THE INCOME TAX CHALLENGE

Hello everyone. Welcome to our program today wherein we reveal information that challenges the
popular narrative about federal and state income taxes. Many of the tax researchers who comprise
the Tax Honesty Movement share a general consensus that the Constitution does not authorize
“income taxes” on the American people’s earnings from private-sector-common-right occupations
and affairs. Alas, Constitutional arguments have not had success with collectors, or in tax courts -
thus many inquisitive minds shied away from prying further behind the income tax curtains.
Discouraged by decades of administrative and court failures, most tax honesty researchers blame
the tax attorneys, CPAs, tax preparers or other such tax professionals, and also the IRS or State tax
collectors and tax judges, for miss-interpreting, miss-applying and miss-enforcing the income tax.
Our guest today, David William, is the only income tax researcher and consultant I know of, who
claims that his clients consistently get the IRS to agree they have a zero income tax liability - and
thus no court battle ensues. While David agrees that the tax honesty group is correct in their
analyses of the Constitutional perspective, and that most tax professionals do misinterpret the
income tax codes, he discovered that the collectors and the judges are actually correct from the
legal perspective. They operate in a Buyer Beware realm where ignorance is no excuse for
incurring legal obligations, even in error, regardless of one’s heeding the advice of some tax
professional to write their name and a SSN on tax forms, and sign under penalties of perjury.
David also agrees that the codes are a crafty weaving of words and terms into a legal-lobster-trap.
But his solution is, “The way in, is also the way out” – which requires understanding of how one
incurs income tax liabilities, and how to navigate through the inward pointy path to exit, before
being rigged onto the courts’ decks for justiciable parsing and served on a menu of precedent cases.
In today’s presentation he will update the solutions presented in his older reports and interviews,
and go much deeper into details about the income tax legal entrapment scheme. We shall also
analyze the most common misperceptions that have blinded the tax honesty researchers from
seeing how the income tax liability and obligations are ignorantly, yet legally incurred.
To keep it all organized, in Part 1 we compare the work of several tax honesty researchers and
their methods against the primal court cases about income taxes, and we also expose the legal
scheme behind the creation of liability. In Part 2 we go over key definitions and their contextual
implications. In Part 3 we expose some of the truths and tricks in the IRS’s frivolous arguments
publication, and in Part 4 we discuss solutions, David’s services, and meet some of his clients
who graciously agreed to be interviewed.
We strongly advise resisting the temptation to skip to Part 4 without first understanding the
foundations provided in Parts 1, 2 & 3.
So, without any further a due, Hello David! - Thank you for agreeing to this in-depth analyses
which I believe is necessary to help shift the tax paradigm not only for newbies, but also for those
who fell deep in the tax collection trenches by committing themselves to faulty un-taxing methods
promoted by other tax researchers. Now, with the understanding that this presentation may not be
construed as legal advice, and scrupulously guarding against redundancies with your reports and
previous interviews, let’s dive into Part 1.

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 PART 1 – Comparative Analyses
Q001: Who influenced your learning about taxation?
A001: 1) Larken Rose at first, Family Guardian/SEDM, then later on Pete Hendrickson. Boston T. Party,
The Informer, Frank Kowalick (IRS Humbug), Pat Patton. And even some pretty-much normie
tax authors such as Daniel Pilla, Frederick W. Daily (Stand Up to the IRS). Most people may not
know who Pat Patton is. He wrote the book IRS: Liars, Thieves, Thugs, Cowards and Hypocrites.

2) I have managed to get some hard to find books along the way. Pat Patton really hammers home
the point that no tax liability exists until an assessment is made -- and that assessment must be
procedurally proper and cannot be arbitrary. I have been researching the standard for arbitrary
assessments established by the courts to see if we can force the IRS to abate a tax and/or release a
lien etc., when they refuse to do so.

3) Another good author is Daniel Pilla. He is pretty much normie in his viewpoint, but I learned a
LOT from his books about HOW the IRS works. Also if you read between the lines on some things
he writes, I think he understands that the 3rd party’s “gross income” reporting is mostly a SCAM.
He actually suggests in one of his books that if you disagree with a 3rd party information return
you can dispute that info on your return, and the IRS would then have a duty to investigate that
information return to verify it is correct. He does not go into details on that. He just mentions
it in passing. But he does say: if the information truly is false, it will be impossible for the IRS to
verify that information so as to provide a valid signed summary of assessment!

4) I think Daniel Pilla is a better writer than most of the authors of the tax books I have read. He
helps dial down the fear by saying things like "you are not going to be dragged off to a dungeon
in the middle of the night for ‘making the IRS mad’". That is something many people need to hear!
He also says that you are not going to jail unless you deliberately set out to cheat the IRS. This is
something I really emphasize - what is in your heart really matters. My clients learn enough to
genuinely have confidence in what we are doing. Unless you really know and believe in it, it will
cause you sleepless nights. No amount of money saved on taxes is worth giving up your peace of
mind.

Q002: How did you arrive at the solutions you advocate today?
A002: 1) Studying approaches that don't work - which is all of them when it comes down to it. Especially
examining Pete Hendrickson's court battles (and his wife's) and realizing that there is actually a
hidden contractual element that creates the liability - which is the missing piece and the reason a
lot of the faulty un-taxing approaches end up in a losing battle.

2) I’ve seen Aaron Russo’s movie Freedom to Fascism where they showed how Irwin Schiff was
on trial and started to argue the Constitution, and the judge on the record said repeatedly -
"irrelevant!" -

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 While that sounded shocking, I wanted to see if I could find a way that the judge was NOT just
being arbitrary but had a valid legal reason for saying that. Many tax researchers seem to get off
track by settling for easy answers like, "the judge is just ignoring the law!"

3) It made more sense to me that the judge would not say something like that unless he KNEW
that the applicable law was on his side. So I began to see that this somewhat fit the model of an
"invisible contract" as described by George Mercier in his book of the same name.

4) Once I figured that out, I could see why Pete's approach does not work, and it was easier to pick
apart every other method and see why they don't work either, when it comes down to it. And by
that I mean: any method where you are essentially “hoping” the IRS does not come after you.
Well, what if they do? Most methods out there have no answer…

Q003: I’m looking forward to your picking apart some of the other methods - but Pete has shown on his
site many people’s refund checks as proof of "success" for those who followed his method. Why
or when did you conclude that his approach does not work?
A003: 1) When I experienced its failure myself, and also when Pete went to prison for filing false returns.
I even emailed him back and forth for a while a few years back, trying to help him get his sentence
vacated, and he was very interested. But eventually he reverted back to his "I'm right and everyone
else is wrong" mentality. His wife went to prison too. If that won't make someone willing to
listen, I don't know what will. He is either a compromised shill/honey-pot, or he is just his own
worst enemy.

2) I learned a lot from him, but I strongly advise against following his repeatedly debunked filing
method which now has its own category in the Internal Revenue Manual for recognizing a possibly
frivolous tax return.

Q004: So, you did find some of Pete’s research to be valuable!

A004: 1) Absolutely. Pete seems to have been influenced by Otto Skinner who wrote some really good
books about the income tax in terms of it being a tax on certain ACTIVITIES and not on money
or income per se. Pete’s book, Cracking the Code, is a rather difficult read, but it explains the
origins of the U.S. income tax very well, and what it is really supposed to be taxing; also the limits
on Congressional taxing power; and especially how to read the law the way the Courts do,
particularly the statutory definitions of terms in the Code.

2) Understanding the definitions of just a few key terms can help you unravel the whole SCAM
pretty quickly.
3) The government cut through Pete like a hot knife through butter in court. His returns were found
to be false as an objective matter of law. He tried to argue about the definition of "wages" to the
jury, but the Court would not allow it because juries decide the facts, and the law of the case is
given to them by the judge. The only question for the jury was whether Pete had WILLFULLY
filed a false return. They decided YES – So, I was interested in HOW and WHY the judge decided
as a matter of LAW that his returns were objectively FALSE.

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 4) Pete tried to get his case dismissed at one point by arguing he is not a "person" as defined for
purposes of the Code provision under which he was being prosecuted. The court took six months
to come back with a denial of his motion to dismiss. I talked extensively with Pete via email about
this. He was convinced (or at least said he was) that the judge had ruled that EVERYONE is an
"individual" and therefore a "person" under the general definition in the Code at 7701. But what
the judge actually said in the ruling is that "individuals SUCH AS DEFENDANT” are "persons"
within the meaning of the provision of the Code he was being prosecuted under---6671(b).

5) The judge did NOT say that everyone is an individual or a person - he said “Individuals SUCH
AS defendant"- the case concerned ONLY Pete - which means there is something about THIS
defendant in particular that MAKES him an individual and a person as defined. This helped me
to see the CONTRACTUAL element at work

Q005: So, do you want to elaborate more on Pete and the contractual aspect?
A005: 1) Yes. Pete THOUGHT that he could ARGUE the definition of "wages" in court to make it self-
evident that he was not liable for any tax. This failed miserably, because he failed to understand
how his tax liability was actually already established by not having properly refuted the evidence
in the administrative record. He failed to see how his Cracking The Code returns were deemed to
be OBJECTIVELY false on their face as a matter of law.
2) Every income tax case concerns ONLY the particular year, taxpayer, and the IRS. It is treated
exactly like a contract dispute. They do set precedents with these cases when unique matters of
fact or law come up, but a case is binding on another case ONLY where the facts are substantively
the same.
3) And this is where frivolous arguments come in. Every argument you can think of has already
been tried and shot down in court – and rightfully so, I might add.
4) When the evidence before a court says there is a LIABILITY you have incurred, there is NO
ARGUMENT that will get you out of that liability without your evidence being already in the
administrative record that properly rebuts the IRS evidence. Contracts are ancient and have to be
binding - or our civilization could not exist. So no judge is going to let anyone get out of an income
tax liability they have incurred by failing to properly refute it administratively.

5) I want to also mention that CTC returns filed by OTHER Pete followers show up in the case
law, and they are now universally deemed invalid returns - if not frivolous.

6) I myself got hit with frivolous penalties for the CTC styled returns I filed. The IRS also audited
one of them and assessed additional tax based on the W-2 information.

7) Pete claims this never happens or that this type of thing is "very rare". Yet he bans people from
his forums who mention this happened to them, so his followers get the message not to bring it up.

8) 100% of the CTC style returns I filed ended up causing me lots of trouble. And they were
accepted initially -- I even have refund checks posted on Pete's site.

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 9) The rate of those refund checks has slowed to a trickle over the years. His approach seems to
be most successful for first-timers getting a refund up front. The other shoe tends to drop within a
year or so. The return gets flagged for an audit because the IRS computer catches the weirdness
of a withholding refund while claiming a $0 gross income.

10) The flagging by the computer means an examiner looks back over the return. It is at THAT
point that we can see whether a return is going to legally hold up or not. When you first file a
return, a return processor is only looking for really obvious problems that make the return not
“process-able” --- they use an optical scanner to process these returns as fast as possible -- as they
receive 100 million or so individual returns every year. So getting a refund SEEMS like proof that
an approach works, but it really just means you got through the initial processing. The IRS has a
minimum of 3 years from the date of filing to audit, and 6 years if they find that income was under-
reported by more than 20%.

11) And if they find the return later to be invalid or fraudulent, there is NO time limit for them to
audit and increase your tax. Pete found this out in 2017 when the IRS AUDITED him for 2002
and 2003 (possibly other years too) --- that’s 13-14 years LATER! He fought this in Tax Court
and lost. His returns were deemed invalid, so it was like he never filed anything because his W-2
forms or whatever, were left standing UNDISPUTED administratively.

12) No matter how much he argued "no, that's not correct", it did not work because he relied solely
on the legal argument about what "wages" means. This is not even a complete and adequate legal
argument, and he did not actually introduce any credible EVIDENCE to support his positon --
remember that his returns were deemed INVALID. So it was like he never filed. Cases are decided
based on EVIDENCE. It is not just an arguing contest.

Q006: And by "evidence" you mean his 1040 and 4852 forms he filed?
A006: 1) Not in the Tax Court Notice of Deficiency case - in the criminal case, yes.

2) The 1040 was the false information that he filed for which he was prosecuted and went before
a jury.

3) For Tax Court, the deficiency is presumed correct once a rational basis is shown by IRS. All
they need is a W-2, a 1099, or even bank records. Any available information if they target someone
who did not file a return. The idea is Pete should have filed a return to properly show his
disagreement in the administrative record - So it was his own fault for not knowing how and
why to participate in the process.

Q007: What is flawed and qualifies as frivolous in filing 1040 accompanied by 4852?
A007: 1) It is the use of 4852 to zero out wages that renders a return frivolous. Not merely the use of
4852, which is a legitimate form published by the IRS. But they did not create it for people to
make legal arguments about whether or not they were paid wages. Cracking the Code return
method attempts to zero out gross income using that form, and typically arguing about the
definition of "wages" at IRC sections 3401 and 3121. But those sections are withholding
provisions! They have nothing to do with determining "gross income" for tax filing purposes.
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 What Pete and others fail to understand is that you are deemed to CONCEDE that which you do
not properly REFUTE.
2) It is frivolous when the person making the argument has failed to properly refute the legal
treatment of his compensation as "gross income". He argued the wrong point and his argument
was deemed nonsensical and irrelevant as being merely his opinion.
3) The situation is most often that one’s compensation has been legally TREATED AS “gross
income”. The relevant question and argument is whether or not that is correct -- not arguing about
how it is not income because it is an equal exchange or whatever…
Q008: You said that Pete relying solely on the legal arguments about what "wages" means is not an
adequate legal argument. Could you please explain why not?
A008: 1) Yes. The W-2 filed by the 3rd party establishes facts and conclusions of law that are not refuted
by arguing merely "but this wasn't wages". "Wages" is a term of art found in IRC Sec. 3401 and
3121 about withholding. Just because an item is not "wages" does not mean it could not be "gross
income".

2) If you look at any W-2 form, you can see that the amounts reported are not limited to "wages".
It says "wages, tips, other compensation". The term "compensation" is short for "compensation
for services performed within the United States".

3) The employer makes an assumption about their business with the employee, which forms the
basis for the employer demanding a Social Security Number and the employee completing a W-4.
That assumption being that the employee will be paid “compensation for services performed within
the United States”. So, it is not a sufficient legal argument against tax liability to argue only that
it is not "wages". You need to also dispute the other items, or it may be inferred that you
CONCEDE to “compensation for services performed within the United States" - which is treated
as the gross income defined in IRC Section 61.

Q009: You said you got hit with frivolous penalties for the CTC styled returns you filed, and the IRS also
audited one of them and assessed additional taxes based on the W-2 information. Could you
elaborate on that?
A009: 1) The CTC returns I filed were not deemed valid. So the IRS did an audit as though no return had
ever been filed. They can do that and ALSO impose a frivolous return penalty. The audit happened
to me about 11 years ago. At that time I did not know how to stop it. So I determined to learn how
– and I did.
Q010: You mentioned Otto Skinner who wrote some really good books about the income tax in terms of
it being a tax on ACTIVITIES and not on money or income per se. How does this fit in the context
of incurring a liability for income taxes?
A010: 1) The Congressional Record shows that the income tax is a tax on certain activities and privileges,
and that it is not a tax on income per se. The income generated by such privilege or activity is only
the basis for measuring how much the tax will be. So naturally the question arises for each
individual: Am I engaged in a federally taxable activity, and if so, what IS that activity? Is working
for a living, or running a business and making a profit, a federally taxable activity? Is being an

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 American a federal privilege? The answer to all these is NO. Unfortunately, people were
bamboozled to assume that’s what’s going on.
2) When you see that even Congress admits the income tax cannot possibly work that way, the
CONTRACTUAL aspect that creates a federal nexus begins to come into focus as the only way
that makes sense when looking at the income tax. Especially in light of the Supreme Court
saying that the obligation to pay taxes (any tax) is not penal; "it is a statutory obligation,
quasi-contractual in nature..."
3) However, to know how to opt out of income tax, you have to know how you are OPTING IN.
You have to exit the same way you entered. This is why they want to keep everyone from clearly
understanding how income tax liability actually arises. People were conditioned and
propagandized to assume that the second any American receives some money, that person
magically owes the IRS a portion of that money. Ironically, this is not far off from how it actually
works - but, unless there is a federal nexus, there is no Constitutional or lawful way to impose such
a requirement generally on all Americans.
4) So instead, a hidden contractual mechanisms is used to dupe as many Americans as possible
into agreeing to make themselves liable. For the majority of Americans it ends up not as a tax on
money or income per se, but a tax on THEM for being under this hidden contract. The real object
of the tax is their privileged federal nexus incurred by signing the Form 1040, which is deemed
as an agreement to being treated as exercising a federal privilege within the meaning of the term
"trade or business within the United States" found in the Internal Revenue Code. That term
describes the primary nexus of income taxation.
Q011: What agreements and disagreements do you have with Larken Rose, Irwin Schiff and David
Champion?
A011: 1) With Larken Rose - arguing that he had no income from a source under IRC 861--this is an
irrelevant argument and recognized as frivolous on the IRS list of frivolous positions. It says right
there in IRC 861 that compensation for services performed in the United States "shall be treated
as ‘gross income’ from a source within the United States". So if you have compensation reported
on W-2, it does not HAVE to be listed in the source rules of 861. Also Larken did not understand
the meaning of United States in the Internal Revenue Code.
2) Irwin Schiff argued consistently that wages and salary are not income. But under IRC 861,
compensation for services performed in the United States "shall be treated as gross income from a
source within the United States". So you can see it being quasi-CONTRACTUAL and has nothing
to do with what income means in the Constitution. The argument that "wages are not income" is
perhaps the MOST repeatedly debunked frivolous argument the courts have shot down.
3) Dave Champion, like all the others, does not grasp that the term "United States" in the IRC does
not mean "everywhere in America" or the country as a whole i.e. the "United States of America".
Q012: Do you agree with Dave Champion’s statement in his booklet that Form W4 is for non-resident
aliens?
A012: 1) No. That is not correct. Form W-4 is properly used for any individual who is to receive federal
payments called “compensation for services performed in the United States”. Your average
“employers” or “employees” should, but do not know the proper meaning of the terms used in the
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 IRC. Thus, they fail to recognize that such terms CANNOT and DO NOT pertain to the
compensation for services in their private business transactions.
2) Dave Champion gets some key things wrong because he equates the “United States” with
the United States of America - but he has a lot of good info, and he does not advocate making
arguments to the IRS. He tells you to reason with employers or payers who misreport that you had
gross income. I doubt that approach has a very high rate of success.
3) He seems to think that the term "nonresident alien" is limited to non-Americans. He references
U.S. persons that file 1040 on behalf of a nonresident alien principal. This would be a good
description of the most crucial aspect of the income tax SCAM - whereby American living people
(who are "nonresident aliens" relative to federal income tax jurisdiction) are the principal, but
unknowingly act as their own "U.S. person" agent (an officer of a straw-man called a “United
States Individual”) when they file that 1040 U.S. person income tax return. Of course we know
if they don't file anything, and they have not yet notified IRS of foreign status for the SSN, the IRS
will presume such person to be a U.S. person anyway, based solely on the SSN. So the SSN alone
establishes a presumption of the person's agreement to act as a U.S. person for income tax
purposes, on behalf of the living person, who remains at all times a nonresident alien (even if the
filer does not realize it.)
4) “alien” in IRC/Title 26 USC, only means alien to federal income tax personal jurisdiction, but
the same term in Title 8 USC means a person who is not a citizen or national of the U.S.
Q013: Back in the 1980s, John Kotmair and Larry Becraft put together the Save-a-Patriot organization
and provided services for people to challenge the IRS with their taxes. Their motto for taxation
was: “Foreigners at home, citizens abroad.” Would you care to comment about that?
A013: 1) It makes no difference whatsoever where a taxpayer is located, except for the exclusion of
foreign earned income under Section 911. The “citizen or resident” in the Code is generally subject
to tax on ALL income worldwide. Whether they are "abroad" is of no moment -- see Section 1.1
of the regulations.
2) And if anyone thinks "But I wasn't abroad" is an argument that will work, I think that is on the
list of IRS frivolous positions. People can learn this with just a smidge of research. The IRS
frivolous argument list is a great resource for learning about all the arguments that have been
rightfully shot down and we shall address that in Part 3.
3) John Kotmair and Larry Becraft strain to show that the "citizen" subject to tax can only mean a
citizen abroad because they fail to see the CONTRACTUAL way the income tax liability arises.
So they find some justification for taxing Americans on the basis of their nationality, and settle on
"well if they are abroad, they are getting protection from the government, so that gives Congress
basis to tax their income above a certain amount" – or some similar explanation to that effect.
4) Maybe SOME tax COULD legally work that way, but this is not how federal income tax works.
Besides, I think this argument is featured in the IRS publication "The Truth About Frivolous Tax
Arguments". Believe it or not, I don't disagree with anything the IRS says in that document. Some
of the cases cited may be misleading – albeit purposefully, because they don't actually support the
points the IRS is making - but they don't say anything false in that document. It is very carefully

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 written so as to make correct statements while using decoy cases to derail tax researchers into
divergent and/or faulty conclusions.
5) Just had a guy contact me with more than half a million dollar levy because he bought the
Revocation Of Election package and even got a dismissal for "lack of jurisdiction" from Tax Court
- which he thought meant the IRS does not have jurisdiction to enforce the tax on him. Now he is
in so deep, there isn't much I can do -- certainly not quickly… I told him even if he has to pay all
of that, we might be able to establish that he is entitled to a refund, but I can't ever guarantee
refunds, since I can't make IRS give anybody their money back.
6) It is not hard to find out that these other un-taxing methods don't work. IRS has cases in their
frivolous positions list, and there is probably at least one case shooting down every one of these
un-tax approaches or arguments. Once I understood how the income tax works, I was able to see
why they all get shot down, and I can explain it in a way that makes sense.
Q014: Your report states, "The process of avoiding an income tax assessment is reversible by you at any
time if you ever truly desire to make a self-assessment of tax for any given tax year." Does "at
any time" mean that someone who filed Hendrickson style ten years ago can re-file a self-
assessment and avoid the IRS final assessment?
A014: 1) No. There is a three year statute of limitations when you file a return to amend (so long as the
return is treated as valid by the IRS). When I made that statement, it was in the context of a not
filing strategy. That report was written more than four years ago and some things I say in there
are things that I would phrase differently today.

Q015: Your report also states: "Once the IRS knows you could expose the scam of fraudulent
misapplication of income tax laws in court, the government will not dare prosecute you and IRS
will not risk being sued by you by trying to take a cent of your money or other property." - How
does the IRS get away with collecting anything when they could be sued for trying to take a cent
of your money based on your falling for their misapplication of income tax law?
A015: 1) I don't accept this premise as true: "that IRS could be sued for trying to take a cent of your
money based on your falling for their misapplication of income tax law"… I think you are lifting
my statement out from the context in which it was written. The context assumes you have properly
resolved your matters with the IRS – administratively.

2) A lot of people may THINK they understand "how to expose the scam of fraudulent
misapplication of income tax laws in court", but they actually do not. So the IRS naturally has no
fear of prosecuting or collecting against such people.

3) Take this argument for example: (1) Compliance with the internal revenue laws is voluntary or
optional, and not required by law.

4) The IRS said it is frivolous - not necessarily that it is wrong. BUT if you allowed or created a
tax liability for yourself, then this argument IS frivolous. You don't have the option to say that
payment of what you owe is not required by law. On the other hand if you have not allowed or
created a tax liability for yourself, you do not NEED this argument - do you? It is MOOT!

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5) This is why these arguments all fail---they are not evidence-based. They are pure legal
arguments. If the evidence was in your favor, you would not need any of these arguments. If the
evidence is NOT in your favor, none of these arguments will do you any good. It seems very
complicated but if you recognize this, it all starts to be a lot simpler.

6) Assuming some people in the audience are non-filers, how do you suppose these people
typically respond to a CP59 from the IRS or other notice saying that the IRS has no record of
receiving a return for x year and requesting them to file a tax return?

7) I think this is important to cover, because how one handles the matter BEFORE the assessment
is made, is crucial. When the IRS sends a demand to file, it means they have information that
creates a presumption that you have a filing requirement AND their records do not show that a
return was filed. Thus their request for you to either file or explain why you are not required to
file.

8) You CAN file a return to establish there is no tax liability (or establish whatever you determine
the correct tax is) and this is your chance to refute the information the IRS is relying on. Ironically,
in this scenario you may be filing a return in order to establish that you are not required to file a
return.

9) The alternative is to use their response form or send your own statement (signed under penalty
of perjury) to explain why you believe you are not required to file.

10) Your return or statement signed under penalty of perjury is what renders your response
as EVIDENCE. Sworn/signed testimony is “evidence”.

11) I suspect many people refuse to respond to such notices, and if they do, they likely do not
provide a statement under penalty of perjury. This is why the IRS does not have to take it seriously.
Any arguments about this or that, are not evidence. ONLY YOUR TESTIMONY of what YOU
determined, IS admissible as administrative or court evidence.

12) The IRS has what is called "prima facie" evidence which opens the presumption that you have
a filing requirement. They give you NOTICE of that when they demand a return. This notice places
the burden of production on YOU to either file a return or to provide, at the very least, a sworn
statement explaining why you believe you are not required to file.

13) This is not burden of proof - it is burden of production. As long as you file a valid return, or
at least respond with a reasonable explanation for why you are not required to file, you will have
met your burden of production. As a practical matter a return is best because it leaves the IRS less
wiggle room. They have to initially accept a valid return even if they later on decide to audit that
return. If you just respond with a sworn statement saying you are not required to file, they might
accept it, but it is also possible they might just keep going and send you more notices, eventually
issuing a 30 day letter and Notice of Deficiency etc. This is because they are so automated. If
someone neglects to tell the IRS computer to stop sending you demands to file for that year, the

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 notices will continue until eventually an examiner opens an SFR examination (substitute for
return).

14) People commonly complain that SFR is "illegal" for various reasons, but it is NOT. For the
simple reason that an SFR exam is predicated on the failure of the taxpayer to file a return which
(according to the prima facie evidence) the taxpayer is REQUIRED to file. So at that point, the
taxpayer is presumed to be in BREACH or DISHONOR of what he obligated himself to do. Under
those circumstances, the IRS is authorized by Congress to determine a deficiency based on
"available information" and proceed as if the taxpayer had filed a return with $0 gross income and
$0 tax.

Q016: Wasn’t Glen Ambort prosecuted for telling people to file nonresident alien form 1040NR?
A016: 1) He was prosecuted for conspiracy to defraud the United States. He advised people to SAY this
or that on their returns, to get refunds, with no apparent regard for whether or not it was TRUE
what they were saying based on LACK of supporting EVIDENCE.
2) So the courts DO protect the income tax, and they DO mislead in their dicta, when necessary to
protect the income tax, but the courts are not as corrupt as many people assume. Lower courts
often make the wrong decision, especially Tax Court, leaving it up to the taxpayer to appeal. That
is their mentality, unfortunately
3) I am dealing with such a scenario with my client's appeal - the Tax Court clearly should have
dismissed the case for lack of jurisdiction and in any case should have shifted burden of proof to
IRS.
4) I found when Congress defined the term nonresident alien in the IRC. Are you ready for this?
1984!!! How symbolic of them! Of course the term was used by Treasury in TD 2313 in 1916,
Frank Brushaber being an example. And I have seen a SCOTUS tax case where the term was used
in the late 1800's.
Public Law 98-369 -- 98th Congress
An Act
July 18, 1984
To provide for tax reform, and for deficit reduction. PART V—TREATMENT
OF ALIEN INDIVIDUALS
SEC. 138. DEFINITION OF RESIDENT ALIEN AND NONRESIDENT ALIEN.
Ante, p. 518. (a) GENERAL RULE.—Section 7701 (relating to definitions) is 26 use 7701.
amended by redesignating subsections (b), (c), and (d) as subsections (c), (d), and (e),
respectively, and by inserting after subsection (a) the following new subsection:
"(b) DEFINITION OF RESIDENT ALIEN AND NONRESIDENT ALIEN.
"(1) I N GENERAL. For purposes of this title (other than sub-title B)

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 "(A) RESIDENT ALIEN. An alien individual shall be treated as a resident of
the United States with respect to any calendar year if (and only if) such
individual meets the requirements of clause (i) or (ii):
"(i) LAWFULLY ADMITTED FOR PERMANENT RESIDENCE
Such individual is a lawful permanent resident of the United State
at any time during such calendar year.
"(ii) SUBSTANTIAL PRESENCE TEST.
Such individual meets the substantial presence test of paragraph (3).
"(B) NONRESIDENT ALIEN. An individual is a nonresident alien if such
individual is neither a citizen of the United States nor a resident of the
United States (within the meaning of subparagraph (A)).
5) I also found that the all-important election to be treated as a resident alien provision was added
in the 1986 Tax Reform Act (which made many amendments to the 1954 Code). It was de facto
in place going back to 1919, when the 1040 return first featured this question:
"Are you a citizen or resident of the United States?" – Sneaky, huh?
6) This was done in the aftermath of World War I (which had seen a lot of patriotic Americans pay
income tax). I think the government had gotten used to all that money rolling in, and wanted to
keep it going. So they devised this SWINDLE/SCAM of getting Americans to call themselves
“citizens or residents of the ‘United States’”, so that ALL of their income could be taxed. I believe
even back then they already had their eye on finding a way to DUPE Americans into an income
tax on wages and salary.
7) If they can DUPE you into declaring yourself a US citizen or resident, it does not take much
from there to be able to tax your wages and salary as “gross income”. Once you declare that status,
your wages or salary become "compensation for services performed in the ‘United States’". Per
IRC 861 that is TREATED AS gross income from sources within the United States. The Supreme
Court gave an important clue regarding the term “source”:
"...From whatever source derived,' as it is written in the Sixteenth Amendment, does not mean from
whatever source derived. Evans v. Gore, 253 U.S. 245, 40 S.Ct. 550, 64 L.Ed. 887, 11 A.L.R. 519. See, also,
Robertson v. Baldwin, 165 U.S. 275, 281, 282, 17 S.Ct. 326, 41 L.Ed. 715; Gompers v. United States, 233
U.S. 604, 610, 34 S.Ct. 693, 58 L.Ed. 1115, Ann.Cas.1915D, 1044; Bain Peanut Co. v. Pinson, 282 U.S. 499,
501, 51 S.Ct. 228, 229, 75 L.Ed. 482; United States v. Lefkowitz, 285 U.S. 452, 467, 52 S.Ct. 420, 424, 76
L.Ed. 877, 82 A.L.R. 775. Wright v. United States Dl, 302 U.S. 583, 58 S.Ct. 395, 82 L.Ed. 439 (1938)

8) Furthermore, in 1966 they added the term "effectively connected income” to the definition of
"gross income" for a nonresident alien (NRA). Before that, ONLY income that was ACTUALLY
from a source within the “United States” would be "gross income" to a NRA. When you
recognize that all Americans are nonresident aliens every year by default, whenever they file a
1040 for that year they create this "effectively connected" nexus that allows for a purely
CONTRACTUAL liability to be created. Before 1966 it was just a mistake of law if a nonresident
alien filed as a “U.S. person” and declared all his income as "gross income".
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9) The introduction of this "effectively connected" nexus, allows for the liability to be created
quasi-contractually (even if done by mistake), and therefore it is more solidly legal because there
is from that point a basis in the Code for liability to arise that way. As if to further cover their
asses, they added "national of the United States" to the Code in 1972 in a provision for
nonresident aliens. And then later, in 1986, the added "election to be treated as a resident
alien" created a quasi-contractual basis for "U.S. person" - whereas before that, it would just have
been purely mistake of law on the part of the nonresident alien filer.
10) So they knew since 1919 (if not earlier) that they were relying on deception to DUPE 1040
filers into liability based on the filer's MISTAKE OF LAW. They wanted tax liability to be more
legally solid, so they added these provisions to the Code in 1966, 1972 and in 1986 that would
transform what had been up to that point a reliance on pure mistakes of law by the 1040 filer into
quasi-contractual devices for American nonresident aliens to effectively "opt in" to being liable by
filing a 1040. This gave everyone running the SCAM much more plausible deniability than they
had before.
11) Also worth noting in what I found is that the term "resident alien" was not defined in the IRC
until 1984. So it seems there was no good way to know before 1984 that "resident of the United
States" actually means "resident ALIEN of the United States".
12) In my mind the development of their scam is coming together: Since 1913 "they" had relied
purely on mistakes of law by errant American 1040 filers. They must have ultimately realised
this would not pass legal muster if anyone ever discovered the scam, especially once they started
collecting income tax from working people in the 1940's and 50's.
13) So in 1967 they introduced this "effectively connected" language into the IRC and also
introduced a form 1040NR where "effectively connected income" can be reported, while on the
1040 Form it is just "income". The "effectively connected" language establishes a legal basis
in IRC for a purely ELECTIONAL means of creating one's tax liability.
14) The IRS plausible deniability is in “how are they supposed to know you did not knowingly
choose to "effectively connect" your income to a trade or business?”
15) They wanted to be able to more clearly place the fault on the 1040 filer's shoulders. So next,
they make sure to define “resident alien” and “nonresident alien” in 1984 for the first time.
Then, 2 years later, they revamp the IRC to make the 1040 an "election to be treated as a resident
alien", carefully avoiding using the term "nonresident alien" in that provision. They had
always used the term "citizen or resident of the United States" in the internal revenue laws going
back to the 1910's. It was VERY deceptive of Congress to use the term "resident" all those
years in the income tax laws without adding "alien" to it.
16) I went back and looked at old 1040 instructions to see if at least Treasury gave 1040 filers a
clue that "resident" = "resident alien". This makes it MUCH easier to see that the "citizen of the
United States" they are referring to CANNOT be the same as an American national. Without
that word "alien" after "resident", it is far more misleading, especially when we see from that 1928
case and Treasury Decision how Treasury defined "residence". It was NOT limited to aliens! -
So I supposed they found it important to get a definition of "resident alien" in the IRC to give
themselves some legal cover.
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 17) 1938 1040 instructions:
A. WHO MUST MAKE A RETURN. For each taxable year a return of income shall be made
by every citizen of the United States, whether residing at home or abroad, and every individual
residing within the United States though not a citizen thereof, whether or not he is the head of
a family or has dependents.
Clearly, "…every individual residing within the United States though not a citizen thereof…"
means a resident alien. In 1984 law they did not so much define the term as add a provision by
which certain individuals would be TREATED AS resident aliens for income tax purposes.
18) In 1986 they added to that provision the so-called "first year election". But there is nothing
"first year" about it. The election can be made EVERY year by a nonresident alien.
So that seems to be the primary purpose of adding those provisions to 7701(b) in 1984-1986.
I was shocked to find they did not define nonresident alien until 1984! Very shocked.
Very important to note that at the same time they defined "resident alien" for the first time.
Most people seem not to see the contractual aspect - which seems so obvious to me.
19) Even Pete H. recognized the contractual aspect but he did not go far enough. He failed to
recognize (or pretends to fail to recognize) the contractual implications of declaring yourself a U.S.
Individual when you file a 1040, and he has NO CLUE about how the SSN is presumed to belong
to a US Person. It's significant.
See 26 CFR - 301.6109-1(g)
20) I can't remember where I first learned about that regulation, but it is HUGE. What is really
interesting is that they don't bother to explain what would be "proof of foreign status" to change
the status of your SSN to nonresident alien. But I have found that filing 1040NR seems to do the
trick.
21) And as long as you DON'T send them proof of foreign status they can just keep on presuming
that your SSN belongs to a U.S. person and you are presumed to be required to report ALL income
as gross income.
22) THIS is why nobody's legal arguments against the income tax ever work. They are presumed
US persons - so ANY money they receive is going to be “gross income” unless there is a specific
provision of the Code that excludes it!
23) So all the IRS has to do is show evidence that the person received income they did not report.
It is as easy as getting payroll records or bank records.
Q017: Attorney Larry Becraft has a memo at the link on the screen addressing the term “Nationals”. Do
you wish to comment about it?
A017: 1) This is disinformation! Why is he citing the Iowa Administrative Code and Washington
Administrative Code? LOL

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2) Those seem to be his basis for this dubious claim: "The following are the only persons classified
as U.S. nationals: (1) Persons born in American Samoa or Swain's Island after December 24, 1952;
and (2) Residents of the Northern Mariana Islands who did not elect to become U.S. citizens.”
3) There is no provision in federal law by which Congress purports to limit the meaning of
"national of the United States" to American Samoans etc. Not even in Title 8 USC.
Congress has NO AUTHORITY to tell Americans they are not nationals of the United States.
4) Even the regulation Becraft cites (which is NOT an act of Congress) does not purport to exclude
Americans generally from the meaning of "national of the United States": National means a
person who owes permanent allegiance to the United States, for example, as a result of birth in a
United States territory or possession.
Even he admits that this is only one definition: "One definition of this word appears in 24 C.F.R.
§ 5.504"
5) Check out this provision of IRC which was enacted by Congress:
“(c) The sole relief and remedy of any person having any claim to any property vested pursuant
to section 202(a) shall be that provided by the terms of subsection (a) or (b) of this section, and
in the event of the liquidation by sale or otherwise of such property, shall be limited to and
enforced against the net proceeds received therefrom and held by the designee of the President.
The claim of any person based on his ownership of shares of stock or other proprietary interest
in a corporation which was the owner of property at the date of vesting thereof under section
202(a) shall be allowable under subsection (a) or (b) of this section if 25 per centum or more
of the outstanding capital stock or other proprietary interest in the corporation was owned at
such date by nationals of countries other than Bulgaria, Hungary, Romania, Germany or Japan.
But no such claim of a national of a foreign country shall be satisfied except after certification
by the Department of State that the country of the national accords protection to nationals of
the United States in similar types of cases.”
Look at “…except after certification by the Department of State that the country of the national
accords protection to nationals of the United States in similar types of cases.”
Clearly "nationals of the United States" is referring to ANYONE who is not a foreign national.
That is from: Current Internal Revenue Code, TAXATION OF BLOCKED ASSETS: VESTING
OF PROPERTY OWNED BY BULGARIA, HUNGARY, OR ROMANIA
Act of August 9, 1955, c. 645, 69 Stat. 562, P.L. 285, 84th Cong., 1st Sess. (H.R. 6382) 22 USC
1631-1631n. - AN ACT to amend the International Claims Settlement Act of 1949, as amended
and for other purposes.
Here is the entire act attached: WK_Current Internal Revenue Code TAXATION OF BLOCKED
ASSETS VESTING OF PROPERTY OWNED BY BULGARIA HUNGARY OR RUMANIA.pdf
Unlike the authorities Becraft cites, THIS is actually an act of Congress enacted as part of the
Internal Revenue Code.

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 6) Also, federal courts have routinely and matter-of-factly referred to Americans generally as
"nationals of the United States", U.S. nationals or United States nationals (which is not actually a
term found in any federal law) -- it is always "national of the United States". So, we must be
careful NOT to confuse U.S. national with U.S. Person.
I have many court of claims cases as examples. It should be noted that naturalization is by
definition the conferring of NATIONALITY not "citizenship".
See 8 USC 1101
Look at these sections - 21, 22 and 23:
(21) The term “national” means a person owing permanent allegiance to a state.
(22)The term “national of the United States” means (A) a citizen of the United States, or (B) a
person who, though not a citizen of the United States, owes permanent allegiance to the United
States.
(23) The term “naturalization” means the conferring of nationality of a state [country] upon a
person after birth, by any means whatsoever.
7) Clearly, neither of these purport to exclude Americans from the definition of "national of the
United States". Nor COULD they. Congress has no lawful power to define nationality for
Americans who have such nationality by birthright or by naturalization. And they certainly have
no lawful power to TAX American nationality. Even though most people assume that if you are
American, you have to pay the IRS your "fair share". This is PREPOSTEROUS
8) Also interesting is the way Becraft shreds all the other crackpot theories in no uncertain terms,
but seems to have just thrown in this "national" bit at the end, without even claiming that anyone
is using this or even claiming it has been debunked as he so thoroughly does with every other
argument.
Q018: SOoo… do you wish to start addressing the United States issue…?
A018: 1) Well it seems everyone makes a big deal about the meaning of "United States" at IRC 7701, but
nobody seems to notice that the IRC defines "United States" ONLY in its geographical sense.
What about its NON-geographical sense?
2) "United States" when used in ANY federal law is nearly always a THING, not a PLACE or
piece of land. This is because the United States is the name of the federal government itself and
all of its property and territory.
You could have a federal tax liability wherever you may be physically by engaging in a federally
regulated activity or exercising a federal privilege. Congressional jurisdiction for imposing income
taxes is NOT territorial jurisdiction in the sense of the tax only applying if you are standing on a
certain piece of land.
3) That is how the Union states operate, for the most part. But even the states don't work that way
for income tax purposes in the case of a "resident" of that state. A "resident" of California is subject
to income tax on all income whether or not it came from California. So this is not a territorial
jurisdiction being exercised. It is personal jurisdiction that is non-geographical. Federal income

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 tax jurisdiction works the same way for "United States persons" - which is the federal equivalent
of a "resident" for state income tax purposes.
4) A nonresident of New York can be required to report and pay income tax only on “gross income”
from “sources” within New York. By the same token, a federal nonresident alien can only be
required to report and pay tax ONLY on “gross income” that is “effectively connected” with the
conduct of a “trade or business within the United States”, or from income from “sources within
the United States”. In either case, the term "United States' is NOT being used in its geographical
sense there.
What it really means is that income from federal government sources is "gross income", no matter
who or where you are.
Q019: You stated that "…a nonresident of New York can be required to report and pay income tax only
on gross income from sources within New York." -- Does this mean the state can impose a direct
tax on the people, their property, or private affairs?
A019: 1) Maybe a state CAN do that, but that is not how any state income tax works. All state income
taxes are imposed on taxable income, which is computed from "gross income" just like in the IRC.
If you don't have any federal income tax, you also shouldn't have any state income tax. They work
the same way.
2) The term "resident" is used by the states for state income tax in the same way the term "citizen
or resident of the United States" is used by federal government for federal income tax. On state
level, you are still only subject to tax on "gross income" just as in the IRC.
3) The "resident" status helps determine what your state tax home is, and that state would have the
right to tax you on “gross income” from outside that state. Of course they cannot do that to a
nonresident.
Q020: You stated: "nobody seems to notice that the IRC defines "United States" ONLY in its geographical
sense". -- WHY and HOW does this NOT mean that the IRC relates only to the United States as
in DC, possessions, territories, enclaves?
A020: 1) When you are dealing with SCAMMERS like the U.S. Congress, you often will find clues in
what they do NOT say. Why do they not provide any definition of "United States" in its NON-
geographical sense anywhere in the IRC? It is this very absence that leads people astray to argue
that "United States" only means D.C. etc., and they get to penalize it as a frivolous argument!
2) From IRS Notice 2010-33 at item 3:
“This position includes the argument that the United States does not include all or a part of the
physical territory of the 50 States and instead consists of only places such as the District of
Columbia, Commonwealths and Territories (e.g., Puerto Rico), and Federal enclaves (e.g.,
Native American reservations and military installations), or similar arguments described as
frivolous in Rev. Rul. 2004-28, 2004-1 C.B. 624, or Rev. Rul. 2007-22, 2007-1 C.B. 866.”
3) Here is the problem with all arguments that are deemed frivolous: they are found frivolous
when used by a taxpayer to try to get out of an obligation that was already created administratively,
according to the EVIDENCE in the record.

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4) And why is it frivolous to argue that "United States" consists only of D.C. etc.? Because the
tax is imposed NON-geographically. Look at 26 CFR 1.1-1 - The tax is imposed on a citizen
WHEREVER resident, and resident aliens, on ALL income regardless of source. In other words
all income WORLDWIDE.
So how could the definition of United States even matter if you are already established on the
record as a “citizen or resident of the United States”?
This is why you have to SEE how the SCAM works and understand HOW the W-2 or 1099 (or
whatever else) is being used as evidence against you.
If you were on trial for murder and they came forward with false evidence, you would be crazy
not to say something! Yet people sit there and let false evidence go unrefuted in their tax matters.
Then they wonder why the IRS won't listen to them!
5) So think about what a "United States person" must mean! Again, "United States" is NOT being
used in its geographical sense. You can see this by breaking down what a United States person is
if one is an individual (as opposed to a corporation or partnership, trust or estate) - an individual
is a “U.S. person” if such individual is a “citizen or resident of the ‘United States’”.
26 CFR 1.1-1(b) states that the citizen, WHEREVER resident, is subject to tax on all income. So
it matters not WHERE one is located.
6) SCOTUS settled that in Cook v. Tait case. Cook was living in Mexico the entire tax year and
with ONLY Mexican sourced income, was denied a refund.
Cook argued that Congress had no authority to tax him when he was not located in the USA.
SCOTUS disagreed!!
7) This is a very important case for understanding that "citizen of the United States" is a
CONTRACTUAL term. What made Cook a "citizen of the United States"? Well, he CALLED
himself one, in his petition to the Court! More importantly, Cook had filed a 1040 on which he
declared himself a "citizen or resident of the United States".
8) They ASKED this question on the form, and he answered "yes" under penalty of perjury. That
was all they needed to impose tax on his income REGARDLESS of where it came from - EVEN
his rental income from MEXICAN real estate! Even though he had lived in the USA for 20 years!!
9) The tax was imposed under the Revenue Act of 1921, which provides by section 210 (42 Stat.
227, 233 [Comp. St. Ann. Supp. 1923, § 6336 1/8 e]):
'That, in lieu of the tax imposed by section 210 of the Revenue Act of 1918, there shall be levied,
collected, and paid for each taxable year upon the net income of every individual a normal tax
of 8 per centum of the amount of the net income in excess of the credits provided in section
216: Provided, that in the case of a citizen or resident of the United States the rate upon the first
$4,000 of such excess amount shall be 4 per centum.'1
Note the act imposed an 8 percent tax on "every individual" but provided a 4 percent rate on the
first $4,000 in the case of a citizen or resident. So 8 % on nonresident aliens, and 4% on the first
$4,000 if you are a citizen or resident.

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Cook took the 4% rate on his return, accepting the benefit of the lower tax rate.
10) Cook did not realize he was a nonresident alien and could have simply excluded all his non-
federal income from “gross income” in the first place!!! He did not NEED this "benefit" of a lower
tax rate on the first $4,000 of gross income. Nonetheless, Cook DID accept this benefit. – Duh..
11) I have SEEN his 1921 tax return, though the particulars of his return are not mentioned in the
SCOTUS case. Why would the court EXPLAIN exactly HOW Cook had gotten himself under
contract? That would have given the SCAM away.
12) They make it look like everyone has to pay an 8% tax and that you get this big tax break and
only have to pay 4% on the first $4,000 if only you declare yourself a "citizen or resident of the
United States"? VERY SNEAKY
13) Note the use of the term "every individual" instead of what they REALLY mean: every
nonresident alien individual.
Look at the 1040 instructions for year 1913:
1. This return shall be made by every citizen of the United States, whether residing at home or
abroad, and by every person residing in the United States, though not a citizen thereof, having
a net income of $3,000 or over for the taxable year, and also by every nonresident alien
deriving income from property owned and business, trade, or profession carried on in the
United States by him.
See that? “…by every nonresident alien deriving income from property owned and business, trade,
or profession carried on in the United States by him.” -- They had no problem using the term
nonresident alien in 1913.
Same thing with the1040 instructions for 1916:
2. This return shall be made by every nonresident alien receiving any net income from sources
in the United States. A nonresident alien individual may receive the benefit of the personal
exemption only by filing or causing to be filed with the Collector of Internal Revenue a true
and accurate return of his total income, received from all sources, corporate or otherwise, in
the United States.
14) BUT after the Brushaber case was decided, and after Treasury Decision 2313 in 1916,
suddenly, in 1917, there is NO mention of nonresident aliens in the 1040 instructions.
15) In 1918, there is no mention of citizens or residents in the 1040 instructions - just an
unspecified "you" and "your":
1. Calculate your net income by filling in page 2 of the work sheet according to page 2 of the
instructions. _ !
2. Add the net income of your wife (or .husband) and dependent minor children, if any, except
as provided in paragraph 5.
3. The total family income, calculated in accordance with paragraphs 1 and 2, must be reported,
either in your return or in a separate return by wife (or husband), if it equaled or exceeded— _

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 (a) $2,000 if you were married and lived with your wife (or husband).
(b) $1,000 if you were not married or did not live with your wife (or husband).
4. In any case, you must make a return if your net income equaled or exceeded the amount of
your personal exemption, not including any additional exemption allowed you as head of
family or on account of dependents.
5. Income of a minor or incompetent, if derived from a separate estate under control of a
guardian, trustee, or other fiduciary, must be reported by his guardian or her legal
representative.
6. If your wife (or husband) had any separate income, she (or he) should make a separate return.
16) It is very important to recognize that Cook v. Tait in 1924 was almost a reaction to the
Brushaber case in 1916. And the aftermath where Treasury referred to this American Brushaber
as a nonresident alien. Brushaber did not file a 1040. Tax was withheld by Union Pacific because
Union was what’s called a “domestic” corporation - which in that case meant a federal corporation.
17) So I am looking at the old revenue acts to make sure of the timing, but by 1919 the 1040
asked on the form if you are a citizen or resident of the “United States”. They NEEDED to
get Americans bamboozled to waive their nonresident alien status!!
In 1921, as mentioned, they had this lower 4% rate on the first $4,000 if you declare yourself a
citizen or resident of the “United States” on 1040.
18) It all started in 1919 revenue act where there was a 12% rate on the net income of "every
individual" but a 6% rate on the first $4,000 in the case of a “citizen or resident of the United
States”.
So they subtly refer to nonresident aliens in the revenue act without actually using the term
nonresident alien.
By the 1919 tax year, WWI was over. A wave of patriotic fervor had led to many Americans
paying income tax during the war years. They seem to have hatched this SCAM to keep that going.
19) George Cook is just one example of an American who received a demand to file a return
from the Collector. Otherwise he probably would not have done so. Trust in government was
never higher than in those days.
Cook felt they were mistaken, but did not fathom the DECEPTION involved.
20) In the 1913 and 1916 Revenue Acts, a NRA paid the same tax rate as a citizen or resident, but
obviously a NRA was subject to tax only on income from “sources within the United States”
- which I hope is becoming quite clear, has a very special meaning.
21) So in 1919 the 1040 form had the question "Are you a citizen or resident of the United States"
in combination with the enticement of the new lower tax rate of 4% on the first $4,000 for
those who declare their status as "citizen or resident of the ‘United States’". This was a big step in
the DECEPTIVENESS of the income tax.

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They continued to ask that question on 1040 form until 1938 when they introduced separate return
forms for NRA's and renamed the 1040 form the "United States Individual Income Tax Return".
22) So I knew that Cook had declared himself a citizen on a 1040 Form, but then I realized that he
accepted the 4% BENEFIT which makes the "contract" substantive - not just nominal, or mistake
of law.
This has continued to today where a citizen or resident gets a standard deduction and can itemize
many personal deductions that a NRA cannot.
23) People are led to worrying about deductions and credits and they never think about whether
they had any gross income to BEGIN WITH, or whether they have income that could be lawfully
EXCLUDED from tax because it does not qualify as gross income. And they NEVER consider
whether or not they are "citizens or residents of the United States".
24) Here is the reasoning of SCOTUS in Cook v Tait in affirming the lower court decision to
uphold the Collector's denial of Cook's refund claim:
“We may make further exposition of the national power as the case depends upon it. It was
illustrated at once in United States v. Bennett by a contrast with the power of a state. It was
pointed out that there were limitations upon the latter that were not on the national power. The
taxing power of a state, it was decided, encountered at its borders the taxing power of other
states and was limited by them. There was no such limitation, it was pointed out, upon the
national power, and that the limitation upon the states affords, it was said, no ground for
constructing a barrier around the United States, 'shutting that government off from the exertion
of powers which inherently belong to it by virtue of its sovereignty.'
Look at 'shutting that government off from the exertion of powers which inherently belong to it by
virtue of its sovereignty.'
You have to understand that the only thing SCOTUS needed to address was Cook's own argument.
NOTHING ELSE.
"Plaintiff assigns against the power, not only his rights under the Constitution of the United
States, but under international law, and in support of the assignments cites many cases. It will
be observed that the foundation of the assignments is the fact that the citizen receiving the
income and the property of which it is the product are outside of the territorial limits of the
United States. These two facts, the contention is, exclude the existence of the power to tax. Or
to put the contention another way, to the existence of the power and its exercise, the person
receiving the income and the property from which he receives it must both be within the
territorial limits of the United States to be within the taxing power of the United States. The
contention is not justified, and that it is not justified is the necessary deduction of recent cases"
This is the end of it right here - his contentions were not justified.
They had the power to tax because COOK HIMSELF GAVE IT TO THEM.
25) Cook effectively cooked himself by accepting the benefit of the lower tax rate (4% on the first
$4,000) afforded ONLY to a “citizen or resident of the United States” (which he SAID he was on

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 the 1040) Cook made ALL of his worldwide income from 1921 subject to the provisions of the
1921 revenue act. The only question raised by Cook was this:
“The question in the case, and which was presented by the demurrer to the declaration is, as
expressed by plaintiff, whether Congress has power to impose a tax upon income received by
a native citizen of the United States who, at the time the income was received, was permanently
resident and domiciled in the city of Mexico, the income being from real and personal property
located in Mexico.”
The lower court answered "yes" to this question, and SCOTUS affirmed.
=====================================================================
Q021: What about the Revocation Of Election (ROE) process that uses the nonresident alien position?
A021: 1) ROE is just one way of using the nonresident alien position - ANY position where you claim to
be immune from taxes because you are a NRA is frivolous, no question about it.
2) There are plenty of court cases where the taxpayer argued he was a NRA in order to try to get
out of his tax or his conviction. This never works. It goes to show that the battle is won or lost in
the preparation, per Sun Tzu. You cannot just show up in court at the last minute and recite some
magic words. My approach works because it is based on such understanding. There is no
argument, per se.
3) We rely on knowing how to determine status and gross income and how to properly convey that
to the IRS. It is also important to have some sense of how to defend your position if the IRS or
state challenges you. But that is very advanced. Some people may learn enough to be confident
doing that themselves, but the vast majority will not be confident doing that on their own.
4) I have had people want the elevator speech version: asking "what's the argument?" The question
assumes you have to ARGUE your way out of a liability that somehow ALREADY exists. This
is the WRONG question
5) As far as the ROE goes, it is easier to just show why it is frivolous and cannot work. The reason
is simple: NRA's can be subject to tax too. So it makes no sense to claim "I am an NRA so, you
see, I cannot possibly be liable for any tax!"
See 26 CFR 1.1-1 and IRC 871
This is one the IRS covers in the frivolous list, and they are correct to call this frivolous but they
also muddy the waters to make it seem like no one can ever claim to be a NRA. That's stupid, but
they do it because they don't want anyone coming anywhere NEAR that position. It is too close
to the truth of how the tax works. They KNOW Americans are nonresident aliens relative to
income taxes. They rely on DUPING Americans into filing form 1040 every year to make an
election to be TREATED AS a resident alien, per IRC 7701(b).
6) And if they cannot get you to file the 1040, they can fall back on the presumption that the SSN
assigned to your person belongs to a “citizen or resident of the United States”, unless/until they
are informed otherwise. We’ll address the SSN matter in Part 2 by reference to the Walby case.

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7) Another un-taxing method people have used is the Original Issue Discount (OID) – also in the
IRS frivolous position list. I agree with what the IRS says there. I get the feeling people don't look
at this list or do not take it seriously. The OID method is most likely to land you in prison. It is
fraud. The other approaches will likely get you penalized with frivolous penalties and other adverse
financial consequences; but I know of people who have been prosecuted for filing OID returns.
=====================================================================

Understanding the term “United States” for the purpose of the IRC
Start with what people assume it means. This is where everyone goes wrong. So look at what it
does NOT mean, without diving into all the legalese right away.
It does NOT mean The United States of America. Yet doesn't everyone pretty much assume it
does?
Once you understand that you are permitted to CONSTRUE "United States" as meaning only the
federal government in the income tax provisions, you can plug that meaning in wherever the
term is used. This helps you see clearly what a nonresident alien is per IRC 7701(b)(1)(B); it helps
you see what the NRA is taxed on - per Section 871.
You are permitted to construe "United States" that way, so this leads to being permitted to construe
"nonresident alien" to include you, so long as you are not a "citizen or resident [alien] of the United
States", and you may freely construe the IRC as lacking jurisdiction over any income you had that
was not from engaging in trade or business WITHIN THE “UNITED STATES” or from a
source WITHIN THE “UNITED STATES”.
Once you understand that there is nothing to stop you to CONSTRUE United States as meaning
only the federal government in the income tax provisions, you can plug that meaning wherever
the term is used in the IRC sections. This requires understanding just one very important rule for
interpreting tax statutes, which SCOTUS has mentioned many times.
My point is that this rule should be explained. Rule of construction. It is not necessary to explain
every rule of construction, but that is a big one people should understand before attempting to read
statutes. Doubt in the language of a tax statute is resolved against the government.
The language of the law must CLEARLY and unequivocally impose liability, or there is no
imposition.
I don't think anybody can do this without help. Some may eventually be confident enough to go
on their own, but there is always the risk of a challenge from the IRS or state after the return is
accepted
I offer what is effectively "insurance" on the back-end for those 2-3 years before they are pretty
much in the clear from any audit
I had even a very knowledgeable client who had no idea what to do when he got audited. I got
him through it, and the IRS closed his audits with NO changes to his return or his tax.
Experience matters a LOT when you have to tangle with these agencies. Not just IRS. States too.
State tax agencies are more likely to give you a problem than IRS.
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Q022: HOW would YOU explain this in 8th grade terms?
A022: Look at the term "citizen of the United States" for example
Most people think that term means any American. But if that is true, where is the evidence in
the law for that? Why does it not say in the law "this means an American citizen"?
I think 26 CFR 1.1-1 is a good place to start because the way to understand what citizen means in
the Code is to see the EFFECT this citizen status has on a person, tax-wise.
As you say, a U.S. person (citizen or resident) is taxed on ALL worldwide income
So what does that tell us about what “United States” means?
If it means USA, then IRC Section 1 is imposing a tax on you just because you are American.
Now of course that is EXACTLY how normies think the tax works.
But American nationality is a RIGHT, is it not? – Does Congress have any authority to strip away
nationality from any American?
Can an American be DEPORTED?
So how can Congress TAX your American nationality? - They can't. And that is how we know
'citizen of the United States" in IRC CANNOT = American nationality
So that is how we know "United States" CANNOT mean the USA, at least not in the context of
a citizen of the “United States”
Also worth mentioning that SCOTUS recognized at least 3 different meanings for the term United
States, so we don't sound crazy - that is not a new data point, a lot of people mention that - But
worth noting
I have not seen anyone make the point that we are meant to believe Congress somehow has the
power to TAX you just because you are an American. NONSENSE
A right cannot be taxed, or it is not a right. I think that is obvious, yes?
If Congress had any power over your nationality, they could punish you for a crime by kicking
you out of the country and/or take away your nationality
But they cannot - and for the same reason, they cannot TAX it - nationality by birth is by right of
the soil -jus soli - an old maxim of law.
By naturalization is just as solid - equal footing as anyone born into American nationality.
So you eliminate what it CANNOT mean, and work with what is left - generally United States in
federal law refers to the federal government itself if they do not provide a definition for the term.
You have to go back to organic law to see that -- Articles Of Confederation, and Constitution
Q023: OK -- so one should start outside the IRC to get the “United States” meaning in the IRC?
A023: IRC does not exist in a vacuum - of course you should look to organic law for context

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So there is NO reasonable basis for anyone to assume "citizen of United States" in IRC means
any American
Based on the obligation that comes with it (26 CFR 1.1-1) it MUST be a voluntarily chosen status
Otherwise it would be slavery - it is a great place to start because once you get what United States
means, you realize you do not need to worry about a lot of this other shit - everything important
uses the term United States.
As far as understanding just one very important rule for interpreting tax statutes, which SCOTUS
has mentioned many times, look up Spreckels Sugar Refining Co. v. McClain, 192 U.S. 397 (1904)
Spreckels Sugar Refining Company v. McClain
No. 103
Argued December 3, 1903
Decided February 23, 1904
192 U.S. 397
"Keeping in mind the well settled rule that the citizen is exempt from taxation unless the same is
imposed by clear and unequivocal language, and that, where the construction of a tax law is
doubtful, the doubt is to be resolved in favor of those upon whom the tax is sought to be laid, …”
Based on the obligation that comes with it (26 CFR 1.1-1) it MUST be a voluntarily chosen status
Note that Treasury explains who is a citizen at 1.1-1(c). But there is no definition in the Code,
so this regulation is NOT based on any income tax statute enacted by Congress.
But the Treasury definition gives us a couple of clues in this definition: (c) Who is a citizen.
Every person born or naturalized in the United States and subject to its jurisdiction is a citizen.
Note they do NOT actually say such person is a "citizen of the United States". Only a "citizen"
So this is arguably ambiguous right there. But for sake of continuing on, let's give them benefit of
doubt and assume they mean "citizen of the United States". Even THAT is not the term used in
the Code!
It is ALWAYS "citizen or resident of the United States" as if to make clear that the meaning of
"citizen" here is functionally equivalent to a resident i.e. a "resident alien of the United States."
We DO see the term "resident alien of the United States" at 7701(b) standing all by itself, but we
NEVER see the term "citizen" or "citizen of the United States" standing by itself in the Code.
Odd, right?
So let me clarify: we don't see the term "citizen" standing alone in the provisions imposing tax.
There are instances where we see 'citizen" used by itself in the Code. But we are interested in
determining whether the tax is imposed on a person or not.
So Section 1 imposes tax on taxable income of various kinds of individuals.

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At 26 CFR 1.1-1 they break this down to show the different treatment for the income of a “citizen
or resident of the United States” (note that a citizen and a resident is treated exactly the same),
compared to treatment of the income of a nonresident alien.
§ 1.1-1 Income tax on individuals.
(a) General rule.
(1) Section 1 of the Code imposes an income tax on the income of every individual who is a citizen
or resident of the United States and, to the extent provided by section 871(b) or 877(b), on the
income of a nonresident alien individual.
Note how the regulation makes it clear that Section 1 is pretty much imposing said tax only on
citizens or residents of the United States, and refers the reader to a different section for imposing
the tax on the nonresident aliens.
But the IRC Section 1 imposes tax on the TAXABLE income of EVERY individual.
Yet the related regulation 26 CFR 1.1 makes it clear that for a “citizen or resident of the United
States”, "taxable income" means ALL income, whether it is from sources within or without the
United States.
So, functionally, "citizen or resident of the ‘United States’" = a status which requires you to
include ALL income as gross income for purposes of computing your tax liability.
Again let's note that they stick "citizen" and "resident" together for the purpose of imposing the
tax on ALL income of the individuals who have either status.
But the Treasury definition gives us a couple of clues in this definition: (c) Who is a citizen.
Every person born or naturalized in the United States and subject to its jurisdiction is a citizen.
There is another big clue in that "United States" is referred to with the pronoun "ITS" - subject
to ITS jurisdiction. What does this indicate about what United States means in that context? The
country? The federal government? Is it singular or plural?
The other big clue is the "AND SUBJECT TO" language - very similar to the language of 14th
Amendment but with one significant difference in the wording: 14th says "and subject to the
jurisdiction thereof" and 26 CFR says "and subject to ITS jurisdiction".
Now many people mistakenly equate 14th Amendment citizen with the citizen in IRC. This is
erroneous because the STATES are the authors of the Constitution, and Congress is the author
of federal laws which include the IRC statutes.
So the CONTEXT is different
"United States" in 14th Amendment refers to the STATES who are members of the Union - anyone
born in any one of these States and subject to the jurisdiction of that STATE (i.e, not an alien who
just happens to be on the land when he or she is born) is a citizen of all of the states collectively
(this is what United States means there) AND of the particular State in which he resides. Because
he is a citizen of ALL of the states collectively, he becomes a citizen of ANY state in which he
chooses to live in.

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United States in the 14th Amendment is PLURAL, as indicated by the reference to an individual
State where such citizen resides and is ALSO a citizen of.
There is NO mention of states in the explanation of who is a citizen at 26 CFR 1.1-1(c)
And the pronoun "ITS" in reference to United States makes it clear that the FEDERAL
GOVERNMENT is being referred to, NOT the STATES collectively as in the 14th Amendment
So, the words "and subject to" are another clue. Context again is very important. In the context
of the income tax, to be "subject to its jurisdiction" amounts to being a person liable under IRC
6001. It means you are required to include ALL income in your gross income, regardless of source.
There can be NO doubt that this "subject" status must be VOLUNTARILY CHOSEN by the
individual because, if not, it would be slavery - would it not?
Contrast with: "subject to the jurisdiction of the United States" in the 14th Amendment. Does
that result in any tax obligation, according to the 14th? No, it confers RIGHTS!
A right to citizenship of any state where one resides, for one…
Important context for 14th is that it was intended to confer a right to State Citizenship on freed
negro slaves who might otherwise be denied such right by a Union State.
For everyone else it is mere clarification. Those born in the USA as Americans do not NEED the
Constitution to give them Citizenship--it is theirs by the doctrine of jus soli.
Congress already had rules for naturalization in place before the 14th Amendment, so that the
naturalized citizens would have the same right to their NATIONALITY as those born in the USA
as Americans, provided they meet the conditions set by Congress for acquiring that
NATIONALITY.
Therefore "citizen" in constitutional terms really means the same as "national'
Congress has confused this by designating some people as non-citizen nationals, conferring
nationality but not the full rights of citizenship (mainly voting rights) –
But 8 USC makes it clear that "naturalization" means the conferring of NATIONALITY. This is
why I prefer to use the term American national. I avoid "citizen" because it can be confusing
This is worth spending a lot of time on and understanding it, because once someone gets THIS,
they will have an easier time understanding how they can be in their own country a nonresident
alien to the IRC.
Because “nonresident alien” is only an income tax term which is not used in immigration law
or in any other federal law !!!!!
It means one who is NOT "subject" to United States jurisdiction for income tax purposes.
Remember that if "subject" means I have to report all my income as "gross income" to IRS, this
HAS TO BE a status which I somehow CHOSE -- or it would be slavery. A resident alien is also
"subject" in that sense. Again, citizen is equated with resident alien for purposes of imposing the
tax. So a nonresident alien only means one who has not CHOSEN this "subject" status.

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Q024: Can a “national of the United States” be an IRC “nonresident alien” for purposes of Section 873?
A024: Who is a "national of the United States"? They do NOT define the term in the IRC. The term
is described at 8 USC, but this is not necessarily the same meaning as in IRC - the common
sense meaning then, is that it means ANYONE with US nationality - the "citizen" described in the
14th Amendment.
"national" clearly refers to nationality
We are left with calling ourselves nationals for tax purposes, because "citizen of the United States"
for tax purposes has already been defined to mean something different from "citizen of the
United State" in the 14th Amendment.
There is no basis for anyone to claim that an American cannot claim nonresident alien status, given
that it only means one who has chosen NOT to have "subject" status for income tax purposes,
which = subjecting ALL income to reporting.
The status of a U.S. person (which includes citizens and resident aliens) is itself the nexus of
taxation, per 26 CFR 1.1-1. By contrast, for a nonresident alien, the nexus attaches to certain
INCOME, not to the person – so really it is U.S. person and nonresident alien - those are the
choices for tax purposes.
I am really just trying to show what United States generally means in IRC. They do not define the
term, except geographically, and this is most often not the sense in which the term is used in the
IRC
So by going through what “citizen or resident of the United States” means, we can see how limited
the definition of United States has to be
I am trying to make it simple: you have to start with looking at the provisions imposing the tax,
and understanding what is written there.
To understand it, you have to understand what "United States" means.
Check this out: IRC 2203 A decedent who was a citizen of the United States and a resident of
a possession thereof at the time of his death shall, for purposes of the tax imposed by this chapter,
be considered a “citizen” of the United States within the meaning of that term wherever used in
this title unless he acquired his United States citizenship solely by reason of (1) his being a citizen
of such possession of the United States, or (2) his birth or residence within such possession of the
United States.
So, “who was a citizen of the United States ....shall....be considered a “citizen” of the United
States” - it is almost like they are admitting that "citizen" for tax purposes is just some crap they
made up ---
…considered a “citizen” of the United States within the meaning of that term wherever used in
this title.
Keep in mind that 26 CFR 1.1-1(a) says: (1) Section 1 of the Code imposes an income tax on the
income of every individual who is a “citizen or resident of the United States”.

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 But the 2203 decedent was a citizen of the US who now is a citizen NOT a "citizen of the United
States"?
Compare with 1.1-1(c) - Who is a citizen. Every person born or naturalized in the United States
and subject to its jurisdiction is a citizen. So now we see what they are doing when they pair
"citizen" with "resident of the United States" together - it is NOT "citizen of the United States, and
resident of the United States"
Note that where they actually IMPOSE the tax, they say only "citizen". Everywhere else they
throw around this "citizen of the United States" but NOT where it matters MOST - the provision
IMPOSING THE TAX:
The tax is imposed on the income of every individual who is a citizen AND also on every
individual who is a resident of the United States.
See what they did there?
They avoid actual FRAUD by not imposing the tax on a “citizen of the United States”!!!
I think it goes back to at least 1919 when they started asking that question on the 1040: Are you
a citizen or resident of the United States? DIABOLICAL
They got George Cook to say he was a citizen on his return - citizen of WHAT?
Doesn't matter - Section 1 imposes tax on every individual who is a “citizen”…
26 CFR 301.6109 (g) Special rules for taxpayer identifying numbers issued to foreign persons -
(1) General rule -
(i) Social security number. A social security number is generally identified in the records and
database of the Internal Revenue Service as a number belonging to a U.S. citizen or resident alien
individual. A person may establish a different status for the number by providing proof of foreign
status with the Internal Revenue Service under such procedures as the Internal Revenue Service
shall prescribe, including the use of a form as the Internal Revenue Service may specify. Upon
accepting an individual as a nonresident alien individual, the Internal Revenue Service will assign
this status to the individual's social security number.
“U.S. citizen or resident alien individual” - they do NOT use the term "citizen of the United States"
there.
"U.S. citizen" is not a term in federal law that I know of – DO YOU?!?!
So it is really "citizen" for purposes of the income tax –AND the SSN is issued to a "citizen"
I am pointing out that they do not use the term "citizen of the United States" but a made up term
"U.S. citizen" which seems to be the same thing as the "citizen" at Section 1 and the subject the
tax is imposed upon
Q025: Are you making a distinction between instances of "citizen or resident of the ‘United States’" in
26 CFR 1.1-1, and "citizen of the United States or US citizen" at 26 USC Section 1 ?

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A025: Section 1 does NOT use either of those terms. 26 CFR 1.1-1(a) says: (1) Section 1 of the Code
imposes an income tax on the income of every individual who is a citizen or resident of the
United States
Section 1 refers only to taxable income and individuals who are either married or single, or head
of household
26 CFR 301.6109 (g) Special rules for taxpayer identifying numbers issued to foreign persons -
(1) General rule -
(i) Social security number. A social security number is generally identified in the records and
database of the Internal Revenue Service as a number belonging to a U.S. citizen or resident
alien individual. A person may establish a different status for the number by providing proof of
foreign status with the Internal Revenue Service under such procedures as the Internal Revenue
Service shall prescribe, including the use of a form as the Internal Revenue Service may specify.
Upon accepting an individual as a nonresident alien individual, the Internal Revenue Service will
assign this status to the individual's social security number.
See that? “U.S. citizen or resident alien individual”
Note they do NOT use the term "citizen of the United States" there
"U.S. citizen" is not a term in federal law that I know of
So it is really "citizen" for purposes of the income tax---the SSN belongs to a "citizen"
Or they can in any case presume resident alien individual from a SSN
Interesting that a resident ALIEN individual must provide "proof of foreign status" to change the
status of his SSN. This shows that "foreign" is not referring to nationality - it is referring to
being legally or jurisdictionally foreign.
Note that "foreign status" is equated with "nonresident alien" - But not with “resident alien”.
So “nonresident alien” means only legally/jurisdictionally foreign to U.S. Congress - it has
nothing to do with nationality - this proves it.
So Section 1 does NOT purport to impose tax on "citizens of the United States" just "residents of
the United States" and this mysterious thing called a "citizen"
So, to conclude, you could say this is all ambiguous - and it is. But that is why it is important to
know that rule about the tax not applying to you unless the law clearly spells it out. It is not
clear that the tax is imposed on citizens of the United States - even if you assume that term means
"any American citizen". And there is no good basis for construing the term that way for tax
purposes, anyway.
THESE are very good things for people to understand!
FICA is also an income tax, imposed on "wages" with respect to "employment" as define in IRC
3121.
"Employment" is defined here:
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 (b)Employment
For purposes of this chapter, the term “employment” means any service, of whatever nature,
performed (A) by an employee for the person employing him, irrespective of the citizenship or
residence of either, (i) within the United States,
"within the United States" There is that term again!
This is the legal predicate for an employer demanding a SSN---the assumption is that you are going
to perform services within the United States
This is also the legal predicate for withholding FICA
Of course, if you later file a 1040 you make this all good after the fact---your have CHOSEN the
U.S. Person status which means that your services WERE performed in the United States---so the
employer was not wrong to demand a SSN, or to withhold FICA or to demand a W-4 be submitted
This is also presumed true even without a 1040, so long as you have not changed the status
of your SSN to "foreign person" per 26 CFR 301.6109(g)
By filing as a NRA, you leave yourself the legal option of refuting the representation that you
performed services within the U.S. - This also applies to any other information return based on
payment of income from a "source within U.S."
====================================================================

PART 2 - Definitions
Q026: You said in part 1 that by understanding the definitions of just a few key terms people could unravel
the whole SCAM/SWINDLE pretty quickly. Which terms are you referring to specifically?
A026: 1) Well people worry about a lot of terms they don't need to worry about. To me the big ones to
know are "United States" "trade or business" and "gross income". The other terms are less
important, or not important at all.
2) "United States" is really the BIG one because the meaning of the term "United States" is crucial
for the other two terms.
3) "Trade or business" is defined at 7701 (26) Trade or business

The term “trade or business” includes the performance of the functions of a public office.

But when defining "gross income" for a nonresident alien - it is income that is “effectively
connected” with the “conduct” of a “trade or business” “within the UNITED STATES” – while
on the form instructions made for “U.S. persons”, they never say "trade or business within the
United States" they only say - just "trade or business". Why? That’s because EVERYTHING
a “U.S. person” does is "within the United States" - legally.

This gives you a clue as to what "United States" generally means in the IRC. It is NOT used in
the geographical sense in most instances in the IRC.

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4) Now “gross income” is defined ONLY for “U.S. persons” at IRC Section 61. They don't
tell you that! They just say "except as otherwise provided in this subtitle, gross income means all
income from whatever source derived..." But when we look at IRC Section 872 and the definition
of "gross income" for a “nonresident alien” we find this:
(a)General rule
In the case of a nonresident alien individual, except where the context clearly indicates
otherwise, gross income includes only—
(1) gross income which is derived from sources within the United States and which is not
effectively connected with the conduct of a trade or business within the United States,
and
(2) gross income which is effectively connected with the conduct of a trade or business
within the United States.
5) To know what "gross income" is for the NRA, you have to know what "trade or business within
the United States" means and you have to know what “United States” means to know whether you
are a nonresident alien, since that is defined like this:
B) Nonresident alien
An individual is a nonresident alien if such individual is neither a citizen of the United
States nor a resident of the United States (within the meaning of subparagraph (A)).
6) So it all comes down to what "United States" means. And they don't WANT you to figure it
out. This is why they don't define the term except in its geographical sense. That is a red herring
for the most part.
7) United States in federal law generally means the federal government itself, except where the
term is specifically defined otherwise.
8) "United States" is a BODY formed by the Union States. That is what "United States" means in
the preamble to the 1787 Constitution. It is short for “the United States of America in Congress
Assembled” (i.e federal government), which is still the first phrase used in every act of congress!!!
9) This goes back to the Articles of Confederation. I explain this in that bonus report I offer for
people who want to understand WHY Congress had to be so sneaky in the way they wrote the
income tax laws.

Additional info - Part 2

The IRC uses a weird term "alien individual" in the Code. They use this term only TWICE in the
IRC and they do not define the term. They use it in a couple of key places to try to avoid using
the term "nonresident alien individual" in order to OBSCURE the fact that nationals of the United
States are considered nonresident aliens relative to the IRC. They DO define the term in the
regulations, but they do it in a provision where the term itself is not even USED. They define
the term there to EXCLUDE nationals of the United States. But that definition has no force of
law because Treasury cannot make up definitions for terms -- that is Congress's job.

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 Our mutual friend pointed out several places in the regulations where the term "alien individual"
is used, and so far everyone I have seen fits the same pattern: they first use the term "nonresident
alien individual", then after that they just call it an "alien individual" in the same
sentence/paragraph --- trying to equate the two and HOPING you will just assume it means only
foreign nationals, or that you’ll look up the definition at 26 CFR 1.1441-1 and see that it excludes
"nationals of the United States". It is clear they are trying not only to hide the fact that American
nationals are nonresident aliens for purposes of the Code, but to conceal how exactly Americans
are DUPED into this "U.S. person" tax status on a permanent basis the first time they file a 1040
return!!
Q027: Just for clarification -- Larry Becraft has an entire section on his site wherein "national of the
United States" appears to be people in territories... what say you?
A027: It can include those people, but there is no provision (nor could there be) excluding ANY American
from being a national of the United States of America. The term THEY use is "national of the
United States". You can also construe that to mean USA in the IRC.
IRC 873(a) - General rule
In the case of a nonresident alien individual, the deductions shall be allowed only for purposes of
section 871(b) and (except as provided by subsection (b)) only if and to the extent that they are
connected with income which is effectively connected with the conduct of a trade or business
within the United States; and the proper apportionment and allocation of the deductions for this
purpose shall be determined as provided in regulations prescribed by the Secretary.
(b)Exceptions. The following deductions shall be allowed whether or not they are connected with
income which is effectively connected with the conduct of a trade or business within the United
States:
(1)Losses
The deduction allowed by section 165 for casualty or theft losses described in paragraph (2) or (3)
of section 165(c), but only if the loss is of property located within the United States.
(2)Charitable contributions
The deduction for charitable contributions and gifts allowed by section 170.
(3)Personal exemption
The deduction for personal exemptions allowed by section 151, except that only one exemption
shall be allowed under section 151 unless the taxpayer is a resident of a contiguous country or
is a national of the United States.
This is I believe the ONLY mention of "nationals of the United States" in the IRC
Q028: If a “citizen and/or resident of the ‘United States’” means a serf subject to its jurisdiction, why
would not a “national” be serf subject to its jurisdiction?
A028: Because nationality is by birth right, or an equivalent right acquired via naturalization.

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 Congress has no power to take your nationality away from you, so long as it was lawfully
acquired. They can strip a naturalized citizen of their nationality if it is found that fraud was
committed in the immigration or naturalization process, but other than that, they cannot touch
it. So they certainly cannot tax it.
Q029: So this means that the rights of a national born in DC are equal to one born in California…
A029: Yes. Any American born in the USA is a C itizen under the constitution. They do not NEED the
14th Amendment. 14th Amendment was for freed slaves who otherwise would have had no lawful
claim to citizenship in any state. It is not the same "citizen" we see in the IRC. Different
definitions of United States, as we have discussed. 14th is in the Constitution while the IRC is
FEDERAL law. The States are the author of the 14th Amendment while Congress is the author of
the IRC. Different powers. Congress is subordinate to the Constitution. They MAKE federal
law. Big difference!! Americans born abroad to American parents are also “citizens”, but
this is by way of Congress, not the 14th Amendment.
Q030: You mean C itizens ?
A030: Yes. If they never come back to live in the USA, they are not necessarily guaranteed citizenship.
So there are conditions. A citizen under 14th can live anywhere he wants and still always be an
American national. He cannot be deported no matter what he does. He cannot be involuntarily
stripped of his nationality no matter what he does. This extends the meaning of the 14th beyond
the slave liberation
As I said, a native born American does not NEED the 14th Amendment, it only clarifies who is a
citizen for constitutional purposes or naturalized... It clarifies things for them, too. There were
naturalized Americans before the 14th Amendment, of course.
Bottom line is 14th Am. citizen is not the citizen of the United States IRC is talking about.
It is defined differently. First of all the term is not even the same: it is "citizen or resident of the
United States". You NEVER see these things separated from each other in the income tax
provisions of IRC. NEVER. That is a big clue! It means "either or" - they are treated the SAME
And "resident" can ONLY mean "resident alien" since it does not matter where a citizen resides
for him to be taxed…
Q031: So the citizen of IRC = resident alien treated exactly the same for income tax purposes - thus
anyone agreeing to be "treated as" a "citizen or resident" - and any activity agreed to be treated as
"trade or business within US" becomes “subject to” tax for purposes of the IRC?
A031: Yup! The election is right there at IRC 7701(b)(1) election to be treated as a resident alien. People
are trying to “revoke an election” under 6013(g) but they never actually made that election to
begin with.
As far as the “activity” agreed to be treated as “trade or business” becoming subject to tax, that is
the meaning of "gross income that is effectively connected with the conduct of a trade or business"
for a nonresident alien. It is not the activity -- it is the ITEM of income and the tax treatment
of it by the very taxpayer that makes it effectively connected.

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Q032: Is it not limited only to nonresident aliens as long as one agrees to being treated as...?
A032: There need not be any taxable activity so long as the taxpayer declares it as "effectively
connected" - or allows the presumption that it is.
For U.S. person ALL income is "gross income" unless there is a specific statutory exemption.
Q033: Does this not contradict Otto Skinner's “activity” premise?
A033: Yes. His understanding was a bit too narrow. As I recall, he thought you could just demand they
"prove you engaged in a taxable activity".
I think he is correct as far as his analysis of what is taxed under the written law. But all of that is
pretty much irrelevant when you assess yourself with tax because you don't know any better - or
you get assessed based on presumptions generated by 3rd parties’ reporting.
It is all quasi-contractual. Consequently the written law hardly matters when it comes down to the
business of manufacturing a tax liability. It is a constructive fraud in which most of the marks take
part themselves!
When you assess yourself with tax, you have no one to blame but yourself because every one of
us is presumed by law to know what he is doing.
Q034: Do you think we should analyze the Walby case now?
A034: I think so! I think it helps to illustrate my point that the SSN is being silently presumed as the
basis for U.S. person by the Courts in non-filer cases. It makes sense that they would not TELL
you that, too. You are presumed to have READ the law and know what you are doing. The
regulation at 301.6109 explains that SSN is presumed to belong to a “U.S. person”. BUT no one
is obligated to explain that to you. To keep you from finding out, they use these red herring
explanations in the court rulings--part of the SCAM is to convince the sheeple that we are all being
taxed just for being Americans. Thus, they always cite 14th Amendment when someone
argues he is not a citizen.
B. Ms. Walby Is a United States Citizen
It is well understood that, with few exceptions, individuals born in the United States are indeed
United States citizens. The Fourteenth Amendment—which was ratified on July 28, 1868—
provides, in relevant part, that “[a]ll persons born or naturalized in the United States, and subject
to the jurisdiction thereof, are citizens of the United States and of the State wherein they reside.”
Similarly, Congress has declared that “a person born in the United States, and subject to the
jurisdiction thereof” is a United States citizen at birth. 8 U.S.C. §1401(a) (2012). This provision
has been in force since 1952. 4 See Immigration and Nationality Act, ch. 477, §301(a)(1), 66 Stat.
163, 235 (1952).
The exception to birthright citizenship i.e., individuals not subject to the jurisdiction of the United
States—is a narrow one. It applies only to children born to foreign diplomats, which typically
enjoy immunity under federal law and are thus not subject to its jurisdiction, and certain other
diplomatic officers. See 8 C.F.R. §§101.3(a)-(b), 1101.3(a)-(b) (2014).

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Ms. Walby does not allege that her parents were foreign diplomatic officers at the time of her birth.
Indeed, both of her parents were, like her, born in Michigan, and thus have always been United
States citizens.
A United States citizen can, however, lose her citizenship “by voluntarily performing [certain] acts
with the intention of relinquishing United States nationality,” 8 U.S.C. §1481(a). As relevant here,
one such act is by making a formal renunciation. See id. §1481(a)(5)-(6). A person renouncing her
citizenship while in the United States must do so formally, in writing, “in such form as may be
prescribed by, and before such officer as may be designated by, the Attorney General, whenever
the United States shall be in a state of war and the Attorney General shall approve such
renunciation as not contrary to the interests of national defense.” Id. §1481(a)(6).
Ms. Walby apparently attempted to renounce her citizenship by submitting her “Affidavit of
Citizenship,” which she executed in Michigan, to the State Department. However, she does not
allege that she fulfilled the remaining requirements of 8 U.S.C. §1481(a)(6). Therefore, because
the burden of proof to establish a “loss of United States nationality [is] upon the person or party
claiming that such loss occurred,” id. §1481(b), her attempted renunciation is ineffective, Further,
Ms. Walby cannot avail herself of the less stringent requirements of 8 U.S.C. §1481(a)(5) because
that subsection only applies to renunciations made while abroad. See id. §1483(a) (providing that
loss of nationality while in the United States can only take place as provided in 8 U.S.C.
§1481(a)(6)-(7)). Finally, Ms. Walby does not allege that she took any other acts listed in 8 U.S.C.
§1481(a) that would result in loss of citizenship, that the State Department has issued her a
certificate of loss of nationality, or that a court of competent jurisdiction has declared her to be a
noncitizen. See I.R.C. §§877A(g)(4) (listing when a “citizen shall be treated as relinquishing [her]
United States citizenship”), 7701(a)(50)(A) (“An individual shall not cease to be treated as a
United States citizen before the date on which the individual's citizenship is treated as relinquished
under section 877A(g)(4).”).
Accordingly, Ms. Walby has failed to demonstrate that she is not a United States citizen. Indeed,
her arguments to the contrary are patently frivolous.
C. Ms. Walby Is a United States Resident for Tax Purposes
Even assuming, for the sake of argument only, that Ms. Walby is not a United States citizen, she
is still a resident for tax purposes and thus her argument that she is a “nonresident alien” not subject
to tax fails.
For tax purposes, an individual is classified as either a (1) “United States person”—i.e., a “citizen
or resident of the United States” or (2) “nonresident alien.” Id. §7701(a)(30)(A), (b)(1); accord
Treas. Reg. §1.871-1(a) (“For purposes of the income tax, alien individuals are divided generally
into two classes, namely, resident aliens and nonresident aliens. Resident alien individuals are, in
general, taxable the same as citizens of the United States ….”). A noncitizen is treated as a resident
with respect to a particular calendar year in three circumstances: (1) obtaining lawful permanent
residence at any time during the year, (2) meeting the “substantial presence” test, or (3) making a
first-year election. I.R.C. §7701(b)(1)(A). A person is treated as a “nonresident alien” only if she
is neither a citizen nor treated as a resident. Id. §7701(b)(1)(B). [All emphasis added by me - M]

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Michigan is located within the United States. Id. §7701(a)(9). Ms. Walby therefore meets the
“substantial presence” test because she was present in the United States for the entirety of the 2014
through 2018 tax years; she does not allege that any of that time is exempt for purposes of the test.
See id. §7701(b)(3), (5) (describing the requirements of the “substantial presence” test and its
exemptions). Further, because a person who meets the “substantial presence” test for a particular
year is deemed a resident as of the first day during that year on which she is present in the United
States, id. §7701(b)(2)(A)(iii), and because Ms. Walby was present for the entirety of each of the
years at issue, Ms. Walby was a United States resident for the entire 2014 through 2018 tax years.
D. Ms. Walby Is Subject to Federal Income Tax
Having established that Ms. Walby is a United States person (either by citizenship or residency
pursuant to the “substantial presence” test), the court considers whether she was subject to federal
income tax for the 2014 or 2016 through 2018 tax years.
The Internal Revenue Code provides that a United States citizen or resident with gross income
above a certain amount in a taxable year is generally subject to tax and must file a tax return for
that year. Id. §6012(a)(1). See generally Treas. Reg. §1.6012-1. A citizen or resident must file her
tax return using Form 1040, 5 whereas a “nonresident alien” required to file a tax return must do
so using Form 1040NR. Id. §1.6012-1(a)(6), (b)(1)(i).
=====================================================================
Although the Court invokes the 14th Amendment, this is a red herring. The REAL reason the
court is finding her to be a citizen is due to her being PRESUMED a citizen or resident via her
SSN.
Although she argued that she is a nonresident alien, she did not file a proper return to establish that
(1040NR).
Interesting how the court covers its ass here, saying that she is any case a RESIDENT alien.
The court MENTIONS the "election to be TREATED AS a resident alien" that we have discussed
and which I believe is the primary part of the SCAM. But since this woman did not file a 1040
for any of these years---the judge cannot even SILENTLY presume she made this election.
But he also needs some excuse for calling her a resident alien, since the SSN is used to presume
that the person is a citizen or resident and the judge has no legal basis for saying it is one or the
other.
This is why the judge takes the odd step of saying that IN ANY CASE, she met the substantial
presence test and is therefore a resident alien.
Here is the bottom line the judge is trying to justify: D. Ms. Walby Is Subject to Federal Income
Tax
Having established that Ms. Walby is a United States person (either by citizenship or residency
pursuant to the “substantial presence” test), the court considers whether she was subject to federal
income tax for the 2014 or 2016 through 2018 tax years.

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Ms. Walby therefore meets the “substantial presence” test because she was present in the United
States for the entirety of the 2014 through 2018 tax years; she does not allege that any of that time
is exempt for purposes of the test. See id. §7701(b)(3), (5) (describing the requirements of the
“substantial presence” test and its exemptions). Further, because a person who meets the
“substantial presence” test for a particular year is deemed a resident as of the first day during that
year on which she is present in the United States, id. §7701(b)(2)(A)(iii), and because Ms. Walby
was present for the entirety of each of the years at issue, Ms. Walby was a United States resident
for the entire 2014 through 2018 tax years.
See what the judge did there? "She did not allege that she is exempt for purposes of the
substantial presence test. " Therefore the judge PRESUMED she was present in the United States.
She did not know she NEEDED to allege she did not meet the substantial presence test !!!
The judge's reasoning is VERY questionable here. But his decision actually is not---the taxpayer
clearly had used an SSN to make her refund claims, an SSN for which she had never changed the
status in IRS records from "U.S. person". But the judge did not want to expose THAT as the
BASIS for finding she is a "U.S. person." If he had, this would have amounted to "pointing
toward the exits", so to speak. So instead, the judge relied on the 14th Amendment bullshit as a
red herring (this is very common) and the substantial presence test bullshit for another.
(I have NEVER seen that reasoning used in any other case EVER). He was forced to do that
because the taxpayer did not ADMIT to being a “U.S. person” and did not file a 1040 (alas… also
did not file 1040NR). She could not win on appeal just because the judge's reasoning is wacky---
an appellate court would do a de novo review of the legal determinations--as long as you agree
with the legal determination (that she is a “U.S. person” and thus not entitled to the refund) it is
not necessary to second-guess how the judge reached that conclusion. See how it works? This
allows the judge to GRANDSTAND and say whatever bullshit he wants as long as he comes up
with the PROPER legal decision!!
(“Adherents to sovereign citizen theory believe in a vast governmental conspiracy governed by
complex, arcane rules, according to which sovereign citizens are exempt from many laws,
including the obligation to pay taxes ….” (Internal quotation marks omitted)). The theory that
“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” has
long been rejected as “completely lacking in legal merit and patently frivolous.” Lonsdale v.
United States [90-2ustc ¶50,581], 919 F.2d 1440, 1448 (10th Cir. 1990).
As far as the SSN creating the US Person presumption, here’s the relevant section:
(g) Special rules for taxpayer identifying numbers issued to foreign persons -
(1) General rule -
(i) Social security number. A social security number is generally identified in the records and
database of the Internal Revenue Service as a number belonging to a U.S. citizen or resident alien
individual. A person may establish a different status for the number by providing proof of foreign
status with the Internal Revenue Service under such procedures as the Internal Revenue Service
shall prescribe, including the use of a form as the Internal Revenue Service may specify. Upon

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accepting an individual as a nonresident alien individual, the Internal Revenue Service will assign
this status to the individual's social security number.
On my 2009 audit I told you about, they never investigated! I could challenge that assessment on
that basis
As a matter of law, any income paid to a U.S. person is "gross income". So it would only be a
question of whether you received the income or not
And this is another reason why I don't want to just tell people how to fill out their return (besides
the fact that it would be irresponsible and could blow back on me if someone gets themselves in
trouble): there is NO guarantee the IRS will accept ANY return that is filed as valid. They can
refuse to accept it (they have done this to one of my clients and FTB has done this to several of
my clients). They can claim the return is frivolous (the IRS and FTB have both done this to clients
of mine). They can audit the return later on and try to intimidate you into agreeing to more tax
(IRS did this to one client, and FTB has done this too, and I am dealing with the same in a couple
of different states).
Most of those kind of problems arise when the return is filed very late. When we file before
the tax agency is demanding a return, this kind of stuff almost never happens. ALMOST
never. But it COULD happen with ANY return. So I am cautious about making this sound so
easy that anybody could do it.
My clients have me as their "insurance" against such problems. I do my best to educate them.
But in the World Series you still want your ace on the mound in Game 7 don't you? You don't
want to send in the rookie who hasn't pitched in the majors before.
The IRS has minimum three years to audit after a return is filed. That is true with ANY return that
is filed. Usually they audit within 2 years if they are going to. So after 2 years it is a safe bet that
whatever the IRS agreed is your tax for that year, that's the end of it.
IRS has only audited one client of mine, for 3 returns all at once. And we ultimately prevailed in
the audit on all three!!! I am not going to say it was easy, though. This client was super glad to
have me helping him through it.
The way they devised the SCAM was to ENSURE they could not be held liable. It is designed to
DUPE you into consenting every year without you realizing what you are doing. That is the only
way they could work around your fundamental rights.
You should know from your friend Ed Rivera that these people don't take any oath to protect
anything but the coffers of the interests they REALLY work for…
I find the moral indignation to be quite naïve. Governments have always deceived people. They
should never have been trusted in the first place.
The reason my approach works is not because the IRS is kind-hearted. What I do, establishes
leverage. Knowing how this SCAM really works, gives you the leverage of FORCING them to
either accept the exercise of your rights, or risk liability by violating those rights. It only SEEMS
like IRS is violating people's rights because people cannot see that the "victims" of enforcement
put themselves under the terms of enforcement via their own consent.
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THAT will sound weird to people who believe the IRS just "does whatever they want" with
impunity. I assure you that is not how it works.
The IRS can be counted on to do whatever you will let them get away with. That is why knowledge
is power and gives you leverage.
Not just any knowledge, but understanding what is binding on THEM. They are not obligated to
respond to most of the things people demand in their letters--"show me the law" etc.

PART 3 – IRS Truths and Tricks

QUESTION: When is a true statement considered frivolous?
ANSWWER: Here is an example of an argument where the statement is true, but it is STILL
frivolous: (j) The Sixteenth Amendment was not ratified, has no effect, contradicts the
Constitution as originally ratified, lacks an enabling clause, or does not authorize a non-
apportioned, direct income tax.
These parts are undeniably true: lacks an enabling clause, or does not authorize a non-apportioned,
direct income tax.
But it is still frivolous because IF you incurred, allowed or caused evidence for a tax liability to
stand, it is IRRELEVANT. Just like IF you have voluntarily enlisted in the military it is
IRRELEVANT that no law REQUIRED you to enlist. You can still be court-martialed for
violations of the special military regulations you made yourself subject to. Suppose you are
MISTAKEN for an AWOL soldier and picked up by MP's and dragged into a court martial. What
is the BIG issue that needs to be addressed? The fact that you are not the person they assumed you
are!? You are not a member of the military!?! You would bring that up FIRST - right? You
would not waste time arguing that it is voluntary to join the military, would you?
By the same token, if you understand what is really going on with the income tax, you understand
it is ALL about the evidence, and that you do not NEED any of these legal arguments. The
CORRECT facts either establish that you are liable or they do not.
"just the fact's ma'am"
=====================================================================
Re Original Issue Discount (OID): (21) A taxpayer may use a Form 1099-OID, (or another Form
1099 Series information return) as a financial or other instrument to obtain or redeem (under a
theory of "redemption" or "commercial redemption") a monetary payment out of the United States
Treasury or for a refund of tax, such as by drawing on a “straw man” or similar financial account
maintained by the government in the taxpayer’s name (see paragraph (20), above)
That is from Notice 2010-33. item 21
Here is the one targeting “Cracking The Code” (CTC) style returns: (22) A taxpayer may claim
on an income tax return or purported return an amount of withheld income tax or other tax that is
obviously false because it exceeds the taxpayer’s income as reported on the return or is
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disproportionately high in comparison with the income reported on the return or information on
supporting documents filed with the return (such as Form 1099 Series, Form W-2, or Form 2439,
Notice to Shareholder of Undistributed Long-Term Capital Gains).
How do they know a CTC return with 4852 zeroing out wages yet claiming a refund is "obviously
false"? Because it is attached to a 1040 U.S. person return---and for such a person ANY amount
received as compensation for services is TREATED AS "gross income from a source within the
U.S." per IRC 861 – This also should clarify why Larken Rose’s 861 arguments failed…
So by admitting there was withholding, the CTC filer using 1040 is ipso facto ADMITTING he
had more "gross income" than he is reporting on the 4852 form and on his 1040 return.
This is where they get the "obviously false" part upon which this frivolous position is based.
Without the "obviously false" part it would not necessarily be frivolous just because your refund
amount exceeds the gross income or is disproportionately high. Obviously it is possible for this
to happen due to ERRONEOUS withholding.
Here is another one: (10) A taxpayer is not a “person” within the meaning of section 7701(a)(14)
or other provisions of the Internal Revenue Code, or similar arguments described as frivolous in
Rev. Rul. 2007-22, 2007-1 C.B. 866.
This is frivolous, yet many people cannot let it go, including our mutual friend at SEDM
EVERY taxpayer is a "person" of one kind or another as far as the IRS is concerned. That is the
“rules of the game”. Arguing against that, is like trying to hit a homerun in a basketball game.
It is important to note that you are not required to deal with the IRS at all. If you have a problem
observing the rules of engagement provided by Congress and Treasury and the courts, you can
always just deal directly with the employer or payer who filed the W-2 or 1099 and started all the
trouble. For most people dealing with IRS is preferable as it allows you to avoid friction with
those you depend upon to make your living.
I believe you have mentioned this one: (45) The Service is not an agency of the United States
government but rather a private-sector corporation or an agency of a State or Territory without
authority to administer the internal revenue laws.
And this catch-all: (46) Any position described as frivolous in any revenue ruling or other
published guidance in existence when the return adopting the position is filed with or the specified
submission adopting the position is submitted to the Service.
Returns or submissions that contain positions not listed above, which on their face have no basis
for validity in existing law, or which have been deemed frivolous in a published opinion of the
United States Tax Court or other court of competent jurisdiction, may be determined to reflect a
desire to delay or impede the administration of Federal tax laws and thereby subject to the $5,000
penalty… which on their face have no basis for validity in existing law, or which have been deemed
frivolous in a published opinion of the United States Tax Court or other court of competent
jurisdiction…
GET IT?

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 PART4 – Solutions, Testimonials and Services
It is important to understand the difference between a Determination of Deficiency which can be
challenged on the basis that it is arbitrary, and an Assessment which has technical requirements.
An assessment already made can only be shown to be erroneous or procedurally improper.

You cannot establish an assessment as "arbitrary" because, if you thought the Determination of
Deficiency that LED to the assessment was arbitrary, you could have challenged it in Tax Court
BEFORE it was assessed. And if you didn't do that, you could still request audit reconsideration
as long as the tax remains not fully paid. Once the tax is fully paid, you would need to make
your case for a refund – but this would require YOU to establish that the assessment is erroneous.

An assessment already made is presumed correct (once IRS meets their burden of production to
show the assessment was properly made in accordance with their administrative process). So, to
challenge it in court, you would have to establish that the tax amount assessed is erroneous, and
that COULD be because the determination of deficiency made by the examiner (that the
assessment is BASED ON) was arbitrary or erroneous.

In the alternative, you could challenge the assessment for more technical reasons such as the
assessment is untimely (made after the statute of limitations) or contend that the IRS failed to make
a procedurally proper assessment (IRS has burden of production in any court proceeding to give
evidence of a contemporaneous signed summary record of assessment). This is where requesting
a signed summary record of assessment is valuable - you can find out (without going to court)
whether or not the IRS can meet its burden of production as to the assessment being properly made.

FROM TELEGRAM CHAT

Maybe I should start the conversation. Anyone who joins us later can go back and read from the
beginning. I am a tax consultant specializing in legally opting out of income tax. This is the term
I came up with to describe it, it’s not an “official” term the IRS uses because they don’t want you
to know that opting out is even an option.
“Opting out” the way I use the term means 100% legal avoidance of what would otherwise be
your income taxes.
The right to use any and all legal means to reduce your tax liability, or “altogether avoid” what
would otherwise be your taxes is a right EVERY taxpayer has and which the Supreme Court of
the U.S. (SCOTUS) recognized as a right that “cannot be doubted” in Gregory v. Helvering
(1935). https://en.m.wikipedia.org/wiki/Gregory_v._Helvering
So there is no question you have the right to use any legal means to reduce or eliminate your
income taxes.
Famous Judge Learned Hand Quote

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“Anyone may arrange his affairs so that his taxes shall be as low as possible; he is not bound to
choose that pattern which best pays the treasury. There is not even a patriotic duty to increase
one's taxes. Over and over again the Courts have said that there is nothing sinister in so arranging
affairs as to keep taxes as low as possible. Everyone does it, rich and poor alike and all do right,
for nobody owes any public duty to pay more than the law demands.”
The IRS and the propaganda machine (which includes the vast majority of tax professionals)
maintain the myth that every American is somehow AUTOMATICALLY liable for tax, and that
your legal means for reducing your tax are limited to
1) Specific deductions allowed in the Internal Revenue Code and
2) Reducing the amount of money you bring in
So one big myth that comes from that is the common assumption that opting out completely is
impossible without taking a vow of poverty, or leaving America and relinquishing your
American citizenship, or needing to argue with the IRS &/or some judge and prove you are NOT
liable for income tax.
But the party making a claim is naturally the party who has the burden of proof.
So the burden of proof is not on anyone to show that he is not liable for tax. A party who claims
you ARE liable is the one who needs to be able to prove that claim.
Another related myth is the idea that IRS can just decide you owe tax any old time (or that you
owe MORE tax) and start taking your property willy-nilly. This is absurd!
The IRS must have basis in evidence to assess you with a tax. Until a formal assessment is made
that follows proper legal procedure established by Congress, no tax liability legally exists.
An IRS assessment is made "by recording the liability of the taxpayer in the office of the
Secretary in accordance with rules or regulations proscribed by the Secretary." 26 U.S.C. § 6203.
The IRS satisfies its obligations under this statute when an assessment officer signs a summary
record of assessment describing: (1) the taxpayer's name and address; (2) the character of the
assessed liability; (3) the taxable period (if any); and (4) the amount of the assessment. Treas.
Reg. § 301.6203-1.
So the IRS must have evidence to make an assessment. They also need your CONSENT to make
the assessment. When you file a return & make a self-assessment, you are consenting to allow
IRS to assess a tax. A lot of people therefore think they can avoid income tax by simply refusing
to file a return.
The problem with that is that IRS can also rely on implied consent. If you refuse to file, but IRS
has evidence that indicates you are required to file, IRS can make a default assessment against
you.
So you don’t have to prove a negative. BUT if there is evidence on the table that IRS may use to
assess tax on you, and you don’t agree with that evidence, you have what is called the “burden of
production”. You must produce some contrary evidence or else you will be tacitly agreeing with
the evidence the IRS has.

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Your tax return is evidence, since it is a declaration made under penalty of perjury. It is therefore
the testimony of a witness with personal knowledge.
So the question I'm sure most people have is how do I get started? What do I need to do to "opt-
out"? What are the most practical steps most people need to take?
Short of an actual filed 1040, I'm guessing that the W-2/W-4 "employment" arm of the scam
produces the most "evidence" of tax liability; but the 1099 "contract" tax forms also provide
"evidence" of liability via "3rd party payer" correct? What are other ways the IRS manufactures
evidence of tax liability?
I think a lot of people would like to "opt-out" but are afraid. Others are not afraid but they don't
know how. (Or varying degrees of each the above.)
People need to understand the process I would think, but many just want to get to the "bottom
line" to all of this quickly. And I can understand that. But I also understand everybody has a
different tax situation and it's hard to give blanket advice. But maybe explain some of the more
common scenarios that might apply in many situations.
This is getting way ahead of ourselves. I am not here to give anyone any “advice” other than to
think and question everything, research and reach their own conclusions.
For “getting started” you have to understand how you are opting IN first. The way OUT is along
the same path you came IN, so to speak.
There’s no jumping ahead to “which form do I fill out and tell me how I should fill it out”.
I’m sure many people just want the 10 second sound bite version—but that mentality is why we
are in this mess as a country.
You have to be deemed in the eyes of the law to have “opted in” to being liable for income tax,
because tax liability in USA works in a contractual manner. The tax is NOT imposed by law on
everyone in America. This would be absolutely impossible under our system of law, even though
that’s how the average person assumes the tax works.
The biggest key to “opting you in” is your Social Security Number. Not just that you have one.
But the fact that most people have their SSN connected to every payment someone else makes to
them for their labor or services. No law requires anyone to have a SSN or furnish a SSN to be
hired for work. Yet try to get a job without one. You are in no position to say no to that demand.
This is coercion. Yet it’s presumed by law that you willingly provided a SSN of your own free
will. That’s the initial step where your “consent” is seemingly obtained to all the obligations that
arise as a result of that SSN connection: FICA withholding, federal & state & even city or local
income taxes. How ELSE do you think it can be legal to tax you 4-5 times on the SAME
money? They have the illusion of your CONSENT. The SSN is the “evidence”. The law does
not presume coercion; it presumes your SSN was obtained via your voluntary choice to furnish
the SSN to the payer. So right from the get-go there is a discrepancy between what the law
presumes and what actually happened.
I understand that, and you understand that, but sadly that is what most people want, the 10
second sound bite. I agree, I try to get people to research this stuff, at least a little bit, but most
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people end up making little to no effort to do so. It's really sad that most people will make so
little effort to understand their own slavery.
Well let’s not invite those kinds of people to this chat. Nobody is asking anyone to do anything
here—that’s the first thing to get clear on. I’ve had people become clients and take action on this
after YEARS of exposure to this info. It’s a paradigm shift. It does not happen in just a
conversation or two. If you are red-pilled on anything, think about how long it took for you to
get there.
This is a place to learn that opting out legally is a real thing, that real people are doing it, and
have been doing it for years, and to learn a little more about it. I personally have been legally
opting out for about 20 years. I have a few American citizen clients with 10+ tax years under
their belt where the IRS agreed they are nonresident aliens and that their tax was $0. At least one
has earned six figures annually for most of those years. So this has nothing to do with how much
you make. It has everything to do with knowing how the tax actually works, knowing what your
rights are, and knowing how to deal successfully with the IRS and (for some) your state tax
agency.
I’ll be inviting clients to participate in this chat.
We just set up the group yesterday so give me a minute on that
Let’s be clear: this is not for “most people” and it never will be.
Look how many fools keep going along with this phony pandemic, for example.
Unfortunately rational thinking people are vastly outnumbered by these fools, so they continue to
enjoy the illusion of being right. That’s true for many things, including income tax.
Just trying to generate some conversation. Hopefully others will join in.
I never knew the depth and breadth of the brainwashed until 2020. I think that was a test to see
how well their mind control works. The tax mind control has been working great for a long time.
I had a few clients chime in on Twitter, though they most often did not ID themselves as clients.
Hoping they will be less shy and open up here in a more private chat group where they know
they won’t have to worry what their normie friends/family might think. There will always be
those people who can’t wait to tell you that you’re “going to jail someday” and act like you are a
meth addict or something in need of an intervention just because you are not a cowardly sheep
like them and exercise your rights against the powers that shouldn’t be. These clients have IRS
account transcripts to prove IRS agreed their tax was $0 (for multiple tax years) and that IRS
issued 100% refund of their income tax withholding! Some of my clients earn 6 figures, and they
still get all of their tax withholding back! We have gotten existing tax assessments removed
completely, liens released etc. Audits of my clients are very rare, but we have gotten IRS to close
multiple audits by agreeing the client’s tax is $0, and making no changes to their tax.
There are lots of people who want to opt out, but are using methods that don’t work. So this will
be a good forum to debunk a lot of the crap some people have been falling for.
Vast majority of tax truthers believe refusing to file a return is a must. I do not agree with that.

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I know, I was always part of the do not file crowd, but I see now the errors of that.
It’s the simplest way to start. And I can help non-filers, even if they had tax assessed already,
because at least they never expressly agreed they owe the tax for that year. That leaves the door
open for them to opt out, still, for that tax year.
It’s possible to get IRS to stop demanding a return. But nothing stops them from raising the issue
again later, if they decide to do so. So there is always a lack of certainty there. You can probably
breathe easy on a tax year more than 7 years ago, but legally there is no time limit for IRS to
come after you as long as no return was filed.
For a few years, my focus was to avoid filing. There were times when IRS just plowed ahead and
issued a notice of deficiency anyway, no matter what we said.
One of the big challenges in dealing with IRS is knowing what to do when the IRS does not
respond the way you hoped they would.
It depends on how you respond to a demand to file.
I have found that filing a return is the best weapon in your arsenal against the IRS, if you know
how to use a return to your advantage. This is what Pete Hendrickson has attempted to do with
his “cracking the code” method (I do not recommend it). Also Irwin Schiff with his “zero
return” method. Also not recommended.
If we are supposed to think the tax is imposed on all Americans on all sources of income
worldwide, why did Congress NOT define “United States person” to include “U.S. citizens”
“citizens of the United States” “American citizens” “American nationals” or “nationals of the
United States”?
Remember that 8 USC includes citizens of the United States in the definition of “national of the
United States”. So whatever “citizen” is supposed to mean in the IRC definition of “United
States person”—we know it does not necessarily include any and all American citizens. Rather,
“citizen” can reasonably be construed to refer to a subset of the group “citizen of the United
States”. In the context of knowing Congress cannot subject all American citizens to involuntary
servitude, it becomes clear that this “citizen” income tax status HAS TO BE a voluntary choice
made for each tax year.
Of course they bring in more revenue as long as Americans are not aware they have any choice.
Thus, all the propaganda.
No one looks at the law, let alone reads it with adequate comprehension. Even if you try, it is
written deceptively. You have to connect some dots to get to the truth of it, but it’s there.
What’s most telling is often what they do NOT say in the law (things which they SHOULD say
in the law if the tax actually works the way most people are conditioned to believe/assume).
This is an ongoing conversation. It will be a good idea I think for anyone new to scroll up and
read from the beginning, so the conversation does not get too repetitive.
[Forwarded from No Thanks, I.R.S.]
https://nothanksirs.famguardian.org/
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The biggest problem with those methods is that both involve using a 1040 form, which is only
for “United States persons” per Treasury Regulations.
https://www.law.cornell.edu/cfr/text/26/1.6012-1.
See (a)(6) of this regulation:
Form of return. Form 1040 is prescribed for general use in making the return required under this
paragraph.
[Forwarded from S. G.]
Yes, I learned a long time ago to avoid the 1040 and there was speculation even back in the 90's
that using the 1040NR was the proper way to go. But I just always avoided anything with 1040
in it.
Also in that regulation:
(b) Return of nonresident alien individual -
(1) Requirement of return -
(i) In general. Except as otherwise provided in subparagraph (2) of this paragraph, every
nonresident alien individual (other than one treated as a resident under section 6013 (g) or (h))
who is engaged in trade or business in the United States at any time during the taxable year or
who has income which is subject to taxation under subtitle A of the Code shall make a return on
Form 1040NR.
The establishment encourages the myth that “nonresident alien” refers only to foreign nationals.
This is not true. Nationals of the United States are included within the meaning of “nonresident
alien” in the IRC.
See https://www.law.cornell.edu/uscode/text/26/873
(3) Personal exemption
The deduction for personal exemptions allowed by section 151, except that only one exemption
shall be allowed under section 151 unless the taxpayer is a resident of a contiguous country or is
a national of the United States.
IRC 873 concerns only nonresident aliens.
The context clearly indicates that nationals of the United States are nonresident aliens.
Further, the 1040NR mentioned U.S. nationals for years on the face of the form (until 2018) as a
type of nonresident alien.
Title 8 of United States Code defines “national of the United States” to include citizens of the
United States.
https://www.law.cornell.edu/uscode/text/8/1101
(a)(22) The term “national of the United States means

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(A) a citizen of the United States or
(B) a person who, though not a citizen of the United States, owes permanent allegiance to the
United States.
So it seems every American citizen has a choice every year between “United States person”
income tax status and nonresident alien status for federal income tax purposes.
Your choice of income tax return form is how you communicate your choice of status.
If you don’t file anything, and you only filed 1040 before (or you never filed any return) the IRS
will presume that your SSN belongs to a “United States person” per regulations at 26 CFR
301.6109-1(g)
https://www.law.cornell.edu/cfr/text/26/301.6109-1
(g) Special rules for taxpayer identifying numbers issued to foreign persons -
(1) General rule -
(i) Social security number. A social security number is generally identified in the records and
database of the Internal Revenue Service as a number belonging to a U.S. citizen or resident
alien individual. A person may establish a different status for the number by providing proof of
foreign status with the Internal Revenue Service under such procedures as the Internal Revenue
Service shall prescribe, including the use of a form as the Internal Revenue Service may specify.
Upon accepting an individual as a nonresident alien individual, the Internal Revenue Service will
assign this status to the individual's social security number.
The regulation is misleading in that it uses the term “U.S. citizen”. That term is not found in
ANY federal law, let alone the IRC. You are meant to read that as “American citizen”. But as
we established, American citizens are nationals of the United States and nationals of the United
States are non-resident aliens.
The context of that regulation makes it clear that “U.S. citizen” would be opposite in meaning to
“nonresident alien”. Therefore, you may reasonably construe the term “U.S. citizen” in that
Regulation to mean only an American citizen who has not changed the status of his SSN to
“nonresident alien” in the IRS records.
Why does it matter what your status is? Because “United States person” status is effectively a
contract whereby you agree to be taxed on income from all sources worldwide. This would not
be legally possible without you consenting to it, as it would amount to subjecting you to a form
of involuntary servitude. That is of course outlawed by the 13th Amendment.
By contrast, a nonresident alien is taxed only on federally-connected income. The nexus of
federal taxation (source of jurisdiction) in that case is the source of the income. The nexus for a
United States person is their status as a United States person—this is how Congress acquires the
legal power to tax income from non-federal sources.
See Title 26 Code of Federal Regulations (26 CFR) at 1.1-1(b)
https://www.law.cornell.edu/cfr/text/26/1.1-1

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(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
As to tax on nonresident alien individuals, see sections 871 and 877.
The Regs there are referring to IRC Sec 871 and 877.
https://www.law.cornell.edu/uscode/text/26/871
26 CFR 1.1-1 does not use the term “United States person”—it refers to citizens and residents of
the United States.
IRC 7701 however, defines “United States person” to include citizens and residents of the United
States. See IRC 7701(a)(30)
https://www.law.cornell.edu/uscode/text/26/7701
(30) United States person
The term “United States person" means—
(A) a citizen or resident of the United States
Note how Congress uses the word “citizen” all by itself there. They do NOT use the term “U.S.
citizen” or “citizen of the United States”. Ask yourself “why NOT?”

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