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[Bobby] I don’t know why not; everybody else has gone home.
[Bobby] Daddy, I think I’m high enough up the food chain; I don’t get monitored
anymore, why what’s the problem?
[Dad] I’m going to want you to click on some web pages you maybe wouldn’t
want certain parties to know you clicked on.
[Dad] I just don’t want you getting in any trouble because of me. This is
potentially explosive. Maybe we ought to meet in the lobby at the Marriot. I can bring my
laptop.
[Bobby] Oh, come on, Daddy I’m as safe here as anywhere. What’s this about.
[Dad] Wesley Snipes, that’s what I’m calling about. You know about Wesley
Snipes?
[Bobby] Yeah.
[Bobby] No, that’s out of the Tampa office. I know the guys but, no, I’m not on that
one.
[Dad] Bobby, I’m telling you this case is going to blow up in their face.
[Bobby] Yeah.
[Dad] See where it says the other two guys used deceit, craft, trickery and
dishonest means to make it appear as if defendant Snipes had no liability for federal
income taxes when, in fact, defendant Snipes had such liability.
[Dad] But the important thing is you say Snipes had tax liability.
[Dad] The bottom line is all that deceit and craft and trickery is making it appear
that he had no liability for taxes is a violation of Title 18, Section 371, see that?
[Bobby] Right, right, conspiracy to defraud the United States. I mean, you can’t
make millions and then come up with a scheme saying you don’t have to pay taxes. The
guy’s a crook, Daddy.
[Dad] I’d save that for closing arguments, son. You know, long before closing
arguments you got to have an indictment.
[Dad] What the indictment really says is that Wesley Snipes never had a tax
liability and if he never had a tax liability he couldn’t have violated Section 371.
[Dad] Well, I’m going to show you how crazy. I’d like you to scroll down to
page twelve.
[Dad] Yeah, these are the failure to file charges that the conspiracy and fraud
counts are based on. If Wesley’s innocent of failure to file, well then the conspiracy and
fraud can’t stand and your prosecution is dead in the water.
[Bobby] Well, so where do counts three through eight say there’s no tax liability?
[Bobby] So?
[Dad] Why did they put deductions and credits to which he was entitled in there?
[Bobby] Because the law says he’s got to state on the return any deductions and
credits to which he was entitled, that’s the law.
[Dad] Of course, it’s the law. Have you ever looked at that law?
[Dad] Well, let’s do a search. Go to your United States Code and type in
quotation marks, deductions and credits, in quotation marks. Got it?
[Dad] Sixteen mentions of deductions and credits in the entire US Code and note
that they’re found only in Title 26.
[Dad] Ok, let’s start clicking on the articles. What does the first one say?
[Bobby] Subchapter ten, tax based on income from source within or without the
United States, non-resident aliens and foreign corporations. Foreign corporations—here it
is, Section 882, tax on income of foreign corporations connected with United States
business.
[Dad] Well, your indictment says he’s a resident of Florida and if you go to his
fan site you can find out that he was born in Orlando. So, unless your people can show
he’s expatriated or incorporated himself on foreign soil I’m going to have to think that
Wesley Snipes is a US citizen, not an alien.
[Dad] Well, scroll, now, down to Section 882 and the deductions and credits part,
past the imposition of tax on foreign corporations and the gross income of foreign
corporations to paragraph (c).
[Bobby] Ok.
[Dad] In the case of foreign corporations; it says nothing about the case of
United States citizens—right?
[Bobby] Foreign corporations shall receive the benefit of the deductions and credits
allowed to it in this subtitle only by filing or causing to be filed with the Secretary a true
and accurate return in the manner prescribed in Subtitle (f) including therein all the
information in which the Secretary may deem necessary for the calculation of such
deductions and credits. Ok, so what?
[Dad] Bobby, that’s the requirement to file that Wesley Snipes willfully failed to
comply with.
[Dad] You tell me, Mr. Prosecution team. Let’s go back to those sixteen articles.
It’s bound to be in there somewhere. Click on number two.
[Bobby] Yeah. Ok, section 1398, rules relating to individuals Title 11 cases.
[Bobby] 931, income from source within Guam, American Samoa, the Northern
Mariana Islands.
[Dad] 931 applies to bona fide residents of Guam, American Samoa or the
Northern Marianas. The indictment says nothing about Wesley Snipes being a resident of
any of these places.
[Bobby] No, this is just about grantors or owners of trusts being treated as in….
[Dad] Well, this section empowers the Secretary to disallow the benefit of
deductions and credits to acquisitions of property made for the purpose of evading or
avoiding federal income tax. This couldn’t apply to Wesley since he failed to apply for
deductions and credits.
[Dad] Section 1312, that’s about the erroneous allowance of deductions and
credits to a taxpayer. Again, that’s not applicable to Wesley Snipes who didn’t seek
deductions and credits.
[Bobby] Well, next is 932, income from sources without the United States. Ok,
treatment of United States residents—ah ha, this subsection shall apply to an individual
for the taxable year if such individual is a citizen or resident of the United States. There,
that’s Wesley Snipes.
[Bobby] And has income derived from sources within the Virgin Islands or
effectively connected with the conduct of a trade or business within such possessions.
[Dad] You got evidence that Wesley’s income was sourced in the Virgin Islands?
[Bobby] I don’t know.
[Dad] You better hope so because if not, Wesley’s off the hook, here, too. Well,
let’s go down to the next article, Subpart (a), non-resident alien individuals. Scroll down
and you’ll see it’s all about aliens, residents of possessions and expatriation. Nothing here
would apply to Wesley Snipes or any other US citizen, for that matter.
[Dad] Well, this is another section about disallowing deductions and credits that
have been filed for.
[Bobby] And Wesley didn’t file. Ok, next is subpart (e), grantor and others treated
as substantial owners.
[Bobby] And then Section 482, accounting periods and methods of accounting.
[Dad] This is about allocating deductions and credit between two or more
organizations, trades or businesses owned by the same interests and has nothing to do
with Wesley Snipes.
[Bobby] Ok, ok, now here it is. Section 269 (a), personal service corporations
formed or availed of, to avoid or evade income tax. Wesley contracted with studios
through loan out companies for the purposes of avoiding income taxes, we know that.
[Dad] Sure he did; it’s legal to do that. He wasn’t indicted for contracting with
studios through loan-out companies. All Section 269 (a) does is permit the IRS to re-
allocate deduction and credit allowances between service corporations and their
employee owners. It doesn’t make Wesley or the loan-outs liable for filing a return and
applying for deductions and credits. There’s nothing about Wesley in this section, either.
And that leaves us with just one more law, Section 118.
[Dad] And in this section the only mention of deductions and credits is their
disallowance again. Nothing here required Wesley Snipes to do anything. Bobby, warn
your people, their indictment charges Wesley Snipes with doing something he was never
legally obligated to do unless he’s an alien or a foreign corporation or has income from
the Virgin Islands or United possessions like Guam or American Samoa.
[Dad] Now, let’s go back to the first page of the Code and do a Boolean search of
deductions and credits, in quote, and United States citizens, in quote. Surely if US
citizens should be charged with failing to state deductions and credits there would be a
law—you got it?
[Dad] Yeah.
[Bobby] Ok, only one article and it takes us back to section 931, the section about
the Virgin Islands.
[Bobby] God almighty. Daddy, how did you get this stuff?
[Dad] I had a client back in the nineties. Do you remember Jack Beasley?
[Dad] Jack tried to use 861 argument to get a refund on taxes he paid. The IRS
denied his claim, just like they did Wesley Snipes.
[Dad] Jack wanted a lot less, but hey, it’s no crime to request a refund.
[Bobby] True.
[Dad] Then Jack stopped filing and after a couple of years the IRS sent out a
special agent to question him and I looked to see how he might get charged criminally
and that took me to Section 7203, willful failure to file.
[Dad] So I looked to 7203 indictments filed over the past twenty years and found
they’re all worded the same like Wesley’s, they all mention gross income tied to
deductions and credits.
[Bobby] So was Jack Beasley charged?
[Dad] Well, the IRS referred him to the Justice Department for prosecution and
the US attorney offered us a conference. We accepted the offer and asked the IRS to bring
all the evidence they had that Jack Beasley was an alien or a foreign corporation or had
Virgin Islands or possessions income and a few weeks later the referral was dropped and
there never was a conference.
[Dad] Well, let me put it this way, it’s been eleven years. Jack Beasley is one
happy client.
[Dad] Absolutely not. I told him his income tax situation is nobody’s business
but his own.
[Dad] But I’m concerned about your Snipes’ indictment, Bobby. You can’t move
forward on it.
[Dad] It’s a false document, son. You’ve accused an American citizen of failing
to do something only aliens and foreign corporations are required to do. Wesley Snipes
hasn’t willfully failed to do anything. You’re oppressing a man under color of revenue
law and that’s a crime punishable by up to five years in prison, Bobby. Look at Section
7214 in the tax code, offenses by officers and employees of the United States.
[Bobby] Well, what are you going to do with this? Are you in touch with Snipes.
[Dad] No, I have to respect the trust he puts in his attorneys. The best I can do is
warn my family when I see trouble ahead. You that crazy about your job, Bobby?
[Bobby] Well, I’m going to have to think about this. Thanks for calling, Daddy.
End
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Home Search Download Classification Codification About
1. 13967 100 26 USC Sec. 882 01/03/05 Sec. 882. Tax on income of foreign corporations
connected with United S
2. 15675 99 26 USC Sec. 1398 01/03/05 Sec. 1398. Rules relating to individuals' title 11
cases
3. 21922 99 26 USC Sec. 931 01/03/05 Sec. 931. Income from sources within Guam,
American Samoa, or the North
4. 5555 99 26 USC Sec. 874 01/03/05 Sec. 874. Allowance of deductions and credits
5. 7196 98 26 USC Sec. 671 01/03/05 Sec. 671. Trust income, deductions, and credits
attributable to grantor
6. 12139 98 26 USC Sec. 45F 01/03/05 Sec. 45F. Employer-provided child care credit
7. 5516 98 26 USC Sec. 269 01/03/05 Sec. 269. Acquisitions made to evade or avoid
income tax
8. 6293 98 26 USC Sec. 1312 01/03/05 Sec. 1312. Circumstances of adjustment
9. 9704 97 26 USC Sec. 932 01/03/05 Sec. 932. Coordination of United States and Virgin
Islands income taxes
10. 2320 97 26 USC Subpart A - Nonresident Alien Individuals 01/03/05 SUBPART A -
NONRESIDENT ALIEN INDIVIDUALS
11. 3085 97 26 USC Sec. 1357 01/03/05 Sec. 1357. Items not subject to regular tax;
depreciation; interest
12. 5278 97 26 USC Sec. 1311 01/03/05 Sec. 1311. Correction of error
13. 1639 97 26 USC Subpart E - Grantors and Others Treated as Substantial Owners
01/03/05 SUBPART E - GRANTORS AND OTHERS T
14. 3814 97 26 USC Sec. 482 01/03/05 Sec. 482. Allocation of income and deductions
among taxpayers
15. 3241 97 26 USC Sec. 269A 01/03/05 Sec. 269A. Personal service corporations formed or
availed of to avoid
16. 14156 97 26 USC Sec. 118 01/03/05 Sec. 118. Contributions to the capital of a
corporation
Sec. 931. Income from sources within Guam, American Samoa, or the
Northern Mariana Islands
-STATUTE-
Sec. 932. Coordination of United States and Virgin Islands income taxes
-STATUTE-
(a) Treatment of United States residents
(1) Application of subsection
This subsection shall apply to an individual for the taxable year if -
(A) such individual -
(i) is a citizen or resident of the United States (other than a bona
fide resident of the Virgin Islands during the entire taxable year), and
(ii) has income derived from sources within the Virgin Islands, or
effectively connected with the conduct of a trade or business within
such possession,