Great catch, Libertarian.
(keep in mind the timing of the Supreme Courts willingness to hear the case...)
This is exactly the point: property vs income. It matters not so much of this other stuff, personal status, regulations etc, although these are also important...if it's private property its not income!
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One element of tax evasion under 26 U. S. C. §7201 is “the existence of a tax deficiency.” Sansone v. United States, 380 U. S. 343 .
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(defendant) sought to introduce evidence that...had no earnings and profits in the relevant taxable years, so he in effect received distributions of property that were returns of capital, up to his basis in his stock, which are not taxable, see 26 U. S. C. §§301 and 316(a)
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Held: A distributee accused of criminal tax evasion may claim return-of-capital treatment without producing evidence that, when the distribution occurred, either he or the corporation intended a return of capital. Pp. 6–17.
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(a) Tax classifications like “dividend” and “return of capital” turn on a transaction’s “objective economic realities,” not “the particular form the parties employed.” Frank Lyon Co. v. United States, 435 U. S. 561 .
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They must be getting ready to wind up the old system in prep for the new one, just around the corner. Then we'll be pining for the good ole days of IRS and 1040's!
