More History of the Freedom Movement

 

      Another individual who made history as a brave Freedom Fighter is Miss Lynn Johnston. She was director back in the 80's of an organization called Citizens Against Taxation.  She published a book: Who's Afraid of the IRS?  In her book she stated that she had paid no taxes since 1975 and she explained that she first got involved in the Freedom Movement in the late "sixties."  She refused to pay the telephone tax since the money was used to fund the immoral, undeclared unconstitutional war in Vietnam."  During the years 1975, 1976 and 1977, she filed Fifth Amendment Returns accompanied by a 38-page letter.   She was tried for the nonpayment of income taxes in Grand Rapids, Michigan.  She appeared pro se and won an acquittal. Eventually she was the victim of a hit and run accident.  The tires of her car were slashed.  The IRS ransacked her garage and there were three shots fired at her from a high-powered rifle.  Her mail was opened.  She was under constant surveillance, her phone was tapped and she received threatening phone calls.  Individuals who let her speak on radio programs were audited.  The harassment went on for years and she finally disappeared from the Freedom Movement.

 

      Another important leader in the early Freedom Movement was Charles Riley.  The IRS prosecuted Charles and they lost their case against him on June 19-21, 1979.  The jury returned a verdict of not-guilty.  Riley filed a Fifth Amendment Tax Return for the years 1972 and 1973      and he answered "Object: Self-incrim." after each pertinent question on the 1040 Form.  For the year 1974, he added 30 pages of documentation which explained his theory of self-incrimination.  He had started the Tri-City Publishing Company in 1971 and in 1972 he began the Mesa Cacus Club which ran weekly meetings for two years.  He also gave regular seminars.  On April 30, 1975, two IRS Special Agents read him his Miranda Rights and then issued summonses to his bank for records.  A grand jury indicted Charles on April 14, 1979.  The government's case consisted of reports on Riley's conversations with IRS agents in which he had discussed the monetary system, government waste, etc.  The basis of Riley's defense was that: (1) It is impossible to complete a conventional 1040 without waiving one's constitutional rights (2) Since the Constitution is the Supreme Law of the Land, no government agency has the right or the power to nullify those rights: and, therefore, (3) The procedures under which the IRS operates are unconstitutional and no one can legally be required to file the kind of return that the IRS demands. 

     

      Riley then organized the Golden Mean Society and started traveling around the country with paralegal parexcellance Peggy Christensen.  Riley explained to people his technique for fighting the Income Tax.  Riley pointed out that the IRS brings criminal charges against those individuals who (1) seem to be easiest to convict and (2) whose conviction may have the highest deterrent effect on others.  Riley was very aware of the importance of the jury system and he provided books and materials to support his system for challenging the income tax.  Riley was one of the most important of the early leaders in the Freedom Movement.  He disappeared from view in the Movement around the middle 80's. 

 

      Peggy Christensen was another early leader who worked early on with Charles Riley and then in the late 80's ran a large office in Missoula, Montana arguing against IRS abuse.  She worked on many of the early criminal cases against patriots and she had quite a good win record. She helped to win dozens of cases.  Her main approach in the beginning was the use of the 1040 return claiming First, Fourth, Fifth and Ninth Amendment Rights.  Unfortunately, Peggy has also disappeared from the front lines of the Freedom Movement.

 

 

More Bankruptcy Stuff

 

      Income tax is dischargeable in a Chapter 13 if the claim is not yet assessed, the tax is over three years old and no returns have been filed.  If you file a return, it will start the assessment and add 240 days before the tax can be discharged in a Chapter 13.  See In re  Zeig, 194 B.R. 469,1 (Bkrtcy D.Neb) 1996.  Also see In re Daniel, 170 B.R. 466 (Bkrtcy.S.D.Geo. 1994) (failure to file a return, unassessed tax was not a priority in a chapter 13.) 

     

      Also be very careful about the filing of an offer in compromise.  The OIC will toll the 240-day period for the time it is pending plus 30 days.  See 11 U.S.C. 507(a)(8)(A)(ii). 

 

      Many people think that they can rely on the advice of the IRS.  Please check out Matter of Larson, 862 F.2d 112 (7th Cir 1988). The court ruled that the taxpayers were not entitled to rely on the IRS agent's erroneous misrepresentation that the taxes would be discharged in the bankruptcy which was filed less than 240 days after the assessment.  There was a similar result in the case of In re Howell, 120 B.R. 137 (9th Cir. BAP 1990).

 

      The issue of the validity of tax liens after a bankruptcy is a very complicated and confusing state of affairs.  In Chapter 13, there are cases that hold that a lien that is unattached to equity is not a secured claim.  See, In re Geyer, 203 B.R. 726 (Bkrtcy.S.D.Cal. 1996).  Also see In re Lam, 211 B.R. 36 (9th Cir BAP 1997).  The issue in Chapter 7 is more complex.  Some cases hold that a lien still survives a Chapter 7 even if it is void of equity.  See, for example, In re Houze, 1994 Bankr. LEXIS 1095 (Bkrtcy.S.D.Fla.); In re Cleary, 1997 Bankr. LEXIS 28 (Bkrtcy. N.D. Ill.).  There are also Chapter 7 opinions that hold that an unsecured lien is a nullity.  See In re Yi, B.R. 394 (E.D.Va. 1998), Howard v. National Westminister Bank 184 B.R. 644 (Bankr.E.D.N.Y. 1995), In re Eudy, Sr. 1989 Bankr. LEXIS 2247 (Bkrtcy.M.D.La. 1989).

 

      The Internal Revenue Manual (IRM) in Part 5 - Collection Activity, Section 5.9 - Bankruptcy Handbook, states in Chapter 6 - Proof of Claim Preparation, (5.9)

 

Secured Claim

 

1.  Two basic conditions must be met for the IRS to have a secured claim:  (A) The IRS must have on file a valid pre-petition Notice of Federal Tax Lien and there must be equity in the debtor's property to which the pre-petition lien attaches.  (B) The secured claim represents the debtor's equity in all real and personal property that is listed in the debtor's schedules that are filed with the court.

 

      In the case of In re Emerson, 224 B.R.577 (Bkrtcy.E.D.N.C. 1998, the debtor's filing of an amended offer in compromise filed after the running of the 240-day period did not toll the running of the period.  The original offer in compromise was deemed rejected when the IRS notified the debtors that it would not be accepting the offer, and not when the debtors received a letter rejecting their appeal of the rejection.  See In re Emerson, 224 B.R. 577 (Bkrtcy.W.D.La 1998).   The IRS was stopped from requiring the debtor to produce tax returns three years after the debtor's bankruptcy discharge, the IRS claimed that the taxes were not discharged because the debtor failed to file returns.  The debtor alleged that he could not produce copies of the returns because the IRS had seized the originals several years before the bankruptcy.  In re McKenzie, 225 B.R. 377 (N.D.Ohio 1998).

 

      Beware of the fact that some individuals are misusing the bankruptcy court in an attempt to get out of their tax problems.  The debtor's dishonest pre-petition conduct in regard to his tax obligations may be taken into consideration on the issue of bad faith.  The Court in Matter of Hazel, 95 B.R. 481 (Mich. 1986) found the plan in bad faith when the debtor willfully failed to report any tax liabilities, purposefully prevented collection of any taxes by the IRS and ultimately filed a Chapter 13 to discharge his taxes.  In the case: In the Matter of Love, 957 F.2d 1350 (7th Cir. 1992), the court rejected a plan for bad faith because the debtor had engaged in pre-petition tax protest activity which led to his primary tax debt.  Other opinions have held that Chapter 13 may not be exploited by taxpayers who were members of tax protest groups.  See In re Paulson 170 B.R. 496 (Bkrtcy.D.CT 1994); In re Hammers 988 F2d 32 (5th Cir. 1993): Schaffner v IRS, 95 B.R. 62 (Bkrtcy. E.D.Mich 1998).  Also see In re Morimoto, 171 B.R. 85 (9th Cir BAP 1994) in which the debtor failed to file tax returns for 28 years. The court, noting that the debtor's prepetition activities were those of a tax protester, denied confirmation on the basis of bad faith.  See also, In re Greatwood, 194B.R. 637 (9th Cir.BAP 1996); In re Hopkins, 201 B.R. 993 (D. Nev. 1996).

 

 

Attorney Larry Becraft has assembled the following discussion of many of the popular patriot arguments.  Since some individuals are still relying on these issues,   it is important to get out the information that their ideas simply do not work.  Thank you Larry Becraft for the effort that you put into this analysis.

 

I. The Money Issue:

 

In the seventies and early eighties, advocates of the specie provisions in Art. 1, §10, cl. 1 of the U.S. Constitution made a concerted effort to educate people about this constitutional provision, consequently people (mostly those who were deperate and ill-prepared) acting pro se began litigating the issue. The courts have rendered the following adverse decisions on this issue:

 

Adverse Federal Decisions:

 

1. Koll v. Wayzata State Bank, 397 F.2d 124 (8th Cir. 1968)
2. United States v. Daly, 481 F.2d 28 (8th Cir. 1973)
3. Milam v. United States, 524 F.2d 629 (9th Cir. 1974)
4. United States v. Scott, 521 F.2d 1188 (9th Cir. 1975)
5. United States v. Gardiner, 531 F.2d 953 (9th Cir. 1976)
6. United States v. Wangrud, 533 F.2d 495 (9th Cir. 1976)
7. United States v. Kelley, 539 F.2d 1199 (9th Cir. 1976)
8. United States v. Schmitz, 542 F.2d 782 (9th Cir. 1976)
9. United States v. Whitesel, 543 F.2d 1176 (6th Cir. 1976)
10. United States v. Hurd, 549 F.2d 118 (9th Cir. 1977)
11. Mathes v. Commissioner, 576 F.2d 70 (5th Cir. 1978)
12. United States v. Rifen, 577 F.2d 1111 (8th Cir. 1978)
13. United States v. Anderson, 584 F.2d 369 (10th Cir. 1978)
14. United States v. Benson, 592 F.2d 257 (5th Cir. 1979)
15. Nyhus v. Commissioner, 594 F.2d 1213 (8th Cir. 1979)
16. United States v. Hori, 470 F.Supp. 1209 (C.D.Cal. 1979)
17. United States v. Tissi, 601 F.2d 372 (8^th Cir. 1979)
18. United States v. Ware, 608 F.2d 400 (10th Cir. 1979)
19. United States v. Moon, 616 F.2d 1043 (8th Cir. 1980)
20. United States v. Rickman, 638 F.2d 182 (10th Cir. 1980)
21. Birkenstock v. Commissioner, 646 F.2d 1185 (7th Cir. 1981)
22. Lary v. Commissioner, 842 F.2d 296 (11th Cir. 1988)

 

Adverse State Decisions:

 

1. Chermack v. Bjornson, 302 Minn. 213, 223 N.W.2d 659 (1974)
2. Leitch v. Oregon Dept. of Revenue, 519 P.2d 1045 (Or.App. 1974)
3. Radue v. Zanaty, 293 Ala. 585, 308 So.2d 242 (1975)
4. Rush v. Casco Bank & Trust Co., 348 A.2d 237 (Me. 1975)
5. Allen v. Craig, 1 Kan.App.2d 301, 564 P.2d 552 (1977)
6. State v. Pina, 90 N.M. 181, 561 P.2d 43 (N.M. 1977)
7. Dorgan v. Kouba, 274 N.W.2d 167 (N.D. 1978)
8. Trohimovich v. Dir., Dept. of Labor & Industry, 21 Wash.App. 243, 584 P.2d 467 (1978)
9. Middlebrook v. Miss. State Tax Comm., 387 So.2d 726 (Miss. 1980)
10. Daniels v. Arkansas Power & Light Co., 601 S.W.2d 845 (Ark. 1980)
11. State v. Gasser, 306 N.W.2d 205 (N.D. 1981)
12. City of Colton v. Corbly, 323 N.W.2d 138 (S.D. 1982)
13. Epperly v. Alaska, 648 P.2d 609 (Ak.App. 1982)
14. Solyom v. Maryland-National Capital Park & Planning Comm., 452 A.2d 1283 (Md.App. 1982)
15. People v. Lawrence, 124 Mich.App. 230, 333 N.W.2d 525 (Mich.App. 1983)
16. Union State Bank v. Miller, 335 N.W.2d 807 (N.D. 1983)
17. Richardson v. Richardson, 332 N.W.2d 524 (Mich.App. 1983)
18. Cohn v. Tucson Elec. Power Co., 138 Ariz. 136, 673 P.2d 334 (1983)
19. First Nat. Bank of Black Hills v. Treadway, 339 N.W.2d 119 (S.D. 1983)
20. Herald v. State, 107 Idaho 640, 691 P.2d 1255 (1984)
21. Allnutt v. State, 59 Md.App. 694, 478 A.2d 321 (1984)
22. Spurgeon v. F.T.B., 160 Cal.App.3d 524, 206 Cal.Rptr. 636 (1984)
23. Rothaker v. Rockwall County Central Appraisal Dist., 703 S.W.2d 235 (Tex.App. 1985)
24. De Jong v. County of Chester, 98 Pa. Cmwlth. 85, 510 A.2d 902 (1986)
25. Baird v. County Assessors of Salt Lake & Utah Counties, 779 P.2d 676 (Utah 1989)
26. State v. Sanders, 923 S.W.2d 540 (Tenn. 1996).

 

II. Wages Are Income:

 

Back in about 1979 or 1980, Bob Golden and Pete Soehnlen published a work entitled Are You Required, which persuasively advocated the argument that wages are not income. However, desperate people championed this issue and lost in the following cases:

1. United States v. Romero, 640 F.2d 1014 (9th Cir. 1981)
2. Lonsdale v. CIR, 661 F.2d 71 (5th Cir. 1981)(rejecting "even exchange" argument)
3. United States v. Lawson, 670 F.2d 923 (10th Cir. 1982)
4. Granzow v. CIR, 739 F.2d 265 (7th Cir. 1984)
5. Hansen v. United States, 744 F.2d 658 (8th Cir. 1984)
6. Perkins v. CIR, 746 F.2d 1187 (6th Cir. 1984)
7. Schiff v. CIR, 751 F.2d 116 (2nd Cir. 1984)
8. Ficalora v. CIR, 751 F.2d 85, 87-88 (2d Cir. 1984) (holding that income includes compensation for services)
9. Lovell v. United States, 755 F.2d 517, 519 (7th Cir. 1984)
10. United States v. Latham, 754 F.2d 747 (7th Cir. 1985)
11. Hyslep v. United States, 765 F.2d 1083 (11th Cir. 1985)
12. Coleman v. CIR, 791 F.2d 68, 70 (7th Cir. 1986)
13. Stubbs v. Commissioner of IRS, 797 F.2d 936, 938 (11th Cir. 1986) (rejecting argument that wages are not taxable income as "patently frivolous")
14. Wilcox v. CIR, 848 F.2d 1007, 1008 (9th Cir. 1988)
15. Maisano v. United States, 908 F.2d 408, 409 (9th Cir. 1990), and Maisano v. United States, 940 F.2d 499, 501-02 (9th Cir. 1991)
16. United States v. Gerards, 999 F.2d 1255, 1256 (8th Cir. 1993).

Jeff Dickstein, lawyer "extraordinare" from California, later Alaska, Montana, Tennessee and now Oklahoma, has written a book entitled Judicial Tyranny, which discusses this issue in great detail, including all the adverse decisions on this issue through 1989. When Jeff and I were about to start the conspiracy trial of Vern Holland and Dave Mauldin in Tulsa in August, 1990, Jeff announced that his book was hot off the press. When we got the first copy and looked at his book just days before we were to start that trial in federal court in Tulsa, we noticed that the front cover contained the seal of the local federal court as well as a likeness of one of the local federal judges. At times, Jeff can be harrowing. However, we got a hung jury in that case and afterwards, 6 of the jurors, including the forelady, came and joined Vern's patriot organization.

 

III. The IRS is a Delaware corporation:

 

Back in 1982 or 1983, somebody started circulating the argument that the IRS was a private corporation which had been created in Delaware in 1933. If it was created only in 1933, then why do we have the following appropriations for this agency found in acts of Congress a decade before 1933:
 
42 Stat. 375 (2-17-22); 42 Stat. 454 (3-20-22); 42 Stat. 1096 (1-3-23); 43 Stat. 71 (4-4-24); 43 Stat. 693 (12-5-24); 43 Stat. 757 (1-20-25); 43 Stat. 770 (1-22-25); 44 Stat. 142 (3-2-26); 44 Stat. 868 (7-3-26); 44 Stat. 1033 (1-26-27); 45 Stat. 168, 1034 (1928); 68 Stat. 86, 145, 807 (1954).

This is indeed a frivolous argument and has properly been rejected by the courts; see Young v. IRS, 596 F.Supp. 141, 147 (N.D. Ind. 1984). The real issue is whether the IRS has been created by law.

 

 IV. The IMF Argument:

 

Some contend that the Secretary of the Treasury is in reality a foreign agent under the control of the IMF; the argument has been rejected by the courts.

1. United States v. Rosnow, 977 F.2d 399, 413 (8th Cir. 1992)
2. United States v. Jagim, 978 F.2d 1032, 1036 (8th Cir. 1992)
3. United States v. Higgins, 987 F.2d 543, 545 (8th Cir. 1993).

 

V. Non-resident Aliens:

 

Some contend we are for tax purposes non-resident aliens; again, this improper argument has been correctly rejected by the courts.

1. United States v. Sloan, 939 F.2d 499, 501 (7th Cir. 1991)
2. United States v. Jagim, 978 F.2d 1032, 1036 (8th Cir. 1992)
3. United States v. Hilgeford, 7 F.3d 1340, 1342 (7th Cir. 1993)
4. United States v. Mundt, 29 F.3d 233 (6th Cir. 1994) ("federal zone" case)
5. Larue v. United States, 959 F.Supp. 957 (C.D.Ill. 1997).

But the rejection by the courts of this issue has not deterred Lynn Meredith, who has continued to promote this argument through her book, Vultures in Eagles Clothing, via a multi-level sales scheme. Fraud is a knowing misrepresentation of facts (or in this case, law) to another upon which that other party relies to his detriment. Concerned Americans have been trying the program promoted by Meredith in her book, but when they get into trouble, they get absolutely no help from Meredith as she refuses to even answer their calls. She spends her spare time on cruise ships.

Incidentally, when Lynn was here in Alabama, she stated to James Shackelford of Tuscaloosa, that she has made better than 3 million bux off this movement.

 

VI. The Form 1040 is Really a Codicil to a

Will:

 

This argument was rejected in Richey v. Ind. Dept. of State Revenue, 634 N.E. 2d 1375 (Ind. 1994), along with other popular arguments of that date.

 

VII. Filing 1099s against IRS Agents:

 

At one time, some asserted that when an agent of the government inflicted damaged upon somebody, the proper response should be filing a Form 1099 against the agent because the agent was "enriched" by the damaged so inflicted. Parties doing this went to jail.

1. United States v. Yagow, 953 F.2d 423 (8th Cir. 1992)
2. United States v. Kuball, 976 F.2d 529 (9th Cir. 1992)
3. United States v. Dykstra, 991 F.2d 450 (8th Cir. 1993).

Of course, today we have essentially the same thing in the format of filing of common law liens. More than enough people have gone to jail with such lunacy.

 

VIII. Land Patents:

 

Back in 1983 and 1984, Carol Landi popularized an argument that the land patent was the highest and best form of title and that by updating the patent in your own name, you could defeat any mortgages. This contention violated many principles of real property and when Carol started trying to get patents for most of the land in California brought up into her own name, she went to jail. Others who have raised this crazy argument lost the issue.

1. Landi v. Phelps, 740 F.2d 710 (9th Cir. 1984)
2. Sui v. Landi, 209 Cal.Rptr. 449 (Cal.App. 1 Dist. 1985)
3. Hilgeford v. People's Bank, 607 F.Supp. 536 (N.D.Ind. 1985)
4. Nixon v. Individual Head of St. Joseph Mtg. Co., 612 F.Supp. 253 (N.D. Ind. 1985)
5. Nixon v. Phillipoff, 615 F.Supp. 890 (N.D. Ind. 1985)
6. Wisconsin v. Glick, 782 F.2d 670 (7th Cir. 1986)
7. Britt v. Federal Land Bank Ass'n. of St. Louis, 505 N.E.2d 387 (Ill. App. 1987).

 

IX. Not a "Person" Under the Tax Code:

 

Some have contended that they were not "persons" under the Internal Revenue Code, an argument which has been lost.

1. Lovell v. United States, 755 F.2d 517, 519 (7th Cir. 1984) (all individuals, natural or unnatural, are  subject to federal income tax on their wages)
2. United States v. Karlin, 785 F.2d 90, 91 (3d Cir. 1986)
3. United States v. Studley, 783 F.2d 934, 937 (9th Cir. 1986)(defendant who contended she was not a "taxpayer" because she was an "absolute, freeborn and natural individual" raised frivolous argument);
4. United States v. Price, 798 F.2d 111, 113 (5th Cir. 1986)
5. Itz v. United States Tax Court, 1987 WL 15893, at 5, 87-2 USTC ¶ 9497 (W.D.Tex. May 6, 1987) (claim of plaintiff that he is a "de jure" citizen as opposed to a "de facto" citizen is without merit)
6. Lonsdale v. United States, 919 F.2d 1440, 1447-48 (10th Cir. 1990)(plaintiff is a person subject to federal income tax, invalidating numerous other frivolous tax protester arguments)
7. United States v. Silevan, 985 F.2d 962, 970 (8th Cir. 1993)
8. United States v. Gerads, 999 F.2d 1255, 1256 (8th Cir. 1993)(these parties raised but had rejected the arguments that the US has no "inland jurisdiction," that wages were not income, and that the federal income tax is voluntary. "And finally, we reject appellant's contention that they are not citizens of the United States, but rather 'Free Citizens of the Republic of Minnesota,' and consequently not subject to taxation").

 

X. Notice of Levy:

 

A popular argument currently circulating is that a mere notice of levy is not equal to a levy and thus may not be used for tax collection purposes. The courts have not accepted this idea.

1. United States v. Eiland, 223 F.2d 118, 121 (4th Cir. 1955)
2. Rosenblum v. United States, 300 F.2d 843, 844-45 (1st Cir. 1962)
3. United States v. Pittman, 449 F.2d 623, 627 (7th Cir. 1971)
4. In re Chicagoland Ideel Cleaners, Inc., 495 F.2d 1283, 1285 (7th Cir. 1974)
5. Wolfe v. United States, 798 F.2d 1241, 1245 (9th Cir. 1986)
6. Sims v. United States, 359 U.S. 108, 79 S.Ct. 641 (1959).

 

XI. The UCC Argument:

 

Some assert that some unknown treaty back in the 1930s placed us under the control of the "international bankers," thus every action filed in this country, both civil and criminal alike, is for the benefit of the bankers. Under these facts, when the government attacks a patriot, he should assert the UCC argument; this silly contention has been rejected.

1. United States v. Stoecklin, 848 F.Supp. 1521 (M.D. Fla. 1994)
2. United States v. Greenstreet, 912 F.Supp. 224 (N.D.Tex. 1996)(also raised flag and common law court issues)
3. United States v. Klimek, 952 F.Supp. 1100 (E.D.Pa. 1997)(also raised nom de guerre and flag issues).

 

XII. The CFR Cross Reference Index:

 

The Code of Federal Regulations contains a separate volume which list various statutes and the regulations which implement those statutes. This is not an exclusive list nor is it an admission made by the government that there are no regulations for Title 26, U.S.C. Parties making this argument have suffered defeat.

1. United States v. Cochrane, 985 F.2d 1027, 1031 (9th Cir. 1993)
2. Russell v. United States, 95 CCH Tax Cases ¶ 50029 (W.D. Mich. 1994)
3. Reese v. CIR, 69 TCM 2814, TC Memo 1995-244 (1995)(this and several other arguments described as "legalistic gibberish")
4. Morgan v. CIR, 78 AFTR2d 96-6633 (M.D.Fla. 1996)
5. Stafford v. CIR, TCM 1997-50.

 

XIII. The Flag Issue:

 

A current popular argument is that the gold fringed flag indicates the admiralty jurisdiction of the court. Naturally, pro ses have made this argument and lost.

1. Vella v. McCammon, 671 F.Supp. 1128, 1129 (S.D. Tex. 1987)(the argument has "no arguable basis in law or fact")
2. Comm. v. Appel, 652 A.2d 341, 343 (Pa.Super. 1994)(the contention is a "preposterous claim")
3. United States v. Schiefen, 926 F.Supp. 877, 884 (D.S.D. 1995): in this case, the CFR cross reference index argument, and those regarding the UCC, common law courts and the flag issue were rejected.
4. McCann v. Greenway, 952 F.Supp. 647 (W.D.Mo. 1997)
5. Sadlier v. Payne, 974 F.Supp. 1411 (D.Utah 1997)
6. Schneider v. Schlaefer, 975 F.Supp. 1160 (E.D.Wis. 1997)

Of course, there are other decisions which have not been published. But against all odds, Dave Miller still travels the country promoting this lost cause.

 

XIV. Common Law Court:

 

These courts have been declared non-existent.

1. Kimmel v. Burnet County Appraisal Dist., 835 S.W.2d 108, 109 (Tex.App. 1992).

 

XV. "Nom de Guerre":

 

According to a book written by Berkheimer, a "nom de guerre" is a war name symbolized by a given name being written in capital letters. The argument contends that because of events in 1933, we have been made "enemies" and government indicates our status as enemies by the nom de guerre. If this is true, then why have the styles of the decisions of the United States Supreme Court since its establishment been in caps? This argument has gotten lots of people in trouble. For example, Mike Kemp of the Gadsden Militia defended himself on state criminal charges with this argument and he was thrown into jail. I have not even seen a decent brief on this issue which was predicated upon cases you can find in an ordinary law library. In any event, at least one case has rejected this argument; see United States v. Klimek, 952 F.Supp. 1100 (E.D.Pa. 1997).

 

XV. Title 26 is not positive law:

 

Ryan v. Bilby, 764 F.2d 1325, 1328 (9th Cir. 1985)(stating that "Congress's failure to enact a title into positive law has only evidentiary significance and does not render the underlying enactment invalid or unenforceable"); United States v. Zuger, 602 F. Supp. 889, 891-92 (D. Conn. 1984) (holding that "the failure of Congress to enact a title as such and in such form into positive law . . . in no way impugns the validity, effect, enforceability or constitutionality of the laws as contained and set forth in the title"), aff'd without op., 755 F.2d 915 (2d Cir.), cert. denied, 474 U.S. 805 (1985); Young v. IRS, 596 F. Supp. 141, 149 (N.D. Ind. 1984) (asserting that "even if Title 26 was not itself enacted into positive law, that does not mean that the laws under that title are null and void"); Berkshire Hathaway Inc. v. United States, 8 Cl. Ct. 780, 784 (1985) (averring that the I.R.C. "is truly 'positive law'"), aff'd, 802 F.2d 429 (Fed. Cir. 1986).

 

XVI. Wangrudites:

 

1. McKinney v. Regan, 599 F.Supp. 126, 129 (M.D.La. 1984)("Petitioner's shield of the 'Common Law' as an 'Unenfranchised Sovereign Individual of the United States of America, a Republic,' provides him with precisely the same degree of protection from federal income taxation as did the Ghost Dance of the Sioux warrior from the repeating rifles of the federal Calvary [sic] -- ZERO")

2. Lonsdale v. United States, 919 F.2d 1440, 1448 (10th Cir. 1990)(the following arguments are completely lacking in legal merit and patently frivolous: (1) individuals ("free born, white, preamble, sovereign, natural, individual common law 'de jure' citizens of a state, etc.") are not "persons" subject to taxation under the Internal Revenue Code; (2) the authority of the United States is confined to the District of Columbia; (3) the income tax is a direct tax which is invalid absent apportionment; (4) the Sixteenth Amendment to the Constitution is either invalid or applies only to corporations; (5) wages are not income; (6) the income tax is voluntary); United States v. Studley, 783 F.2d 934, 937 (9th Cir. 1986); United States v. Buras, 633 F.2d 1356 (9th Cir. 1980); United States v. Neff, 615 F.2d 1235 (9th Cir. 1980).
 
3. United States v. Kruger, 923 F.2d 587, 587-88 (8th Cir. 1991)("The Krugers' principle argument below and on appeal is that the Thirteenth, Fourteenth, and Fifteenth Amendments to the United States Constitution unlawfully purported to bestow citizenship upon non-white races and other 'artificial statutory persons.' This argument is absurd").

 

Perhaps the most famous "Wangrudite" was John Cheek, whose criminal conviction went to the U.S. Supreme Court; see Cheek v. United States, 498 U.S. 192, 111 S.Ct. 604 (1991). John sent to me copies of his motions and briefs that he filed in his case, one of which was just a single page motion which in essence stated that he could not be prosecuted because he was not a 14th amendment citizen. Naturally, such a non-substantive motion was denied. Cheek's appeal would have involved this argument if he had reached the conclusion that it had merit. However, the only issue which was decided in the appeal to the Supreme Court regarded the validity of the "willfulness" jury instruction given at trial.

 

XVII. Implementing regulations:

 

United States v. Hartman, 915 F.Supp. 1227 (M.D.Fla. 1996): argument regarding implementing regs and the cross references in CFR index held frivolous.
Stafford v. CIR, TCM 1997-50.

 

XVIII. Taxes are contractual:

 

    In McLaughlin v. CIR, 832 F.2d 986, 987 (7th Cir. 1987), this argument was held to be without merit.
 
XIX. SIMPLE FACTS REGARDING "SUBJECTS OF THE BRITISH CROWN" ISSUE

 

1. The Articles of Confederation provided as follows:

"Article II. Each state retains its sovereignty, freedom, and independence, and every Power, Jurisdiction and right, which is not by this confederation expressly delegated to the United States, in Congress assembled."

2. Our country and the British Crown signed the Treaty of Peace on September 3, 1783, the first provision of which reads as follows:

"His Britannic Majesty acknowledges the said United States, viz, New-Hampshire, Massachusetts-Bay, Rhode-Island and Providence Plantations, Connecticut, New-York,  New-Jersey, Pennsylvania, Delaware, Maryland, Virginia, North-Carolina, South-Carolina, and Georgia, to  be free, sovereign and independent States; that he treats with them as such; and for himself, his heirs and successors, relinquishes all claims to the government, proprietary and  territorial rights of the same, and every part thereof."

 

Does this 1783 Peace Treaty still exist? All one needs to do to confirm this is to check out a government  publication  entitled  "Treaties in Force"  which  can be found  in any  good library, especially a university library. Under the list of our treaties with Great Britain and the United Kingdom,  you will find that this 1783 treaty is still in effect, at least a part of it: "Only article 1 is in force." The War of 1812 resulted in modifications of this treaty and so did later treaties.

3. The courts have not been silent regarding the effect of the Declaration of Independence and the Treaty of Peace. For example, the consequences of independence was explained in Harcourt v. Gaillard, 25 U.S. (12 Wheat.) 523, 526, 527 (1827), where the Supreme Court stated:

"There was no territory within the United States that was claimed in any other right than that of some one of the confederated states; therefore, there could be no acquisition of territory made by the United States distinct from, or independent of some one of the states.

"Each declared itself sovereign and independent, according to the limits of its territory.
"[T]he soil and sovereignty within their acknowledged limits were as much theirs at the declaration of independence as at this hour."

In M'Ilvaine v. Coxe's Lessee, 8 U.S. (4 Cranch) 209, 212 (1808), the Supreme Court  held:

"This opinion is predicated upon a principle which is believed to be undeniable, that the several states which composed this Union, so far at least as regarded their municipal regulations, became entitled, from the time when they declared themselves independent, to all the rights and powers of sovereign states, and that they did not derive them from concessions made by the British king. The treaty of peace contains a recognition of their independence, not a grant of it. From hence it results, that the laws of the several state governments were the laws of sovereign states, and as such were obligatory upon the people of such state, from the time they were enacted."

In reference to the Treaty of Peace, this same court stated:

"It contains an acknowledgment of the independence and sovereignty of the United States, in their political capacities, and a relinquishment on the part of His Britannic Majesty, of all claim to the government, propriety and territorial rights of the same. These concessions amounted, no doubt, to a formal renunciation of all claim to the allegiance of the citizens of the United States."

Finally, in Inglis v. Trustees of the Sailor's Snug Harbor, 28 U.S. (3 Peters) 99, 120-122 (1830), the question squarely arose as to whether Americans are "subjects of the crown," a proposition flatly rejected by the Court:

"It is universally admitted both in English courts and in those of our own country, that all persons born within the colonies of North America, whilst subject to the crown of Great Britain, were natural born British subjects, and it must necessarily follow that that character was changed by the separation of the colonies from the parent State, and the acknowledgment of their independence.

"The rule as to the point of time at which the American antenati ceased to be British subjects, differs in this country and in England, as established by the courts of justice in the respective countries. The English rule is to take the date of the Treaty of Peace in 1783. Our rule is to take the date of the Declaration of Independence."

In support of the rule set forth in this case, the court cited an English case to demonstrate that the English courts had already decided that Americans were not subjects of the crown:

"The doctrine of perpetual allegiance is not applied by the British courts to the American antenati. This is fully shown by the late case of Doe v. Acklam, 2 Barn. & Cresw. 779. Chief Justice Abbott says: ‘James Ludlow, the father of Francis May, the lessor of the plaintiff, was undoubtedly born a subject of Great Britain. He was born in a part of America which was at the time of his birth a British colony, and parcel of the dominions of the crown of Great Britain; but upon the facts found, we are of opinion that he was not a subject of the crown of Great Britain at the time of the birth of his daughter. She was born after the independence of the colonies was recognized by the crown of Great Britain; after the colonies had become United States, and their inhabitants generally citizens of those States, and her father, by his continued residence in those States, manifestly became a citizen of them.' He considered the Treaty of Peace as a release from their allegiance of all British subjects who remained there. A declaration, says he, that a State shall be free, sovereign and independent, is a declaration that the people composing the State shall no longer be considered as subjects of the sovereign by whom such a declaration is made."

 

XX. The US is "foreign" to the states.

 

    A popular belief promoted in the freedom movement is the concept or idea that the United States is a foreign sovereign as regards the states. How this idea got started is beyond me because the U.S. Supreme Court and other courts have concluded otherwise; see Clafin v. Houseman, 93 U.S. 130, 136 (1876)("The United States is not a foreign sovereignty as regards the several States"); Severson v. Home Owners Loan Corp., 88 P.2d 344, 347 (Ok. 1939)(quotes Clafin); Bowles v. Heckman, 64 N.E.2d 660, 662 (Ind. 1946)(quotes Clafin); Kersting v. Hardgrove, 48 A.2d 309, 310 (N.J. 1946)(summarizes Clafin); Harrison v. Herzig Bldg. & Supply Co., 290 Ky. 445, 161 S.W.2d 908, 910 (1942)(quotes Clafin); Robinson v. Norato, 71 R.I. 256, 43 A.2d 467, 471 (1945)(quotes Clafin and further states "the several States of the Union are neither foreign to the United States nor are they foreign to each other").

    There are lots of theories which float through the freedom movement and people are very prone to accept any contention or position without question. But if they fail to check out the sources upon which they rely, they run the risk of believing something which has no foundation and will not work in court.
    
   
 

 

 

Dear Willie:

 

I got a Notice of Intent to Levy.  I am judgment proof except for wages and it takes everything I now make to live.  What are my chances of stopping the wolf at the door?

 

Sincerely,  Worried

 

----------

 

Dear Worried:

 

It is good to hear from you.  You have a typical problem that effects many individuals.  I would suggest that you follow these procedures:  Go to my website and click the link to the IRS' website and download the returns for the years in which you have not filed.  If you don't have any records, check out their Statutory Notices; you should be able to get the figures you need.  Get your returns together and fill out the 433A from the IRS' website.  What is the bottom line?  If you don't have too much in the way of excess income, you might consider asking the IRS to write your account off as uncollectable. Remember also, to get the state returns prepared.  The ideal situation is to get the IRS to accept the case as uncollectable because you don't have any assets and your wages aren't enough to give you extra funds.  Then you can sit back and relax and look forward to a Chapter 7 Bankruptcy sometime in the future. You will have to wait at least two years after the returns are filed.    Of course, the IRS' position is that they will not work out a payment plan or they will not take off the levy if the individual doesn't comply; so they require you to volunteer whether or not you owe the tax.  Remember that you simply cannot own property, real estate, etc. and fight the IRS by not paying taxes.  Also, transfers of property for less than market value may be considered by the IRS to be a fraudulent transfer.  So watch out if you are an individual who has property; it's a shame that you got yourself onto the front lines.

 

Whatever you do, don't despair.   The IRS seems to care more about the filing of the "delinquent" returns than they do about collecting money. So, many times, they will be rather decent about taking off the levy and collecting nothing; if the 433A shows an inability to pay.  If your Revenue Officer will not work out a payment plan suitable to you; be sure to ask to see his supervisor. If the supervisor won't listen, then there is the Problem Resolution Office.  I have found them to be very helpful.  And if they don't listen there is the 911 Form and your Congressperson.  You can also file a bankruptcy.

 

Work out the best plan that you can and then start complaining. Filing returns under the conditions above is not really a retreat; it simply makes good sense to give the IRS paper instead of money.  After all, that is what they want anyway.  I do suggest, however, that you give a call for help with these maneuvers.  The cardinal rule to stay out of trouble is this: don't tell any lies and realize that the 433A might mean immediate seizure of assets. Good luck and keep the faith.

 

-------------

Dear Willie:

 

I just did a FOIA request and I found a copy of a Form 4930 in my file.  Can you tell me what that form means?

 

Sincerely, Peter Patriot

 

--------------------

 

Dear Mr. Patriot:

 

The Form 4930 is the IRS Criminal Investigation Case/Project Report Form.  It is used by special agents and other district employees familiar with the facts, to provide case and project information to IDRS terminal operators for input to the system.  The IDRS is the IRS computer system and it has terminals all over the country.  IRS workers can instantaneously retrieve or update stored information and  they can immediately get a video display of project  information stored in their system.

 

The IRS provides case numbers for each person or entity against whom a prosecution may be recommended.   When the Chief, Criminal Investigation Division, or his designate determines that an item has prosecution potential, a Form 4930 will be prepared by the initiating district.  The Form 4930 must be prepared to initiate a project and it should reflect all information that is available at the time of preparation.  In other words, if there is a Form 4930 in your file, it implies that the IRS has initiated a criminal investigation.  You might check to see if there is a Criminal Freeze Code of 914 or a "CRINV-Z" on your IMF Specific.  If there is, then the IRS has frozen data entry to your file and the Criminal Investigation Division has jurisdiction of your case.  Let us know if you want to discuss the issue further.

 

Dear Willie:

 

I filed a return that was normal except that I did not assess tax.  I did however fill in the rest of the return with my deductions and income, etc.  The IRS assessed me a penalty for filing a frivolous return.  What do I do?

 

Sincerely, Non-Frivolous

 

------------

Dear Non-Frivolous:

 

You can pay the $500.00 penalty and file a claim for a refund.  You can use the 843 Form, which you can get a copy of in Chapter RL of the Anti-IRS Technical Manual.

 

Once the IRS denies the claim, you have 30 days to file a refund suit in the District Court.  If you need help, give me a call. If the IRS doesn't answer your refund claim, you have 30 days after the six-month expiration period to file the suit. 

 

 

Dear Willie:

 

I am currently receiving harassment from the collection division.  I never got a Statutory Notice and I was never allowed an audit.  I know that if I did go through an audit I wouldn't owe anything.  I did file returns for the years in question.

 

Sincerely,

 

Harassed

 

-------------------------

 

Dear Harassed:

 

I have heard that story more than once.  It is a very common occurrence.  Actually, the IRS might have messed up their Statutory Notice procedures.  We can find out.  If you are in immediate danger of levy, you might file a 911 Form with problem resolution.  Explain that the IRS never sent you a Statutory Notice.  Then do a FOIA request for all the information in the audit division and the collection division.  We will find out what the IRS did do.

 

If the IRS didn't issue a Statutory Notice, they have problems and you can litigate the issue if the IRS won't back off.  If they did issue a Statutory Notice we can explain the problem and ask for audit reconsideration under Revenue Regulation Section 601.105(j).  We can also request that the IRS rescind the Statutory Notice

 

 

Dear Willie:

 

Does the IRS have the right to audit individuals for expressing ideas that they don't like?

 

Sincerely,  Iconoclast

---------------------------

 

Dear Iconoclast:

 

It has been my experience that the IRS can audit anyone for any reason and get away with it.  Federal law theoretically prohibits the IRS from initiating investigations of anyone unless there is reason to suspect that person has violated, or intends to violate, U.S. tax laws. (26 U.S.C. Section 6103(i)(1) (1986).  However, the IRS has investigated individuals and groups because of their stand.  If you want, you can read the Church of World Peace cases in the Tenth Circuit.  The IRS audited the Church of World Peace because their pastor was critical of them.    Also the IRS has audited numerous groups for First Amendment Activity.   See Intelligence Activities and the Rights of Americans, Book 2, Final Report of the Select Committee to Study Government Operations with Respect to Intelligence Activities, S. Rep. no. 755, 94th Cong., 2d Sess. (1976) at 297-304 (recommendations) note 3 at 53n. 183, citing Memorandum, Attorney Assistant to Commission Director, IRS Audit Division, April 2, 1962; see also David Burnham, A Law unto Itself: Power, Politics and the IRS (1990).

 

The IRS has audited tax returns of people and groups suspected of nothing but engaging in unpopular, though protected, First Amendment expression.  For this reason Congress passed 26 U.S.C. Section 6103(i)(1)(1986).  But in spite of these so- called protections of the law, the government audited individuals simply because they took a trip to Nicaragua. (See Nadine Epstein, "U.S. Border Agents Charged with Rights Abuse," Christian Science Monitor, April 13, 1988; D. Burnham, "Foes of the Reagan Latin Policies Fear They're Under Surveillance," New York Times, April 19, 1985 at B20.)

 

It is my opinion that the IRS will continue to do whatever they want to do and it will be up to you and the rest of us to discover their errors and fight back.  When we get enough of us fighting, things will change.  Thanks for writing, you asked a very good question. 

 

 

Dear Willie:

 

Recently the IRS levied my bank account.  I had just sent some checks in for deposit but they had not yet cleared.  The bank paid the IRS for the checks that had not yet cleared.  Can they do that?

 

Sincerely, Levied

_____________________________

 

Dear Levied:

 

Actually, the bank can do anything it wants to do.  However, if it gives money to the IRS that is not in its possession at the time the levy was issued, you may have a cause of action against the bank.  The liability of a bank under a levy upon a delinquent taxpayer is limited by the amount of funds on hand at the time  of the levy so that if the funds of the taxpayer are subsequently reduced below  the amount claimed in the notice of levy, the bank will be held liable for the amount withdrawn. (See Commonwealth Bank v. U.S., 115 F.2d 327 (CCA6, 1940); Citizens and Peoples Nat. Bank of Pensacola v. U.S., 570 F2d 1279 (CA5, 1978).  The levy extends only to property possessed at the time of the levy, which is the property of the taxpayer and in possession of the person on whom the levy is made, (IRC Section 6331(b); HR Rep No. 1884 89th Cong. 2d Sess 57. I hope that helps to answer your question.  If not give me a call?

 

 

 

Dear Mr. Bankruptcy Expert:

 

I attended you seminar in Denver on Bankruptcy and I really enjoyed it. You are a great speaker and you put together an excellent book.  Considering the recent activity of the IRS, I am sure that it will become a bestseller.  I referred two individuals in your area to you last week.  Hope you can help them.

 

I have several questions that I hope you can answer.

 

1.  I asked you if a Tax Court proceeding would extend the three year statute for bankruptcy.  You said, I believe, that it would not.  Elliot says that it will extend the three year statute on page 12-26 of his book (Exhibit attached). Could you clarify? How about the 2 year statute for the filing of a return?

 

1.  Answer:  Eliot is partially correct.  As I indicated to you the discharge provisions for income taxes are found in the Bankruptcy Code, Sections 523 and 507.  The basic theory is that income taxes:

 

     a.  with a due date more than three years before the bankruptcy petition;

 

     b.  assessed more than 240 days before the bankruptcy petition; and

 

     c.  for a non-fraudulent tax return filed more than two years before the bankruptcy petition   will be discharged in a Chapter 7 bankruptcy.

 

Thus, a Tax Court proceeding will not affect the so called "three year rule" because the due date of the tax return does not change whether or not you're in Tax Court.  The same thing is true for the "two year rule" because when a tax return is filed is ordinarily not effected by whether or not you are in Tax Court.  However, if a taxpayer is in Tax Court taxes generally cannot be assessed.  Thus, until an assessment is made, the 240 days cannot begin to run.

 

 

2.  Also, does the filing of a 911 Form stay the statute for the filing of a bankruptcy during the time it is pending?  Does it stay either the 3 year or the 240 day statute?

 

2.  Form 911, Taxpayer Assist Order (TAO) operates only to suspend the IRS statute of limitations not any Bankruptcy Code provisions.  Indirectly this could happen however if a tax is not assessed and a taxpayer gets a TAO, then the statute of limitations on assessment would be suspended and the 240 day period does not begin to run.

 

3.  I am now very confused on the issue of the 2 year statue for filing a return.  The Revenue Manual Section that you placed in your book seems to say that if an assessment is over one year old on a three year old tax, that the returns don't have to be filed for two years.  However, the statute seems to say that the returns do have to be filed for two years.  You gave an example of a situation where you file returns the day of the Chapter 13 providing the tax was three years old and I understood you to say that the tax could be bankrupted (as non- priority) even though the returns were filed less than two years before the bankruptcy was filed.  If a guy has five years of taxes due that are three years old with a 240 day assessment period present, then he should be able to discharge those taxes according to disposable income. But what if he has three years outstanding that are less than three years old and the IRS raises that issue in the confirmation hearing or puts in a proof of claim? Does the filing of the bankruptcy prevent the IRS from raising the issue of the priority taxes for the current three years?  If so, I assume you can take advantage of the stay during the 3 year period and when the bankruptcy is over that you can ask for immediate assessment wait 240 days, and then file another Chapter 13 on the newest three years.  The question is then does a current Chapter 13 prevent the 3 year statue from running toward the subsequent Chapter 13 since the IRS presumably cannot collect on the current three years during the first Chapter 13?  (I am thinking in terms of the rationale in Federal Tax Collections attached).

 

 

3.  I'm not certain I understand your question.  Let me say this.  Chapter 13 can be used to discharge income taxes even where no returns were filed by the taxpayer. Our procedure is to file the income tax returns on day 1 and on day 2 or 3 (before they are assessed) to file the Chapter 13.

 

          As to the so-called "three year rule" in my opinion it is not tolled by a Chapter 13 petition.  The IRS and some courts do not agree. Whether or not IRS could collect is irrelevant.  The only question is: Are they a priority creditor at the time the Chapter 13 petition is filed?

 

          If you have any questions relating to a specific fact pattern in the future, please feel free to send it to me. Incidentally, I may incorporate your notion of a question and answer section in the future revisions to the book.

          -------------------------

          As you can see, even Willie has to ask questions, but that is how we learn.  The issue of bankrupting taxes is very important because it is one of the only ways individuals can escape from the abject poverty created by a Federal Tax Lien. As you can see from this Dear Willie article, you do have to know what you are doing.

 

 

 

 

 

Dear Willie:

 

I have two very important questions that I hope you can answer.

 

     1.  What is the best way to let the IRS know that I have a change of address?

 

     2.  How can I prove that I filed back tax returns for purposes of the bankruptcy?

 

Sincerely,

 

Mr. Question

________________________

 

Dear Mr. Question:

 

Thank you for writing.  Your questions, although fairly simple are something that many people overlook and it costs them a lot for doing so.

 

     1.  In response to your first question.  The IRS has a form 8822, which is used to tell them about a change in address. .  Get the form from the IRS' website, which is linked, to my website at anti-irs.com and make copies.  Fill it out and mail it by certified mail to the appropriate service center listed on the back of the form.  Be sure to keep the return receipt and a copy of the form you sent in case they mess up and send a Statutory Notice to the wrong address.

 

     2.  In response to your second question: It is my opinion that the IRS deliberately trashes late filed returns so that they can prevent people from bankruptcy.  You must be sure that you can prove that you filed.  Therefore, you must do the following:

 

         A.  Send your returns in by certified mail return receipt and send each return in a separate envelope.  When you get the receipts back, staple them to the returns; make copies, and keep at least two copies of the returns in two different places so you don't lose them. Alternatively, you can hand-deliver the returns to the IRS and get a stamp on your copy.

 

          B. One Month after you file, get in Chapter FO in the Anti-IRS Technical Manual and get out a copy of form 4506. Send in Form 4506 and ask for copies of your past tax returns that you recently filed. When you get the copies, make another copy and file them in two separate places so you don't lose them.  If the IRS claims you didn't file then you can immediately send the returns to them again.

 

           C.  After you get copies of the returns, do a FOIA request to the IRS to get your IMF.  If the returns are not listed as filed, then send copies of the returns that the IRS stamped as filed and ask them to record the returns on your IMF per the date they were originally filed.

 

            If you do not take the above precautions, the IRS may claim that you never filed your back returns and attempt to keep you from completing a successful Chapter 7 Bankruptcy against them. Sincerely,  Willie

THE DOCUMENT LOCATOR NUMBER (DLN) AND THE IMF

 

 

 

 

     If you will take a look at your IMF, you will very possibly see a lot of document locator numbers. Documents are identified with a Taxpayer Identification Number (TIN) and they have a Document Locator Number "DLN." The DLN is a part of the Automatic Data Processing System (ADP).

 

     The Document Identification Number is a fourteen-digit number. Every document that enters in the IRS system is classified with a DLN. The DLN tells exactly what the document is and identifies the location and origin of the document as well as the date it was prepared and the individual who prepared it.

 

     The fourteen digits are coded as follows:

 

     a.  The first two digits consist of the filing location code. Generally, this is the Service Center or the district office.

 

     b.  The third digit is the tax class.

 

     c.  The fourth and fifth digits are document codes.

 

     d.  The sixth, seventh and eighth digits are the control or Julian dates. These are calendar dates based upon the Julian Calendar.

 

     e.  The ninth, tenth and eleventh digits are the block number.

 

     f.  The twelfth and thirteenth digits are the document serial

numbers.

 

     g.  The fourteenth digit is the processing year.

 

     Anyway, for those of you who have your IMF, now you know something about what it means.  Good luck.

 

BANKRUPTCY AND THE GOVERNMENT'S

MOTION TO DISMISS FOR BAD FAITH

 

 

     Many individuals have been attacked by the IRS and have been placed in a position that makes it impossible for them to live. Certain of these individuals have realized that it is important for them to use bankruptcy as a means of self-defense.

 

     It is commonplace for the IRS to ask for a dismissal for bad faith.  Recently in Denver, I watched a judge dismiss a Chapter 11 Bankruptcy by declaring that he agreed that the bankruptcy filing was in bad faith.  The judge made the decision in spite of the fact that the debtors had filed all their back returns and had come forth with all income information.  I was absolutely astounded at the court's decision in view of the intended purpose for a bankruptcy court.

 

     The dismissal of your case for bad-faith is a definite risk; however, there is light at the end of the tunnel.  I have come into possession of a Bankruptcy Court Order filed on October 31, 1988, which deals with the issue of bad-faith.  The court stated:

 

     "The debtor filed bankruptcy to escape the consequences of an IRS tax levy which resulted in seizure of a van he drove and garnishment of all his wages except $75.00.  This filing is not an abuse of the bankruptcy system.  As far as I know, no one can live on $75.00 per paycheck and this alone would necessitate for most individuals a bankruptcy filing.

 

     The debtor's plan proposes to pay the Internal Revenue Service's entire priority claim (as the debtor calculates it at least) and to pay 3.3 percent of the IRS's unsecured claims.  The IRS argues that a one creditor Chapter 13 which pays a de minimus amount to the creditor violates the good faith plan requirement of 11 U.S.C. 1325(a) (3).  I do not find that this filing is outside the purposes of the Bankruptcy

Code. There is no preclusion of one-creditor Chapter 13 plans, In re March, Id., at p. 276.  The fact that some or all of the IRS's claim would be nondischargeable in a Chapter 7 case does not make the filing of a plan in Chapter 13 a "bad faith" filing.  In re Owens, 82 B.R. 960, 963 (Bankr. N.D. Ill. 1988)."

 

     As you can see, at least this Bankruptcy judge realizes that the protection of the Bankruptcy Court is necessary for the protection of debtors.

 

Bankruptcy Issues

 

      Remember that the Offer in Compromise tolls the period during which the 240-day period is tolled.  The Bankruptcy Code 507(a)(A)(8)(ii) provides that the 240-day period is tolled during "... any time plus 30 days during which an offer in compromise with respect to such tax...was pending."  The Offer in Compromise is pending during the appeal for purposes of the Bankruptcy Code.  If you have filed an offer in compromise with an appeal, be careful because the appeal is included in the time that the offer in compromise is pending.

 

      There is substantial case authority that a previous bankruptcy extends the time periods for dischargeability of taxes during the time that the bankruptcy is pending plus six months.  Remember that a tax lien survives bankruptcy on exempt assets. See In re Forrest 220 B.R. 411 (Bkrtcy.W.D.Okla.1997).  In the case of In re Genung, 220 B.R. 505 (Bkrtcy.N.D.N.Y. 1998), the court ruled that the debtor's appeal of IRS' rejection of the offer in compromise tolled the 240-day priority period for purposes of discharge.  In the case of In re Odell, 221 B.R. 1000 (Bkrtcy.M.D.Fla. 1998), the court held that the suspension provision of 11 U.S.C. 108(c) operates to extend only nonbankruptucy periods of limitations and cannot be used to extend the 240-day priority/nondischargeability period for tax debts.  In the case of In reBurke, 146 F.3d 1313 (11th Cir. 1998), the court ruled that the state waived sovereign immunity by filing a proof of claim in a Chapter 7 case.  In the case of In re Holowell, 222 B.R. 790 (Bkrtcy.N.D. Miss 1998), the court ruled that the two-year period for tax return filing for purposes of the discharge of the tax was tolled during the debtor's prior Chapter 7 case.  The ten-year statute of limitations for collection of income tax was tolled for the period debtor was in Chapter 7, plus additional time, notwithstanding an agreement signed by the taxpayer extending the limitations period to a certain date.  See In re Klingshirn, 147 F.3d 526 (6th Cir. 1998).

 

      In the case of In re Pascoe, 223 B.R. 574 (Bkrtcy.D.Wyo. 1997), the debtor failed to file tax returns, the assessments against the debtor were based on the BLS Statistics.  The burden of proof is on the taxpayer to show that the amount which is sought by the IRS in its deficiency assessment is erroneous in order to overcome the presumption of correctness.

 

      Here is an interesting case: In U.S. v. Ashe, 98-2 USTC 85,695, the court ruled that the debtor's furnishing of schedules contained sufficient information upon which the IRS could make an assessment constituted a tax return for purposes of dischargeability. 

 

      A prior bankruptcy stops the clock on 3-year, 2-year and 240-day rules.  See In re Brickley, 70 B.R. 113 (9th Cir. BAP 1986); Matter of Ross, 130 B.R. 312 (Bkrptcy (Neb. 1991), U.S. Worthen 137 B.R. 1016 (DC Ore. 1992), In re Deitz, 116 B.R. 792 (Bkrptcy D. Colo 1990), Matter of Stoll 132 B.R. 782 (N.D.Ga. 1990), In re Tibaldo 187 B.R. 673 (Bkrtcy.C.D.Cal. 1995), In re Tesslink, 165 B.R. 708 (Bkrtcy.S.D.Ga. 1994), In re Zecco, 211 B.R. 109 (Bkrtcy.D.Mas. 1997), Montoya v. United States, 965 F.2d 554 (7th ir. 1992), In re Waugh, 109 F.3d (3rd Cir. 1997), In re Taylor, 81 F.3d 763 (10th Cir. 1993) (relying on equitable tooling), In re Genung, 220 B.R. 505 (Bkrtcy.N.D.N.Y. 1998), In re Thomas, 222 B.R. 742 (Bkrtcy.E.D.Pa. 1998), In re Affiliated Food Stores, 222 B.R. 799 (N.D.Tex. 1988), In re Hollowell, 222 B.R. 602 (Bkrtcy.S.Fla. 1998), In re Collins, 223 B.R. 372 (Bkrtcy.M.D.Fla. 1998). 

 

History of the Early Freedom Movement

 

      The Anti-IRS News has previously featured articles about the early Freedom Movement. The history continues in this article.  Robert B. Clarkson of the Patriot Network was one of the early freedom fighters.  He founded the Patriot Network in 1976; the object of the network was to preserve the constitution. Clarkson was a Vietnam Vet and he had a law degree from the University of South Carolina. The Greenville News carried an article about him published on November 27, 1979 regarding an IRS audit. When an IRS Agent called to conduct an audit, he offered her an uncomfortable chair while he and a witness had comfortable seats.  When he attempted to record the meeting, the IRS Agent fled and the conference was over. 

 

      Clarkson was one of the first leaders in the Freedom Movement who provided information to confront the Internal Revenue Service.  He provided much of the early information regarding quashing subpoenas, tape recording meetings, etc. Clarkson succeeded in tying up the courts so well on the third party summons issue that Congress changed the law and made it much easier for the government to get records.  For several years he published a newsletter called the Patriot Cannon, Booming for the Tax-Patriot Movement which featured news concerning his Network. Clarkson used various techniques of delay and he taught individuals to make the IRS spend a lot of money in their quest against the American citizen. Clarkson stated in an early issue of the Patriot Cannon why he refused to pay income taxes:

 

      "Since I closed all of my bank accounts in November, 1977, I have been outside the jurisdiction of the IRS-Federal Reserve-Rockefeller Cabal. Our enemy has no control over us unless we voluntarily submit ourselves to his jurisdiction.

 

      Since I have removed myself from one division of the Federal Reserve, i.e., the Banks, and no longer have a privilege, i.e., a checking account, I have automatically removed myself from the other arm of the Federal Reserve, the IRS.

     

      My allegiance is to God, Family and Country.  The Washington regime is ungodly; one that no religious man could support.  My tithe is to my church, to my churches' charity, not to the satanic wastrels, scoundrels, and politicians in the Babylon on the Potomac.

 

      I must be prepared to support my family, not depend on the good will of lying bureaucrats, thousands of miles away.  To provide for my family's future, I need to store survival food now, survival guns, and survival currency, and not to send any more hard-earned dollars to their bankrupt Ponzi scheme.

 

      When I joined the Army in 1967, I took an oath to support and defend our Constitution from all enemies, both foreign and domestic.  I reaffirmed that oath in August 1969, when I accepted a commission in the U.S. Army.  As yet, I have not been released from the solemn swearing.

 

      Sending Federal Reserve Notes to Washington's bloated bureaucracy is financing the destruction of our country, making more funds available to the welfare industry to increase the open-ended obligations to society's parasites."

     

      The Patriot Cannon stopped publishing in 1981 and the Federal Criminals sent Robert off to prison for income tax evasion.

 

      Another great Patriot from the early years is George Hansen: the courageous congressman from Idaho.  Although there were other congressmen who criticized the IRS in the past, George Hansen was probably the most outspoken critic before the current attack on the IRS.  He wrote a book entitled, To Harass Our People, which he published in 1980.  Hanson said that the people of the United States are afraid and frightened by the runaway agency.  He pointed out in his book that: Only the IRS can attach 100 percent of a taxpayer's wage, salary, and/or property.  Only the IRS can invade the privacy of a citizen without a court order.  Only the IRS can seize property without a court order.  Only the IRS can force a citizen to try his case in a special court governed by the IRS.  Only the IRS can compel production of documents, records, and other material without a court case being in existence.  Only the IRS can with impunity publish a citizen's debt to the IRS.  Only the IRS can legally, without a court order, subject citizens to electronic surveillance.  Only the IRS can force a waiver of the Statute of Limitations and other citizen rights through the power or arbitrary assessment.  Only the IRS uses extra-legal coercion.  Threats to witnesses to examine their taxes regularly produce whatever evidence the IRS dictates. Only the IRS is free to violate a written agreement with a citizen.  Only the IRS uses reprisals against citizens and public officials alike.  Only the IRS can take property on the basis of conjecture.  Only the IRS is free to maintain lists of citizens guilty of no crime, for the purposes of harassing and monitoring them.      ONLY THE IRS PUBLICLY ADMITS THAT ITS PURPOSE IS TO INSTILL FEAR INTO THE CITIZENRY AS A TECHNIQUE FOR PERFORMING ITS FUNCTION.

 

      Hanson said that the IRS "is an extraordinary example of the age-old adage that the 'end justifies the means.' The means used by the Agency is growth.  In fact, it has a pathological fixation for growing, for consuming.  The IRS reminds me of a tasteless parody of bad science fiction--a monstrous organism from another planet bent on devouring all within its path until its swelling protoplasm finally fills the entire earth."

 

      Hanson did such a good job of showing how corrupt the IRS is that the agency attacked him on a technicality.  He was tried and found guilty and sent off to prison. The government simply incarcerates its vocal critics. That is how our government works and that is how it keeps the sheep lining up for the slaughterhouse each April 15.

 

      Another important figure from the early years of the Freedom Movement is Dr. Cleon Skousen.  Dr. Skousen founded the Freeman Institute, which is located in Salt Lake City.  Dr. Skousen received his jurs doctorate from George Washington University and he practiced law in the District of Columbia.  He was chief of police in Salt Lake City from 1952 to 1956 and he taught law at the BYU from 1956 to 1979.  He has written many books on history, economics and law and he is especially well known for his excellent material that explains the United States Constitution.

Trusts and the IRS

 

      The IRS takes the following position toward the trusts that are being set up by many groups across the country:

 

      "When trusts are used for legitimate business, family or estate planning purposes, either the trust, the trust beneficiary or the transferor to the trust, as appropriate under the tax laws, will pay the tax on the income generated by the trust property.  In the abusive trust arrangements, presently being marketed as tax avoidance vehicles, the original owner of the assets effectively retains authority to cause the financial benefits of the trust to be directly or indirectly returned or made available to the owner.  These arrangements seek to reduce or eliminate the purchaser's tax liability without reducing real income or the taxpayer's control over the income or property.  This type of arrangement is not permitted under Federal tax law.

 

      Several well-established tax principles control the proper tax treatment of these abusive tax arrangements.  If the person who transferred property into the trust (called the 'grantor') retains control over the trust property or income, then that person will be taxed on the income.  I.R.C.671-679; and Wesenberg v. Commissioner, 69 T.C. 1005 (1978).  Under the substance over form doctrine, the abusive trust arrangements may be viewed as sham transactions, and the IRS may ignore the trust and its transactions for federal tax purposes.  See Markosian v. Commissioner, 73 T.C. 1235 (1980); and Zmuda v. Commissioner, 731 F.2d 1417 (9thCir. 1984).  If the trust is not a sham and is not a grantor trust, the trust is taxable on its income, reduced by amounts distributed to beneficiaries.  See Sections 641, 651, 652, 661, and 662.  Alleged charitable payments made by the trust, which in substance are for the benefit of the owner or the owner's family members, are not deductible charitable contributions. See, e.g. Fausner v. Commissioner, 55 T.C. 620 (1971).  The courts have consistently held that non-deductible personal expenses cannot be transformed into deductible expenses by the use of trusts.  See e.g., Schulz v. Commissioner, 686F.2d 490 (7th Cir.1982); Neely v. United States, 775 F.2d 1092 (9th Cir. 1985). In addition, transfers to a trust may be subject to gift taxes and/or the property may be included in the grantor's estate upon death.

 

      The courts have sustained the imposition of civil or criminal penalties against taxpayers who attempt to use trusts to evade tax liability as well as against the promoters who sell these arrangements.  Accordingly, in addition to disregarding the trust entity, the Government may pursue civil and criminal penalties against such taxpayers and promoters.  See, e.g. Wesenberg, supra; United States v. Buttorff, 761 F.2d 1056 (5th Cir. 1985); United States v. Krall, 835 F.2d 711 (8th Cir. 1987); and Zmuda, supra."

 

      If you have been sold a common law or pure trust and the promoter took the position that you can receive expenses from the trust and that the payments are non-taxable; and that the trust is not required to file returns and pay taxes, please pay attention to the discussion quoted above.  The IRS may attack your trust in the future.