Ask a Tax Lawyer about the Tax Law

I am a Tax Lawyer. There are a lot of myths and misconceptions about the tax laws out there. For example, many people think that rich people pay zero taxes or that you do not have to pay income taxes because the Supreme Court held the federal income tax is unconstitutional. However, that is not to say that some of these beliefs may be rooted in truth. Rich people can use sophisticated tax planning techniques to lower their tax bill. Courts have held some tax statutes were unconstitutional under limited circumstances like retroactively assessed taxes.


This thread will be limited to myths and misconceptions about tax laws. I will not give legal advice on this thread, so please do not ask me if you can deduct this or exclude that.

So anyway, hit me with your questions or comments.

reply to post by hotpinkurinalmint


Hey, I am due to inherit some money, lets say 100k, from an irrevocable trust held in Massachusetts from my Grandmother in June. I live in WI. It is currently in various securities/ bonds and what not. If I ask for everything to be liquidized, and then a check sent to me, what are the tax ramifications? Does this count as income for me? Does this have anything to do with the death tax issue?/

Thanks,
SN

reply to post by skunknuts


I am not going to give you legal advice, but I will clarify a few things. I do not know much about Wisconsin state tax law or the intricacies of Massachusetts state law, which could also be important in your situation.

First, "income" for Income tax purposes does not include bequests or gifts. Hence people do not pay income taxes on gifts they receive or inheritances. However, bequests and gifts are covered by the estate and gift taxes.

One misconception about the gift and estate taxes is that they affect everybody or that they affect large numbers of people. Many get all riled up when politicians talk about raising the estate tax or "death tax." The fact of the matter is the federal gift and estate taxes only affect the very wealthy. If you do not have a net worth of more than $3.5 million, the federal estate tax does not apply to you.

Depending on the terms of the trust, it could have already been subjected to the gift tax and may also be subjected to the estate tax. These taxes will be assessed on the fair market value of the property transferred or cash transferred. $100K of securities or other assets will be taxed the same as $100K of cash.

[edit on 4-1-2010 by hotpinkurinalmint]

What do you think of the Brown's case:

Ed and Elaine Brown were convicted of federal tax evasion in January. They did not appear in court for their sentencing, where they were ordered to serve five and a half years in prison. They have remained in their heavily fortified home in Plainfield, N.H., since April.

Now here's the interesting part from Wiki, they DID NOT get convicted for tax evasion! Instead they threw as many other charges as possible at them:

-Conspiracy to impede or injure officer
-Conspiracy to commit offense or to defraud United States
-Assaulting, resisting, or impeding certain officers or employees
-etc, etc

I suppose point two could be valid, but it seems such an umbrella clause.

What about this video "paying income tax is voluntary in the U.S":


[edit on 4-1-2010 by PrisonerOfSociety]

reply to post by PrisonerOfSociety


Tax evasion is against the law. I know a lot of people around here and people like the Browns think that various taxes are unfair, unconstitutional, etc. No matter how well reasoned and eloquent these arguments are, the fact of the matter is you could face prison, fines, and/or confiscation of property if you avoid paying taxes.

That being said, if you want to avoid prison, fines, etc. do not take advice from tax protesters. Much of what they have to say has no basis in the law.

Hello Tax Lawyer,

Can you confirm that the "income tax law" is not an actual law but in fact an "act" as in the "income tax act" by which that "act" is GIVEN THE POWER OF LAW within a society ONLY as a result of consent to such a society?

Can you confirm that "given the power of law" does not mean the same thing as "the law" and that this power only applies to those who consent willingly or (unwillingly; meaning whether one knows of a choice existing or not) to "participate" in said society?

Could you confirm that "acts" and "statues" are not laws but in fact only given the power of law within a society;and that by definition a society must be one that operates with consent as a means of membership, thereby resulting in the possibility of withdrawing ones consent?

Could you also please confirm that the failure to distinguish between "act" and "law" or "statute" and "law" is akin to gross negligence which is fraud?

Thanks

I guess the USA uses the "revenue act" rather that the "Commonwealth's" "income tax act".

reply to post by StrangeBrew


I do not know what you exactly mean by "law" or and other terminology you use, but I hope this clarifies things. Lawyers use the term "law" to refer to a rule. Rules can come from statutes, treaties, regulations, court cases, and other such sources.


When Congress enacts a statute, or the executive branch promulgates a regulation, it has the force of law in that the government enforces the law by imposing punishments against people who do not follow the statutes or regulations. The government even does this if the statute or regulation is unpopular. The "tax laws" are based on the internal revenue code, which is a statute, and treasury regulations, which are rules written by the Executive branch which elaborate upon the internal revenue code. Tax laws are also based on court decisions and other sources.

You might think it is unfair or unjust for an unpopular statute or regulation to be enforced against people, but in the real world the government "gets away" with enforcing laws and regulations against people that you may think are unfair, unjust, unpopular, or that society did not consent to. You would not be successful in court if you argued a statute or regulation is not valid because it is unpopular or you (or any other segment of society) did not consent to the law.

As far as your comments about gross negligence and fraud, the legal definitions of gross negligence and fraud are completely different. Fraud is an intentional misrepresentation. Gross negligence does not necessarily involve misrepresentations and does not involve intentional acts, but rather involves carelessness. It can be gross negligence or fraud on the part of an attorney, or anybody else, to tell someone they do not need to pay taxes because society did not "consent" to the tax statutes and tax regulations.

As far as the practice of law goes, distinguishing between rules from court cases, rules from statutes, rules from regulations, etc. generally does not matter as all these rules have the force of law. The one time

Do you have any opinion on Mary Croft and her book HOW I CLOBBERED EVERY BUREAUCRATIC CASH-CONFISCATORY AGENCY KNOWN TO MAN?

Here is a recent thread about her

www.abovetopsecret.com...

Have you ever heard of the freeman ideology?

You are right, there is statute and common-law (i'm from the UK). Statute law is passed by parliament and covers stupid laws like clamping your car if you park 2 inches over a white line and then the fine can transgress into compound fines from further subsidiary statute laws, like failing to pay release fees et al.

Common law, is law passed by judges and has been created for the good of humanity like murder, rape, theft, etc, and has evolved over hundreds of years.

Now this is the interesting thing; from birth, you are created as an [entity] by virtue of a registered birth certificate. When statute law tries to impose their idiotic revenue generator laws (which is all they are), they need to contract you with their legal entity. Even courts of law and countries are legally binding entities, so if you receive a court summons for example, you have every right to just say the following:

"NO CONTRACT, RETURN TO SENDER"

You do not have to enter into a legally binding contract with the courts, nor any other legal entity by submission of a signatory right.

As humans we are born free. It's only when you register with the state, that you then become their property. Enough is enough; they can take a flying leap for all i care. They are all murderous bastards (unjust wars for oil) who skank the system (MP's expenses in UK was huge) to evolve their plutocracy and widen the echelons of society, so they can sit on their fat asses in their ivory towers.

You'll love Mary Croft's epic pdf

Edit: Above poster also mentioned Mary Croft, whilst i was creating this post. Good job

[edit on 4-1-2010 by PrisonerOfSociety]

Originally posted by skunknuts
reply to post by hotpinkurinalmint

 

Hey, I am due to inherit some money, lets say 100k, from an irrevocable trust held in Massachusetts from my Grandmother in June. I live in WI. It is currently in various securities/ bonds and what not. If I ask for everything to be liquidized, and then a check sent to me, what are the tax ramifications? Does this count as income for me? Does this have anything to do with the death tax issue?/

Thanks,
SN

I'm a real friggin' lawyer that went to a real school. Inactive status. Don't worry about the tax consequences. Of course my tax course started at 8:00 in the morning when I was in school, and at that time we all were still three sheets to the wind.

reply to post by hotpinkurinalmint


What is the subject of "The Personal Income Tax"? Is it a direct tax or an indirect tax? Is it a tax on People, Property or Activities?

reply to post by hotpinkurinalmint

sophisticated tax planning techniques to lower their tax bill
hit me with your questions

As of roughly ten years ago ago there was a highly effective means of tax avoidance involving foreign residency. Essentially, there was a $70,000/yr deduction (at the time) for living outside of the country, but that deduction could be applied per day, and regardless of where/when that income was generated. Effectively this allowed you to write off $191 per day you spent outside of the US. Thus, for example, a person who generated no more than $35,000 + standard deduction in income over six months could spend the remaining six months out of the country and pay no income taxes on it.

However, I've recently looked into it and it appears that these rules have been changed to require meeting extensive qualifications, and I find no allowance for smaller deductions for shorter stays outside the country.

Questions:

1) Are you familiar with the historical deduction I'm referring to?

2) Has it in fact been changed as it appears, or have the names and phrasing merely been changed in such a way that I'm not finding it?

3) Are you aware of a current means to acquire a per diem deduction as I've described, without residing outside of the country for long periods of time?

Thank you.

I just want to say thank god for the author of this thread. Although I do believe that the federal income tax is unconstitutional and can be defeated in court (see Freedom to Fascism) I know it is very tricky and a huge can of worms. That being said I am current on all of my taxes but need advice on a question involving my infant son.

He was born in September of 2008 and I have not applied for a social security number for him. Last year I did not claim his as a dependant on my personal income taxes, nor did my wife. This year I am the sole breadwinner in my household and want to know if it is possible to claim him without the social security number, and if so could I revise my 2008 claim also. I would really appreciate it if certain forms, websites, articles, etc. could be specifically referenced in response to this question. Again, thank you very much.

I would love to hear a response to PrisonerOfSociety please.
This is the exact question I wanted to post.

Are there possible criminal implications over not reporting a life insurance payout? (death benefit, life insurance).. which I understand are tax free and not considered income.

I think its none of the govts business if a benefit is collected, but I'm sure they think otherwise..

Thanks.

reply to post by jam321


I did not read much about her. However, I think it is a bad idea to avoid paying taxes with the hope that one can "clobber" the IRS like she did. In my opinion, he book is rubbish from a legal standpoint. If she truly found a way to avoid taxes, her book would be required reading in every tax course taught in law school and/or legislation would be re-written to cover up every potential for abuse she exploited.

I cannot say that every single time somebody breaks any law, including a tax law, they get punished. Many of us drive a few miles over the speed limit on a regular basis, yet we seldom get ticketed for it. Similarly, there are millions of people each year who commit relatively minor tax transgressions like taking a few hundred dollars in deductions they were not really entitled to or fibbing a bit about their income. Sometimes the IRS catches up to these people, often it does not.

However, when it comes to major violations of the tax law, like paying no tax whatsoever or gross under reporting of income, the chances of getting caught are higher. The IRS focuses more of its resources trying to catch these people. It is not wise to become one of them.

reply to post by PrisonerOfSociety


From a philosophical standpoint, you may or may not be right. From a strictly legal standpoint, you are dead wrong. You cannot go around breaking laws then go to court and say the court has no jurisdiction over you because you did not enter into a contract with the government or society.

As a lawyer, I would never argue this in court. Not only would the judge quickly dismiss my case, but I would lose my license for making a frivolous argument. (Yes, this argument is legally frivolous even by the lax standards of the US court system.)

reply to post by LordBucket


Sorry, off the top of my head I have not worked with that type of deduction. I mostly work with business taxation and not personal income taxation. I would like to remind everyone I am not here to give legal advice, but rather talk about tax laws and misconceptions people have about them.

reply to post by budaruskie


I cannot tell you whether or not you can go back and amend your personal income tax form to reclaim that particular deduction. Generally, people can go back and amend tax returns.

I would suggest you talk to an accountant about squaring away your tax return. The do-it-yourselfers can visit the IRS website at their own peril to find forms and other information.