income in a class or less gross income than deductions allocated
to the class, and paragraph (d)(2) of this section
which provides that a class of gross income may include excluded
income.
26CFR1.861-8
(d) Excess of deductions and excluded and eliminated income-(1)
Excess of deductions. Each deduction which bears a definite relationship
to a class of gross income shall be allocated to that class in accordance
with paragraph (b)(1) of this section even though, for the taxable
year, no gross income in such class is received or accrued or the
amount of the deduction exceeds the amount of such class of gross
income. In apportioning deductions, it may be that, for the taxable
year, there is no gross income in the statutory grouping (or residual
grouping), or that deductions exceed the amount of gross income
in the statutory grouping (or residual grouping). If there is no
gross income in a statutory grouping or the amount of deductions
allocated and apportioned to a statutory grouping exceeds the amount
of gross income in the statutory grouping, the effects are determined
under the operative section.
(2) Allocation and apportionment to exempt, excluded, or eliminated
income. [Reserved] For guidance, see Sec. 1.861-8T(d)(2).
[ IMPORTANT NOTICE: Do not simply gloss over that last
citation. It is a very misleading double negative statement, which
more accurately worded is "Income That Is Considered Taxable."
It is the only rule in the CFR to make such a specific instruction.
The income of most Americans is not in the list. ]
Most importantly the rules above tell us, which items of gross are
"Income that is not considered tax exempt" and "where
the operative section so requires, the statutory grouping or the
residual grouping may include, or consist entirely of, excluded
income." They also say, "If there is no gross income in a
statutory grouping... the effects are determined under the operative
section." So, next we examine the list of "operative sections
of the Code which require the determination of taxable income of
the taxpayer" found in paragraph (f)(1). Notice how much more
specific this rule is than in "General... whatever source"
[CFR Sec. 61].
26CFR1.861-8
(f) Miscellaneous matters--(1) Operative sections.
The operative sections of the Code which require the determination
of taxable income of the taxpayer from specific sources
or activities and which give rise to statutory groupings
to which this section is applicable include the sections described
below.
(i) ...the statutory grouping is foreign source income
(ii) [Reserved]
(iii) DISC and FSC taxable income... Sections 925 and 994...section
925...
(iv) Nonresident alien individuals and foreign corporations
engaged in trade or business within the United States...under sections
871(b)(1) and 882(a)(1)...873...
(v) Foreign base company income... Sec. 954
(vi) Other operative sections...(more foreign)
Did you notice that the rule, which "described" the "sections
of the Code which require the determination of taxable income of
the taxpayer" actually excluded the income of most Americans
from its list. Next, we see that we are indeed following the correct
rules; they specifically explain these "are the four... applicable"
and that "Each... applies independently."
26CFR1.861-8 (f)(3)(ii)
Relationship of sections 861, 862, 863(a), and 863(b). Sections
861, 862, 863(a), and 863(b) are the four provisions applicable
in determining taxable income from specific sources. Each
of these four provisions applies independently.
So, did you catch all that?
Hint: Sections of the Code, now "referred to...as operative
sections", which require the determination of taxable income from
specific sources are listed in:
26CFR1.861-8 (f)(1)
The operative sections of the Code which require the determination
of taxable income of the taxpayer from specific sources or activities
and which give rise to statutory groupings to which this
section is applicable include the sections described below.
(i)
(ii)
(iii)...
QUESTION: Do you see your specific source(s)
of income listed? Have a look. We did not list them here, so you
would have to prove it to yourself. See How
to Search and Search
Examples..
What are we to think if our specific sources are not
listed in 26CFR1.861-8(f)(1), or if our "items of income" are not
listed under "Income That Is Taxable", 26CFR1.861-8T(d)(2)(iii)
?
Law Dictionaries
"expressio unius est exclusio alterius":
New Latin, the explicit mention of one (thing) is the exclusion
of another : a principle in statutory construction: when
one or more things of a class are expressly mentioned others
of the same class are excluded
Source: FindLaw.com
Dictionary
Also see Black's Law Dictionary 581 (6th ed. 1990) (defining "expressio
unius est exclusio alterius" as
"[w]hen certain . . . things are specified in a law, . . . an intention
to exclude all others from its operation may be inferred")
Previous Cases
"Under the well established, common-sense canon of statutory
construction, known as expressio unius est exclusio alterius, the
"mention [by Congress] of one thing [in a statute] implies exclusion
of another thing." Ethyl Corp. v. EPA, 51 F.3d 1053 (D.C. Cir. 1995)."
http://www.fanniemae.com/global/pdf/media/issues/appendixb121301.pdf
"A relevant principle of statutory construction is that omissions
from an express statutory list are deemed excluded from the statute's
coverage or application. See Fantasia Restaurant & Lounge, Inc.
et al. v. New Castle County Board of Adjustment, 735 A. 2d 424,
430 (Del. Super. 1998). "
http://www.state.de.us/attgen/main_page/opinions/2003/03-ib18.htm
"This court has consistently applied the rule of expressio unius
est exclusio alterius -- the express inclusion of a provision
of a statute implies the exclusion of another -- in interpreting
statutes." (Citing Keliipuleole v. Wilson, 85 Hawaii 217, 227,
941 P.2d 300, 310 (1997)"
http://www.state.hi.us/jud/23153dis.htm
"Familiar principles of statutory construction teach that Congress
is presumed to be aware of judicial interpretations of the law,
and that when Congress enacts a new statute incorporating provisions
similar to those in prior law, it is assumed to have acted with
awareness of judicial interpretations of the prior law. See Merrill,
Lynch, Pierce, Fenner & Smith, Inc. v. Curran, 456 U.S. 353, 382
n.66 (1982); Lorillard v. Pons, 434 U.S. 575, 589 (1978); Kelly
v. United States, 849 F.2d 1049, 1052 (Fed. Cir. 1987)."
http://www.law.emory.edu/fedcircuit/aug97/96-5130.html
Shouldn't we assume the Code of Federal Regulations is also written
according to the "familiar principles of statutory construction"?
Simply by default, this is true. The "rules" are after all, based
on the statutes.
What about 26CFR1.1-1(b)?
(b) Citizens or residents of the United States liable
to tax. In general, all citizens of the United States,
wherever resident, and all resident alien individuals are liable
to the income taxes imposed by the Code whether
the income is received from sources within or without
the United States.
Notice it says "In general" and "liable to."
This is a true statement, "In general, all...are liable to
the income taxes". But, this does not tell us what we are liable
for. Nor does it tell us what is taxed or excluded, nor when
or who is taxed on "whatever" source, but Sec. 861 does.
Sec. 1-1(b) also says, "taxes imposed by the Code " and the
Code says, " the tax imposed is upon taxable income." We
are just told this in the previous subsec (a), and notice Sec. 1-1(b)
does not tell us "how to determine taxable income", but CFR
Sec. 861-8(a)(1) does. Can it be because sec. 861 is a part
of "the rules...
for determining taxable income" [CFR Sec. 863-1(c)]?
Suspiciously, the law in USC Sec. 1 (from which CFR
Sec. 1-1 is derived) says nothing about "whether the income is
received from sources within or without the United States"?
In fact, it says nothing about "within or without the United
States" or "sources". Other than the table of contents,
which actually guides us to Sec. 861, the words, "within or
without" are not even written in the law until USC Sec. 512.
So, how exactly could the Treasury Secretary interpret USC Sec.
1 to provide us with such a statement in CFR Sec. 1? What was the
name of that Secretary? Can we ask him why...?
Notice there is a significant difference between being "liable
to" and "liable for" something.
We are, in general, all liable to break things (laws,
etc.), but we are Not all specifically liable for
the breaking of things (laws, etc.), unless we have broken something.
Likewise, we are all liable to the income taxes,
but we are Not all liable for the income taxes,
unless we have taxable income. And, likewise, we "are
subject to tax under section 1 and section 11"
Great-West Life Assur. Co. V. United States, 230 Ct. Cl. 477, 678
F.2d 180, 183 (1982), but what exactly "for" is unambiguous;
specifically determined by the rules written beginning in CFR Sec.
861-8. This fact, and specific requirement is written more than
once. We are told in 20 different files to "see sec. 1.861",
and there are 74 files that mention "sec. 1.861". Read
them all. In general, they describe 861 as the "rules"
and "principles" for "prescribing", "allocation",
"apportionment" of our "taxable income", "excluded
income", "items of gross" and many other "deductions".
Read the "scope"
of the rules for determining our taxable income. The long arm of
the law is really very short.
Unambiguous and Specific
As the Supreme Court has explained: "[I]n interpreting a statute a
court should always turn to one cardinal canon before all others.
. . .[C]ourts must presume that a legislature says in a statute what
it means and means in a statute what it says there." Indeed, "[w]hen
the words of a statute are unambiguous, then, this first canon is
also the last: `judicial inquiry is complete.' " Connecticut
Nat'l Bank v. Germain, 112 S. Ct. 1146, 1149 (1992). Id.
http://www.lectlaw.com/def2/s104.htm
Another "commonplace [rule] of statutory construction" is that the
"specific governs the general." Doe v. National Bd. of Medical
Examiners, 199 F.3d 146, 154-55 (3d Cir. 1999) (quoting Morales v.Trans
World Airlines, Inc., 504 U.S. 374,384 (1992)) www.ca3.uscourts.gov/opinarch/024602p.pdf
[ Since the regulations are the interpretation of the statutes,
they inherit all the specifics (and create more). ]
Commonplace Construction?
If "the tax imposed is upon taxable income" (1
file(s) found) [26CFR1.1-1],
and "the rules... for determining taxable income"
are written just once (1 file(s) found) [26CFR1.863-1(c)]
and it is "commonplace of statutory construction" that the
"specific governs the general"
...shouldn't we see exactly (not just generally)... what
we will be "liable for", specifically...
A - How are we supposed to be "determining taxable
income from specific sources": (1 file(s) found)
26CFR1.861-8(f)(3)(ii)
Relationship of sections 861, 862, 863(a), and 863(b).
Sections 861, 862, 863(a), and 863(b) are the four provisions
applicable in determining taxable income from specific
sources. Each of these four provisions applies independently.
and shouldn't we see what will be determining it... specifically...
B - What are "the rules... for determining taxable income":
(1 file(s) found)
26CFR1.863-1 (c)
Determination of taxable income. The taxpayer's taxable income
from sources within or without the United
States will be determined under the rules
of Secs. 1.861-8 through 1.861-14T for determining taxable
income from sources within the United States.
and shouldn't we see...
C - Where are the sections of the Code with
"specific sources":
(1 file(s) found) ...and where are
"the rules... determining taxable income of the taxpayer from
specific sources": (1 file(s) found)
26CFR1.861-8
(a) In general--(1) Scope.
... The rules contained in this section apply in determining
taxable income of the taxpayer from specific sources
and activities under other sections of the Code, referred
to in this section as operative sections. See paragraph (f)(1)
of this section for a list and description of operative sections.
and shouldn't we see specifically...
D - What "taxable income from sources within the United States
shall consist of": (1 file(s) found)
26CFR1.861-1(b)
Taxable income from sources within the United States. The taxable
income from sources within the United States shall consist of
the taxable income described in paragraph (a)(1) of this section
plus the taxable income allocated or apportioned to such sources,
as indicated in paragraph (a)(3) of this section.
and shouldn't we see...
E - How to perform a "Computation of taxable income from sources
within the United States": (3 file(s) found in 2003 text edition)
- Only 1 file found in 2004 text edition (the 2003 PDF edition will
show 4 occurrences in 26 CFR).
26CFR1.861-8
Sec. 1.861-8 Computation of taxable income from sources
within the United States and from other sources
and activities.
(a) In general--(1) Scope. Sections 861(b) and 863(a) state
in general terms how to determine taxable income of a taxpayer
from sources within the United States after gross
income from sources within the United States has been
determined. Sections 862(b) and 863(a) state in general terms how
to determine taxable income of a taxpayer from sources
without the United States...
... See paragraph (f)(1) of this section for a list
and description of operative sections.
How can we do our taxes if we do not perform a Computation?
All of these rules are found under:
Title 26, Subtitle A, Chapter 1, Subchapter N
"Tax Based on Income From Sources Within or Without the United States"
(which begins with Sec. 861)
Obviously, these are the rules on which Tax is Based.
It is worth mentioning that IRS Form 1040 instructions only say
"You must report...income...from sources
outside the United States", but not even once does
it say anything close to "You must report...income...from sources
within the United States". How could they possibly forget to state
the most basic, primary, number one rule, "You must report income
from sources INSIDE the United States"? If "inside the United
States" is taxable, shouldn't this have been added at some point
within the last 90 or whatever, years? Are decades of IRS editors,
attorneys, & managers truly all making the same oversight? (You
can search using the PDF file instructions rather than printed-paper
1040 instructions, find them at http://www.irs.gov).
This omission fits exactly with what the regulations show.
All sources are indeed taxable, for someone, and all of
us are liable TO the income tax...
However, for U.S. citizens...to see exactly what we are liable
FOR...
26CFR1.861-8 is showing "how to determine tax" and the "sources"
of taxable income apply only to those U.S. citizens with foreign
earned income, and to nonresident alien individuals and some corporations.
It is paragraph (f)(1) of this section [26CFR1.861-8(f)(1)] that
gives us the list of taxable income 'sources' under the operative
sections. These are all sources most U.S. citizens are not involved
with.
Sec. 1.861-8(a) is also showing...
...for the specific sources and activities under other sections of
the Code, which are taxable, the rules contained in this section apply
in determining taxable income of the taxpayer. If we follow this to
26CFR1.861-8(f)(1), we can see exactly what sources of income are
taxable within the United States. Again, these are all sources most
U.S. citizens are not involved with.
861-8T(d)(2)(iii) is the only list of "Income that is not considered
tax exempt", or stated more plainly, "Income That Is Taxable." Since
it is the only list, it must include ANY ITEM of income that is taxable.
We may assume Sec. 1.861-8 does not apply to us, since we may have
no foreign source income, and we "shouldn't be looking under Section
861 titled SOURCE RULES AND OTHER GENERAL RULES RELATING TO FOREIGN
INCOME". But, as mentioned earlier in 26 USC Sec 7806(b), Construction
of title... shows that the individual titles of sections, i.e. descriptive
matter relating to the contents, or table of contents, and cross
references, outlines, etc. are only tools for the location of a
subject. The laws (and rules) are only found on the inside of these
labeled sections. Perhaps a better title would be "SOURCE RULES, AND
FOREIGN INCOME RULES".
And, 861, having the only occurrence of the term "determining taxable
income from specific sources" in the entire CFR, also explains that,
861 (source is within US), and 862 (without US), and
863 (partly within and without), ...each... applies independently.
26CFR1.861-8(f)(3)(ii)
Relationship of sections 861, 862, 863(a), and 863(b). Sections
861, 862, 863(a), and 863(b) are the four provisions applicable
in determining taxable income from specific sources. Each
of these four provisions applies independently.
THE ONLY RULE
And, finally, who uses 26CFR1.863-1(c), the ONLY rule,
which tells us in plain English, where the location is for...
"the rules... for determining taxable income from sources
within the United States": (1 file(s) found)
26CFR1.863-1 (c)
Determination of taxable income. The taxpayer's taxable income
from sources within or without the United States
will be determined under the rules of Secs. 1.861-8 through 1.861-14T
for determining taxable income from sources within the United
States.
It states clearly that it is for the "taxpayer".
Please see How
to Search and Search
Examples to conduct your own analysis, and if anyone has a regulation
or statute, which indicates otherwise... please, send it ASAP. Thank
you.
END OF ANALYSIS
Re-read the analysis again at a later time to properly absorb what
you've just read.
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