IRS Code 6 Unanswered Questions

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    united States of America Congress, Senate,, Mark Everson,
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January 25, 2005

Dear Congressman, Senator, Mark Everson

(Please be advised, this letter should be brought to the attention of the Congressman personally, because your response to this letter, or failure to respond, will be permanently noted on multiple web sites (such as which are regularly visited by hundreds of thousands of Americans.)

As your constituent I am writing to ask for your assistance. I have enclosed six questions regarding the proper method to use to determine one's "taxable income" (for federal income tax purposes). I want to be sure what my legal responsibilities are, and I cannot determine my correct tax liability unless I have answers to these questions. I expect that as my representative you will provide me with precise, specific written answers to these questions (not a canned response which does not address the specifics).

Thank you in advance for your assistance.


cc: Mark W. Everson, IRS Commissioner

1111 Constitution Avenue, NW

Washington, DC 20224

(P.S. I do not believe that anyone should be working for the IRS, particularly as IRS Commissioner, if he is unable or unwilling to answer these perfectly reasonable questions, which are essential to properly administering and complying with the tax laws.)

Questions Regarding Determining Taxable Income

1) Should I use the rules found in 26 USC 861(b) and 26 CFR 1.861-8 (in addition to any other pertinent sections) to determine my taxable domestic income?

2) If I should not use those sections to determine my taxable domestic income, please show where the law says who should or should not use those sections for that.

3) If I, as a U.S. citizen, receive all of my income from working within the 50 states, do 26 USC 861(b) and 26 CFR 1.861-8 show my income to be taxable?

4) Should I use 26 CFR 1.861-8T(d)(2) to determine whether my items of income (e.g. compensation, interest, rents, dividends, etc.) are excluded for federal income tax purposes?

5) What is the purpose of the list of non-exempt types of income found in 26 CFR 1.861-8T(d)(2)(iii), and why is my domestically earned income not on that list?

6) What types of income (if any) are not exempted by any statute, but are nonetheless excluded by law (not subject to the income tax) because they are, under the Constitution, not taxable by the federal government?

Reasons for questions 1 and 2:

The regulations at 26 CFR 1.861-8 begin by stating that Sections 861(b) and 863(a) state in general terms how to determine taxable income of a taxpayer from sources within the United States after gross income from the U.S. has been determined. Section 1.861-1(a)(1) confirms that taxable income from sources within the United States is to be determined in accordance with the rules of 26 USC 861(b) and 26 CFR 1.861-8 (see also 26 CFR 1.862-1(b), 1.863-1(c)). Cross-references under 26 USC 61, as well as entries in the USC Index under the heading Income Tax, also refer to Section 861 regarding income (gross and taxable) from sources within U.S.

Reason for question 3:

Section 217 of the Revenue Act of 1921, predecessor of 26 USC 861 and following, stated that income from the U.S. was taxable for foreigners, and for U.S. corporations and citizens deriving most of their income from federal possessions, but did not say the same about the domestic income of other Americans. The regulations under the 1939 Code (e.g. 29.119-1, 29.119-2, 29.119-9, 29.119-10 (1945)) showed the same thing. The current regulations at 1.861-8 still show income to be taxable only when derived from certain specific sources and activities, which still relate only to certain types of international trade (see 26 CFR 1.861-8(a)(1), 1.861-8(a)(4), 1.861-8(f)(1)).

Reason for question 4:

The regulations (26 CFR 1.861-8(a)(3)) state that a class of gross income consists of the items of income listed in 26 USC 61 (e.g. compensation, interest, rents, dividends, etc.). The regulations (26 CFR 1.861-8(b)(1)) then direct the reader to paragraph (d)(2) of the section, which provides that such classes of gross income may include some income which is excluded for federal income tax purposes.

Reason for question 5:

After defining exempt income to mean income which is excluded for federal income tax purposes (26 CFR 1.861-8T(d)(2)(ii)), the regulations list several types of income which are not exempt (i.e. which are subject to tax), including the domestic income of foreigners, certain foreign income of Americans, income of certain possessions corporations, and income of international and foreign sales corporations; but the list does not include the domestic income of most Americans (26 CFR 1.861-8T(d)(2)(iii)).

Reason for question 6:

Older income tax regulations defining gross income and net income said that neither income exempted by statute or fundamental law were subject to the tax ( 39.21-1 (1956)), and said that in addition to the types of income specifically exempted by statute, other types of income were excluded because they were, under the Constitution, not taxable by the Federal Government ( 39.22(b)-1 (1956)). (This is also reflected in the current 26 CFR 1.312-6.)