There are a wide variety of ways that psychological denial can be expressed by a person who is unconsciously defending or protecting themselves from unwanted knowledge, thoughts, or feelings. What follows is a partial list of denial strategies. Human ingenuity being what it is, I couldn't possibly list all the possible strategies. "Affect Storm" or Exaggerated Emotional Responses This is a hyperemotional response to anything that threatens the veneer of denial or that questions the motivations of the denier. EXAMPLE: Take your pick among the usual ad hominem attacks leveled at anyone who has the audacity to disagree with the person in denial or to question his denial.
Yet another "expert" opinion poo-pooing the 861 evidence was recently brought to my attention. It would be a full-time job to respond to all of them (the status quo always has a lot of beneficiaries, and therefore proponents), but the general gist of most of them can be addressed with one response. The example I'll use this time comes from a professor of law at the George Washington University Law School (in DC), so one would think that it would at least be a little more credible than the remarks of some untrained paper-pusher. Here is the link to the (attempted) refutation of the 861 evidence: http://docs.law.gwu.edu/facweb/jsiegel/Personal/taxes/861.htm An important first thing to note about the article is that it cites absolutely nothing from the law. Not one word. Anywhere. As is often the case, it consists of a string of unsupported assertions. The closest thing to legal support Mr. Siegel gives is to say that "the rest of the tax code (especially sections 1, 61 and 63) shows that U.S. citizens are taxed on their income from all sources, whether from within or outside the United States." Again, nothing from the law is quoted. cont.
As many of you know, Section 1 imposes a tax on one's "taxable income." It says nothing about how to determine what is and what is not "taxable income." Section 63 generally defines "taxable income" to mean "gross income" minus deductions. It says nothing about how to determine what is or is not to be included in "gross income." Section 61 not only says NOTHING about geographic origin of income, or the type of commerce which generates the income (which is addressed in great detail in Subchapter N of the code, beginning with Section 861), but Section 61 itself, for many decades, was followed by a cross-reference referring the reader to Section 861 regarding "Income from sources WITHIN the United States," and to Section 862 regarding income from OUTSIDE of the United States. (If the wording of Section 61 meant that geographic origin didn't MATTER, why on earth would we be told to look somewhere else concerning geographic origin?) I expect that Mr. Siegel is basing his conclusion upon the wording "all income from whatever source derived" from Section 61, though he did not bother to quote even that. But the first thing that should be addressed is actually a psychological point: WHY did he feel no need to cite ANYTHING from the law? My guess is that, being a professor of law, he is accustomed to having his students assume that he knows what he's talking about. In other words, his credentials ARE his support, and the only support he thinks he needs. (Conversely, many people might view my LACK of credentials as all that is needed to render my "opinion" worthless, despite the fact that I quote from the law itself constantly, as you'll see below.) cont.
Mr Siegel asserts that 861 and its regs exist, not to determine whether domestic income is taxable, but merely to "determine[] whether income is considered to be from a source within the United States or from a source outside the United States." While that is ONE thing that those sections do (though he cites nothing demonstrating that), the implication is clearly that one should NOT look there to determine whether his domestic income is TAXABLE. Again, nothing is cited supporting such a claim. Being sans credentials myself, I must defer to the statutes and regulations. Mr. Siegel states that whether one's income is foreign or domestic "doesn't matter" and that 861 "is irrelevant" for most U.S. citizens, "because U.S. citizens are taxed on all income from all sources." However, here is what the official Executive branch regulations say: ââ¬Å(c) Determination of taxable income. The taxpayerââ¬â¢s taxable income from sources WITHIN OR WITHOUT the United States WILL BE DETERMINED under the rules of Secs. 1.861-8 [and following].ââ¬Â [26 CFR ç 1.863-1(c)] Of course, to determine what (if anything) you owe, you must first determine your TAXABLE income, be it foreign and/or domestic. So how does one DETERMINE his taxable domestic income? I think the above is pretty darn clear about that. I believe the following is pretty darn clear as well: cont.
ââ¬ÅSections 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 sources within the United States has been determined. Sections 862(b) and 863(a) state in general terms how to determine taxable income of a taxpayer from sources WITHOUT the United States after gross income from sources without the United States has been determined.ââ¬Â [26 CFR ç 1.861-8] Clearly implied in Mr. Siegel's comments is that you DON'T NEED to go to Section 861 and its regs to determine the "taxable income of a taxpayer from sources within the United States." The rest of the code, he say (without quoting anything from it), says that citizens are taxed on their income regardless of its geographic source. Someone can have taxable domestic income, taxable foreign income, both, or neither. (There can't be taxable income that doesn't come from anywhere.) Consider the following, which is what the first section of regulations under 861 says, and has said since before I was born (with minor wording changes). While reading it, keep in mind that this professor of law says you should NOT be looking to 861 to determine your taxable domestic income: ââ¬Åç1.861-1 Income from sources within the United States (a) Categories of income. Part I (section 861 and following), subchapter N, chapter 1 of the Code, and the regulations thereunder DETERMINE THE SOURCES OF INCOME FOR PURPOSES OF THE INCOME TAX. ... The statute provides for the following three categories of income: à à (1) WITHIN the United States The gross income from sources within the United States, consisting of the items of gross income specified in section 861(a) plus the items of gross income allocated or apportioned to such sources in accordance with section 863(a). See çç 1.861-2 to 1.861- 7, inclusive, and ç 1.863-1. The TAXABLE INCOME FROM SOURCES WITHIN THE UNITED STATES, in the case of such income, shall be determined by deducting therefrom, in accordance with sections 861(b) and 863(a), the [allowable deductions]. See çç 1.861-8 and 1.863-1. cont.
(2) Without [outside of] the United States ... à à (3) Partly within and partly without the United States ... (b) Taxable income from sources within the United States. The TAXABLE INCOME FROM SOURCES WITHIN THE UNITED STATES shall consist of the taxable income described in paragraph (a)(l) of this section plus the taxable income allocated or apportioned to such sources, as indicated in paragraph (a)(3) of this section.ââ¬Â [26 CFR ç 1.861-1] In giving his reason for 861's existence, without (in his words) "going into all the situations where section 861 matters," Mr. Siegel gives two examples: 1) a foreigner distinguishing between taxable domestic income and non-taxable foreign income, and; 2) a citizen entitled to the foreign tax credit, who must determine domestic versus foreign to figure out the limit on the credit. Again (sorry to beat a dead horse), he cites nothing supporting his claim that 861 is only to be used in such unusual circumstances. Above, you can see for yourself what the OFFICIAL government regulations say about what the sections are for. Notice that they give NO indication that only CERTAIN people should be referring to those sections. Here is yet another example of an official IRS document summarizing the purpose of 861 and following. See if you see ANY indication that most people should ignore the section entirely, as Mr. Siegel suggests. ââ¬ÅRules are prescribed for DETERMINATION OF GROSS INCOME AND TAXABLE INCOME derived from sources WITHIN AND WITHOUT the United States, and for the allocation of income derived partly from sources within the United States and partly without the United States or within United States possessions. çç 1.861-1 through 1.864. (Secs 861-864; ââ¬Ë54 Code.)ââ¬Â [Treasury Decision 6258] cont.
I just can't relate to this strange psychological phenomenon wherein someone with credentials can assert ANYTHING, and somehow people think it needs responding to. "That section is only for foreigners/Americans with foreign income/albino wombats named Edmund." They ASSERT who should look there, and people automatically give it credibility, though the asserters cite NOTHING from the law supporting it. They can assert until they're blue in the face that 861 is for someone other than you, but when have you ever seen any of them QUOTE anything from the statutes or regulations which comes close to supporting that claim? Show me ANY citation which says that 861 is NOT to be used by everyone to determine their taxable domestic income. You will NEVER see one. I've done text searches through ALL of the tax statutes and regulations, reviewing EVERY mention of Section 861. NEVER is there any indication, or even a subtle hint, that most people should IGNORE 861 when it comes to determining their taxable domestic income. Quite the opposite, as you can see above. So let's review: we have lots of assertions but ZERO citations saying that we shouldn't use 861--that's it's not for us--and at least half a dozen official citations (including those shown above) which say, unequivocally and unconditionally, that those ARE the sections to use for "determining taxable income from sources within the United States." Why are people so reluctant to believe their own eyes, or to accept what is right in front of them in black and white? Why do they continue to give weight to the provably-false, utterly baseless assertions of people, just because those people have credentials (i.e., pieces of paper that say they SHOULD know what they're talking about)? cont.