DEFINITIONS: “foreign income”
EDITORIAL:
- There is no definition we can find of the term “foreign income” by itself as used in Internal Revenue Code , 26 U.S.C. Subtitle A, Chapter 1, Subchapter N, Part I.
- “foreign source income”:
2.1. Is generally associated with income from WITHOUT the United States in 26 U.S.C. §862 in the case of “nonresident aliens” under 26 U.S.C. §871(a). This type of income is excluded from taxable income under 26 U.S.C. §872.
2.2. Is taxable to a nonresident alien when “effectively connected” per 26 U.S.C. §864(c) and 26 U.S.C. §871(b).
2.3. Means CIVILLY foreign in the the case of both aliens and American nationals. An alien can file a 8840 with a 1040NR if they are in a constitutional state under 26 C.F.R. §301.7701(b)-2 to make themselves civilly foreign. However, their PROPERTY or earnings will not be CIVILLY foreign unless they are not “effectively connected” under 26 U.S.C. §864(c). - “foreign earned income” is associated with earnings abroad of a “U.S. person” under 26 U.S.C. §911.
3.1. The term “foreign” in this context means CIVILLY foreign.
3.2. It applies to income earned “abroad” only. “Abroad” is never defined but its meaning is clarified by 26 C.F.R. §301.7701(b)-2.
Lessons learned about “foreign”:
- You can ALWAYS make your person “foreign” by filing a 1040NR.
- Making your property and earnings foreign by avoiding “effectively connecting” is more difficult.
- Legislative control over PUBLIC property DOES NOT automatically imply control over the person in POSSESSION of said property. That control has to be acquired separately by a voluntary choice of domicile or a “U.S. person” election. Otherwise, they come under state law in accordance with 28 U.S.C. §1652 and Federal Rule of Civil Procedure 17.
- Mere receipt of a government payment does not automatically make the payment “effectively connected”. It takes more than that. Only the OWNER of the payment can do that, and not the PAYOR. Specifically:
4.1 CONSENT to effectively connect it voluntarily. You can’t do this for any of the things on the Schedule NEC, BTW. . .or
4.2. The government must NOTICE you of a reserved property interest in the payment AFTER you receive it. That’s what 26 U.S.C. §864(c)(6) does AFTER you effectively connect it YOURSELF previously in the case of a deferred payment. However, this cannot be done in a constitutional state, because the geographical United States does not expressly include the states of the Union so that there is no notice of extraterritoriality mandated under 4 U.S.C. §72, 28 U.S.C. §1652, Federal Rule of Civil Procedure 17, U.S. v. Bowman, 260 U.S. 94 (1922) and Foley Bros. v. Filardo, 336 U.S. 281 (1949). So it fails due process.
The above are substantiated at:
PROOF OF FACTS: “Deferred earnings” paid in connection with government retirement earned as a “U.S. person” are not “foreign income” or taxable under I.R.C. 864(c), FTSIG
https://ftsig.org/proof-of-facts-deferred-retirement-earnings-not-taxable/
There are lots of reasons why the geographical “United States” defined at 26 U.S.C. §7701(a)(9) and (a)(10) and 4 U.S.C. §110(d) does not expressly include areas under the exclusive jurisdiction of the constitutional states and why Congress has no legislative authority to notice you of extraterritorial application of the income tax within states of the Union as a result:
- The Constitution does not authorize Congress to bestow any of the privileges or benefits that the income tax pays for so they can’t be offered there. This would:
1.1. Be a commercial invasion of the states in violation of Article 4, Section 4.
1.2. Violate the dual office prohibitions in state constitutions and state law.
1.3. Corrupt voters, jurists, and government officers with a criminal financial conflict of interest in violation of 18 U.S.C. §208, 28 U.S.C. §144, and 28 U.S.C. §455. - Congress cannot establish a trade or business in a state in order to tax it. License Tax Cases. The income tax is ONLY on this “trade or business” in fact.
- It’s never been the case that you can unilaterally elect yourself into a lawfully established public office managing property received OFF duty. That’s ridiculous and it would produce a de facto office. Preventing this from happening is EXACTLY what the declaration of independence was about:
“He has erected a multitude of New Offices, and sent hither swarms of Officers to harrass our people, and eat out their substance.”
De ja vu all over. The officers are called “taxpayers” and “U.S. persons”. To suggest that public offices and a “trade or business” can be authorized in a constitutional state is to violate the above. Given that states are not within the geographical definitions and there is no presence test for serving in said offices that would permit preemption to operate like there is with aliens (26 U.S.C. §7701(b)), possessions (26 U.S.C. §937), and abroad (26 U.S.C. §911).
Sourcing of Income, IRS
https://www.irs.gov/individuals/international-taxpayers/nonresident-aliens-sourcing-of-income
EVERYTHING in the above table is “property”. We know that only “aliens” fit the “international” category in the upper left corner of this page.
26 U.S.C. 911(b): Foreign earned income
26 U.S. Code § 911 – Citizens or residents of the United States living abroad
(b)Foreign earned income
(1)Definition
For purposes of this section—
(A)In general
The term “foreign earned income” with respect to any individual means the amount received by such individual from sources within a foreign country or countries which constitute earned income attributable to services performed by such individual during the period described in subparagraph (A) or (B) of subsection (d)(1), whichever is applicable.
(B)Certain amounts not included in foreign earned income
The foreign earned income for an individual shall not include amounts—
(i) received as a pension or annuity,
(ii) paid by the United States or an agency thereof to an employee of the United States or an agency thereof,
(iii) included in gross income by reason of section 402(b) (relating to taxability of beneficiary of nonexempt trust) or section 403(c) (relating to taxability of beneficiary under a nonqualified annuity), or
(iv) received after the close of the taxable year following the taxable year in which the services to which the amounts are attributable are performed.
(2)Limitation on foreign earned income
The foreign earned income of an individual which may be excluded under subsection (a)(1) for any taxable year shall not exceed the amount of foreign earned income computed on a daily basis at an annual rate equal to the exclusion amount for the calendar year in which such taxable year begins.
(B)Attribution to year in which services are performed
For purposes of applying subparagraph (A), amounts received shall be considered received in the taxable year in which the services to which the amounts are attributable are performed.
(C)Treatment of community income
In applying subparagraph (A) with respect to amounts received from services performed by a husband or wife which are community income under community property laws applicable to such income, the aggregate amount which may be excludable from the gross income of such husband and wife under subsection (a)(1) for any taxable year shall equal the amount which would be so excludable if such amounts did not constitute community income.
The exclusion amount for any calendar year is $80,000.
(ii)Inflation adjustmentIn the case of any taxable year beginning in a calendar year after 2005, the $80,000 amount in clause (i) shall be increased by an amount equal to the product of—
(I) such dollar amount, and
(II) the cost-of-living adjustment determined under section 1(f)(3) for the calendar year in which the taxable year begins, determined by substituting “2004” for “2016” in subparagraph (A)(ii) thereof.
If any increase determined under the preceding sentence is not a multiple of $100, such increase shall be rounded to the next lowest multiple of $100.
ALL I.R.C. Subtitle A “income” is “foreign”
The Internal Revenue Code , 26 U.S.C. Subtitle A, Chapter 1, Subchapter N, Part I identifies ALL “income” a “taxpayer” can earn as “foreign income”
26 U.S. Code Subtitle A Chapter 1 Subchapter N Part I – SOURCE RULES AND OTHER GENERAL RULES RELATING TO FOREIGN INCOME
Notice there are two different references to “income from [geographic] sources without the United States”?
- Subchapter N, Part I, § 862 (relating to foreign person income); and
- Subchapter N, Part III (stated within the part’s heading itself)
Because 1. relates to “foreign income” (read: foreign person income), it follows from the context that 2. Part III is attributable to U.S. persons.
We believe all the domestic quasi-contractual provisions we have previously identified are in place resulting in:
1. U.S. persons being taxed on worldwide income at a graduated rate through the “trade or business” franchise in the “United StatesG” and from foreign sources under Subchapter N, Part III as a resident agent of the United StatesGOV pursuant to 26 U.S.C. §911(d) or 26 U.S.C. §937, with 26 U.S.C. §7408(d) applying in either instance.
2. Foreign persons taxed under Subchapter N, Part III.
2.1. Alien NRAs engaged in the “trade or business” franchise
Pursuant to 26 U.S.C. §872, taxed under 26 U.S.C. §871(b) with deductions under 26 U.S.C. §873.
2.2. Alien NRAs not engaged in a trade or business.
Pursuant to 26 U.S.C. §872, taxed under 26 U.S.C. §871(a) with no deductions permitted under 26 U.S.C. §873.
2.3. Non-alien NRAs (American nationals)
Pursuant to 26 U.S.C. §872, taxed under 26 U.S.C. §862 via 26 U.S.C. §864, with deductions under 26 U.S.C. §873.
And then finally, APART from the domestic “effectively connected” franchise:
The geographical meaning of “United States” in 861 and 862 is there for at least three reasons:
- To give the impression that the 16A language “from whatever source derived” permits any and all income to be taxable regardless of where (and ostensibly how) it is derived.
- The geographical source categories veil the substantive source of taxable income: “trade or business” with the United StatesGOV and its agents.
- The geographies serve as a functional intermediary to permit the “effectively connected” function to always be manifest. That is, the foreign taxpayer is “effectively connected” to a United StatesGOV payment through a geographical source category whether within or without the United StatesG, because it’s the substantive source that really matters—not the geographical funnel it goes through before received.
For an example of how to apply this realty to a specific tax obligation, see:
PROOF OF FACTS: “Deferred earnings” paid in connection with government retirement earned as a a “U.S. person” are not “foreign income” or taxable under I.R.C. 864(c), FTSIG
https://ftsig.org/proof-of-facts-deferred-retirement-earnings-not-taxable/