Dear [IRS Counsellor],
This is about another good question that I think you had in mind
to pose during our 2/25 meeting, though didn't actually put in to
words: "WHY doesn't the Code define the legal term 'income'?"
On 2/11 you discovered that CS 61, contrary to IRS folklore, does
not define it or even pretend to define it. (It does pretend to
define "gross income", but only in terms of "income"; since it
defines that term nowhere else, it does no more than to pretend.)
That absence was observed by the court in U.S. v. Ballard (1976),
535 F2d 400:-
"...the general term "income" is not defined in the Internal Revenue Code..."
But why? - Inquiring minds would like to know, so you must have
wondered about that in the two weeks following. All of Subtitle A
purports to have to do with taxing income, and a trillion dollars
a year is collected by the IRS on that pretext, so there cannot
be any word in more urgent need of a crisp legal definition.
The answer is actually very simple: the task is impossible.
Title 26 as you know is written by Congress; it is the law. And
as you also know from its Section 5, Congress does NOT have the
power to amend the US Constitution. Now, the term "income" is
used in one part of the Constitution (Amendment 16) and so it is
impossible - illegal, in fact - for Congress to attempt to change
what Amendment 16 might mean, by redefining one of its words.
That answer is so simple and compelling that it is acknowledged
even in an Opinion of the Supreme Court - the case of Eisner v
Macomber (1920) 252 U.S. 1889 in which it rightly held:
"...the Congress may not, by any definition it may adopt, conclude the matter,
since it cannot by legislation alter the Constitution, from which alone it
derives its power to legislate, and within whose limitations alone, that
power can be lawfully exercised."
So much for the "Why?". Now you will want to know "Where, then,
is the term defined?" and on 2/28 you asked and answered that by
referring to a dictionary of current, common use and proposed a
definition "accession to wealth". The question "where?" is good,
but the answer you found that day is not; for there's no way that
a 2004 current-use dictionary can reliably define the meaning of a
legal term used in a Constitutional Amendment of 1913. We have to
look much deeper than that.
My own view (for what it's worth) is that since Amendment 16 fails
to define the term, for that reason alone Amendment 16 is void for
vagueness and so whatever "income" is, Congress does not have the
power to tax it without apportionment and the whole of Subtitle A
is therefore equally void and the annual trillion dollars you folk
collect should be handed back at once to its rightful owners. Even
so, let me "go the extra mile" and try to help you find what the
term probably meant, in Law, at the time it was allegedly ratified.
Absent any better source, we can try the Supreme Court.
Fortunately, that Court did define "income" both before and after
that alleged ratification; therefore we do have a fairly reliable
indicator of how the term was being used in the Law at that time.
The matter is summarized best, perhaps, in the case of Merchants'
Loan & Trust Co v Smietanka (1921), 255 US 509. The court referred
to several post-ratification cases and to the 1909 (pre-ratification)
Corporation Excise Tax Act, and said:-
'There can be no doubt that the word ["income"] must be given the same meaning
and content in in the Income Tax Acts of 1916 and 1917 that it had in the Act
of 1913. When to this we add that in Eisner v Macomber, supra, a case arising
from the same Income Tax Act of 1916 which is here involved, the definition of
"income" which was applied was adopted from Stratton's Independence v Howbert,
supra, arising under the Corporation Excise Tax Act of 1909, with the addition
that it should include "profit gained through the sale or conversion of capital
assets", there would seem to be no room to doubt that the word must be given
the same meaning in all of the Income Tax Acts of Congress that was given to it
in the Corporation Excise Tax Act and that what that meaning is has now become
definitely settled by decisions of this Court.'
Thus, "income" in the Income Tax Acts is identical to "income" in
the Corporation Excise Tax Act, ie corporate profit - of which
of course all individuals have none. That is perfectly consistent
with CS 61: "Gross income" is "all income from whatever source
derived..." and the sources exemplified are those from which a
Corporation might derive a profit. "Wages", from which it could
obviously not, wages always being an expense, were removed from
that list in the 1954 Edition of the Code - and none too soon.
That's about it; may I end my reply to your unspoken question
by referring to Irwin Schiff's scholarly book "The Great Income
Tax Hoax." Say the word, and the address where you'd like to
receive it, and it will be my pleasure to send you a copy. It's
a towering indictment of the whole i-tax scam, and includes a
fascinating chapter on the Congressional debate on what Amendment
16 was to say. No reader can leave that account unmoved by the
very obvious fact that the debating Members were hopelessly
confused about what the word "income" actually meant. Obviously
they voted for it; just as obviously, the "Aye" voters had very
varying notions about what they were voting for. This is the
highly unstable foundation underlying all your employer's work.