Dear friends,
This is my Independence Day gift to all of you. It is gift wrapped in three magical words "trust fund taxes" and it will take you on a trip to the "Pink Rock Candy Mountain", and show you the truth. The gift is a very special section of the IRC that just does the most magical things, like make you smaller if you use it one way and bigger if you use it another. Right out of Alice's Adventures in Wonderland. This is your gift...
IRC §7501(a): "Whenever any person is required to collect or withhold any internal revenue tax from any other person and to pay over such tax to the United States, the amount so collected or withheld shall be held to be a special fund in trust for the United States. The amount of such fund shall be assessed, collected, and paid in the same manner and subject to the same provisions and limitations (including penalties) as are applicable with respect to the taxes from which such fund arose."
Central Bank v. United States
345 U.S. 639 (1953) ( when 7501 was 3661 under the 1939 code)
It arose from the conversion of the withheld taxes which Graham held as trustee for the United States
(Note: I'd bet he shocked to learn he was a trustee as I'll bet there are few employers that know they are a trustee for the United States. )
pursuant to § 3661 of the code.fn7
FN7. '§ 3661. Enforcement of liability for taxes collected.
'Whenever any person is required to collect or withhold any internal- revenue tax from any other person and to pay such tax over to the United States, the amount of tax so collected or withheld shall be held to be a special fund in trust for the United States. The amount of such fund shall be assessed, collected, and paid in the same manner and subject to the same provisions and limitations (including penalties) as are applicable with respect to the taxes from which such fund arose.
(Note: they haven't changed a word since then)
Slodov v. U. S.
436 U.S. 238 (1978) :
This section was enacted in 1934. Act of May 10, 1934, ch. 277, § 607, 48 Stat. 768, 26 U.S.C. § 3661 (1952 ed.). The provision was added to H.R. 7835, 73d Cong., 2d Sess., by the Senate Finance Committee, which explained:
"Under existing law the liability of the person collecting and withholding the taxes to pay over the amount is merely a debt, and he cannot be treated as a trustee or proceeded against by distrait. Section [607] of the bill as reported impresses the amount of taxes withheld or collected with a trust and makes applicable for the enforcement of the Government's claim the administrative provisions (Such as a Notice of Levy, and distrait. ) for assessment and collection of taxes." S.Rep. No. 558, 73d Cong., 2d Sess., 53 (1934).
Since the very reason for adding § 7501 was, as the Senate Report states, that "the liability of the person collecting and withholding the taxes . . . is merely a debt" (emphasis added), § 6672, whose predecessor section was enacted in 1919 while the debt concept prevailed, hardly could have been intended to impose a trust on after-acquired cash.
We further reject the argument that § 7501, whose trust concept may be viewed as having modified the duty imposed under § 6672,18 can be construed as establishing a fiduciary.
Compare with:
Begier v. I.R.S.496 U.S. 53 (1990)
Justice SCALIA, concurring in the judgment. (Note: Read this carefully!)
"If the Court had applied to the text of the statute the standard tools of legal reasoning, instead of scouring the legislative history for some scrap that is on point (and therefore ipso facto relevant, no matter how unlikely a source of congressional reliance or attention), it would have reached the same result it does today, as follows: Section 7501 obviously intends to give the United States the advantages of a
trust beneficiary with respect to collected and withheld taxes. Unfortunately, it does not always succeed in doing so.
A trust without a res can no more be created by legislative decree than can a pink rock-candy mountain. In the nature of things no trust exists until a res is identified. Ordinarily the res is identified by the settler of the trust; in the case of § 7501 it is initially identified (if at all) by the statute, subject ( as I shall discuss) to later reidentification by the taxpayer. Where the taxes subject to the trust-fund provision of § 7501 are collected taxes, the statute plainly identifies the res: it is the collections. There may be difficulty in tracing them, but there is no doubt that they exist. Where, however, the [71]
taxes subject to the trust-fund provision are withheld taxes, the statute provides no clear identification. When I pay a worker $90 there is no clearly identifiable locus of the $10 in withheld taxes that I do not pay him. Indeed, if my total assets at the time of the payment are $90 there is no conceivable locus.
We may have to grapple at some later date (Note: you got that right) with the question whether the lack of immediate identification means that no trust arises, or rather that § 7501 creates some hitherto unheard-of floating trust in an unidentified portion of the taxpayer's current or later-acquired assets. "
Well there it is! What you say? Go back and read it again. You are dealing with "TRUST LAW" folks. The IRS is the "SETTLER" with powerful administrative trust law to use against you, the EMPLOYER is the "TRUSTEE" and the United States is the "BENEFICIARY" and also a "DONOR" on the excise taxes. You my friends have been duped in the most cunning legal torture of the law ever devised. The collector / bearer / and now settler / administrator of a trust? No wonder we haven't stood a chance, at least till now. I have been spending the last few years studying trust law (Scott & Perry on Trusts mostly) and case law. You may have noticed that many of my posts have had trusts mentioned in them, and that is why I have pushed so hard on "EQUITY" as it is needed knowledge in trust law. Oh; I'll bet that is why they don't teach it to attorneys any more! How stupid of me to have missed that. See the attachment titled "Equity Case".
I will be posting on this subject as the new year arrives. I would suggest that each of you go to FIND LAW and type in the words "trust fund taxes" in the Supreme Court section for word searches and you will find the magical words used 43 times in the 4 mentioned cases below! It wouldn't hurt you to get a copy of Scott or Perry on Trusts and Trustees at
www.trustinfoonline.com
Begier v. I.R.S.
496 U.S. 53 (1990) : 20 times
U.S. v. Energy Resources Co., Inc.
495 U.S. 545 (1990) : 10 times
U. S. v. Sotelo
436 U.S. 268 (1978): 3 times
Slodov v. U. S.
436 U.S. 238 (1978) : 10 times
Not bad for words that one can not find in Words and Phrases, Webster's, Bouvier's, Ballentine's, Blacks, or any other source one might conger up. Remember they said Social Security taxes are held in trust? They sure do go to a trust but not for you. Now you know why you couldn't find it. Well this is it.
I think we should have a prosperous Independence Day and coming New Year with this new knowledge.
Dragon
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