Is U.S. income tax invalid?

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Again, I could refute all your assertions made. But whats the point?

My uncle coined a phrase. It was "Experience keeps a dear school, but fools will learn in no other."

I think the point is you will believe what you want to believe and don't want to examine your beliefs in light of reality.

If you really wanted to learn, I would be happy to report your failure to pay income tax to the IRS. I am sure you will find the experience quite enlightening.

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parados wrote:

Quote:
Again, I could refute all your assertions made. But whats the point?

My uncle coined a phrase. It was "Experience keeps a dear school, but fools will learn in no other."

I think the point is you will believe what you want to believe and don't want to examine your beliefs in light of reality.
If you really wanted to learn, I would be happy to report your failure to pay income tax to the IRS. I am sure you will find the experience quite enlightening.

I suppose your quote to describe me can describe yourself as well.

And there you go again talking out of your ass. All ready to report me for something when you dont even know me. Im sorry if this reality upsets your little view of the world, But one day you will be the one enlightened.

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I am well aware that my comments can describe me as well as you. You don't seem to be aware that your comments work both ways. :wink:

I don't know whether you pay income taxes or not. I do know that if you really acted on what your professed beliefs are then you wouldn't be paying them. If you are paying them, then perhaps you don't really believe what you profess here. Personally, I don't care which it is. Why try to convince others if you aren't willing to stand up and be counted yourself? Experience is a dear school but some people don't want to attend that school for fear of what they will learn.

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parados wrote:

I am well aware that my comments can describe me as well as you. You don't seem to be aware that your comments work both ways. :wink:

I don't know whether you pay income taxes or not. I do know that if you really acted on what your professed beliefs are then you wouldn't be paying them. If you are paying them, then perhaps you don't really believe what you profess here. Personally, I don't care which it is. Why try to convince others if you aren't willing to stand up and be counted yourself? Experience is a dear school but some people don't want to attend that school for fear of what they will learn.

I understand the comment can describe me as well.

The reason is very simple. One trying to fight the IRS head on is much akin to showing up at a gunfight with a knife. Although some people beat the IRS, I would rather not go that route.

The IRS is just a smaller problem of the entire Federal Reserve problem we have. Attackiing the federal reserve whose income comes from the personal income tax is a much more logical target. It IS the soft underbelly if you will, and I choose to educate as many people on that topic as possible. It is hard enough for people to grasp the machinations of economics sometimes but at least explaing the fed is a much less cumbersome process than wading thru the entire IRC and SCOTUS decisions to explain the income tax is a much more daunting and less productive outcome.

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Parados rather wittily wrote, "Experience is a dear school but some people don't want to attend that school for fear of what they will learn." Very true.

"Why try to convince others if you aren't willing to stand up and be counted yourself?"

Good point, and I do just that; they can tax my property and investments, companies and profit, but they will not get a cent of my earnings. And they never have!

Politicians are wonderful people as long as they stay away from things they don't understand, such as working for a living.

There are a variety of theories about the "income" tax scheme, some wildly popular and some more obscure, but all reflecting an incomplete understanding of the law. Like the six blind men describing the elephant, each view discussed here is grounded in a varyingly accurate perception of some facts related to the scheme, but never the whole picture. Indeed, it is a characteristic of each such theory that some part of the overall body of the law or its administration must be explained away in order to provide a superficial plausibility to the theory.

In some cases sections of the law are declared to be simply inoperative window-dressing; in others, sections which contradict the theory are declared to have a REAL meaning which is contrary to the clear language with which they are set forth; in still others, the vast difference between the theory's explanations or conclusions and the written language of the law is argued to be due to a vast conspiracy comprising every judge, prosecutor, tax professional, defense attorney, etc., or a hidden web of deeper law in which we are all ensnared, and which modifies the meaning of the law which we are able to perceive.

In every case, although each theorist marshals selected and carefully construed language from the millions of words of code, statutes, and/or regulations in the fabrication of his or her view, none can offer the least evidence of any actual implementation of these theories; at the same time, the fully visible means by which the real "income" tax scheme actually IS implemented is (perforce) studiously ignored.

Another truism must be to quote Richard, "Trying to fight the IRS head on is much akin to showing up at a gunfight with a knife." I like that a lot.

Do we all at least agree that any personal income tax extorted before the 16th amendment was illegal? And by that I mean against the constitution, and not a sick bird?

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Tryagain wrote:

Parados rather wittily wrote, "Experience is a dear school but some people don't want to attend that school for fear of what they will learn." Very true.

"Why try to convince others if you aren't willing to stand up and be counted yourself?"

Good point, and I do just that; they can tax my property and investments, companies and profit, but they will not get a cent of my earnings. And they never have!

Politicians are wonderful people as long as they stay away from things they don't understand, such as working for a living.

There are a variety of theories about the "income" tax scheme, some wildly popular and some more obscure, but all reflecting an incomplete understanding of the law. Like the six blind men describing the elephant, each view discussed here is grounded in a varyingly accurate perception of some facts related to the scheme, but never the whole picture. Indeed, it is a characteristic of each such theory that some part of the overall body of the law or its administration must be explained away in order to provide a superficial plausibility to the theory.

In some cases sections of the law are declared to be simply inoperative window-dressing; in others, sections which contradict the theory are declared to have a REAL meaning which is contrary to the clear language with which they are set forth; in still others, the vast difference between the theory's explanations or conclusions and the written language of the law is argued to be due to a vast conspiracy comprising every judge, prosecutor, tax professional, defense attorney, etc., or a hidden web of deeper law in which we are all ensnared, and which modifies the meaning of the law which we are able to perceive.

In every case, although each theorist marshals selected and carefully construed language from the millions of words of code, statutes, and/or regulations in the fabrication of his or her view, none can offer the least evidence of any actual implementation of these theories; at the same time, the fully visible means by which the real "income" tax scheme actually IS implemented is (perforce) studiously ignored.

Another truism must be to quote Richard, "Trying to fight the IRS head on is much akin to showing up at a gunfight with a knife." I like that a lot.

Do we all at least agree that any personal income tax extorted before the 16th amendment was illegal? And by that I mean against the constitution, and not a sick bird?

I would agree with that. It is a fair analysis.

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Quote:

Do we all at least agree that any personal income tax extorted before the 16th amendment was illegal? And by that I mean against the constitution, and not a sick bird?

No, we don't all agree with that. Even the USSC didn't agree with that when they said it was consitutional in Springer. Don't you bother to read anything that questions your ill concieved notions?

Simple fact. The United States Supreme Court. The highest court in the US. the one that according the constitution is the final voice on questions of law and the constitution had the opportunity to examine the 1861 income tax on personal income. They said this about it..

Quote:

Our conclusions are, that direct taxes, within the meaning of the Constitution, are only capitation taxes, as expressed in that instrument, and taxes on real estate; and that the tax of which the plaintiff in error complains is within the category of an excise or duty.

Springer v US

Springer had property siezed because he failed to pay income tax. He argued that tax on his income was a direct tax. There was no corporation in this situation. The tax was on Springer for his income.

The two of you can agree to ignore facts. I post them for others to see the error in your statements.

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Parados, a knight in shining armour, upholder of liberty, democracy and the constitution wrote, "The exact same process was used for every amendment, the process spelled out in the constitution. To say the public wasn't consulted is complete bunk. If you don't like it then you are free to repeal the amendment. All it takes is for you to get enough of the public to agree with you."

"The two of you can agree to ignore facts. I post them for others to see the error in your statements."

I am sure no matter how distasteful it may be, you will agree that under a democracy, the majority win the vote. Therefore, unless you can find numerical support, you are bound by the result.

The Court concluded that only taxes on real estate and capitation taxes were direct taxes.

Although it rendered a seemingly contrary decision in Pollock v. Farmers' Loan and Trust (1895).

In Springer v United States (1881)the Supreme Court rejected this economic definition of a direct tax in favor of the judicial-historical definition, and quoting at length from Hylton v. United States, held the income tax to be an excise: "Our conclusions are, that direct taxes, within the meaning of the Constitution, are only capitation taxes as expressed in that instrument, and taxes on real estate; and that the tax of which the plaintiff in error complains is within the category of an excise or a duty." Congress repealed the act five years later.

More than 20 years passed before Congress again enacted an income tax law, the legality of which was decided in the present case. In 1894, fulfilling promises made in a campaign of 1892, a Democratic Congress passed a law that levied an income tax graduated to the extent that it exempted incomes under $4000 and taxed those above at 2 percent. Subject to the tax were incomes from (1) real estate, (2) stocks, bonds, and other securities, (3) state and municipal bonds, and (4) wages, salaries, and professional earnings. Adopted and defended as a measure to relieve the victims of the panic of 1893 and to shift most of the tax burden to the wealthy, the act was bitterly denounced as socialistic; and capital and industry girded its loins for a last-ditch fight in the Supreme Court.

Ignoring a well-established principle that taxes can be contested only after they have been paid, the Supreme Court agreed to hear on appeal a suit in which a stockholder sought to enjoin a bank from paying the new tax. The best legal talent of the country was brought into the case, and the Court heard argument twice, one justice being ill during the first argument. In a five-to-four decision, one unidentified justice having switched over on the second argument, the Court held the income tax law invalid.

The provision taxing income derived from wages, salaries, and professional earnings was declared valid as an excise, but under the rule governing the partial unconstitutionality of statutes, the entire act was held void.

How do you like them apples?

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Them apples says that an income tax on wages has always been constituitonal.

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Tryagain wrote:

Parados, a knight in shining armour, upholder of liberty, democracy and the constitution wrote, "The exact same process was used for every amendment, the process spelled out in the constitution. To say the public wasn't consulted is complete bunk. If you don't like it then you are free to repeal the amendment. All it takes is for you to get enough of the public to agree with you."

"The two of you can agree to ignore facts. I post them for others to see the error in your statements."

I am sure no matter how distasteful it may be, you will agree that under a democracy, the majority win the vote. Therefore, unless you can find numerical support, you are bound by the result.

The Court concluded that only taxes on real estate and capitation taxes were direct taxes.

Although it rendered a seemingly contrary decision in Pollock v. Farmers' Loan and Trust (1895).

In Springer v United States (1881)the Supreme Court rejected this economic definition of a direct tax in favor of the judicial-historical definition, and quoting at length from Hylton v. United States, held the income tax to be an excise: "Our conclusions are, that direct taxes, within the meaning of the Constitution, are only capitation taxes as expressed in that instrument, and taxes on real estate; and that the tax of which the plaintiff in error complains is within the category of an excise or a duty." Congress repealed the act five years later.

More than 20 years passed before Congress again enacted an income tax law, the legality of which was decided in the present case. In 1894, fulfilling promises made in a campaign of 1892, a Democratic Congress passed a law that levied an income tax graduated to the extent that it exempted incomes under $4000 and taxed those above at 2 percent. Subject to the tax were incomes from (1) real estate, (2) stocks, bonds, and other securities, (3) state and municipal bonds, and (4) wages, salaries, and professional earnings. Adopted and defended as a measure to relieve the victims of the panic of 1893 and to shift most of the tax burden to the wealthy, the act was bitterly denounced as socialistic; and capital and industry girded its loins for a last-ditch fight in the Supreme Court.

Ignoring a well-established principle that taxes can be contested only after they have been paid, the Supreme Court agreed to hear on appeal a suit in which a stockholder sought to enjoin a bank from paying the new tax. The best legal talent of the country was brought into the case, and the Court heard argument twice, one justice being ill during the first argument. In a five-to-four decision, one unidentified justice having switched over on the second argument, the Court held the income tax law invalid.

The provision taxing income derived from wages, salaries, and professional earnings was declared valid as an excise, but under the rule governing the partial unconstitutionality of statutes, the entire act was held void.

How do you like them apples?

Thats a very insightful statement.. do you have a link for that?

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"Those who say it cannot be done should not interfere with those of us who are doing it" - S. Hickman

"do you have a link for that?"

"The material you requested is included in JSTOR, an online journal archive made available to researchers through participating libraries and institutions. This journal is licensed to JSTOR by The Harvard Law Review Association."

I think it was part of:

State Constitutional Law in 1935-36
J. A. C. Grant
The American Political Science Review, Vol. 30, No. 4 (Aug., 1936), pp. 692-712
doi:10.2307/1947946

"There is a kernel of truth in Chief Justice Hughes' remark that, "We are under a Constitution, but the Constitution is what the judges say it is."

"I would agree with that. It is a fair analysis."

Richard, I fear you may have condemned yourself to a visit by the Spanish Inquisition! There may yet be time for you to save yourself and recant.

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Tryagain wrote:

"Those who say it cannot be done should not interfere with those of us who are doing it" - S. Hickman

"do you have a link for that?"

"The material you requested is included in JSTOR, an online journal archive made available to researchers through participating libraries and institutions. This journal is licensed to JSTOR by The Harvard Law Review Association."

I think it was part of:

State Constitutional Law in 1935-36
J. A. C. Grant
The American Political Science Review, Vol. 30, No. 4 (Aug., 1936), pp. 692-712
doi:10.2307/1947946

"There is a kernel of truth in Chief Justice Hughes' remark that, "We are under a Constitution, but the Constitution is what the judges say it is."

"I would agree with that. It is a fair analysis."

Richard, I fear you may have condemned yourself to a visit by the Spanish Inquisition! There may yet be time for you to save yourself and recant.

I like that quote from Hickman.. Im going to adopt that.

I appreciate the JSTOR information Ill look it up. And dont worry the Spanish Inquisition cant hurt me - Im protected.

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The Spanish Inquisition.? You two certainly do remind me of Monty Python.

"The courts have ruled wages aren't subject to income taxes."

Actually, the courts have declared wages are subject income tax.

"No they haven't."

I can cite over 50 cases where they did declare wages are income.

"No, you can't. and if you did none of them would be the Supreme Court."

The US Supreme Court said as much in Springer, Eisner, Glennshaw Glass

"No, they didn't."

Let me quote you the relevant parts from Springer.

"I don't want to talk about that anymore. Lets talk about the Fed and how it isn't legal. Now stop changing the topic so much."

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Try: Trouble at mill.

Richard: Oh no - what kind of trouble?

Try: One on't cross beams gone owt askew on treadle.

Richard: Pardon?

Try: One on't cross beams gone owt askew on treadle.

Richard: I don't understand what you're saying.

Try: One of the cross beams has gone out askew on the treadle.

Richard: Well what on earth does that mean?

Try: I don't know - Mr Wentworth just told me to come in here and say that there was trouble at the mill, that's all - I didn't expect a kind of Spanish Inquisition.

[The door flies open and Cardinal Parados of A2K enters]

Parados: NOBODY expects the Spanish Inquisition! Our chief weapon is surprise...surprise and fear...fear and surprise.... Our two weapons are fear and surprise...and ruthless efficiency.... Our three weapons are fear, surprise, and ruthless efficiency...and an almost fanatical devotion to the IRS 2 Cents

.... Our four...no... Amongst our weapons.... Amongst our weaponry...are such elements as fear, surprise....

Try: I didn't expect this kind of Parados Indecision .

'Taxes on houses, lands, and other permanent real estate have always been deemed to be direct taxes, and capitation taxes, by the express words of the Constitution, are within the same category; but it has never been decided that any other legal exactions for the support of the Federal government fall within the condition that unless laid in proportion to numbers the assessment is invalid.'

All these cases are undistinguishable in principle from the case now before us, and they are decisive against the plaintiff in error.

The question, what is a direct tax, is one exclusively in American jurisprudence. The text-writers of the country are in entire accord upon the subject.

Mr. Justice Story says all taxes are usually divided into two classes,- those which are direct and those which are indirect,-and that 'under the former denomination are included taxes on land or real property, and, under the latter, taxes on consumption.' 1 Const., sect. 950.

Chancellor Kent, speaking of the case of Hylton v. United States, says: 'The better opinion seemed to be that the direct taxes contemplated by the Constitution were only two; viz., a capitation or poll tax and a tax on land.' 1 Com. 257. See also Cooley, Taxation, p. 5, note 2; Pomeroy, Const. Law, 157; Sharswood's Blackstone, 308, note; Rawle, Const. 30; Sergenat, Const. 305.

We are not aware that any writer, since Hylton v. United States was decided, has expressed a view of the subject different from that of these authors.

Our conclusions are, that direct taxes, within the meaning of the Constitution, are only capitation taxes, as expressed in that instrument, and taxes on real estate; and that the tax of which the plaintiff in error complains is within the category of an excise or duty. Pomeroy, Const. Law, 177; Pacific Insurance Co. v. Soule, and Scholey v. Rew, supra.

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All your quotes leave me to wonder why you stated...

Quote:

Do we all at least agree that any personal income tax extorted before the 16th amendment was illegal?

And Richard agreed with you.

You can stop trying to pass off the personal income tax being unconstitutional as a live thing.

Quote:

'E's not pinin'! 'E's passed on! This parrot is no more! He has ceased to be! 'E's expired and gone to meet 'is maker! 'E's a stiff! Bereft of life, 'e
rests in peace! If you hadn't nailed 'im to the perch 'e'd be pushing up the daisies! 'Is metabolic processes are now 'istory! 'E's off the twig! 'E's kicked the bucket, 'e's shuffled off 'is mortal coil, run down the curtain and joined the bleedin' choir invisibile!! THIS IS AN EX-PARROT!!

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Thank you for your discourse on Parrot, although I must say I am not sure it is pertinent to the matter in hand, unless it is to admit; your argument is no more.

U.S. Supreme Court
PARROT v. TALLAHASSEE, 381 U.S. 129 (1965)
381 U.S. 129

PARROT ET AL. v. CITY OF TALLAHASSEE.
ON PETITION FOR WRIT OF CERTIORARI TO THE CIRCUIT COURT OF THE
SECOND JUDICIAL CIRCUIT, LEON COUNTY, FLORIDA. No. 958.
Decided May 3, 1965.

A minor procedural defect which petitioners tried to correct does not constitute an adequate independent state ground for decision barring review by this Court. The petition for writ of certiorari is granted and the judgment is reversed. Robinson v. Florida, 378 U.S. 153.

Certiorari granted and judgment reversed.

Jack Greenberg and Derrick A. Bell, Jr., for petitioners.

Roy T. Rhodes and Edw. J. Hill for respondent.

PER CURIAM.

The petition for writ of certiorari is granted and the judgment of the Florida Circuit Court is reversed. Robinson v. Florida, 378 U.S. 153.

Back to

The adoption of the Sixteenth Amendment in 1912 gave Congress power to tax incomes from whatever source derived, but the wording of the amendment raised certain difficulties. The decision in the Pollock case, which was generally construed to mean that income taxes were direct taxes and must therefore be apportioned, seemed to infer that they were not excise taxes which had to be uniform, since obviously they could not be both at once.

But with the removal by the Sixteenth Amendment of the requirement of apportionment, the income tax was not required to be either uniform or apportioned. The Court extracted itself from this apparent dilemma in Brushaber v. Union Pacific R. Co. (1916). Mr. Chief Justice White, in one of his famous nonstop sentences, solved the problem to the satisfaction of everyone. He said:

"Moreover, in addition, the conclusion reached in the Pollock Case did not in any degree involve holding that income taxes generically and necessarily came within the class of direct taxes on property, but, on the contrary, recognized the fact that taxation on income was in its nature an excise entitled to be enforced as such unless and until it was concluded that to enforce it would amount to accomplishing the result which the requirement as to apportionment of direct taxation was adopted to prevent, in which case the duty would arise to disregard form and consider substance alone, and hence subject the tax to the regulation as to apportionment which otherwise as an excise would not apply to it."

What this means is that income taxes are now returned to the status of excise taxes, which must be "uniform throughout the United States."

The language of the Sixteenth Amendment, authorizing Congress to tax incomes "from whatever source derived," raised other issues. Could Congress subject federal judges to income taxation on their salaries, in the face of the clause in Article III forbidding diminution of such judicial salaries?

In Evans v. Gore (1920) the Court held it could not, although Mr. Justice Holmes urged in dissent that such salaries were "income from whatever source derived." It was also responsibly urged that this phrase in the amendment destroyed the immunity from federal taxation of income from state and municipal bonds, an immunity established in the Pollock case. Again it was plausibly argued that the income from these bonds fell within the meaning of the phrase, "income from whatever source derived." The Court's language in Evans v. Gore has been accepted as the answer to these problems. The words "from whatever source derived" are not to be construed literally, but rather in the context of the purpose of Congress in drafting the Sixteenth Amendment.

The Court said: "... the genesis and words of the Amendment unite in showing that it does not extend the taxing power to new or excepted subjects, but merely removes all occasion otherwise existing for an apportionment among the states of taxes laid on income, whether derived from one source or another." While there has been no judicial utterance on the precise point, income from state and municipal bonds remains immune from federal taxation, and Congress has acquiesced in this result.

Please note that the court said that the words are not to be taken literally. This is where people have gotten off track. Why are they not taken "literally? Because the intent of Congress, in drafting the sixteenth Amendment, was to apply the 1909 Corporation Tax Act by incorporating it into the Normal Tax on the Federal Government worker as found in 38 Stat 166 Part II. A careful reading of page 166 brings this out; it said "apportionment among the states" and NOT "apportionment among the people."

I have to give a definition from Websters 1911 Dictionary because the word of the time must be defined and what better way than to use a dictionary from that time period. The word is Home and this is the definition of the phrase "at home" found in 38 Stat 166.
Websters page 633.

HOME: n. A dwelling house; the house in which one resides; residence.
The place of constant residence; the seat.
At home, at one's own house or lodgings. Home department, in the executive part of a government, that department that has charge of matters connected with the civil jurisdiction of the State.

Need I say more?

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If you are going to steal other people's words Try, could you at least give them some credit?
http://www.atgpress.com/inform/gov031.htm

But do you really want to trust someone that can't get simple facts right? The adoption of the 16th amendment in 1912? So much for this guys great research. Laughing

But wait, do you really want to trust someone that wants you to send blank money orders to him to get his books?

Quote:

To Order: Send a completely blank U.S. Postal Money ONLY to:

A bar C, c/o 7055 Mountain Road, Oxford, North Carolina (27565)

http://www.atgpress.com/inform/indexinf.htm#BOOKS

The parrot is still dead. He's not coming back to life no matter how much you shake the cage.

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Keep more of your own money (Part II)

Owning a home is the world's greatest tax shelter. You can deduct mortgage interest and property taxes. And almost always, you can keep the gains when you sell your home.

In the last few years, Congress and the Internal Revenue Service have made your home potentially an even greater tax shelter than it has ever been -- especially if you use your home for your business.

How long these breaks stay in place is a question market. Many experts believe the tax breaks Congress gave home owners is a big reason why home prices have shot up so much in many markets. In 2005, President Bush's Advisory Panel on Tax Reform suggested we should limit some of the goodies.

But changes may take a few years to become law. So enjoy. Here are all the deductions and benefits you get when you pay homage to the mortgage gods and go into more debt than your parents earned in their lifetimes. We'll start with the bread-and-butter breaks and then hit the new wrinkles.

Taxes

First, you get to deduct all the real property taxes you pay. That includes all state or local taxes for the general welfare. It doesn't count any trash or garbage collection fees or homeowner association charges specifically stated and billed.

If you're escrowing for the taxes, you get the deduction when your bank makes the payment.

Even if you're a tenant shareholder in a co-op apartment building, you get to deduct your share of any property taxes paid.

There's no limit on the number of properties on which you can deduct taxes paid. If you have 10 homes, you can deduct the taxes on all 10.

But watch out: If your deductions are too great, you could be required to use the Alternative Minimum Tax. The AMT is designed to ensure that everyone pays some tax and does so by forcing you to take fewer deductions.

Interest
Uncle Sam wants to put you in a home. Sorry, that doesn't sound right. How about: Uncle Sam wants to put you in a house? In any case, our government wants to subsidize your home purchase. It does that by making your interest payments deductible.

Interest paid on the purchase of your principal residence is deductible. You can even finance the purchase of additional land, adjacent to your home, and deduct the interest as qualified residence interest. You can also deduct the interest you pay to buy a second residence or vacation home.

The personal-interest deduction is limited to the first $1 million of debt. If you plan to spend more than $1 million for your house, call your accountants.

You can also deduct the interest on as much as $100,000 worth of home-equity debt. As long as the house has the equity and the debt is secured by that equity, the IRS doesn't care what you do with the borrowed money. You can use it for whatever you want, including a vacation or a party to celebrate your newfound deductions.

If you're in the 25% bracket, $100 in interest paid only takes $75 out of your pocket. Uncle Sam pays the other $25 in income taxes forgone.

This is always one to watch. In its 2005 report, the President's Tax Panel thought the interest deduction should be limited. Congress has not yet weighed in on the topic.

Gain exclusion
Here's where, a few years ago, the Congress and the IRS gave away the farm.

In the good old days (i.e., before 2002), you had to worry about having to roll over your gain into a new home. Or work to qualify for the $125,000 gain exclusion if you're age 55 or older.

The current rule is good no matter how old you are.

If the property was your principal residence for any two of the five years prior to sale, you can exclude from taxes $250,000 in gain (or $500,000 on a joint return). If you qualify under the 2-out-of-5 rule, you normally sign an affidavit at settlement. If the house sold for less than $250,000/$500,000, the sales amount isn't even reported to the IRS because you have no tax liability on that sale.

This is no one-time exclusion. You don't have to buy a new house. You can even rent, and you can get another full exclusion every two years -- or whenever you qualify. But, if you have a $250,000/$500,000 gain every two years, I want to meet your real-estate agent and get in on the gold mine.

You can even get a partial exclusion based on the time of use and ownership. But you only get the partial exclusion if the sale is because of:

A change in place of employment, or Health reasons, or Unforeseen circumstances.

The partial exclusion is based on the maximum exclusion, not on the basis of your actual realized profit. So, say you bought a home for $250,000 and sold it, because of a job change, for a $25,000 profit after only one year.

Because the sale was covered by a change in employment, you get a partial exclusion. It was your principal residence for one year out of two, so 50% of the maximum exclusion, up to $125,000 in total gain, is excluded. Since that's more than the $25,000 gain you actually realized, no tax is due on the sale. That's because you exclude half the maximum allowed, not the gain itself. It's a major tax break. Not many properties are going to appreciate more than $125,000/$250,000 in one year.

The key is to qualify for the partial exclusion if possible. "Change in employment" covers anyone who lives in the household. The person doesn't even have to be an owner of the property. The "change in employment" must be the primary reason for the move. There's a "safe harbor" that assumes that it was the primary reason if your new job is at least 50 miles farther from the residence sold than where you used to work.

But if you don't meet the "safe harbor," all is not lost. You'll just have to prove (if you're audited) that it was the primary reason for the move based on the facts and circumstances of your case.

Health reasons include advanced-age-related infirmities, the need to move to care for a family member, or to obtain or provide medical or personal care for a qualified individual suffering from a disease, illness or injury.

Unforeseen circumstances are where the IRS really became consumer-friendly. Safe harbors here include divorce, death, multiple births from the same pregnancy and even a change in employment or self-employment status that results in your inability to pay the costs and living expenses of your household. So, if your income goes down, or even if your spouse or other co-owner's income goes down, you can qualify for a partial or even a full exclusion.

Even if you don't qualify for one of these "safe harbors," you might still qualify on the basis of your specific facts and circumstances.

Home offices
Here's where, in my opinion, the IRS actually crossed the line. But, since it was in favor of the taxpayer, I'm not going to complain.

Let's say you use 20% of your house as a home office, and you deduct depreciation and expenses for working in that part of the house.

In the past, when you sold your house, 20% of the gain wouldn't qualify for the exclusion because that 20% wasn't used as a "residence." It was used exclusively as your office. And check IRS Publication 587 on home office deductions.

The IRS doesn't care even if you used your home 90% for business as a home office. You can now exclude as much as 100% of your gain, up to the $250,000/$500,000 limit.

You're only going to be subject to tax on the gain to the extent of depreciation taken on the building since May 7, 1997. But that's taxed only at a rate no more than 25%.

Wow! That means, if you qualify, there's no reason not to claim a home office. And I know there are any numbers of people who work out of their homes who don't claim home offices now.

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The rules for writing off an home office tightened a few years ago. In order for you to write off a home office it has to be your main place of business.

For instance, if you are a carpenter and spend most of your day on jobsites building, you can no longer write off a home office since it is not where you spend most of your work day. Even if you do your billing and paperwork in a designated spot in your home, I don't believe you can write any of it off.

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Is U.S. income tax invalid?

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