26 USC 83 case law -
Is the value of your personal services in the category of cost and is therefore deductible from gross income? Or is the value of your personal services in the category of gross income or "profit" so that it may rightfully, lawfully be subjected to an "income" tax? Profit or 'income' is defined when one identifies amounts which are cost; define cost and you define income, income is what's left after cost is deducted from the total revenue raised. Tax Code section 83 defines cost for the purposes of compensation for services.
Relienace upon this group of cases was NEVER challenged in the five trips my clients made to the Supreme Court and in cases on every federal level. While nobody in the entire country has even looked at this provision and applied it to compensation, my brief of this was in the very first tax brief I ever wrote ('94?). This means that none of those experts has applied it to Social Security chapters' compensation in FICA and self employment earnings, nor have they applied it to compensation in chapter 24/W-4 Form requirements. It "explains how property received in exchange for services is taxed" and nobody has ever thought to find it; where's the "expert" in that?!?! You will see this nowhere else.
Pdf files.
If you don't know about this statute and how it operates, DO NOT claim to be an expert or authority on tax law!!! These cases hold 26 USC 83 applicable to all compensation paid for personal services -
See Montelepre Systemed, Inc. v. C.I.R., 956 F.2d 496, 498 at [1] (CA5 1992): “Section 83(a) explains how property received in exchange for services is taxed.”
MacNaughton v. C.I.R., 888 F.2d 418, 421 (CA6 1989): “The Alves court stated that the plain language of section 83 belied this argument because the “statute applied to all property transferred in connection with the performance of services” and because no reference is made to the term “compensation.” Id. The court further concluded in Alves that “if Congress had intended section 83(a) to apply solely to restricted stock used to compensate employees, it could have used much narrower language.” Id. at 481-82. Upon consideration, we agree with the interpretation advanced by the Alves court and, therefore, join the Ninth Circuit in holding that section 83 is not limited to stock transfers which are compensatory in nature.”
Pledger v. C.I.R., 641 F.2d 287, 293 (CA5 1981): “The taxing scheme imposed by Congress more accurately reflects what taxpayer received as compensation than a scheme that taxes the taxpayer on merely a portion of the compensation.”
Alves v. C.I.R., 734 F.2d 478, 481 (CA9 1984): “The plain language of section 83(a) belies Alve’s argument. Section 83(a) applies to all property transferred in connection with the performance of services. No reference is made to the term “compensation.” Nor is there any statutory requirement that property have a fair market value in excess of the amount paid at the time of transfer. Indeed, if Congress had intended section 83(a) to apply solely to restricted stock used to compensate its employees, it could have used much narrower language. Indeed, Congress made section 83(a) applicable to all restricted “property,” not just stock; to property transferred to “any person,” not just to employees; and to property transferred “in connection with . . . services,” not just compensation for employment. See Cohn v. Commissioner, 73 USTC 443, 446-47 (1979).”
Klingler Electric Co. v. C.I.R., 776 F.Supp. 1158, 1164 at [1] (S.D.Miss. 1991): “Section 83(a) applies to all property transferred in connection with the performance of services.”
Robinson v. C.I.R., 82 USTC 444, 459 (1984); The legislative history of section 83 does not require the conclusion that the statute should be applied to tax-avoidance techniques only. To the contrary, the House and Senate reports specifically delineate transactions and transfers to which section 83 was not to apply and do not exclude from its purview contractual provisions that were not tax motivated.”
Cohn v. C.I.R., 73 USTC 443, 446 (1979): “Petitioners rest their entire case on the proposition that Elovich and Cohn and/or Mega were “independent contractors” and not employees of the Integrated and that, therefore, section 83 does not apply to the acquisition of the shares from Integrated. They rely on the legislative history surrounding the statute to support their proposition that section 83 was intended to apply only to restricted stock transferred to employees. Respondent contends that the words “any person” in section 83(a) encompass independent contractors as well as employees. We agree with Respondent. . . . We reject petitioner’s argument. While restricted stock plans involving employers and employees may have been the primary impetus behind the enactment of section 83, the language of the section covers the transfer of any property transferred in connection with the performance of services “to any person other than the person for whom the services are performed.” (Emphasis added.) The legislative history makes clear that Congress was aware that the statute’s coverage extended beyond restricted stock plans for employees. H.Rept. 91-413 (Part 1) (1969), 1969-3 C.B. 200, 255; S.Rept. 91-552 (1969), 1969-3 C.B. 423, 501. The regulations state that that section 83 applies to employees and independent contractors (sec. 1.83-1(a), Income Tax Regs.). There is no question but that, under the foregoing circumstances, these regulations are not “unreasonably and plainly inconsistent with the revenue statutes.” Consequently, they are sustained. (cites omitted)”
Concurring with Cohn, Alves, see Centel Communications Co. v. CIR, 920 F.2d 1335, 1342 (CA7 1990). Annotations / Public Law
U.S. Tax Court/Secretary of Treasury/ Commissioner of IRS says “Any property” excludes some property, i.e., labor; income tax on pay. (26 USC 83, 1012; 26 CFR 1.83-3(g), 1.1012-2(a)); Extortion, coercion, racketeering.
vs.
Supreme Court and Department of Justice in US v. Monsanto interpreting Congressional mandate say “Any property” means everything; no tax on value of labor. (26 USC 83, 1012; 26 CFR 1.83-3(g), 1.1012-2(a)); Law.
KEY: The IRS and the courts exclude personal services from cost because you paid nothing for your personal services before you sold them to your employer or customer. This requires that 26 1.83-3(g) "the value of any money or property" be construed to mean "the value of any money or property within which you have a cost" but we know that we cannot do that to the plain language of the law. Tax Code § 1012 (CONGRESS!) says "cash or other property" and it does not say "cash or other property within which you have a cost." The IRS' requirement that the only property to be considered as a cost is property in which one has a prior cost is a requirement dreamed up out of thin air by the IRS and endorsed or sanctioned by the judiciary. In Cohn v. Commissioner of IRS, 73 USTC 444, Tax Court determined that the regulations under § 83 were consistent with statute, so 1.83-3(g) can be argued as if it were statute straight from Congress.
This is precisely the difference between your paycheck or fees being taxed like income or profit, and them being left alone because the value of your labor is a cost which is deductible from gross income. If you live by Roe v. Wade because the Supreme Court made that ruling, why do you not favor Monsanto and a free paycheck?
Remember, many very technical aspects of the full curriculum have been withheld from this abbreviated view of the Tax Code. This chart seeks to explain or outline only a couple of the most easily identified of the IRS' many faults. Adjust text size to get this chart to fit your screen.