Wednesday, February 28, 2007

Aaron Russo talks with IRS Commissioner Sheldon Cohen



Note: Income is not defined in the Internal Revenue Code.

Note: The Definition of Income was given in the Eisner vs Montgomery case to mean gains or profits from corporate activity and not wages.

Supreme Court on the 16th Amendment:

"The provisions of the Sixteenth Amendment conferred no new power of taxation . . ."

United States Supreme Court, Stanton v. Baltic Mining Co., 240 U.S. 103 (1916)

“The Sixteenth Amendment, although referred to in argument, has no real bearing and may be put out of view. As pointed out in recent decisions, it does not extend the taxing power to new or excepted subjects...”

United States Supreme Court, Peck v. Lowe, 247 U.S. 165 (1918)
Aaron with Sheldon on Title 26 (IRC) & 16th

Sheldon: Title 26 requires you to file a return.

Aaron: But doesn’t title 26 have to be in compliance with the Supreme Court decisions?

Sheldon: Your gonna take a 1920’s case and super impose it on the on the whole internal revenue code that was written after it, no that’s not….

Aaron Narrating: I can’t believe what I just heard rewind.

Sheldon: Your gonna take a 1920’s case and super impose it on the on the whole internal revenue code that was written after it, no that’s not….

Aaron Narrating: Remember he said earlier that the internal revenue code was authorized by the 16th Amendment.

Sheldon: The internal revenue code is authorized by the 16th amendment.

Aaron Narrating: Remember the supreme court said the 16th amendment did not give the government any new taxing power, these decisions have never been overturned. Lets listen further.

Special thanks to Casey Lee Cobb for the heads up posting this!

Click here to view America: Freedom To Fascism (AFTF)- the entire movie - on Google Video for free! AFTF rocketed to # 11 on Google Video this past Sunday and is currently ranked at # 40 worldwide.

8 Comments:

Blogger MrTideman said...

Yeah! I've seen this film and the Commissioner says some Yiddish like that old saying at the River Styx: Abandon all hope, ye that enter here. - -

1:20 PM  
Blogger AMERICA: FREEDOM TO FASCISM said...

Thanks for sharing Joe!

1:34 PM  
Blogger FredMarshall1937 said...

It isn't EISNER v. MONTGOMERY, it's EISNER v, McCOMBER:

Eisner v. McComber 252 U.S. 189 (1920) - U.S. Supreme Court
http://caselaw.lp.findlaw.com/scripts/getcase.pl?court=us&vol=252&invol=189
~~~~~~~~~~~~~~~~~~~~~~~

"...Nevertheless, in view of the importance of the matter, and the fact that Congress in the Revenue Act of 1916 declared (39 Stat. 757 [Comp. St . 6336b]) that a 'stock dividend shall be considered income, to the amount of its cash value,' we will deal at length with the constitutional question, incidentally testing the soundness of our previous conclusion.

"The Sixteenth Amendment must be construed in connection with the taxing clauses of the original Constitution and the effect attributed to them before the amendment was adopted. In Pollock v. Farmers' Loan & Trust Co., 158 U.S. 601 , 15 Sup. Ct. 912, under the Act of August 27, 1894 (28 Stat. 509, 553, c. 349, 27), it was held that taxes upon rents and profits of real estate and upon returns from investments of personal property were in effect direct taxes upon the property from which such income arose, imposed by reason of ownership; and that Congress could not impose such taxes without apportioning them among the states according to population, as required by article 1, 2, cl. 3, and section 9, cl. 4, of the original Constitution.

"Afterwards, and evidently in recognition of the limitation upon the taxing power of Congress thus determined, the Sixteenth Amendment was adopted, in words lucidly expressing the object to be accomplished:

'The Congress shall have power to lay and collect taxes on incomes, from whatever source derived, without apportionment among [252 U.S. 189, 206] the several states, and without regard to any census or enumeration.'
As repeatedly held, this did not extend the taxing power to new subjects, but merely removed the necessity which otherwise might exist for an apportionment among the states of taxes laid on income. Brushaber v. Union Pacific R. R. Co., 240 U.S. 1 , 17-19, 36 Sup. Ct. 236, Ann. Cas. 1917B, 713, L. R. A. 1917D, 414; Stanton v. Baltic Mining Co., 240 U.S. 103 , 112 et seq., 36 Sup. Ct. 278; Peck & Co. v. Lowe, 247 U.S. 165, 172 , 173 S., 38 Sup. Ct. 432.

"A proper regard for its genesis, as well as its very clear language, requires also that this amendment shall not be extended by loose construction, so as to repeal or modify, except as applied to income, those provisions of the Constitution that require an apportionment according to population for direct taxes upon property, real and personal. This limitation still has an appropriate and important function, and is not to be overridden by Congress or disregarded by the courts.

"In order, therefore, that the clauses cited from article 1 of the Constitution may have proper force and effect, save only as modified by the amendment, and that the latter also may have proper effect, it becomes essential to distinguish between what is and what is not 'income,' as the term is there used, and to apply the distinction, as cases arise, according to truth and substance, without regard to form. Congress cannot by any definition it may adopt conclude the matter, since it cannot by legislation alter the Constitution, from which alone it derives its power to legislate, and within whose limitations alone that power can be lawfully exercised.

"The fundamental relation of 'capital' to 'income' has been much discussed by economists, the former being likened to the tree or the land, the latter to the fruit or the crop; the former depicted as a reservoir supplied from springs, the latter as the outlet stream, to be measured by its flow during a period of time. For the present purpose we require only a clear definition of the term 'income,' [252 U.S. 189, 207] as used in common speech, in order to determine its meaning in the amendment, and, having formed also a correct judgment as to the nature of a stock dividend, we shall find it easy to decide the matter at issue.

"After examining dictionaries in common use (Bouv. L. D.; Standard Dict.; Webster's Internat. Dict.; Century Dict.), we find little to add to the succinct definition adopted in two cases arising under the Corporation Tax Act of 1909 (Stratton's Independence v. Howbert, 231 U.S. 399, 415 , 34 S. Sup. Ct. 136, 140 [58 L. Ed. 285]; Doyle v. Mitchell Bros. Co., 247 U.S. 179, 185 , 38 S. Sup. Ct. 467, 469 [62 L. Ed. 1054]), 'Income may be defined as the gain derived from capital, from labor, or from both combined,' provided it be understood to include profit gained through a sale or conversion of capital assets, to which it was applied in the Doyle Case, 247 U.S. 183, 185 , 38 S. Sup. Ct. 467, 469 (62 L. Ed. 1054).

"Brief as it is, it indicates the characteristic and distinguishing attribute of income essential for a correct solution of the present controversy. The government, although basing its argument upon the definition as quoted, placed chief emphasis upon the word 'gain,' which was extended to include a variety of meanings; while the significance of the next three words was either overlooked or misconceived. 'Derived-from- capital'; 'the gain-derived-from-capital,' etc. Here we have the essential matter: not a gain accruing to capital; not a growth or increment of value in the investment; but a gain, a profit, something of exchangeable value, proceeding from the property, severed from the capital, however invested or employed, and coming in, being 'derived'-that is, received or drawn by the recipient (the taxpayer) for his separate use, benefit and disposal- that is income derived from property. Nothing else answers the description.

"The same fundamental conception is clearly set forth in the Sixteenth Amendment-'incomes, from whatever source derived'-the essential thought being expressed [252 U.S. 189, 208] with a conciseness and lucidity entirely in harmony with the form and style of the Constitution.

"Can a stock dividend, considering its essential character, be brought within the definition? To answer this, regard must be had to the nature of a corporation and the stockholder's relation to it. We refer, of course, to a corporation such as the one in the case at bar, organized for profit, and having a capital stock divided into shares to which a nominal or par value is attributed.

"Certainly the interest of the stockholder is a capital interest, and his certificates of stock are but the evidence of it. They state the number of shares to which he is entitled and indicate their par value and how the stock may be transferred. They show that he or his assignors, immediate or remote, have contributed capital to the enterprise, that he is entitled to a corresponding interest proportionate to the whole, entitled to have the property and business of the company devoted during the corporate existence to attainment of the common objects, entitled to vote at stockholders' meetings, to receive dividends out of the corporation's profits if and when declared, and, in the event of liquidation, to receive a proportionate share of the net assets, if any, remaining after paying creditors. Short of liquidation, or until dividend declared, he has no right to withdraw any part of either capital or profits from the common enterprise; on the contrary, his interest pertains not to any part, divisible or indivisible, but to the entire assets, business, and affairs of the company. Nor is it the interest of an owner in the assets themselves, since the corporation has full title, legal and equitable, to the whole. The stockholder has the right to have the assets employed in the enterprise, with the incidental rights mentioned; but, as stockholder, he has no right to withdraw, only the right to persist, subject to the risks of the enterprise, and looking only to dividends for his return. If he desires to dissociate himself [252 U.S. 189, 209] from the company he can do so only by disposing of his stock.

"For bookeeping purposes, the company acknowledges a liability in form to the stockholders equivalent to the aggregate par value of their stock, evidenced by a 'capital stock account.' If profits have been made and not divided they create additional bookkeeping liabilities under the head of 'profit and loss,' 'undivided profits,' 'surplus account,' or the like. None of these, however, gives to the stockholders as a body, much less to any one of them, either a claim against the going concern for any particular sum of money, or a right to any particular portion of the assets or any share in them unless or until the directors conclude that dividends shall be made and a part of the company's assets segregated from the common fund for the purpose. The dividend normally is payable in money, under exceptional circumstances in some other divisible property; and when so paid, then only (excluding, of course, a possible advantageous sale of his stock or winding-up of the company) does the stockholder realize a profit or gain which becomes his separate property, and thus derive income from the capital that he or his predecessor has invested..."

4:21 PM  
Blogger Casey Lee Cobb said...

Yep thats right the fomer Commissioner said to Mr. Russo “Gornished von hellfin.” a yiddish expression which means, “Nothing can help you.”

I don’t know much about Yiddish, or the context of the phrase however Aaron Russo considered it to be either a threat or an ominous statement.

4:23 PM  
Blogger jet said...

Fred, in your opinion, what is the holding of Eisner?

7:05 PM  
Blogger Brian said...

Funny how tax protestors attempt to cite Supreme Court cases ... they love the ones they think support their nonsense, but ignore other decisions which are incovenient.

Maybe tax protestors should now go read the case of Commissioner v. Glenshaw Glass, 348 U.S. 426, which says ...

******************************
Nor can we accept respondent's contention that a narrower reading of 22 (a) is required by the Court's characterization of income in Eisner v. Macomber, 252 U.S. 189, 207 , as "the gain derived from capital, from labor, or from both combined." 6 The Court was there endeavoring to determine whether the distribution of a corporate stock dividend constituted a realized gain to the shareholder, or changed "only the form, not the essence," of [348 U.S. 426, 431] his capital investment. Id., at 210. It was held that the taxpayer had "received nothing out of the company's assets for his separate use and benefit." Id., at 211. The distribution, therefore, was held not a taxable event. In that context - distinguishing gain from capital - the definition served a useful purpose. But it was not meant to provide a touchstone to all future gross income questions.
******************************

In other words, Eisner v. Macomber is not the end of the discussion. In fact, Glenshaw Glass went on to give income a much broader meaning than tax protestors would like to admit.

11:59 PM  
Blogger TruePatriot said...

The IRS is guilty. The Federal Reserve is guiltier. The International Bankers are even guiltier, yet...

Finally, the BASTARD POLITITIANS, who the public has entrusted to serve the best interest of WE THE PEOPLE, are THE GUILTIEST for selling us out... selling this country out to den of vipers!!!

12:48 AM  
Blogger TrueLogic said...

Sheldon Cohen looks like he was on Drugs! You're damned right Aaron cought Him unprepared!

It's funny watching Sheldon eat his own foot in this clip from AFTF.

His answers to Aaron sure do shine the Light of Suspicion on the IRS... and Makes them look even Guiltier than ever!

Because they simply are.

3:25 PM  

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