RE: IRS SERVICE OF JOHN DOE SUMMONS ON LAW FIRM Dear Mr. Salmon: In connection with hearings of the Subcommittee on As a result of a series of audits in the IRS New Jersey District Office, the Service has challenged certain deductions claimed by taxpayers for legal fees paid to this firm--arguing that such expenditures should, instead, have been capitalized. In an effort to determine the identities of other taxpayers (our clients) who may have claimed such deductions, the IRS has advised us that it intends to issue a John Doe Summons seeking our disclosure of the names of such clients who may have claimed such deductions. Putting aside for a moment the practical ability of this firm to give the IRS what it desires, the summons in this case strikes at the heart of the attorney/client privilege: namely, the right of a client to be heard and to receive advice in confidence from his attorney with every expectation that those communications will remain confidential. Additionally, all of the information which IRS could possibly obtain from this firm by use of a John Doe Summons must of necessity already be available to the IRS in its own [NOTE TO READER: Memorandum is retained in subcommittee files.] files. Though it is admittedly easier to attempt to gain such information from this firm, the issuance of such a subpoena by the IRS would be both abusive and without legal authority. Indeed, adherance to standards of procedural and substantive due process often require approaches which are not the most efficient, but this is justified by the important competing stakes in individual liberties. The service of a John Doe Summons on an attorney (concerning information about his clients) goes well beyond the constitutional and legal powers of the IRS. It is particularly upsetting when using appropriate and less intrusive methods IRS could secure all of the information sought by examining its own files. Admittedly, this brief letter can only summarize the situation. Accordingly, we have enclosed for the record a copy of a memorandum which this firm submitted to the IRS on March 12, 1982. We trust that this information will be useful to the Committee and stand ready to provide whatever additional assistance you feel might be helpful. RJF: bah Very truly yours, LIEBMAN & FLASTER, A Professional Corporation Ruched it Ihaster Richard J. Flaster [NOTE TO READER: Report retained in subcommittee files.] The Financial Planning Corporation OF AMERICA 11304 Elm Street. Omaha, Nebraska 68144 (402) 330-3011 I recently heard that you were in charge of hearings on the I.R.S. I became aware of the tremondous abusives of the IRS through a friend of mine who operated an independent capital formation company in the midwest. After years of harasement the IRS has nearly put him out of business. Iwould like to enter this following report into the record and Mr. Kilpatrick would be happy to answer your questions personally if you call at 1 (800) 525-8527. I can help in any way, please feel free to call upon me. If possible I would like to visit with you as I will be in Washington, D.C. on or around May 5th. Please let me know if you could accomodate me in this fashion Sincerely yours, Craig B Forney CFP President CBF/1b Hon. Charles B. Rangel, Chairman, Subcommittee on Oversight, Committee on United States House of Representatives, In response to a recent Hearing before this Subcommittee on 'Abuses by the I.R.S.", which was held on April 26, 1982, I would like to provide additional testimony to the record of my own experiences with the I.R.S. and the Tax Court. It becomes more evident, as the Citizens' lives are literally destroyed by this tyranical and evil agency, called the I.R.S., that the victims are now looking into ways (laws) to save themselves from total slavery, and in the process they are finding out the real truth about this fraud of "Voluntary Income Tax System". Since most patriotic Americans are law abiding Citizens, they try to resolve their differences and problems within the frame work of the law, and in this case we are talking specifically about the Internal Revenue Code, which is a Code in "Equity" and NOT in "Law". It's been said to be a "MASTER PIECE OF DECEPTION" and I have to agree as I will prove this point to be true later on. For instance, the language of certain key sections in the Code are arbitrary and vague and are admittingly impossible to understand. Thus they are in violation of the Citizen's Right to "DUE PROCESS". In topping off this violation, said Agency has the audacity to add insult to injury by abusing their discretion and powers in declaring thereunder some "Thing" that is not so. EXAMPLE: The definition of Gross Income is one of the basic elements in determining, whether or not some-one is required to file a Return (Sec. 6012, IRC of 1954). The original statutory language contained in former Sec. 22(a), IRC of 1939, is expressly and implicitly clear as to what is income to be included in Gross Income and as to what is a source of that income furthermore it states: "Gross Income in cludes GAINS, PROFITS and income derived from salaries, wages or compensation... " It should be noted, that it does NOT say, gross income includes also salaries, wages or compensation. However the enacted law text is quite clear that the terms salaries, wages or compensation are sources of income and not income as the IRS claims them to be, as can be seen in the same language: ...gains, profits and income derived from any SOURCE whatever." EXHIBIT 1 Therefore, the terms "salaries", "wages", "compensation" and "sources" are absolutely synonymous. 1) Additionally it is quite clear, that the President and Judges' "compensation" shall be included in Gross Income (Exhibit as enacted by the "PUBLIC (employees) SALARY TAX ACT of 1939" EXHIBITS 2 & 3 In 1954 however, the Congress decided to re-write the original statutory language contained in Sec. 22(a) of the I.R.C. of 1939 with the sole intention of simplifying the language, which appeared clearly comprehensible. The Congress asserted in the Legislative History, H.R. 1337 and S.R. 1622 of 92d Congress, that Sec. 61 (a) of the I.R.C. of 1954 corresponds to Sec. 22(a) and the statutory Gross Income has not been affected thereby. At the same time the Congress revealed in the legislative History, that : " no change is effected by the elimination of the specific reference to "compensation" of the President and Judges....... and the compensation of such individuals (President and Judges) will continue to be taxed in the same manner as that (gains & profits) of other 10 taxpayers. Attached please find a flowchart, which truly reflects the transition of meaning from the enacted law text to the newly re-written text contained in Sec. 61(a), in accordance with Legislative History. EXHIBIT 1 Now then, inspite.of all this, the I.R.S. still insists, that my salary or wages are forms of compensation and are included in Gross Income pursuant to Sec. 61(a)(1). NOT SO - The term "Compensation" (Sec. 61(a)(1) defined as Gross Income, is statutorily restricted to the President and Judges and other Governmental (State & Fed.) employees (see Public Employees Salary Tax Act), and does not include ordinary citizens. 11-243 - 83 - 46 -2 |