\-\-\-\--Original Message\-\-\-\--

From: ke6kzr
\[[[mailto:ke6kzr@sbcglobal.net]{.underline}](mailto:ke6kzr@sbcglobal.net)\]

Sent: Sunday, February 27, 2005 7:37 PM

To: comments

Subject: Public Comments to Tax Panel

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.)