Legal Question in Tax Law in Indiana

Enforcing Authority

I wish to pay my taxes as obligated by law. Where can I find or can you quote me the exact place (I think it's supposed to be in USC 26) where I am required by law to be subject to an "income" tax? What is the definition of "income"? By the way, the people advising me haven't paid income taxes for some 16 years and are not in jail.

Asked on 2/26/98, 11:17 am

2 Answers from Attorneys

Section 1 of Chapter 26 of U.S.Code obligates you to pay income taxes.

The definition of income is in several places throughout USC 26 because there are many types of income which are taxable according to thelaw, the most notable of which are of course wage (earnings) income and investment income. (There are of course many exceptions; investment income from tax-free bonds are not consideredincome, of course.)

I would like to suggest that someone who says s/hehasn't paid income taxes for 16 years is probablyduping you. Either that person has a cash business and each year deducts (crookedly) as much as s/he shows for income (begging the question of how s/heobtains nourishment and shelter in our currency-basedsociety!), or is simply breaking a law by not filingreturn. (I don't recall offhand which section requiresthe filing, ... it's somewhere in the low 500's, I think.But I have definitely read it personally, including the(rare) exceptions, penalties for failure to do so, rulesfor getting extensions, and penalties for filing false or"frivolous" returns. (I've advised one party who by thetime he came to me had already been fined $500 for a frivolous filing and the IRS was just beginning to startin on him.)

Last Wed., I got a similar question from someone in Indiana;was it you? They asked whether disclosing information via atax return was required (or, I suppose, would be possible to refuse to do under the 5th Ammendment privilege of not testifyingagainst oneself). Here is what I wrote to that person:

There is no question that tax returns are required under the law for thosewho earn over the minimum (I think that's $600/year). All the particularsof where you earn the money and what kind of citizen reminds me of therhetoric I hear from certain modern scam artists running rampant thesedays: they run cons where they encourage a taxpayer to break the law andeventually they get money for their bad advice. They imply they you don'treally have to pay taxes, under many theories. If they were lawyers,they'd go to jail for what they encourage the public to do, but if a persontakes legal advice from someone who isn't a lawyer, that person runs therisk of going to jail alone, without the advisor who'd encouragedit.Steer clear. Dream if you like, but I assure you that taxation,though not popular, is legal and that people DO go to jail for not payingand for not reporting their taxes. To be frank, however, the far morelikely and more frequent penalty is that taxpayers pay steep, steep finesand penalties for not reporting, underreporting, filing frivolous returns,or underpaying their taxes.

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Answered on 2/28/98, 8:30 pm

Here's something about Pure Contract Trusts, another tax-evasion scheme.

I just came across this e-mail on an asset protection forum I belong to.

Date: Fri, 27 Feb 1998 15:37:21 -0600From: J Richard Duke Subject: [A}F] Pure Contract Trust

Dear Vern:

The so-called pure contract trust (there is no such thing under U. S. taxlaws) is on the "hit list" of the IRS. The Criminal Investigation Division(CID) is looking to put the promoters of this technique in jail, period.The CID is working with the CIA, FBI and the Secret Service. When thepromoter is indicted, the IRS will then subpoena the records of all hisclients and will have a "field day" in its audits.

The material promomoting the so-called pure contract trust takes cases outof context, misquotes the language from various cases and is simplymisleading.

As to the so-called pure contract trust, don't do it!!

J Richard Duke, J.D.; LL.M., TaxationDuke Law Firm, P.C.

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Answered on 2/28/98, 8:35 pm

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