                           Chapter 7:
                         Inside Sources
                                
                                
     Frank Brushaber was taxed on a dividend he received from the
stock of  a domestic  corporation.  Remember, the term "domestic"
in this  context means  "inside" the  federal zone.  The dividend
came, therefore,  from a  "source" that  was situated inside this
zone.   The exact legal meaning of the term "source" has been the
subject of  much debate,  both inside  and  outside  the  federal
courts.   I would  not presume  to be  the one  who settles  this
debate once  and for all, least of all in the few pages dedicated
to this  chapter.    It  is  important  to  understand  that  the
Brushaber  Court's   decision  turned,   in  large   part,  on  a
determination  of  the  "source"  of  the  dividend  which  Frank
Brushaber received.  That source was a domestic corporation which
had been  chartered by Congress to build a railroad and telegraph
through the  Utah Territory.   As such, it was an "inside source"
--  a source that was situated inside the federal zone.

     Frank Brushaber's  income was "unearned" income.  This means
that he did not exchange any of his labor in order to receive the
dividend paid  to him  by the  Union  Pacific  Railroad  Company.
Earned income, on the other hand, is income which is derived from
exchanging labor for something of value, like money.  Also beyond
the scope  of this  chapter are  the sad debate, and considerable
mass  of   IRS-sponsored  confusion,   that  surround  the  legal
definition of  "income".   Author Jeffrey  Dickstein has  done an
extremely thorough  job of  documenting the  history of  judicial
definitions of  the term "income".  Many of those definitions are
in direct  conflict  with  each  other,  but  all  Supreme  Court
decisions on  the question  have been  completely consistent with
each other.  In Appendix J of this book, you will find one of our
formal petitions  to Congress in which are summarized a number of
rulings on  this issue  by the  Supreme Court and by lower courts
which concur.   If  you must  also review the courts which do not
concur, you  gluttons for punishment should buy Dickstein's great
book on the subject.

     Back to  sources.   IRS Publication  54 explains  in  simple
terms that:   "The source of earned income is the place where you
perform the  services."   I always enjoyed it when Sister Theresa
Marie would  tell our  third-grade class  that the whole world is
divided into  persons, places  and things.   How I long for those
simpler days!   The  courts have  used the technical term "situs"
instead of "place" as follows:


     We think  the language  of the statutes clearly demonstrates
     the intendment  [sic] of  Congress that the source of income
     is the situs of the income-producing service.

           [C.I.R. vs Piedras Negras HB Co., 127 F.2d 260 (1942)]
                                                 [emphasis added]


                        Page 7 - 1 of 14

                                                The Federal Zone:


     It is  useful to  repeat the section of the Internal Revenue
Code (IRC)  which was  quoted in the last chapter.  Specifically,
in the  case of  a nonresident alien individual, except where the
context clearly indicates otherwise, gross income includes only:


     (1)  gross income  which is  derived from sources within the
          United States**  and which is not effectively connected
          with the  conduct of  a trade  or business  within  the
          United States**, and

     (2)  gross income  which is  effectively connected  with the
          conduct of  a  trade  or  business  within  the  United
          States**.
                                                  [26 USC 872(a)]
                                                 [emphasis added]
                                                                 
                                                                 
     The term  "gross income"  is  crucial,  because  it  is  the
quantity which  triggers the  filing requirement.   It  is like a
threshold, or  so we are told by august members of the black robe
like Judge  Eugene Lynch  of the  Federal District  Court in  San
Francisco.  Section 6012 of the IRC reads, in pertinent part:


     General Rule. --  Returns with respect to income taxes under
     subtitle A shall be made by the following:

     (1)(A)    Every individual having for the taxable year gross
               income  which  equals  or  exceeds  the  exemption
               amount ...

     except that  subject to  such conditions,  limitations,  and
     exceptions and  under such  regulations as may be prescribed
     by the  Secretary, nonresident  alien individuals subject to
     the tax  imposed by section 871 ... may be exempted from the
     requirement of making returns under this section.

                                                 [26 USC 6012(a)]
                                                 [emphasis added]
                                                                 
                                                                 
     Section 6012  is a  pivotal section, if only because the IRS
is now  citing this section (among others) as their authority for
requiring "taxpayers"  to make  and file  income tax returns.  As
you can  plainly read  with  your  own  eyes,  nonresident  alien
individuals may  be  exempted  from  the  requirement  of  making
returns.   Diving into  the many  thousands of  regulations which
have been  "prescribed by the Secretary" is also beyond the scope
of this book.  For now, realize that the regulations do exist and
that the  quantity "gross income" for nonresident aliens includes
only two  things:   (1) gross  income derived from sources within
the United  States** and  (2) gross  income that  is  effectively
connected with a U.S.** trade or business.  That's it!


                        Page 7 - 2 of 14

                                                   Inside Sources


     You will  note that  the statute  and its  regulations  make
frequent use  of the  terms "within"  and "without",  in order to
contrast the  two terms  as antonyms,  or  opposites.    In  this
context, the term "within" is synonymous with "inside";  the term
"without" is  synonymous with  "outside".  "Within" and "without"
are antonyms.   And  the term  "antonym"  is  an  antonym  for  a
synonym!   ("Good grief,"  declared Charlie Brown.)  Thus, if you
are outside  the federal  zone,  you  are  "without"  the  United
States** in  the languid  language of federal tax law.  (Languid:
drooping or  flagging from,  or as  if from  exhaustion.)  Can we
ever get along "without" the United States**?

     The  importance   of  "within"   and  "without"   cannot  be
emphasized too  much.   In the  context of everything we now know
about jurisdiction  within the  federal  zone,  these  terms  are
crucial to  understanding the territorial extent of Title 26.  To
underscore this  point, consider  IRC  Section  862(a),  entitled
"Income from Sources Without the United States**":


     (a)  Gross Income from Sources without United States**. --

          The following items of gross income shall be treated as
          income from sources without the United States**: ...

          (3)  compensation  for   labor  or   personal  services
               performed without the United States**.

                                           [26 USC 862(a)-(a)(3)]
                                                 [emphasis added]
                                                                 
                                                                 
     Now, turn  to IRS Form 1040NR.  A copy of this form is found
in Appendix  K.   The "NR" stands for "NonResident".  Nonresident
aliens file  this form  to report  and pay tax on gross income as
defined in  IRC Section  872(a).  On page one of the 1990 version
of this  form, there is a block of line items numbered 8 thru 22.
These items  are summed  to produce a total on line 23.  "This is
your total  effectively connected income," states the form.  Now,
turn the  form clockwise  90 degrees.   Note,  in particular, the
phrase near the left margin of page one which reads:


     Income Effectively Connected With U.S.** Trade/Business


If you  are a  nonresident alien  and you have no income which is
effectively connected  with a  U.S.** trade or business, then you
can, in  good conscience,  put a  big fat  ZERO on line 23.  But,
this is  not the whole story.  On page 4 of Form 1040NR, there is
a table  for computing  "Tax on  Income Not Effectively Connected
with a U.S.** Trade or Business".  What would this be?




                        Page 7 - 3 of 14

                                                The Federal Zone:


     Recall IRC  Section 872(a),  quoted above.   The  only other
component of  gross income for nonresident aliens is income which
is derived  from sources  within the  United States**, like Frank
Brushaber's stock  dividend.   Lo and behold, this table itemizes
such things  as dividends,  interest,  royalties,  pensions,  and
annuities.   These are  all items  of unearned  income, that  is,
profits  and   gains  derived  from  U.S.**  sources  other  than
compensation for  labor or  personal services  performed "within"
the United  States**.   The total  tax is computed and entered on
line 81  of Form 1040NR.  Unfortunately, true to form, line 81 in
this table  says that "This is your tax on income not effectively
connected with  a U.S.**  trade  or  business."    This  is  very
deceptive.     Remember,  gross  income  for  nonresident  aliens
includes only two kinds of gross income:


     (1)  gross income  derived from  sources within  the  U.S.**
          which is  not effectively connected with a U.S.** trade
          or business and

     (2)  gross income  which is  effectively connected  with the
          conduct of  a  trade  or  business  within  the  United
          States**


Line 81  of Form  1040NR is  referring to the first kind of gross
income, namely,  gross income which is "not effectively connected
with a  U.S.** trade  or business".   The  second kind  of  gross
income is entered on page 1 at line 23 of this form.  Again, it's
simple when  you know  enough to decode the Code.  It's also very
easy  to   get  confused   when  the  confusion  is  intentional.
("Encode" and "decode" are antonyms, by the way.)

     Unfortunately,  the   filing  requirements  for  nonresident
aliens are not as straightforward as you might think, because the
regulations contain  certain rules that are not found in the Code
itself, and  the Code  is frequently  vague.  To understand these
requirements, the  regulations must  be reviewed as they apply to
your particular situation.  A brief overview is in order.

     If you  are a  nonresident alien  with no  gross income from
sources within  the U.S.**, and with no U.S.** trade or business,
is it  a good  idea to file a 1040NR with zeroes everywhere?  No,
it is  not.   The main  reason is  that filing  any 1040 form can
provide the  IRS with  a legal  reason to  presume that you are a
"taxpayer", as  that term is defined in the IRC.  A later chapter
of this  book will  explore the  "law  of  presumption"  in  some
detail.  Your filed return can be used as evidence that you are a
taxpayer, that is, one who is subject to any internal revenue tax
because you  are engaged  in a  "revenue taxable  activity".    A
U.S.** trade  or business is a revenue taxable activity.  Thus, a
key issue  for nonresident  aliens is  whether or  not  they  are
engaged in any U.S.** trade or business.  The CFR regulations say
this about the filing requirement for nonresident aliens:


                        Page 7 - 4 of 14

                                                   Inside Sources


     ... [E]very  nonresident alien individual ... who is engaged
     in a  trade or  business in  the United  States at  any time
     during the  taxable year  or who has income which is subject
     to taxation under Subtitle A of the Code shall make a return
     on Form  1040NR.  For this purpose it is immaterial that the
     gross income  for the  taxable year is less than the minimum
     amount specified  in section  6012(a) for  making a  return.
     Thus, a  nonresident alien  individual who  is engaged  in a
     trade or  business in the United States** at any time during
     the taxable year is required to file a return on Form 1040NR
     even though

     (a)  he has  no income  which is  effectively connected with
          the conduct  of a  trade  or  business  in  the  United
          States**,

     (b)  he  has  no  income  from  sources  within  the  United
          States**, or

     (c)  his income  is exempt  from income  tax by reason of an
          income tax convention or any section of the Code.

                                          [26 CFR 1.6012-1(b)(1)]
                                                 [emphasis added]
                                                                 
     Thus, the  gross income  "threshold" defined  in the  filing
requirement at IRC 6012(a) is not relevant if a nonresident alien
is engaged  in any  U.S.** trade  or business.   Conversely,  the
rules are  somewhat different  if  a  nonresident  alien  is  not
engaged in  any U.S.**  trade or  business.  The regulations have
this to say about a nonresident alien in the latter situation:


     A nonresident alien individual ... who at no time during the
     taxable year is engaged in a trade or business in the United
     States** is  not required  to make  a return for the taxable
     year if  his tax  liability for  the taxable  year is  fully
     satisfied by  the withholding of tax at source under Chapter
     3 of the Code.

                                          [26 CFR 1.6012-1(b)(2)]
                                                 [emphasis added]
                                                                 
     If a  nonresident alien  has no U.S.** trade or business and
no tax liability that required withholding (such as U.S.** source
income), then a return is not required.  If you are a nonresident
alien and  you remain  in doubt  as to  whether or  not  you  are
required to  file a  Form 1040NR,  you might begin by reading all
the rules found in the Instructions for Form 1040NR.  In general,
the instructions  are much  easier to  read than the regulations,
but also  understand that  the regulations  have the force of law
and the  instructions do  not.   The instructions for form 1040NR
address the question of who must file as follows:



                        Page 7 - 5 of 14

                                                The Federal Zone:


     Use Form  1040NR if  any of the four conditions listed below
     and on page 2 applies to you:

     1.   You were  a nonresident  alien engaged  in a  trade  or
          business in  the United  States** during 1990. You must
          file Form 1040NR even if:

          a.   none of your income came from a trade or businesss
               conducted in the United States**,

          b.   you have no income from U.S.** sources, or

          c.   your income is exempt from U.S.** tax.

          In any  of the  above three  cases, do not complete the
          schedules for  Form 1040NR.   Instead, attach a list of
          the kinds  of exclusions  you claim  and the  amount of
          each.

     2.   You were  a nonresident alien not engaged in a trade or
          business in the United States** during 1990 with income
          on which not all U.S.** tax that you owe was withheld.

     3.   You represent  a deceased  person who would have had to
          file Form 1040NR.

     4.   You represent an estate or trust that would have had to
          file Form 1040NR.

                           [Instructions for Form 1040NR, page 1]
     

     Now, what  is  a  "trade  or  business"  within  the  United
States**?   Author and  legal scholar  Lori Jacques has concluded
that the  meaning  of  a  "trade  or  business"  is  confined  to
performing the  functions of a public office.  This conclusion is
supported by  an explicit  definition of "trade or business" that
is found in the IRC itself:


     Trade or  Business. -- The term "trade or business" includes
     the performance of the functions of a public office.

                                             [26 USC 7701(a)(26)]
                                                                 
                                                                 
The Informer  has come  to the  same conclusion,  after years  of
research.   All  of  this  "trade  or  business"  activity,  thus
defined, boils  down to one simple thing:  government employment.
If you  work for  the federal  government,  even  if  you  are  a
nonresident alien, the Congress reserves the power to define that
work as  a "privilege",  the exercise  of which Congress can tax.
The measure  of that tax is the amount of income derived.  Author
Lori Jacques summarizes government employment as follows:


                        Page 7 - 6 of 14

                                                   Inside Sources


     It appears  that the federal income tax is the graduated tax
     on income  effectively connected  with  a  U.S.**  trade  or
     business as  described in  IR  Code  Sec.  871(b)  which  is
     government employment.   Remember the nonresident alien does
     not pay tax on non U.S.** source income.  If the nonresident
     alien signs  a Form  W-4 he  is obviously  presumed to  be a
     government employee with "effectively connected income."
                                                                 
         [United States Citizen vs National of the United States]
                                        [page 39, emphasis added]


     Another competent  author and IRS critic, Frank Kowalik, has
also arrived  at similar  conclusions about  the "taxability"  of
employment with  the federal  government.   In his  thorough book
entitled IRS  Humbug, IRS  Weapons of Enslavement, Kowalik argues
with exhaustive  proof that  a tax  "return"  is  really  just  a
kickback.   Government employees  are expected to return or "kick
back" some  of their  earnings to  the Treasury,  in obvious  and
grateful tribute  to the  great giver  of all federal privileges,
Uncle Sam.   Kowalik's  arguments and accompanying complaints are
so persuasive  that Rep.  Jack  Brooks,  Chairman  of  the  House
Judiciary Committee,  has scheduled Kowalik's request for redress
as Petition  No. 107.   In a personal letter to me, Frank Kowalik
wrote the following:


     I read  with interest  your Redress  (12-24-90)  to  Barbara
     Boxer.   I also  delivered a  Redress to Congress making Tom
     Foley, House  Speaker, my  personal representative.  My book
     "IRS Humbug"  was an  exhibit in this Redress.  Jack Brooks,
     Chairman of  the House  Judiciary Committee, was among those
     copied.  From his letter (copy attached) my Redress has been
     referred to  the Committee  on the Judiciary as Petition No.
     107.   As I  understand it,  it will be heard in the session
     after the  holidays.   I also  provide information  on  "IRS
     Humbug" that  covers the fact that federal income tax is not
     a tax  on labor.   It  is a  kickback  program  between  the
     federal government and its employees.

                      [personal communication, December 10, 1991]
                                                 [emphasis added]
                                                                 
                                                                 
     Taken together, The Informer, Lori Jacques and Frank Kowalik
appear unanimous in understanding the term "trade or business" to
include only the performance of the functions of a public office.
This  conclusion   is,  of  course,  supported  by  the  explicit
definition of  "trade or  business" which  is found  in  the  IRC
itself at  7701(a)(26).  Note, however, that this definition does
not say "includes only";  it says "includes".





                        Page 7 - 7 of 14

                                                The Federal Zone:


     Once again,  we are  haunted by  the ambiguity  that results
from not  knowing for  sure whether  "includes" is  expansive  or
restrictive.   If "includes"  is restrictive,  then The Informer,
Lori Jacques,  and  Frank  Kowalik  are  all  correct  about  the
inferences they  have drawn from the statute and its regulations.
If "includes"  is  expansive,  however,  then  we  have  to  look
elsewhere for  things that  are "otherwise  within the meaning of
the term  defined", that  is, otherwise  within  the  meaning  of
"U.S.** trade or business".

     An  expansive   intent  is   manifested  by   the   explicit
definitions of  "includes" and  "including" that are found at IRC
7701(c).   The issues  of statutory  construction that arise from
these definitions of "includes" and "including" are so complex, a
subsequent chapter  of this book will revisit these terms in more
detail.   The conclusions  in  that  chapter  should  already  be
obvious to  you.   For now,  suffice it  to say that the intended
clarification at  7701(c) is anything but.  The hired lawyers who
wrote this  stuff should have known better than to use terms that
have a  long history of semantic confusion.  For this reason, and
for this  reason alone,  I am now convinced that the confusion is
inherent in  the language  chosen by  these hired  "guns" and  is
therefore deliberate.

     There is evidence that the meaning of "trade or business" is
not limited  to the  performance of  the functions  of  a  public
office.   The Code  itself contains a second definition of "trade
or business within the United States**" as follows:


     Trade or Business within the United States**. --

     For purposes  of this part, 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 ....

                                                  [26 USC 864(b)]
                                                 [emphasis added]
                                                                 
                                                                 
     It is  tempting  to  interpret  this  definition  only  "for
purposes of  this part, part II, and chapter 3".  I will not take
the bait,  because it  is more  important to  stay above  a major
addiction of  the federal  zone:   obfuscation.    You  may  have
already begun to notice how frequently the IRC makes reference to
other   sections,    subsections,   subparts,    subtitles,   and
subchapters.   Sure, these  other places in the law must be taken
into account before the "performance of personal services" can be
fully understood  as defined.   I can see that as well as anybody
else.   But two  can play  this game.  Is there any reason in the
statute to suspect that these remote references might not even be
valid?  First, read the following sub-statute within the statute,
and then decide for yourself (go ahead, you have my permission):


                        Page 7 - 8 of 14

                                                   Inside Sources


     Construction of Title.

                         [Sec. 7806(a)]

     (a)  Cross References. -- The cross references in this title
          to other  portions of the title, or other provisions of
          law, where  the word  "see" is  used, are made only for
          convenience, and shall be given no legal effect.

                         [Sec. 7806(b)]
                                
     (b)  Arrangement  and  Classification.  --    No  inference,
          implication, or presumption of legislative construction
          shall be  drawn or  made by  reason of  the location or
          grouping of  any particular  section  or  provision  or
          portion of this title, nor shall any table of contents,
          table  of   cross  references,   or  similar   outline,
          analysis,  or   descriptive  matter   relating  to  the
          contents of  this title be given any legal effect.  The
          preceding sentence  also applies  to the side notes and
          ancillary tables  contained in  the various  prints  of
          this Act before its enactment into law.

                                                    [26 USC 7806]
                                                 [emphasis added]
                                                                 
                                                                 
     If  the  statute  itself  is  entirely  too  frustrating  to
decipher, it  is no  wonder why  the IRS  has published literally
hundreds of  instruction booklets and official IRS "Publications"
to help  "clarify" the  myriad rules  and forms.   At last count,
there were  more than  5,000 IRS forms in the IRS Printed Product
Catalog  quoted   elsewhere  in  this  book.    To  conclude  our
discussion of  "U.S.** trade  or business",  you  might  want  to
obtain a  copy of IRS Publication 519, U.S. Tax Guide for Aliens.
This 40-page booklet expresses the English language in words that
are much  easier to  understand than the statute itself.  It even
has its  own Index.   Be  forewarned, however,  that official IRS
"Publications" do not have the force of law because they have not
been published  in the  Federal Register,  nor  do  any  of  them
display control numbers and expiration dates issued by the Office
of Management and Budget (OMB).  (If the IRS makes an error, it's
not their fault anyway.)  Publication 519 has this to say about a
trade or business inside the United States**:


     Trade or Business

     Whether you are engaged in a trade or business in the United
     States** depends  on the  nature of  your activities.    The
     discussions that  follow will help you determine whether you
     are engaged in a trade or business in the United States**.

                                                  [continued ...]


                        Page 7 - 9 of 14

                                                The Federal Zone:


     Personal Services

     If you  perform personal  services in the United States** at
     any time  during the  tax year,  you usually  are considered
     engaged in  a trade or business in the United States**.  You
     are engaged in a trade or business in the United States** if
     you  perform   services  in   this   country   and   receive
     compensation such  as wages,  salaries, fees, tips, bonuses,
     honoraria, or commissions.

                     [Publication 519: U.S. Tax Guide for Aliens]
                                                         [page 8]
                                                                 
     Back to  sources  one  more  time.  (It's  so  easy  to  get
sidetracked by  some remote  code reference  that  has  no  legal
effect!)  The interested reader and intrepid investigator will be
happy to  know that  there are  literally "oodles" of regulations
which go  into details, great and small, about the life and times
of Mr.  and Mrs.  Nonresident Alien.   Here  is a blockbuster for
which I  am eternally grateful to Tarzan The Informer for weeding
out of the jungle of slippery lines and double negatives:


     Nonresident aliens.   A  nonresident alien  individual never
     has self-employment  income.    While  a  nonresident  alien
     individual who  derives income  from  a  trade  or  business
     carried on  within the  United States**,  Puerto  Rico,  the
     Virgin Islands,  Guam, or  American Samoa (whether by agents
     or employees,  or by  a partnership of which he is a member)
     may be  subject to  the applicable  income tax provisions on
     such income,  such nonresident  alien individual will not be
     subject to  the tax on self-employment income, since any net
     earnings which  he may  have  from  self-employment  do  not
     constitute self-employment.

                                            [26 CFR 1402(b)-3(d)]
                                                 [emphasis added]
                                                                 
                                                                 
A nonresident  alien individual never has self-employment income.
I agree completely with The Informer: "never" always means never.

     
     The  point   of  this  chapter  is  to  stress  the  extreme
importance  of   understanding  "sources"   as  they  affect  the
nonresident alien  like you and me.  Remember how Frank Brushaber
ultimately lost  his bid  to the  Supreme  Court  of  the  United
States.   He received  a dividend that was issued by a "domestic"
corporation.   Even though he was found to be a nonresident alien
with respect to the United States**, his dividend was found to be
unearned income  from a source inside the United States**, inside
the federal  zone.   The Informer  nicely summarizes  the overall
situation as follows:



                        Page 7 - 10 of 14

                                                   Inside Sources


     YOU ARE NOT TAXABLE IF YOU ARE:


          ITEM 1:   a non  resident alien NOT carrying on a trade
                    or business  with the  U.S.** or  State of  a
                    Union State;

          ITEM 2:   a non resident alien NOT making source income
                    from within the United States**;

          ITEM 3:   a non  resident alien NOT having a trademark,
                    patent, or copyright;

          ITEM 4:   a non resident who is NOT a fiduciary, so you
                    cannot be  a person of incidence with respect
                    to a person of adherence;


     then the  income tax  is  not  imposed,  under  subtitle  A,
     chapter 1  on  a  non  resident  alien.    So  you  fit  the
     description under 26 USC Sections 2(d) & 872.

                                    [Which One Are You?, page 24]
                                           [emphasis in original]
                                                                 
                                                                 
     The complex  issues of  patents, trademarks,  copyrights and
fiduciaries are beyond the scope of this book.  My "sources" tell
me that  The Informer  is  writing  another  book,  hopefully  to
clarify some  of the  legal in's  and out's of being a fiduciary.
Author  Lori   Jacques  has   arrived  at  a  remarkably  similar
conclusion about nonresident aliens.  The first person "I" in the
following excerpt is author Jacques:


     It  is  conclusive  the  Department  of  Treasury,  Internal
     Revenue Service, has no authority within the several states,
     it is  just as  conclusive that  any  income  deriving  from
     within  the  jurisdiction  of  the  national  government  is
     taxable to  the person  receiving it.  The treasury decision
     on Brushaber confirms that.

     The  tax   on  the   nonresident  alien   conforms  to   all
     constitutional provisions:

     1.   Uniform taxation  of 30% on unearned income from U.S.**
          sources.

     2.   No reporting  of private  information  as  the  tax  is
          withheld at  source or  else the government has all the
          information of  amount it  has paid  -- just return the
          receipt to prove the tax was paid.

                                                  [continued ...]


                        Page 7 - 11 of 14

                                                The Federal Zone:


     3.   Graduated taxation  on income  received from  trade  or
          business  conducted   within   the   United   States**,
          permitted because  only the  states are  parties to the
          compact    guaranteeing    unalienable    rights    and
          uniform/apportioned taxation.   The  federal areas  are
          always exempt from laws guaranteeing equal treatment.

     4.   No public  notice has  been published  in  the  Federal
          Register  since  state  citizens,  nonresident  to  the
          United States**  as defined,  are not  affected by  the
          delegation of authority orders.

     After the  evidence is  in, I  now believe  that  under  the
     internal revenue  law I  am a  "national" and  a nonresident
     alien to  federal jurisdiction  who  has  no  U.S.**  source
     income nor  any effectively  connected income  with a U.S.**
     trade or business for which I am liable to render a return.

         [United States Citizen vs National of the United States]
                                        [page 44, emphasis added]


     This lengthy  excerpt does an excellent job of summarizing a
mountain of  earnest legal  research and  writing by  author  and
scholar Lori  Jacques.   My hat's  off to  you, Lori, for doing a
"totally boss" and uniquely thorough job.  I take issue only with
your statement  above that  "the Internal  Revenue Service has no
authority within the several States."  Without clarifying the tax
liability that  attaches to  income from  "inside sources",  this
statement could  be misleading.   Remember that Frank Brushaber's
liability attached  to income  from such  a source.  The Informer
has accurately  qualified  the  precise  extent  of  federal  tax
jurisdiction within the 50 States of the Union as follows:


     Yes, the IRS can go into the States of the Union by Treasury
     Decision Order,  to  seek  out  those  "taxpayers"  who  are
     subject to  the tax, be they a class of individuals that are
     United States** citizens, or resident aliens.  They also can
     go after  nonresident aliens  that are  under the regulatory
     corporate jurisdiction of the United States**, when they are
     effectively connected  with a  trade or  business  with  the
     United States** or have made income from a source within the
     United States**  that they  have entered  into an  agreement
     with, for then they are in the state of the forum.

                                    [Which One Are You?, page 98]
                                                 [emphasis added]




                             #  #  #



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                                                   Inside Sources


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                                                The Federal Zone:


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