FAQ: Is there any harm done in claiming “beneficial owner” tax status?
QUESTION:
Is there any harm done in claiming “beneficial owner” tax status by submitting the standard IRS Form W-8BEN?
ANSWER:
the term “beneficial owner”, which is defined in 26 C.F.R. §1.1441-1(c)(6)(i) as:
(6) Beneficial owner—
(i) General rule.
This paragraph (c)(6) defines the term beneficial owner for payments of income other than a payment for which a reduced rate of withholding is claimed under an income tax treaty. The term beneficial owner means the person who is the owner of the income for tax purposes and who beneficially owns that income. A person shall be treated as the owner of the income to the extent that it is required under U.S. tax principles to include the amount paid in gross income under section 61 (determined without regard to an exclusion or exemption from gross income under the Internal Revenue Code). Beneficial ownership of income is determined under the provisions of section 7701(l) and the regulations under that section and any other applicable general U.S. tax principles, including principles governing the determination of whether a transaction is a conduit transaction. Thus, a person receiving income in a capacity as a nominee, agent, or custodian for another person is not the beneficial owner of the income. In the case of a scholarship, the student receiving the scholarship is the beneficial owner of that scholarship. In the case of a payment of an amount that is not income, the beneficial owner determination shall be made under this paragraph (c)(6) as if the amount were income.
The term “income” is then defined as follows:
26 U.S. Code § 643 – Definitions applicable to subparts A, B, C, and D
(b)Income
For purposes of this subpart and subparts B, C, and D, the term “income”, when not preceded by the words “taxable”, “distributable net”, “undistributed net”, or “gross”, means the amount of income of the estate or trust for the taxable year determined under the terms of the governing instrument and applicable local law. Items of gross income constituting extraordinary dividends or taxable stock dividends which the fiduciary, acting in good faith, determines to be allocable to corpus under the terms of the governing instrument and applicable local law shall not be considered income.
Below is our position on the above definitions:
- Declaring yourself as the owner of anything violates your privacy. Its none of their business who the owner is. The fact that the earnings are private property and not THEIR property ought to be the only reason necessary to assert your right to simply deny them any use, benefit, or power to regulate the property as someone who is not an “alien” coming under the foreign affairs jurisdiction of the national government.
- The “beneficial owner” is connected with the term “income”.
- Income is defined in 26 U.S.C. §643(b) definition says:
“For purposes of this subpart and subparts B, C, and D, the term “income”, when not preceded by the words “taxable”, “distributable net”, “undistributed net”, or “gross”, means the amount of income of the estate or trust for the taxable year determined under the terms of the governing instrument and applicable local law.” - Human beings filing the 1040NR are NOT “estates or trusts” and therefore have no “income” as defined above.
- The IRS Website describes “beneficial owners” below:
https://www.irs.gov/individuals/international-taxpayers/beneficial-owners - The above website article deals with “international taxpayers”. People in states of the Union are NOT “international taxpayers”. Only aliens are international taxpayers as far as we can tell.
- We therefore think that anyone who files a W-8BEN and declares themself a “beneficial owner” without at least clarifying that they are not an estate or trust is making a mistake.
- On the flip side, if you are a “foreign beneficial owner”, they can’t reach you civilly but they can reach your property within the “United States”.
SEDM solves the “beneficial owner” declaration trap with the following definition of the term for the purposes of the W-8BEN:
SEDM Disclaimer, Section 4.34
4.34 Beneficial owner
The absolute owner of PRIVATE property:
- The ownership of all of whose property is not shared or qualified or a usufruct in relation to any government.
- Who retains and invokes the “right to exclude” of absolute ownership of himself/herself and their property by expressly prohibiting any and all enforcement activity directed at such property.
- Who is protected only by the constitution and not civil statutory law and which is NOT described in any civil statute.
- Who is the Merchant under U.C.C. §2-104(1) and never the Buyer under U.C.C. §2-103(1)(a) in relation to any and every government who is offering their private property to the government for sale under the conditions of the following:
Injury Defense Franchise and Agreement, Form #06.027
https://sedm.org/Forms/06-AvoidingFranch/InjuryDefenseFranchise.pdf- Who is legislatively foreign to any and EVERY government.
- Who is not consenting to be party to any privilege, franchise, or “benefit” offered by any and every government either expressly or impliedly.
- Who is in possession, use, or “benefit” of NO civil statutory status offered by any government, including but not limited to “person”, “taxpayer”, “citizen”, “resident”, etc.
- Whose consent to anything must be procured ONLY in writing signed by both parties and never by implied consent or action.
- Who makes no “elections” under the Internal Revenue Code and consents to NOTHING that any government offers using the civil statutory law.
- Who is not engaged in a “trade or business” excise taxable franchise as defined in 26 U.S.C. §7701(a)(26).
- Whose property and earnings are a “foreign estate” as described in 26 U.S.C. §7701(a)(31) because not engaged in the “trade or business” excise taxable franchise.
- Who if a human being, trust, or estate, is NOT mentioned as a party “liable to” under 26 C.F.R. §1.1-1(a), which in the case of foreign persons, excludes nonresident aliens NOT engaged in a “trade or business” under 26 U.S.C. §871(a). Therefore, they are PURPOSEFULLY excluded and here defined as “non-persons” as a result.
- Who is not a statutory “alien” for foreign affairs purposes. Thus, not the “alien individual” defined in 26 C.F.R. §1.1441-1(c)(3)(i) as “neither a citizen nor a national of the United States”.
Specifically EXCLUDES the following references to the statutory term “beneficial owner” in:
- 31 U.S.C. §5336: Beneficial ownership information reporting requirements.
https://www.law.cornell.edu/uscode/text/31/5336- 26 C.F.R. §1.1441-1: Requirement for the deduction and withholding of tax on payments to foreign persons, including but not limited to 26 C.F.R. §1.1441-1(c)(6).
https://www.law.cornell.edu/cfr/text/26/1.1441-1- 31 C.F.R. Subpart C – Subpart C—Reports Required To Be Made, Part 1010
https://www.law.cornell.edu/cfr/text/31/part-1010/subpart-C- “Beneficial owner” mentioned anywhere on the IRS Website, including but not limited to:
https://www.irs.gov/individuals/international-taxpayers/beneficial-owners- “Beneficial owner” mentioned anywhere on the U.S. Department of Treasury FINCEN Website, including but not limited to:
https://www.fincen.gov/boi[SOURCE: https://sedm.org/disclaimer.htm#4.34._Benefical_owner]