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Day 2, Tuesday August 9, 2005
Prosecution (P) starts its case at 9 AM, by calling Mary Sonna. May is an IRS custodian of records for 32 years. * She basically went through a bunch of exhibits with the prosecution to show that Larken and Tessa Rose had not filed and paid Federal Income taxes for 1997 through 2003, except that they had paid over $2,000 for 1997.
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In addition, she showed that in 2000, Larken and Tessa had filed 3 amended returns for 1994, 1995 and 1996 with explanations, based on the 861 argument. * This was all unnecessary, since Larken was willing to stipulate (agree) that they had not filed or paid Federal Income Taxes for these years!
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In addition 2 different letters were sent to Larken by the IRS that stated that ???Gross Income??? includes ??? Compensation for services.??? IRS sent many dumb computer generated letters to Larken, asking him to file Income Tax Confession (return) forms and to call or write the IRS if he believes that he is not required to file.
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None of these letters refer to section 861 of the IRS Code. Instead they mention Sections 61 through 64, if any.
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At 10:35 AM, this testimony ended and after a 10-minute break, the next witness, Barbara Thompson took the stand. She basically verified that the Medical group that she worked for paid Tessa for doing their medical transcriptions.
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Then the prosecutor read the stipulation of the parties that ?? of the medical transcription services was allocated to Larken.
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At 11:20 AM the next Government witness, a lady named Cathy Lee Spalding, who worked for IRS??? Small Business/Self Employed section of the IRS, was a revenue agent for 3 years and an auditor for 8 years. She got assigned to Larken???s case at the end of 1999 and met Larken after April 15, 2000.
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IRS??? position was based on Section 61 of the IRS Code and Larkin???s based on Section 861 of the Code. Both parties recorded this meeting. She told Larkin that she will do some research on the issue. She made a referral for technical advise, from the National Office of the IRS in Washington, D.C, for the first time ever, based on the request of Larken.
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The IRS National Office refused to take up Larkin???s case. On June 8, 2000 the IRS denied his 1040X return???s claim for refund. Cathy handled the 1994 and 1995 1040X tax returns of Larken and someone else handled the 1996-year 1040X. In September 2000, she met with Larken and in that meeting he accused of denying his Constitutional Rights. Cathy responded that she was only trying to do her job.
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Under cross-examination Cathy said that he and the IRS recorded the April and September meetings. One IRS letter referred to an 11 th Circuit Federal Court of appeal decision named Coleman. Coleman disagreed with People who claim ???wages are not income???, that ???only gold money??? or that ???16th Amendment [of the U.S. Constitution] was never ratified. Agent Cathy admitted that Larken never brought out any of these issues.
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Agent Cathy felt so threatened by the tone of voice and body language of Larken that she called the Police! She admitted that nothing bad came of it, it was just a concern she had. The judge said that whatever part of the tape that would challenge her assertion about his tone of voice could be played to the jury.
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She read the first part of a letter, which Larken had written to her. In His letter, Larken quoted the IRS regulations and had Agent Cathy read some of it on the stand that stated that Section 861 is to be used to determine the taxable income of a U.S Citizen from domestic source income.
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Now it was 12:25 PM and the judge announced a lunch break till 1:30 PM.
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I (Peymon) got back to court and the testimony of Agent Cathy was about to finish. Ross told me that she said nothing of significance in the afternoon. At 2:05 a new witness, Charles Judge, who is the supervisor/manager of Agent Cathy Spalding and has been an IRS agent for 32 years.
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Larken???s 1040X refund tax return claims were assigned to his group in April of 2000. In September 2000 manager???s conference, Charles and Larken met to go over Larken???s case. Agent Charles told larken that per Section 61 of the IRS Code, all income is taxable, unless specifically excluded. Agent Charles had never dealt with the 861 issue before.
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Charles stated that he had read IRS Code Section 861 and that his understanding of it is that it is about a person has income from within and without the United States. Larken sent a letter and a video to Agent Charles, marked ???personal??? on the outside of it, in which he invited Charles and possibly his wife to dinner to go over it.
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Agent Charles, reported it to the IRS inspector general about this upcoming meeting, per the Rules of Conduct of IRS Agents. * Agent Charles then secretly tape recorded the meeting. Charles said that Larken said he was being clobbered by the income taxes and started studying the law. Then another agent, named Dianna referred his case to CID.
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At the September 2000 meeting, Larkin acknowledged receipt of the income from the transcription business. Charles, once again told Larkin that based on IRS Code, Section 61, all income is taxable unless otherwise excluded. Larkin gave Agent Charles the 861 regulations.
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At the meeting, Charles told Larken that they could not at that time address Larken???s points on the 861 issue. IRS never answered Larkin???s questions on the 861 issue. IRS did not tell Larken that the IRS was going to tape Agent Charles??? conversation with Larken.
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Agent Charles stated that Larken said that at one point in the past, he was a tax protester. And had trouble paying his bills.
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This was the end of testimony of IRS Agent Charles Judge. Now, at 2:43 PM, a new witness of the Government, named Stanley Escher took the witness stand. Agent Stanley is currently the Senior Program Analyst of Abusive Tax Transactions that, go after and shut down, these types of organizations and entities. Back in 2000, when he met Larken, he was a group manager.
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Agent Stanley, met Larkin as a witness in the audit of John Hoffman. Hoffman had filed a 1997 tax confession form (return) and later on, filed an amended return and thereby sought the refund of the money that he had given to the IRS. Hoffman and Larken, wanted Agent Stanley, to answer 12 questions that they had on the 861 issue.
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At this meeting, Larken stated that per Section 861 of the IRS Code, the domestic income of Mr. Hoffman is not taxable. They wanted Stanley to answer the 12 questions that eventually he answered for them.
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Stanley tried to make it clear to them that Section 861 did not apply and that section 61 is the applicable code section. In addition, he sad that the 861 Section is about when someone or corporation, has income from within the united states, as well as income from outside the United States, like China, the person or corporation could get a tax credit for the taxes that they had paid to the foreign government.
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Throughout his testimony, Stanley had his hands tightly clenched together, as if to hide his nervousness. Larken asked Stanley if the word ???tax credit??? was used in section 861? Stanley said ???yes.??? Then Larken showed a copy of Section 861 to Stanley and now Stanley was not so sure about his last statement.
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Then the Judge, let there be a word search on the computer, found the word ???tax credit??? mentioned in the text of Section 861 under ???dividends??? only. IRS procedures say that frivolous issues do not go to National Office of the IRS.
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We all had a break for about 10 to 15 minutes and at 4:15 PM, Prosecutor Miller read the stipulation (agreement) of Larken and IRS, which stated that Larken and his wife Tess, operated a medical transcription service and that at least 50% of its income would be attributable to Larken.
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Last witness of the IRS today, was their best witness, Department of Justice lawyer Evan John Davis, who is a senior civil trial attorney of the tax division of the DOJ. Evan met Larkin as a result of his work on the Thurston Bell abusive Tax Shelter Injunction case.. For the last 4-5 years, Evan has been shutting down people who did wholesale tax scams.
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Evan was working the case of Thurston Bell and had heard Larkin???s name thrown around when Larkin was around. Evan wanted to know what was the relation between Bell and Thurston and what might Larken testify to about the Bell case, if they go that far.
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This is as far as we could go on today???s report. * We will finish it tomorrow and send this plus the rest of it, so you can discard this part because it will be included in what we send tomorrow as Day 2.* Day 3 will be sent separately.
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Yours in truth, freedom and justice,
Peymon ,and Ross, Harry and Ken
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