Larken Rose

[Famspear]

Compensation for services not effectively connected with a trade or business in the U.S. is and always will be an item of gross income under section 61, nothing excludes it and yet it still isn't taxable income.

You've lost me again.

Come up with an example and call me in the morning.

Nighty-night.

[Famspear]

PS, Steve, when I say you have to look at all the internal revenue laws (not just section 61) to determine "gross income", I mean just that.

For example, there are provisions in laws other than the Internal Revenue Code itself that exclude certain items from "gross income."

Can you think of, for example, certain amounts received "from the Virginia Polytechnic Institute & State University" to the extent provided in section 1 of Public Law No. 110-141 with respect to a "tragic event on April 16, 2007........"? I'll leave you to ponder that.

OK, OK, I'm goin' to bed.....

[cynicalflyer]

Is it me, or is there something surreal about debating 861 when the great 861 guru (Larken) not only got convicted, but abandoned it and ran (if I recall correctly) a Cheek defense rather than a straight-up 861 argument at trial?

[SteveSy]

PS, Steve, when I say you have to look at all the internal revenue laws (not just section 61) to determine "gross income", I mean just that.

For example, there are provisions in laws other than the Internal Revenue Code itself that exclude certain items from "gross income."

Can you think of, for example, certain amounts received "from the Virginia Polytechnic Institute & State University" to the extent provided in section 1 of Public Law No. 110-141 with respect to a "tragic event on April 16, 2007........"? I'll leave you to ponder that.

OK, OK, I'm goin' to bed.....

What I'm saying is it doesn't have to be excluded from gross income, have no deductions or exemptions and its still not taxable income.

[Paul]

What I'm saying is it doesn't have to be excluded from gross income, have no deductions or exemptions and its still not taxable income.

And you can't come up with a single example of anything that is comes within the ordinary meaning of the word "income" (so it comes within the definition of "gross income" in section 61) and that is not excluded from gross income under some express provision of Subtitle A (as stated in section 61), and yet is not included in "taxable income" under section 63, but who cares?

Section 63 defines taxable income as gross income minus deductions and exemptions. That means any item of income that is included in gross income is in taxable income, and if there are no exemptions or deductions to offset it, you have taxable income under the statutory definition. For someone who rants about courts just making things up that are not written in the statutes or the constitution, you sure love to make things up yourself on no basis whatsoever.

[Famspear]

PS, Steve, when I say you have to look at all the internal revenue laws (not just section 61) to determine "gross income", I mean just that.

For example, there are provisions in laws other than the Internal Revenue Code itself that exclude certain items from "gross income."

Can you think of, for example, certain amounts received "from the Virginia Polytechnic Institute & State University" to the extent provided in section 1 of Public Law No. 110-141 with respect to a "tragic event on April 16, 2007........"? I'll leave you to ponder that.

OK, OK, I'm goin' to bed.....

What I'm saying is it doesn't have to be excluded from gross income, have no deductions or exemptions and its still not taxable income.

And what I'm saying is: Give an example.

[SteveSy]

PS, Steve, when I say you have to look at all the internal revenue laws (not just section 61) to determine "gross income", I mean just that.

For example, there are provisions in laws other than the Internal Revenue Code itself that exclude certain items from "gross income."

Can you think of, for example, certain amounts received "from the Virginia Polytechnic Institute & State University" to the extent provided in section 1 of Public Law No. 110-141 with respect to a "tragic event on April 16, 2007........"? I'll leave you to ponder that.

OK, OK, I'm goin' to bed.....

What I'm saying is it doesn't have to be excluded from gross income, have no deductions or exemptions and its still not taxable income.

And what I'm saying is: Give an example.

I already did....compensation for services not effectively connected with a trade or business within the U.S. It's considered gross income under section 61. Nothing excludes it from gross income, there's a reason for that...my turn to hide the ball.

[Famspear]

No, Steve, that's not what I mean by an "example."

You don't seem to understand the terminology of "gross income." Either something is gross income or it isn't. You keep saying "section 61" -- but you cannot define something as "gross income" merely by looking at section 61 by itself. You have to look at all the law.

If it's "income" but it's not "includible in gross income" (because of some exemption or exclusion under some law somewhere), then it's NOT "gross income" for federal income tax purposes.

And you cannot have something that's "gross income" (as defined in ALL THE LAW) and yet have "zero section 63 taxable income" without also having some deductions. Go back and read my original post again.

And when I say "example," I mean just that. An example means: a specific set of facts. Give me an example of "compensation for services not effectively connected with a trade or business within the U.S."

[SteveSy]

If it's "income" but it's not "includible in gross income" (because of some exemption or exclusion under some law somewhere), then it's NOT "gross income" for federal income tax purposes.

Nothing excludes income not effectively connected with a trade or business within the U.S. from gross income.

And you cannot have something that's "gross income" (as defined in ALL THE LAW) and yet have "zero section 63 taxable income" without also having some deductions. Go back and read my original post again.

Yes you can, you're wrong. Read the regulations under 861 and you'll see. It's pretty clear you haven't. To save you some time look specifically at 1.861-8, don't skim over it.

And when I say "example," I mean just that. An example means: a specific set of facts. Give me an example of "compensation for services not effectively connected with a trade or business within the U.S."

That's enough information.

[Famspear]

If it's "income" but it's not "includible in gross income" (because of some exemption or exclusion under some law somewhere), then it's NOT "gross income" for federal income tax purposes.

Nothing excludes income not effectively connected with a trade or business within the U.S. from gross income.

And you cannot have something that's "gross income" (as defined in ALL THE LAW) and yet have "zero section 63 taxable income" without also having some deductions. Go back and read my original post again.

Yes you can, you're wrong. Read the regulations under 861 and you'll see.

And when I say "example," I mean just that. An example means: a specific set of facts. Give me an example of "compensation for services not effectively connected with a trade or business within the U.S."

That's enough information.

Sorry, but if that's all you can come up with, then you're wrong. Since you refuse to supply a specific example, I can't help you.

Also, look at this earlier post, Steve:

Compensation for services not effectively connected with a trade or business in the United States. Section 61 is for everyone regardless of where your income comes from. The truth is the code doesn't even have to specifically exclude income not effectively connected with a trade or business in the United States. It still wouldn't be taxable because there isn't a way to determine your taxable income on it.

(bolding added).

The phrase I highlighted in bolding makes no sense.

[SteveSy]

Sorry, but if that's all you can come up with, then you're wrong. Since you refuse to supply a specific example, I can't help you.

Ok, a foreign corporation doing business in the United States is a manufacturer of computers. It has no United States subsidiaries and manages all it's business overseas. It manufactures and sells these machines in the United States and in foreign countries and has a separate manufacturing base in those countries.

Income made from the foreign manufacturing facilities is "gross income" not effectively connected with a U.S. trade or business and it is treated as gross income by the code and yet it is not "taxable income" even if there are no deductions.

Happy?

[Famspear]

Now, let's go back and look at your earlier statement, Steve:

You can have an item of gross income from section 61, have no deductions or use Part III and it still won't be "taxable income". I'm not talking about income that can be taxed but isn't because of deductions or exemptions, I'm using the term as in it can't be taxed, like that used in section 63.

(bolding added).

Again, in the bolded material, you incorrectly focus on "section 61" without considering the rest of the law, such as Part III.

Example: Life insurance proceeds received by reason of the death of the insured.

If you looked only part of section 61 without considering the rest of the Code (and without considering the first seven words of subsection (a) of section 61), then this item would be includible in gross income. However, because of section 101, it's not includible in gross income.

If you have an item that is includible in gross income UNDER ALL RELEVANT LAWS (not just section 61), then by definition there is nothing that EXCLUDES that item from gross income. In fact, that's just two ways of saying the same thing.

If something is theoretically includible in gross income under section 61 (without considering the rest of the law), then there is no way you can get from THAT down to a "zero taxable income" amount without either having some exclusion in some law somewhere (such as Part III or section 911) for that amount OR you having to take some sort of "deduction" under the law (meaning a deduction for expenses, or standard deduction, personal exemption deduction, or whatever).

[Imalawman]

If it's "income" but it's not "includible in gross income" (because of some exemption or exclusion under some law somewhere), then it's NOT "gross income" for federal income tax purposes.

Nothing excludes income not effectively connected with a trade or business within the U.S. from gross income.

Yes, look at 871, 864 etc...its excluded.

And you cannot have something that's "gross income" (as defined in ALL THE LAW) and yet have "zero section 63 taxable income" without also having some deductions. Go back and read my original post again.

Yes you can, you're wrong. Read the regulations under 861 and you'll see. It's pretty clear you haven't. To save you some time look specifically at 1.861-8, don't skim over it.

Steve, you're misunderstanding the difference between an exclusion and deduction. For instance, if something is excluded from gross income then well, its not "100%" in gross income. For instance, there are some things that are in 61, but aren't in taxable income. Numerous examples there. However, you won't find an example of something that is gross income, but not taxed without a deduction.

If you're saying, "something could be ostensibly included in 61 if it weren't for unreferenced code sections excluding it, but yet not taxed under 63" then, yes, I would agree with that. Sec. 61 does not cross reference every single exclusion - such as inheritances, ECI (for non-residents), etc. But those aren't deductions and those remove the items from the definition of gross income under 61.

[SteveSy]

Now, let's go back and look at your earlier statement, Steve:

You totally avoided my example. I considered ALL OF THE CODE, the income I gave an example of is still gross income under section 61, specifically item 2 "Gross income derived from business", it is not excluded from gross income anywhere in the code.

[Famspear]

Sorry, but if that's all you can come up with, then you're wrong. Since you refuse to supply a specific example, I can't help you.

Ok, a foreign corporation doing business in the United States is a manufacturer of computers. It has no United States subsidiaries and manages all it's business overseas. It manufactures and sells these machines in the United States and in foreign countries and has a separate manufacturing base in those countries.

Income made from the foreign manufacturing facilities is "gross income" not effectively connected with a U.S. trade or business and it is treated as gross income by the code and yet it is not "taxable income" even if there are no deductions.

Happy?

Wrong. First, income from manufacturing is not income from services.

Second, either the U.S. source income from the manufacturing is includible in gross income, or it's not.

If the income is includible in gross income, then you cannot get from there to "zero taxable income" without having some deductions.

If, on the other hand, the income is not includible in gross income, then by definition you have an exclusion. And the only way you can have an exclusion is that some law somewhere gives you that exclusion.

Either way, you're wrong.

[Pottapaug1938]

SteveSy: "Income made from the foreign manufacturing facilities is "gross income" not effectively connected with a U.S. trade or business and it is treated as gross income by the code and yet it is not "taxable income" even if there are no deductions.

Happy?"

Not quite. This foreign company, BY THE TERMS OF SECTION 861, is required to pay income tax on that portion of its income derived from sales within the U.S., because it receives that portion of its income within the U.S. Section 861's ONLY relevance to this example is that it relieves the foreign corporation of any obligation to pay U.S. income tax on that portion of its income derived from sources OUTSIDE the U.S. For those of us who live in the U.S. and derive our income from within the U.S. the source of the income is irrelevant. It is taxable to us unless some provision of the law says otherwise -- and Section 861 has no bearing on this.

[SteveSy]

If it's "income" but it's not "includible in gross income" (because of some exemption or exclusion under some law somewhere), then it's NOT "gross income" for federal income tax purposes.

Nothing excludes income not effectively connected with a trade or business within the U.S. from gross income.

Yes, look at 871, 864 etc...its excluded.

Where? You're wrong because of obvious reasons.

Steve, you're misunderstanding the difference between an exclusion and deduction. For instance, if something is excluded from gross income then well, its not "100%" in gross income. For instance, there are some things that are in 61, but aren't in taxable income. Numerous examples there. However, you won't find an example of something that is gross income, but not taxed without a deduction.

I'm not confused nor do I misunderstand.

If you're saying, "something could be ostensibly included in 61 if it weren't for unreferenced code sections excluding it, but yet not taxed under 63" then, yes, I would agree with that. Sec. 61 does not cross reference every single exclusion - such as inheritances, ECI (for non-residents), etc. But those aren't deductions and those remove the items from the definition of gross income under 61.

[/quote]
Sorry you're wrong....this only goes to show none of you have actually read the regulations under 861. Like I told Famspear, specifically read 1.861-8.

I'm not going to tell you why you're wrong, but once you see it you'll realize its obvious you are.

[SteveSy]

SteveSy: "Income made from the foreign manufacturing facilities is "gross income" not effectively connected with a U.S. trade or business and it is treated as gross income by the code and yet it is not "taxable income" even if there are no deductions.

Happy?"

Not quite. This foreign company, BY THE TERMS OF SECTION 861, is required to pay income tax on that portion of its income derived from sales within the U.S., because it receives that portion of its income within the U.S. Section 861's ONLY relevance to this example is that it relieves the foreign corporation of any obligation to pay U.S. income tax on that portion of its income derived from sources OUTSIDE the U.S. For those of us who live in the U.S. and derive our income from within the U.S. the source of the income is irrelevant. It is taxable to us unless some provision of the law says otherwise -- and Section 861 has no bearing on this.

That's true it does owe tax on the income made from within the U.S., that's not up for argument. The argument is, is the income made in foreign countries considered "gross income" for the purposes of the code? The answer is, yes it is.

The purpose of this discussion is to show that section 61 and 63 are very general definitions and do not necessarily mean what you think they say.

[Cpt Banjo]

Ok, a foreign corporation doing business in the United States is a manufacturer of computers. It has no United States subsidiaries and manages all it's business overseas. It manufactures and sells these machines in the United States and in foreign countries and has a separate manufacturing base in those countries.

Income made from the foreign manufacturing facilities is "gross income" not effectively connected with a U.S. trade or business and it is treated as gross income by the code and yet it is not "taxable income" even if there are no deductions.

Income derived from the foreign facilities is excluded from gross income under Section 882(b):

(b) Gross income
In the case of a foreign corporation, except where the context clearly indicates otherwise, gross income includes only—
(1) gross income which is derived from sources within the United States and which is not effectively connected with the conduct of a trade or business within the United States, and
(2) gross income which is effectively connected with the conduct of a trade or business within the United States.

[SteveSy]

Ok, a foreign corporation doing business in the United States is a manufacturer of computers. It has no United States subsidiaries and manages all it's business overseas. It manufactures and sells these machines in the United States and in foreign countries and has a separate manufacturing base in those countries.

Income made from the foreign manufacturing facilities is "gross income" not effectively connected with a U.S. trade or business and it is treated as gross income by the code and yet it is not "taxable income" even if there are no deductions.

Income derived from the foreign facilities is excluded from gross income under Section 882(b):

(b) Gross income
In the case of a foreign corporation, except where the context clearly indicates otherwise, gross income includes only—
(1) gross income which is derived from sources within the United States and which is not effectively connected with the conduct of a trade or business within the United States, and
(2) gross income which is effectively connected with the conduct of a trade or business within the United States.

That has context, its for a specific instance...it's not referring to section 61. Read 1.861-8, it's very clear why.