Got this from take it from ceazar David Maryland. Section 83 IRS Code.
Provisions It defined how all income is taxed and your paycheck is not.
Internal Revenue Code
(#)
§ 1 ....................................... 1
§ 31(a) ................................. 2
§ 31(b) ................................. 3
§ 61(a) .................................. 4
§ 63(a) .................................. 5
§ 83(a) .................................. 6
§ 212 .................................. 7
§ 879(a)(2) ........................... 8
§ 1001 .................................. 9
§ 1011 .................................. 10
§ 1012 .................................. 11
§ 1401(a), (b) ....................... 12
§ 1402(b) ............................. 13
§ 3101(a), (b) ....................... 14
§ 3121(e) .............................. 15
§ 3401(a) .............................. 16
§ 3401(c) ............................. 17
§ 3402 ................................. 18
§ 6065 .................................. 19
§ 6201(a) ............................. 20
§ 7651(5)(A) ........................ 21
§ 7655 ................................. 22
§ 7852(a) ............................ 23
1939 Internal Revenue Code (#)
§ 111 .................................. 24
§ 112 .................................. 25
§ 113 .................................. 26
§ 3640 .................................. 27
§ 3811 .................................. 28
26 CFR; Code of
Federal Regulations.
(#)
1.1-1(c)................................. 29
1.31-2(b)............................... 30
1.61-6.................................... 31
1.83-1(a)............................... 32
1.83-3(e)............................... 33
1.83-3(f)............................... 34
1.83-3(g)............................... 35
1.83-4(b)(2).......................... 36
1.1001-1(a)........................... 37
1.1011-1(a)........................... 38
1.1012-1(a)........................... 39
1.1401-1(a)........................... 40
1.1402(a)-2(a)....................... 41
1.1402(b)-1(d)...................... 42
31.0-2(a)(1)........................... 43
31.3121(e)-1(b).................... 44
301.6201-1(a)....................... 45
Title 42 USC, definition of “citizen
from Social Security Act,
Section 411(b)(2)...........46 or 13
*Print this entire document and use it as a guide during your study of the rest of this course.
Provisions relied upon:#1. § 1 of the Code imposes the chapter 1 tax upon the “taxable income” of married and single
individuals, surviving spouse, etc... Here is where we find the tax brackets that many track for the effect of
making enough to enter a different “bracket” (percentage). Below is the definition of the term “citizen”
for chapter 1, found in regulation 26 CFR 1.1-1(c). Because of the length of the statute it is not quoted
here. (Married individuals filing jointly, separately, surviving spouse, single individual, etc...)
#2. § 31(a) of the Code is a provision exploited by every wage earner in America. This section permits the
amount withheld, via the Form W-4 from wages or salaries earned, as a credit in chapter 1, against the
tax imposed by chapter 1. You will find it under #3.
§ 31(a) Wage Withholding for Income tax Purposes.-
(1) In general.-The amount withheld as tax under chapter 24 shall be allowed to
the recipient of the income as a credit against the tax imposed by this
subtitle.
# 3. § 31(b) of the Code permits the Secretary of the Treasury to write regulations under § 6413(c)
providing for the credit or refunds of FICA. Only “employees of certain foreign corporations” are
eligible (See 1.31-2(b)).
§
31(b)
Credit
for
Special
Refunds
of
Social
Security
Tax.
(1) In general.-The Secretary may prescribe regulations providing for the
crediting against the tax imposed by this subtitle [of the amount allowable
under section 6413(c) as a special refund of tax imposed on wages.
#4. § 61(a) of the Code defines “gross income” in ambiguous terms, leaving one with “Except as
otherwise provided” in this subtitle, gross income means everything. § 61(a)(2) says that gross income
includes gross income derived from business.
§ 61 Gross Income Defined.
(a) General Definition.-Except as otherwise provided in this subtitle,
gross income means all income from whatever source derived, including (but not
limited to) the following items;
(1) Compensation for services, including fees, commissions, fringe
benefits, and similar items;
(2) Gross income derived from business;
(3) Gains derived from dealings in property;
#5. § 63(a) of the Code defines taxable income as gross income minus deductions.
§ 63 Taxable Income Defined.
(a) In General.-Except as provided in subsection (b), for purposes of
this subtitle, the term “taxable income” means gross income minus the
deductions allowed by this chapter (other than the standard deduction).
#6. § 83(a) of the Code is held by appellate courts on six circuits as applicable to all compensation for
services. It requires that only the excess over the amount paid for the compensation by the service
provider be included in gross income.
§ 83 Property Transferred in Connection with the Performance of Services.
(a) If, in connection with the performance of services, property is
transferred..., the excess of-
(1) the fair market value of such property... over,
(2) the amount (if any) paid for such property, shall be included in the
gross income of the person who performed such services...#7. § 212 of the Code is a very broadly worded statute. It provides that any reasonable expense paid or
incurred in the production or collection of income shall be allowed as a deduction. A “deduction” from
gross income occurs after the cost is, for whatever reason, mistakenly included in gross income. This is
different from the “exclusions” sought under § 83(a) and § 1001(a) or, 26 CFR 1.83-3(g) and 1.1001-
1(a).
§ 212 Expenses for Production of Income.
In the case of an individual, there shall be allowed as a deduction all
the ordinary and necessary expenses paid or incurred during the taxable year-
(1) for the production or collection of income;
#8. § 879(a)(2) of the Code speaks volumes when it instructs the non-resident alien to the chapter 1 U.S.
Citizen to go to chapter 2 (Social Security, self employed) to figure his taxes. This mandate serves only to
validate the provisions of § 7655 which says that the two chapters imposing Social Security are for the
U.S. Possessions.
§ 879 Tax Treatment of Certain Community Income in the Case of Nonresident
Alien Individuals.
(a) General rule.-In the case of a married couple 1 or both of whom are
nonresident alien individuals..., such community income shall be treated as
follows:
(2) Trade or business income..., shall be treated as provided in section
1402(a)(5).
#9. § 1001 of the Code explains how the recognizable gain or loss from the sale or other disposition of
property is to be determined. 26 CFR 1.1001-1(a) contains the instruction that, from the amount realized,
there shall be withdrawn a sum sufficient to restore the adjusted basis (deduct cost).
§ 1001(a) Computation of Gain or Loss.-The gain from the sale or other
disposition of property shall be the excess of the amount realized therefrom
over the adjusted basis provided in section 1011...
#10. § 1011 of the Code assigns a synonym to the term “cost”; “adjusted basis.”
§ 1011(a) General rule.-The adjusted basis for determining the gain or loss
from the sale or other disposition of property, whenever acquired, shall be the
basis (determined under section 1012...)...
#11. § 1012 of the Code describes what shall be considered as a cost when property is sold or otherwise
disposed of. “The cost of property you buy is the amount you pay for it in cash or other property.”
§ 1012 Basis of Property-Cost. “The basis of property shall be the cost of such
property...”
#12. § 1401(a) and (b) of the Code impose Old Age Survivors and Disability Insurance and Hospital
Insurance (Social Security) upon self employment income. This is the chapter 2 tax.
§ 1401 Rate of Tax
(a) Old-Age, Survivors, and Disability Insurance.
(b) Hospital Insurance.#13. § 1402(b) of the Code defines the term “citizen” for the purposes of chapter 2 in terms of who is not
a non-resident alien individual. Here, the Puerto Rican is said not to be nonresident alien or, said to be
the subject citizen.
§ 1402(b) .”..An individual who is not a citizen of the United States but who
is a resident of the Commonwealth of Puerto Rico, the Virgin Islands, Guam, or
American Samoa shall not, for the purposes of this chapter be considered to be
a nonresident alien individual.”
#14. § 3101(a) and (b) of the Code impose Old Age Survivors and Disability Insurance and Hospital
Insurance (Social Security) upon wage income. This is the chapter 21 tax. Chapter 21 is called the
Federal Insurance Contributions Act (FICA).
§ 3101 Rate of Tax
(a) Old-Age, Survivors, and Disability Insurance.
(b) Hospital Insurance.
#15. § 3121(e) of the Code contains the definition of the term “citizen” for the purposes of chapter 21
FICA. Here, the term “includes” is not used, and, the United States Citizen is expressly excluded from
this chapter’s applicability.
§ 3121(e) An individual who is a citizen of the Commonwealth of Puerto Rico
(but not otherwise a citizen of the United States) shall be considered... as a
citizen of the United States.
#16. § 3401(a) defines “wages” for the purposes of chapter 24.
§ 3401 Definitions.
(a) Wages.-For purposes of this chapter, the term “wages” means all
remuneration (other that fees paid to a public official) for services performed
by an employee for his employer, including the cash value of all remuneration
(including benefits) paid in any medium other than cash...
#17. § 3401(c) of the Code defines the term “employee” for the purposes of chapter 24 Federal
Withholding. Here, we find the use of the term “includes” in place of the term “means” so as to offer the
IRS semantic leeway, enabling them to enforce this definition as if it were an inclusion. In regulations
under this statute, the term “employee” is said to extend to anybody.
§ 3401(c) Employee.-For the purposes of this chapter, the term “employee”
includes an officer, employee, or elected official of the United States, a
State, or any political subdivision thereof, or the District of Columbia, or
any agency or instrumentality of any one or more of the foregoing. The term
“employee” also includes an officer of a corporation.
Note: Regulations under this definition (26 CFR 31.3401(c)-1(a) and (b)) seek to include everyone in
this “definition.”
#18. § 3402 of the Code imposes the tax under chapter 24 Federal Withholding. The Form W-4 finds its
statutory origin here. The text of this section extends from subsection (a) through to subsection (s). (20
pages) Suffices to say that it imposes the chapter 24 tax, Federal Withholding) and it is the Form W-4.#19. § 6065 requires that form filed by the public be singed (verified) under penalties of perjury.
§ 6065 Verification of Returns.
Except as otherwise provided by the Secretary, any return, declaration,
statement, or other document required to be made under any provision of the
internal revenue laws or regulations shall contain or be verified by a written
declaration that it is made under penalties of perjury.
#20. § 6201(a) of the Code bestows assessment authority upon the Secretary of the Treasury. Here, this
authority is said to extend only to those taxes which have not been duly paid by stamp (casinos and
insurance companies)
§ 6201 Assessment Authority.
(a) Authority of Secretary.-The Secretary is authorized and required to
make the inquiries, determinations, and assessments of all taxes (including
interest, additional amounts, additions to the tax, and assessable penalties)
imposed by this title, or accruing under any former internal revenue law, which
have not been duly paid by stamp at the time and in the manner prescribed by
law. Such authority shall extend to and include the following...
#21. § 7651(5)(A) of the Code provides that when § 28(a) of the Revised Organic Act of the Virgin Islands
refers to any tax imposed by § 3811 of the Internal Revenue Code, it means chapters 2 and 21 of the
Code. These two chapters impose Social Security, and Congress has just told us that § 3811 is their
equivalent. Proceeding to the 1939 Tax Code, we find in § 3811 the origin of Social Security.
§ 7651(5) Virgin Islands.-
(A) For purposes of this section, the reference in section 28(a) of the
Revised Organic Act of the Virgin Islands to “any tax specified in section 3811
of the Internal Revenue Code” shall be deemed to refer to any tax imposed by
chapter 2 or by chapter 21.
#22. § 7655 of the Code is called “Cross References” and instructs that, anyone seeking information
about tax imposed in the United States possessions should proceed to chapters 2 and 21.
§ 7655 Cross References
(a) Imposition of Tax in Possessions.-
For provisions imposing tax in possessions, see-
(1) Chapter 2, relating to self-employment tax;
(2) Chapter 21, relating to the tax under the Federal Insurance Contributions
Act.
#23. § 7852(a) is the Separability Clause that seems to prohibit the use of prior decisions as authorities to
dispose of other tax cases.
§ 7852(a) Separability Clause.-If any provision of this title, or the
application thereof to any person or circumstances, is held invalid, the
remainder of the title, and the application of such provision to other persons
or circumstances, shall not be affected thereby.
1939 Internal Revenue Code (1939 “IRC”)
§ 111, 112, and 113 are the predecessors to §s 1001, 1011, and 1012 of today’s Code; property is cost,
cost is also adjusted basis, recognition of gain or loss.
#24. § 111 is “Determination of amount of, and recognition of, gain or loss.” This is the equivalent of #9
above, from the current Tax Code.#25. § 112 is “Recognition of gain or loss.” This statute is the equivalent of #9 and simply explains
further, and in more detail, the requirements of #24.
#26. § 113 is “Adjusted basis for determining gain or loss” and equates “adjusted basis” with “cost,” as
is found in #11 (section 1012, “cost”).
#27. § 3640 is predecessor to § 6201 of today’s Code which limits assessment authority of the Secretary
to taxes paid by stamp. This statute serves to do likewise.
1939 IRC § 3640 Assessment authority. The Commissioner is authorized and
required to make the inquiries, determinations, and assessments of all taxes
and penalties imposed by this title, or accruing under any former internal
revenue law, where such taxes have not been duly paid by stamp at the time and
in the manner provided by law.”
#28. § 3811 Collection of Taxes in Puerto Rico and Virgin Islands. This provision is the statutory origin
of Social Security. As § 7651(5)(A) indicates, this provision is equal to chapters 2 and 21. In 1954, § 3811
of the 1939 Code was simply split into two chapters and is still for the United States Possessions only.
1939 Code § 3811 Collection of Taxes in Puerto Rico and Virgin Islands.
(a) Puerto Rico
(b) Virgin Islands
Provisions in 26 CFR:
#29. 1.1-1(c) defines the term “citizen” as one who is born or naturalized in the United States and subject
to its jurisdiction (U.S. Citizen). While the statute that this regulation implements does not mention the
United States Citizen, accepting this Citizenship as applicable places one in chapter 1 of the Code.
26 CFR 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.
#30. 1.31-2(b) outlines exactly who is eligible for credits or refunds of FICA and Withholding under §
31(a) and (b). It is important to note that, § 31 addresses only FICA and Withholding. A reading of this
regulation reveals a very telling correlation; only gov’t employees and those of “certain foreign
corporations” are eligible under § 31; not a coincidence.
26 CFR 1.31-2(b) Federal and State employees and of certain foreign
corporations. The provisions of this section shall apply to the amount of a
special refund allowable to an employee of a Federal agency or a wholly owned
instrumentality of the United States, ...employee of any State of political
subdivision thereof (or an instrumentality of any one or more of the
foregoing), and to the amount of a special refund allowable to employees of
certain foreign corporations.
#31. 1.61-6 defines the term “property” for the purposes of § 61(a)(3) Gains derived from dealings in
property. Included in this definition of property is “intangible items, such as good will.”
26 CFR 1.61-1.Gains derived from dealings in property.-(a) In general. Gain
realized on the sale or exchange of property is included in gross income,
unless excluded by law. For this purpose, property includes tangible items,
such as a building, and intangible items, such as goodwill. ...The specific
rules for computing the amount of gain or loss are contained under section 1001
and the regulations thereunder.#32. 1.83-1(a) implements § 83(a) and therefore, this regulation explains how to tax compensation also.
26 CFR 1.83-1(a)(1) General rule. Section 83 provides rules for the taxation of
property transferred to an employee or an independent contractor (or
beneficiary thereof) in connection with the performance of services by such
employee or independent contractor. ...In that case, the excess of-
(i) The fair market value of such property ...at the time that the
property becomes substantially vested, over-
(ii) The amount (if any) paid for such property, shall be included as
compensation in the gross income of such employee or independent contractor...
#33. 1.83-3(e) is a regulation written by the Secretary in the attempt to exclude money, paid as
compensation, from the term “property” and its purview as it is used in § 83(a).
26 CFR 1.83-3(e) Property. For the purposes of section 83 and the regulations
thereunder, the term “property” includes real and personal property other than
either money or an unfunded and unsecured promise to pay money or property in
the future.
#34. 1.83-3(f) says that property paid for services is property for the purposes of § 83 and the regulations
thereunder.
26 CFR 1.83-3(f) Property transferred in connection with the performance of
services. Property transferred to an employee or an independent contractor ..in
recognition of the performance of, or refraining from the performance of,
services is considered transferred in connection with the performance of
services within the meaning of section 83.
#35. 1.83-3(g) very plainly states that the FMV of Labor is classified as cost. If Labor is property, and if
section 83 applies to all compensation, and if the term “amount paid” is equated with “cost” throughout
the case law under section 83, this conclusion is irrefutable.
26 CFR 1.83-3(g) Amount paid. For the purposes of section 83 and the
regulations thereunder, the term “amount paid” refers to the value of any money
or property paid for the transfer of property to which § 83 applies.
#36. 1.83-4(b)(2) requires that the cost of your paycheck be determined by applying section 1012 of the
Code. That section does not exclude Labor from cost.
26 CFR 1.83-4(b)(2) If property to which 1.83-1 applies is transferred at an
arm’s length, the basis of the property in the hands of the transferee shall be
determined under section 1012 and the regulations thereunder.
#37. 1.1001-1(a) requires that, from the sale or other disposition of property, one must restore the
adjusted basis (cost) before arriving at the “realized gain.”
26 CFR 1.1001-1(a) .”..The fair market value of property is a question of fact,
but only in rare and extraordinary circumstances will property be considered to
have no fair market value. The general method of computing such gain or loss is
prescribed by section 1001(a) through (d) which contemplates that from the
amount realized upon the sale or exchange there shall be withdrawn a sum
sufficient to restore the adjusted basis prescribed by section 1011 and the
regulations thereunder... The amount that remains after the adjusted basis has
been restored to the taxpayer constitutes the realized gain.#38. 1.1011-1(a) says that cost is also known as “adjusted basis.”
26 CFR 1.1011-1 Adjusted basis.-The adjusted basis... is the cost or other
basis prescribed in section 1012...
#39. 1.1012-1(a) says that cost, when acquiring property, is the amount paid for it in cash “or other
property,” never excluding Labor from this category.
26 CFR 1.1012-1(a) ...The cost is the amount paid for such property in cash or
other property.
#40. 1.1401-1(a) is the regulation that imposes double chapter taxation upon the self employed when it
instructs that the chapter 2 tax is to be added to the tax imposed by chapter 1, bringing Social Security
tax into the fifty states.
26 CFR 1.1401.–1 ”Tax on self-employment income.-(a) ....This tax shall be
levied, assessed, and collected as part of the income tax imposed by subtitle A
of the Code and, ...will be included with the tax imposed by section 1 or 3...”
#41. 1.1402(a)-2(a) requires that chapter 1 provisions are to be applied to arrive at chapter 2 liabilities.
26 CFR 1.1402(a)-2(a). Computations of net earnings from self-employment.-(a)
General rule. .”..for the purpose of ascertaining his net earnings from self-
employment, are to be determined by reference to the provisions of law and
regulations applicable with respect to the taxes imposed by sections 1 and 3.”
#42. 1.1402(b)-1(d) is the equivalent of § 879(a)(2) for the purposes of stating that chapter 1 is for people
who are non-resident alien to chapter 2. This regulation explains how a non-resident alien to chapter 2
will never be a chapter 2 taxpayer, but such non-resident alien may be subject to chapter 1 taxes (U.S.
Citizen).
26 CFR 1.1402(b)-1(d) Nonresident aliens. A nonresident alien individual never
has self-employment income. While a nonresident alien individual who derives
income from a trade or business carried on within the United States, Puerto
Rico, the Virgin Islands, Guam, or American Samoa... may be subject to the
applicable income tax provisions on such income, such nonresident alien
individual will not be subject to the tax on self-employment income, since any
net earnings which he may have...do not constitute self-employment income. For
the purposes of the tax on self-employment income, an individual who is not a
citizen of the United States but who is a resident of the Commonwealth of
Puerto Rico, the Virgin Islands, or ...of Guam or American Samoa is not
considered to be a nonresident alien individual.”
#43. 31.0-2(a)(1) states that, definitions in part 31 of 26 CFR (Employment Taxes) “shall have the
meaning so assigned to them.”
26 CFR 31.0-2(a)(1) The terms defined in the provisions of law contained in the
regulations in this part shall have the meaning so assigned to them .
#44. 31.3121(e)-1(b) is in part 31 of the CFR and defines the term “citizen” under § 3121(e) (FICA
citizen) in terms of a citizen of the United States Possessions.
26 CFR 31.3121(e)-1(b) ...The term “citizen of the United States” includes a
citizen of the Commonwealth of Puerto Rico or the Virgin Islands, and,
effective January 1, 1961, a citizen of Guam or American Samoa.#45. 301.6201-1(a) is written under § 6201(a) which limits the assessment authority of the IRS to those
taxes paid by stamp (Insurance co.s and Casinos). This regulation removes this limitation and extends
such authority to “all taxes imposed by the 1954 Internal Revenue Code.”
26 CFR 301.6201-1(a) Assessment authority.-(a) In general. The District
Director is authorized and required to make all inquiries necessary to the
determination and assessment of all taxes imposed by the Internal Revenue Code
of 1954 or any prior internal revenue law.
#46. 42 USC 411(b)(2) is the definition of the term “citizen” for the purposes of the Social Security Act
and matches identically the definition in chapter 2 of the Code, § 1402(b) “a Puerto Rican is not a non-
resident alien individual.” See #13 above.
26 CFR 602.101 was written by the Office of Management and Budget under the Paperwork Reduction
Act and it prescribes the forms required under the Code, according to OMB control numbers. The U.S.
Citizen is to be taxed under § 1. In 602.101, under § 1 regulations (26 CFR 1.1-1), this regulation lists the
OMB #1545-0067. This number is not found on the Form 1040, but it IS found on the Form 2555 Foreign
Earned Income Form. If this form is the only required form for the U.S. Citizen, domestically earned
“income” would not be addressed under form filing requirements. It amounts to a massive list of numbers
and has been omitted from this directory.
Other points:
26 CFR 601.106(f)(1) “Rule 1. An exaction by the U.S. Government, which is not based upon law,
statutory or otherwise, is a taking of property without due process of law, in violation of the [5th
Amendment]. Accordingly, an appeals representative in his or her conclusions of fact or application of
the law, shall hew to the law and the recognized standards of legal construction. It shall be his or her
duty to determine the correct amount of the tax, with strict impartiality as between the taxpayer and the
Government, and without favoritism or discrimination as between taxpayers.”
27 CFR 70.150(b)(1) .”..In general, the fair market value is that amount which
one ready and willing but not compelled to buy would pay to another ready and willing
but not compelled to sell the property.”
“The mission of the Service is to encourage and achieve the highest possible degree of
voluntary compliance with the tax laws and regulations and to maintain the highest degree of public
confidence in the integrity and efficiency of the Service. This includes communicating the
requirements of the law to the public, determining the extent of compliance and causes of non-
compliance, and doing all things needful to a proper enforcement of the law.” Federal Register, Vol.39,
#62, Fri.March 29, 1974, 1110 Organization and functions of the Internal Revenue Service, Sec.1111.1
Mission.