CITES BY TOPIC:  trade or business

WARNINGS!:

  1. The ONLY thing that belongs on an  PDF IRS Form 1040 is EXCLUSIVELY "trade or business" earnings subject to the graduated rate of tax under I.R.C. Section 1 and "trade or business" deductions under 26 U.S.C. §162. This form is intended ONLY for STATUTORY "U.S. persons" under 26 U.S.C. §7701(a)(30) domiciled on federal territory.
  2. PDF IRS Form 1040NR allows for:
    2.1 "trade or business" income under 26 U.S.C. 871(b), all of which must be "effectively connected" VOLUNTARILY by YOU.
    2.2 Income not "effectively connected with a trade or business" under 26 U.S.C.  871(a) on Schedule NEC.
  3. If you live in a state of the Union and you either ELECT (choose) to call your earnings "trade or business" earnings by calling them "effectively connected", or you are receiving "U.S. source" payments from ONLY the national government, the only proper form to file is the PDF IRS Form 1040NR, not the PDF IRS Form 1040.
  4. If you live in a state of the Union and make NO elections and do not receive U.S. government payments, everything you make is "excluded income" not subject to tax. You are a "foreign estate" pursuant to 26 U.S.C. §7701(a)(31).
  5. Remember that if all of your earnings are EXCLUDIBLE from "gross income", then you don't NEED "trade or business" DEDUCTIONS and it would be STUPID to file any tax form including the PDF IRS Form 1040 that allows for deductions. More on "excludible income" at:
    What is an Income Tax "Exclusion"?, SEDM
    https://sedm.org/what-is-an-income-tax-exclusion/
  6. More on how to file tax returns:
    6.1 1040NR Attachment, Form #09.077
    6.2 How to File Returns, Form #09.074 (OFFSITE LINK) -SEDM. Member Subscriptions
    6.3 Procedure to File Tax Returns, Form #09.075 (OFFSITE LINK)-SEDM. Member Subscriptions. Slide presentation with sample forms.

26 U.S.C. §7701(a)(26)

"The term 'trade or business' includes the performance of the functions of a public office."


The "trade or business" scam-heart of the IRS fraud

HTML Version-Family Guardian

PDF PDF Version-SEDM


It is ILLEGAL for a "nonresident alien" to CALL or ELECT TO CALL something "trade or business" that IN FACT is NOT a "trade or business"

26 C.F.R §1.871-8(c)(1) Taxation of nonresident alien individuals engaged in U.S. business or treated as having effectively connected income.

“. . . Income, gain, or loss of a nonresident alien individual is not treated as being effectively connected for the taxable year with the conduct of a trade or business in the United States if he is not engaged in trade or business within the United States during such year, . . .”

[EDITORIAL: The above excerpt is incontrovertible evidence that the phrase “conduct of a trade or business” is a term of art and is statutorily defined and restricted to the performance of a public office.

The regulation itself admits that the distinct possibility that a non resident alien could earn and receive income, gain, or losses, WITHOUT being engaged in the conduct of a trade or business.

Now, if the term “trade or business” as used in the regulation, meant it’s ordinary definition, it would be IMPOSSIBLE for a non resident alien to earn or receive any income, gain, or loss unless they were employed or engaged in the conduct of a trade or business!!

This is also a good section of regulation. The fact that they vacillate between "in the United States" and "within the United States" in the same sentence is very telling. One could definitely be construed as geographical where the other one is clear not otherwise there would be no need to be redundant. Also they often use “a” in regards to “engaged in ‘a’ trade or business in”, in juxtaposition to “engaged in trade or business within”

We learned a long time ago, that often times when we examine a problem, that we discover truth. And we came to understand that the problem is never apart from the answer.

We came to realize that if one invests the time and effort into studying that tax code and the treasury regulations, we acquired a deep understanding of both, and we understood that the PROBLEM is the ANSWER. Understanding the problem dissolves the problem.

The problem - in this case - Understanding the complexity of the tax code and regulations, is greatly simplified, when one realizes that the problem is the answer. Understanding the problem will dissolve that problem.

Our research pivots off of “The Trade or Business Scam”. Responsible American citizens and newbies to the sites, must understand and know the truth about the term “trade or business”.

For an expanded version of this topic, see:
The "Trade or Business" Scam, Form #05.001, Section 1.4
https://sedm.org/Forms/05-MemLaw/TradeOrBusScam.pdf

]


Treatise on the Law of Public Offices and Officers (OFFSITE LINK) -Floyd Mechem, 1890.  Google Books.  Excellent.


You Don't Have Any Taxable Sources of Income-excellent article about the "trade or business" issue from Great IRS Hoax, section 5.6.11


PDF  Defining " Trade or Business" under the Internal Revenue Code: A Survey of Relevan Cases, Florida STate University Law Review, Volume 11, Issue 4, Article 5, Fall 1984


The Trade or Business" Scam-Great IRS Hoax, section 5.6.12


PDF  I.R.C. 7701-General Discussion-by IRS EO organization. Note the description of "trade or business"


18 U.S.C. §1901 Collecting or disbursing officer trading in public property

Chapter 93: Public Officers and employees

1901. Collecting or disbursing officer trading in public property.

Whoever, being an officer of the United States concerned in the collection or the disbursement of the revenues thereof, carries on any trade or business in the funds or debts of the United States, or of any State, or in any public property of either, shall be fined under this title or imprisoned not more than one year, or both; and shall be removed from office, and be incapable of holding any office under the United States.

(June 25, 1948, ch. 645, 62 Stat. 790Pub. L. 103–322, title XXXIII, § 330016(1)(J)Sept. 13, 1994108 Stat. 2147.)

[EDITORIAL: Our view is that what the above criminal law means, is that any USG employee who handles money as part of their job, is not allowed to use the federal funds to run a private business. Trade or business as used here, has its ordinary meaning and is not a term of art.]


AN ACT To revise, codify, and enact into positive law, Title 18 of the United States Code, entitled "Crimes and Criminal Procedure", 62 Stat. 790, Public Law 772, H.R. 3190

Chapter 93: Public Officers and employees

1901. Collecting or disbursing officer trading in public property.

“Whoever, being an officer of the United States concerned in the collection or the disbursement of the revenues thereof, Carries on any trade or business in the funds or debts of the United States, or of any State, or in any public property of either, shall be fined not more than $3,000 or imprisoned not more than one year, or both; and shall be removed from office, and be incapable of holding any office under the United States.”

[EDITORIAL: Our view is that what the above criminal law means, is that any USG employee who handles money as part of their job, is not allowed to use the federal funds to run a private business. Trade or business as used here, has its ordinary meaning and is not a term of art.]


26 U.S.C. §864: Definitions and Special Rules

TITLE 26 > Subtitle A > CHAPTER 1 > Subchapter N > PART I > Sec. 864
Sec. 864. - Definitions and special rules

(b) Trade or business within the United States

For purposes of this part [part I], part II, and chapter 3, the term ''trade or business within the United States'' includes the performance of personal services within the United States at any time within the taxable year, but does not include -

  (1) Performance of personal services for foreign employer

The performance of personal services -

    (A) for a nonresident alien individual, foreign partnership, or foreign corporation, not engaged in trade or business within the United States, or

    (B) for an office or place of business maintained in a foreign country or in a possession of the United States by an individual who is a citizen or resident of the United States or by a domestic partnership or a domestic corporation, by a nonresident alien individual temporarily present in the United States for a period or periods not exceeding a total of 90 days during the taxable year and whose compensation for such services does not exceed in the aggregate $3,000.


31 C.F.R. 103.: Reports relating to currency in excess of $10,000 received in a trade or business

Title 31: Money and Finance: Treasury
PART 103—FINANCIAL RECORDKEEPING AND REPORTING OF CURRENCY AND FOREIGN TRANSACTIONS
Subpart B—Reports Required To Be Made

103.30   Reports relating to currency in excess of $10,000 received in a trade or business.

(11) Trade or business. The term trade or business has the same meaning as under section 162 of title 26, United States Code.


26 U.S.C. §6041:  Trade or Business Expenses

26 U.S. Code § 6041 - Information at source

(a)Payments of $600 or more

All persons engaged in a trade or business and making payment in the course of such trade or business to another person, of rent, salaries, wages, premiums, annuities, compensations, remunerations, emoluments, or other fixed or determinable gains, profits, and income (other than payments to which section 6042(a)(1), 6044(a)(1), 6047(e), 6049(a), or 6050N(a) applies, and other than payments with respect to which a statement is required under the authority of section 6042(a)(2), 6044(a)(2), or 6045), of $600 or more in any taxable year, or, in the case of such payments made by the United States, the officers or employees of the United States having information as to such payments and required to make returns in regard thereto by the regulations hereinafter provided for, shall render a true and accurate return to the Secretary, under such regulations and in such form and manner and to such extent as may be prescribed by the Secretary, setting forth the amount of such gains, profits, and income, and the name and address of the recipient of such payment.


26 U.S. Code 6041A - Returns regarding payments of remuneration for services and direct sales

(a)Returns regarding remuneration for servicesIf—

(1) any service-recipient engaged in a trade or business pays in the course of such trade or business during any calendar year remuneration to any person for services performed by such person, and

[. . .]

(d)Applications to governmental units

(1)Treated as persons

The term “person” includes any governmental unit (and any agency or instrumentality thereof).

[EDITORIAL: So it does not matter if is a trade or business! What matters is whether or not the payer AND the recipient is a "person" as defined. Note that 6041A(d) definition of "person" does not say "for purposes of this section". So one of the reasons to coerce a W-9 out of a payee is to obtain their certification of US person status---this confirms they are within the same meaning as the definition of person at 6041A i.e. "includes a governmental unit"


26 U.S.C. §162:  Trade or Business Expenses

TITLE 26 > Subtitle A > CHAPTER 1 > Subchapter B > PART VI > Sec. 162.
Sec. 162. - Trade or business expenses

(a) In general

There shall be allowed as a deduction all the ordinary and necessary expenses paid or incurred during the taxable year in carrying on any trade or business, including -

(1)a reasonable allowance for salaries or other compensation for personal services actually rendered;


26 U.S.C. 32: Earned Income Credit

TITLE 26 > Subtitle A > CHAPTER 1 > Subchapter A > PART IV > Subpart C > 32

32. Earned income

(i) Denial of credit for individuals having excessive investment income

(1) In general
No credit shall be allowed under subsection (a) for the taxable year if the aggregate amount of disqualified income of the taxpayer for the taxable year exceeds $2,200.
(2) Disqualified income

For purposes of paragraph (1), the term “disqualified income” means—
(A) interest or dividends to the extent includible in gross income for the taxable year,
(B) interest received or accrued during the taxable year which is exempt from tax imposed by this chapter,
(C) the excess (if any) of—

(i) gross income from rents or royalties not derived in the ordinary course of a trade or business, over

(ii) the sum of—
(I) the deductions (other than interest) which are clearly and directly allocable to such gross income, plus
(II) interest deductions properly allocable to such gross income,


26 C.F.R. 1.1-1: Income Tax on Individuals

Title 26: Internal Revenue
PART 1—INCOME TAXES
Normal Taxes and Surtaxes
1.1-1   Income tax on individuals.

(a) General rule.

(1) Section 1 of the Code imposes an income tax on the income of every individual who is a citizen or resident of the United States and, to the extent provided by section 871(b) or 877(b), on the income of a nonresident alien individual. For optional tax in the case of taxpayers with adjusted gross income of less than $10,000 (less than $5,000 for taxable years beginning before January 1, 1970) see section 3. The tax imposed is upon taxable income (determined by subtracting the allowable deductions from gross income). The tax is determined in accordance with the table contained in section 1. See subparagraph (2) of this paragraph for reference guides to the appropriate table for taxable years beginning on or after January 1, 1964, and before January 1, 1965, taxable years beginning after December 31, 1964, and before January 1, 1971, and taxable years beginning after December 31, 1970. In certain cases credits are allowed against the amount of the tax. See part IV (section 31 and following), subchapter A, chapter 1 of the Code. In general, the tax is payable upon the basis of returns rendered by persons liable therefor (subchapter A (sections 6001 and following), chapter 61 of the Code) or at the source of the income by withholding. For the computation of tax in the case of a joint return of a husband and wife, or a return of a surviving spouse, for taxable years beginning before January 1, 1971, see section 2. The computation of tax in such a case for taxable years beginning after December 31, 1970, is determined in accordance with the table contained in section 1(a) as amended by the Tax Reform Act of 1969. For other rates of tax on individuals, see section 5(a). For the imposition of an additional tax for the calendar years 1968, 1969, and 1970, see section 51(a).

(2)(ii)  (ii) For taxable years beginning after December 31, 1970, the tax imposed by section 1(d) [married individuals filing separately] , as amended by the Tax Reform Act of 1969, shall apply to the income effectively connected with the conduct of a trade or business in the United States by a married alien individual who is a nonresident of the United States for all or part of the taxable year or by a foreign estate or trust. For such years the tax imposed by section 1(c), as amended by such Act, shall apply to the income effectively connected with the conduct of a trade or business in the United States by an unmarried alien individual (other than a surviving spouse) who is a nonresident of the United States for all or part of the taxable year. See paragraph (b)(2) of 1.871–8.


26 C.F.R. 1.1402(c)-1: Trade or business

§ 1.1402(c)-1 Trade or business.

In order for an individual to have net earnings from self-employment, he must carry on a trade or business, either as an individual or as a member of a partnership. Except for the exclusions discussed in §§ 1.1402(c)-2 to 1.1402(c)-7, inclusive, the term “trade or business”, for the purpose of the tax on self-employment income, shall have the same meaning as when used in section 162. An individual engaged in one of the excluded activities specified in such sections of the regulations may also be engaged in carrying on activities which constitute a trade or business for purposes of the tax on self-employment income. Whether or not he is also engaged in carrying on a trade or business will be dependent upon all of the facts and circumstances in the particular case. An individual who is a crew leader, as defined in section 3121(o) (see such section and the regulations thereunder in part 31 of this chapter (Employment Tax Regulations)), is considered to be engaged in carrying on a trade or business with respect to services performed by him after 1956 in furnishing individuals to perform agricultural labor for another person or services performed by him after 1956 as a member of the crew.

[T.D. 6978, 33 FR 15937, Oct. 30, 1968]

26 C.F.R. 1.1402(c)-2: Public Office

Title 26: Internal Revenue
PART 1—INCOME TAXES
TAX ON SELF-EMPLOYMENT INCOME

1.1402(c)-2   Public office.

(a) In general

(1) General rule. 

Except as otherwise provided in subparagraph (2) of this paragraph, the performance of the functions of a public office does not constitute a trade or business.

(2) Fee basis public officials

(i) In general. If an individual receives fees after 1967 for the performance of the functions of a public office of a State or a political subdivision thereof for which he is compensated solely on a fee basis, and if the service performed in such office is eligible for (but is not made the subject of) an agreement between the State and the Secretary of Health, Education, and Welfare pursuant to section 218 of the Social Security Act to extend social security coverage thereto, the service for which such fees are received constitutes a trade or business within the meaning of section 1402(c) and §1.1402(c)–1. If an individual performs service for a State or a political subdivision thereof in any period in more than one position, each position is treated separately for purposes of the preceding sentence. See also paragraph (f) of §1.1402(c)–3 relating to the performance of service by an individual as an employee of a State or a political subdivision thereof in a position compensated solely on a fee basis.

(ii) Election with respect to fees received in 1968. 

(A) Any individual who in 1968 receives fees for service performed by him with respect to the functions of a public office of a State or a political subdivision thereof in any period in which the functions are performed in a position compensated solely on a fee basis may elect, if the performance of the service for which such fees are received constitutes a trade or business pursuant to the provisions of subdivision (i) of this subparagraph, to have such performance of service treated as excluded from the term “trade or business” for the purpose of the tax on self-employment income, pursuant to the provisions of section 122(c)(2) of the Social Security Amendments of 1967 (as quoted in §1.1402(c)). Such election shall not be limited to service to which the fees received in 1968 are attributable but must also be applicable to service (if any) in subsequent years which, except for the election, would constitute a trade or business pursuant to the provisions of subdivision (i) of this subparagraph. An election made pursuant to the provisions of this subparagraph is irrevocable.

(B) The election referred to in subdivision (ii)(A) of this subparagraph shall be made by filing a certificate of election of exemption (Form 4415) on or before the due date of the income tax return (see section 6072), including any extension thereof (see section 6081), for the taxable year of the individual making the election which begins in 1968. The certificate of election of exemption shall be filed with an internal revenue office in accordance with the instructions on the certificate.

(b) Meaning of public office. 

The term “public office” includes any elective or appointive office of the United States or any possession thereof, of the District of Columbia, of a State or its political subdivisions, or a wholly-owned instrumentality of any one or more of the foregoing. For example, the President, the Vice President, a governor, a mayor, the Secretary of State, a member of Congress, a State representative, a county commissioner, a judge, a justice of the peace, a county or city attorney, a marshal, a sheriff, a constable, a registrar of deeds, or a notary public performs the functions of a public office. (However, the service of a notary public could not be made the subject of a section 218 agreement under the Social Security Act because notaries are not “employees” within the meaning of that section. Accordingly, such service does not constitute a trade or business.)

[T.D. 7333, 39 FR 44448, Dec. 24, 1974, as amended by T.D. 7372, 40 FR 30945, July 24, 1975]


26 C.F.R. § 31.3401(a)(11)-1:  Remuneration other than in cash for service not in the course of employer's trade or business

Title 26: Internal Revenue
PART 31—EMPLOYMENT TAXES AND COLLECTION OF INCOME TAX AT SOURCE
Subpart E—Collection of Income Tax at Source
31.3401(a)(11)-1   Remuneration other than in cash for service not in the course of employer's trade or business.

(a) Remuneration paid in any medium other than cash for services not in the course of the employer's trade or business is excepted from wages and hence is not subject to withholding. Cash remuneration includes checks and other monetary media of exchange. Remuneration paid in any medium other than cash, such as lodging, food, or other goods or commodities, for services not in the course of the employer's trade or business does not constitute wages. Remuneration paid in any medium other than cash for other types of services does not come within this exception from wages. For provisions relating to cash remuneration for service not in the course of employer's trade or business, see 31.3401(a)(4)–1.

(b) As used in this section, the term “services not in the course of the employer's trade or business” has the same meaning as when used in 31.3401(a)(4)–1


20 C.F.R. §404.1066-Trade or business in general

20 CFR § 404.1066 - Trade or business in general.

§ 404.1066 Trade or business in general.

For you to be covered as a self-employed person for social security purposes, you must be engaged in a trade or business. You can carry on a trade or business as an individual or as a member of a partnership. With some exceptions, the term trade or business has the same meaning as it does when used in [26 U.S.C. ] section 162 of the Code.


20 C.F.R. §404.1073-Public office

20 CFR § 404.1073 - Public office.

§ 404.1073 Public office.

(a) General. The performance of the functions of a public office is not a trade or business except under the circumstances explained in paragraph (b) of this section. If you are an officer of a State or political subdivision, you are considered as employee of the State or political subdivision.

(b) State and local governmental employees paid by fees -

(1) Voluntary coverage under section 218 of the Act. The services of employees of States and political subdivisions, including those in positions paid solely on a fee-basis, may be covered as employment by a Federal-State agreement under section 218 of the Act (see subpart M of this part). States, when entering into these agreements, have the option of excluding under the agreement coverage of services in positions paid solely by fees. If you occupy a position paid solely on a fee-basis and the State has not covered your services under section 218 of the Act, you are considered to be engaged in a trade or business.

(2) Mandatory old-age, survivors, disability, and hospital insurance coverage. Beginning with services performed after July 1, 1991, Social Security coverage (old-age, survivors, disability, and hospital insurance) is mandatory, with certain exceptions, for services performed by employees of a State, a political subdivision of a State, or of a wholly owned instrumentality of one or more of the foregoing, if the employees are not members of a retirement system of the State, political subdivision, or instrumentality. Among the exclusions from such mandatory coverage is service performed by an employee in a position compensated solely on a fee-basis which is treated pursuant to section 211(c)(2)(E) of the Act as a trade or business for purposes of inclusion of such fees in the net earnings from self-employment.

(3) If you are a notary public, you are not a public officer even though you perform a public function. Your services as a notary public are not covered for social security purposes.

[45 FR 20075, Mar. 27, 1980, as amended at 57 FR 59910, Dec. 17, 1992]

Bing ChatGPT Query: What are the various tests for whether income is connected with a trade or business in 26 U.S.C. 7702(a)(26)?

QUESTION: What are the various tests for whether income is connected with a trade or business in 26 U.S.C. 7702(a)(26)?

CHAT GPT ANSWER: The Internal Revenue Service (IRS) and the U.S. tax code provide several tests to determine whether income is effectively connected with a trade or business12. Here are some of the key tests:

  1. Asset-Use Test: The income must be associated with U.S. assets used in, or held for use in, the conduct of a U.S. trade or business1.
  2. Business Activities Test: The activities of that trade or business conducted in the United States are a material factor in the realization of the income1.

In general, you must be engaged in a trade or business during the tax year to be able to treat income received in that year as Effectively Connected Income (ECI)1. You usually are considered to be engaged in a U.S. trade or business when you perform personal services in the United States1.

Please note that tax laws can be complex and change frequently, so it’s always a good idea to consult with a tax professional or legal advisor for your specific situation.

[EDITORIAL: For the purposes of the above "U.S. assets" means GOVERNMENT property and NOT the geographical "United States", So it is a synonym for PUBLIC property. That is why the statutory "U.S. person", "U.S. citizen", or "U.S. resident" identified as parties "LIABLE TO" rather than "LIABLE FOR" the income tax in 26 C.F.R. §1.1-1(a) are liable for tax on their worldwide earnings:

  1. Everything that goes on the 1040 returns is subject to "trade or business" deductions under 26 U.S.C. §162.
  2. The civil status of STATUTORY "citizen" and "resident" is a legislative creation of and therefore property of the national government on loan to those INVOKING its CIVIL STATUTORY PRIVILEGES granted by congress.
  3. Former president and Chief Justice William Howard Taft, in Cook v. Tait, 265 U.S. 47 (1924) acknowledged that the income tax upon Cook, who was domiciled abroad in Mexico, was upon the STATUS he invoked on the 1040 tax return that he filed in 1922 that was the subject of the case.
  4. The government's response to Cook's pleading challenging authority to collect a tax upon those domiciled abroad indicated that he could have filed as a nonresident alien and thus NOT invoked the civil statutory status of "citizen" on his 1040, but that he didn't invoke that and was receiving the PRIVILEGE of a REDUCED rate that made him SUBJECT to the tax as a STATUTORY citizen, even though he claimed that he was NOT that kind of citizen on his 1040 filed in 1922. The IRS and the court BOTH interpreted the type of citizen on his 1040 return as a STATUTORY citizen and NOT a constitutional citizen, even though he intended otherwise.

More on the Cook v. Tait case at:

Cook v. Tait, 265 U.S. 47 (1924), Citizenship of George W. Cook, SEDM Exhibit 01.025
https://sedm.org/Exhibits/EX01.025-CookVTait-Citizenship.pdf

Property of the national government, public property, and "U.S. assets" are all synonymous in the I.R.C. Anyone who uses PUBLIC property is availing themselves of a GRANT and a PRIVILEGE and will be treated AS IF they are a public officer through IMPLIED consent in this case. The definition of "public office" confirms that a public officer is someone in charge of "THE PROPERTY OF THE PUBLIC"

Public office. The right, authority, and duty created and conferred by law, by which for a given period, either fixed by law or enduring at the pleasure of the creating power, an individual is invested with some portion of the sovereign functions of government for the benefit of the public. Walker v. Rich, 79 Cal.App. 139, 249 P. 56, 58. An agency for the state, the duties of which involve in their performance the exercise of some portion of the sovereign power, either great or small. Yaselli v. Goff, C.C.A., 12 F.2d. 396, 403, 56 A.L.R. 1239; Lacey v. State, 13 Ala.App. 212, 68 So. 706, 710; Curtin v. State, 61 Cal.App. 377, 214 P. 1030, 1035; Shelmadine v. City of Elkhart, 75 Ind.App. 493, 129 N.E. 878. State ex rel. Colorado River Commission v. Frohmiller, 46 Ariz. 413, 52 P.2d. 483, 486. Where, by virtue of law, a person is clothed, not as an incidental or transient authority, but for such time as de- notes duration and continuance, with Independent power to control the property of the public, or with public functions to be exercised in the supposed interest of the people, the service to be compensated by a stated yearly salary, and the occupant having a designation or title, the position so created is a public office. State v. Brennan, 49 Ohio.St. 33, 29 N.E. 593.
[Black’s Law Dictionary, Fourth Edition, p. 1235]

More on the laws of property at:

  1. Laws of Property, Form #14.018
    https://sedm.org/Forms/14-PropProtection/LawsOfProperty.pdf
  2. Hot Issues: Laws of Property, SEDM
    https://sedm.org/laws-of-property/

We just love how the irs website is cited so heavily. Of course they say themselves we can’t trust anything on their website. We also love how they use "trade or business" in the definitions they provide. It's a tautology designed to deceive. All of the ‘evidence’ in support of these claims boils down to tautologies and circular reasoning.

The issues discussed here are the HEART of the fraud that is protected with silence, equivocation, and deception to ensure it is never discovered. They are all THIRD RAIL issues NO ONE in the government can ever talk about without committing commercial suicide.]


Green v. Bookwalter, 207 F.Supp. 866, 873-74 (W.D. Mo. 1962)

“We also agree that § 7701(a)(26) cannot be construed as "automatically converting into a trade or business the functions of every so-called `public office' performed by a volunteer." We likewise believe, as stated there, "that the functions of a public office which are in the nature of a trade or business should be treated as such, even though the incumbent thereof may serve without compensation * *". But such a determination does not mean that the travel expenses of all unpaid offices are deductible. The parties recognized that there are "public offices" of different sorts when they stipulated that the issue for decision was "whether or not the Resolution had the effect of creating a `public office' within the meaning of § 7701(a)(26), IRC, 1954". The meaning of the words "public office" or "public officer" within the meaning of a taxing power is not a new legal problem. Before the Supreme Court reexamined the basic rationale of Collector v. Day, 11 Wall. 113, 20 L.Ed. 122 (1870), courts were not infrequently required to determine whether particular State public officers were or were not exercising the type of state or city governmental function that would exempt their incomes from taxation by the Federal Government. Chief Justice Hughes, in Helvering v. Powers, 293 U.S. 214, 224, 55 S.Ct. 171, 79 L.Ed. 291 (1934) held that the question of whether Congress could impose a tax on the compensation of certain public officers could not be "answered by mere terminology". That case held in language applicable to this case that:

"The term `public office' undoubtedly implies a definite assignment of public activity, fixed by appointment, tenure and duties. But whether that field of activity, in relation to a State, carries immunity from federal taxation is a question which compels consideration of the nature of the activity, apart from the mere creation of offices for conducting it, and of the fundamental reason for denying federal authority to tax."

In Metcalf Eddy v. Mitchell, 269 U.S. 514, 522, 523, 46 S.Ct. 172, 70 L.Ed. 384, (1926), Mr. Justice Stone called attention to the problem of drawing a line between the cases where particular "public officers" of a State "immediately and directly exercises its sovereign powers" and the cases at "the other end of the scale" where there was merely some connection with state or city government. "Experience has shown", it was there held, "that there is no formula by which that line may be plotted with precision in advance". Brush v. Commissioner, 300 U.S. 352, 360, 361, 365, 366, 57 S.Ct. 495, 81 L.Ed. 691 (1936), suggested the test of whether the income of the city employees there involved was exempt was dependent upon the question of whether the office "was created and is conducted in the exercise of the city's governmental functions". That case further noted that "the phrase `governmental functions,' * * * has been qualified * * in a variety of ways". The court noted that the adjectives "strictly", "essential", and "usual" had been used in various earlier cases to describe the particular sort of "governmental function" involved. Like Metcalf Eddy, the Supreme Court in Brush held that "the issue cannot be decided in accordance with the established formula" but that "the cases must be put upon one side or the other of the line by * * * the gradual process of historical and judicial `inclusion and exclusion.'" The cases are in quite general accord is to the requisite elements that define a public office. There is no conflict between the law of Missouri and that of the United States. Pope v. Commissioner, (6 Cir., 1943) 138 F.2d 1006, 1009, for example, in a case involving the taxability of the income of a public office created by the State of Tennessee, held:

"Giving the word `office' the sovereignty of the state attaches for its technical qualities, five elements would seem indispensable in order to make a public office of a civil nature.

(1) It must be created by the Constitution or the Legislature, or by a municipality or other body with authority conferred by the Legislature.

(2) There must be a delegation of a portion of the sovereign powers of government to be exercised for the benefit of the public.

(3) The powers conferred and the duties to be discharged must be defined either directly or indirectly by the Legislature or through legislative authority.

(4) The duties must be performed independently and without control of a superior power other than the law.

(5) The office must have some permanency and continuity and the officer must take an official oath."

Mechem's definition was adopted as a rule of decision by the Supreme Court of Missouri, en Banc, in State ex rel. Pickett v. Truman, 333 Mo. 1018, 1022, 64 S.W.2d. 105, 106 (1933):

"A public office is the right, authority and duty, created and conferred by law, by which for a given period, either fixed by law or enduring at the pleasure of the creating power, an individual is invested with some portion of the sovereign functions of the government, to be exercised by him for the benefit of the public. The individual so invested is a public officer."

[Green v. Bookwalter, 207 F.Supp. 866, 873-74 (W.D. Mo. 1962)]

Congress, Act of July 1, 1862, Chapter 119, 12 Stat. 432

This is the earliest instance of the use of the word "trade or business" that we are aware of in any act of Congress.  See the following references to "trade or business":

  • Section 60, p. 454
  • Section 62, p. 454
  • Section 63, p. 455

Internal Revenue Manual, Section 7.27.5.2: Trade or Business

7.27.5.2  (02-23-1999)
Trade or Business

1.  For purposes of IRC 513, the term "trade or business" has the same meaning it has in IRC 162, and generally includes any activity carried on for the production of income from the sale of goods or performance of services. Thus, the term trade or business is not limited to integrated aggregates of assets, activities, and goodwill which comprise businesses for the purposes of certain other provisions of the Code. Activities of producing or distributing goods or performing services from which a particular amount of gross income is derived do not lose identity as trade or business merely because they are carried on within a larger aggregate of similar activities or within a larger complex of other endeavors which may, or may not, be related to the exempt purposes of the organization. Regs. 1.513–1(b).


U.S. v. American Bar Endowment, 477 U.S. 105, 106 S.Ct. 2426 (U.S.,1986)

In the Tax Reform Act of 1969, Pub.L. 91-172, 83 Stat. 487, Congress defined a “trade or business” as “any activity which is carried on for the production of income from the sale of goods or the performance of services,” 513(c). The Secretary of the Treasury has provided further clarification of that definition in Treas.Reg. 1.513-1(b) (1985), which provides: “in general, any activity of [an exempt] organization which is carried on for the production of income and which otherwise possesses the characteristics required to constitute ‘trade or business' within the meaning of section 162” is a trade or business for purposes of 26 U.S.C. 511-513.FN1

FN1. Section 162 permits a taxpayer to deduct “all the ordinary and necessary expenses paid or incurred during the taxable year in carrying on any trade or business.” Undoubtedly due to the desirability of tax deductions, 162 has spawned a rich and voluminous jurisprudence. The standard test for the existence of a trade or business for purposes of 162 is whether the activity “was entered into with the dominant hope and intent of realizing a profit.” Brannen v. Commissioner, 722 F.2d 695, 704 (CA11 1984) (citation omitted). Thus several Courts of Appeals have adopted the “profit motive” test to determine whether an activity constitutes a trade or business for purposes of the unrelated business income tax. See Professional Insurance Agents of Michigan v. Commissioner, 726 F.2d 1097 (CA6 1984); Carolinas Farm & Power Equipment Dealers v. United States, 699 F.2d 167 (CA4 1983); Louisiana Credit Union League v. United States, 693 F.2d 525 (CA5 1982).

**2430 ABE's insurance program falls within the literal language of these definitions. ABE's activity is both “the sale of goods” and “the performance of services,” and possesses the *111 general characteristics of a trade or business. Certainly the assembling of a group of better-than-average insurance risks, negotiating on their behalf with insurance companies, and administering a group policy are activities that can be-and are-provided by private commercial entities in order to make a profit. ABE itself earns considerable income from its program. Nevertheless, the Claims Court and Court of Appeals concluded that ABE does not carry out its insurance program in order to make a profit. The Claims Court relied on the former Court of Claims holding, in Disabled American Veterans v. United States, 650 F.2d 1178, 1187 (1981), that an activity is a trade or business only if “operated in a competitive, commercial manner.” See 4 Cl.Ct., at 409. Because ABE does not operate its insurance program in a competitive, commercial manner, the Claims Court decided, that program is not a trade or business. The Court of Appeals adopted this reasoning. 761 F.2d, at 1577.

[U.S. v. American Bar Endowment, 477 U.S. 105, 106 S.Ct. 2426 (U.S.,1986)]


License Tax Cases, 72 U.S. 462, 18 L.Ed. 497, 5 Wall. 462, 2 A.F.T.R. 2224 (1866)

"Thus, Congress having power to regulate commerce with foreign nations, and among the several States, and with the Indian tribes, may, without doubt, provide for granting coasting licenses, licenses to pilots, licenses to trade with the Indians, and any other licenses necessary or proper for the exercise of that great and extensive  power; and the same observation is applicable to every other power of Congress, to the exercise of which the granting of licenses may be incident. All such licenses confer authority, and give rights to the licensee. But very different considerations apply to the internal commerce or domestic trade of the States. Over this commerce and trade Congress has no power of regulation nor any direct control. This power belongs  exclusively to the States. No interference by Congress with the business of citizens transacted within a State is warranted by the Constitution, except such as is strictly incidental to the exercise of powers clearly granted to the legislature. The power to authorize a business within a State is plainly repugnant to the exclusive power of  the State over the same subject. It is true that the power of Congress to tax is a very extensive power. It is given in the Constitution, with only one exception and only two qualifications. Congress cannot tax exports, and it must impose direct taxes by the rule of apportionment, and indirect taxes by the rule of uniformity. Thus limited, and thus only, it reaches every subject, and may be exercised at discretion.  But, it reaches only existing subjects. Congress cannot authorize a trade or business within a State in order to tax it."

[License Tax Cases, 72 U.S. 462, 18 L.Ed. 497, 5 Wall. 462, 2 A.F.T.R. 2224 (1866)]