There are actually a lot of people that do not pay their income tax and were unjustly put in prison for it. The IRS does not define the word “income” in their internal revenue code however the Supreme Court has and they define it as CORPERATE profit and gains.
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252 U.S. 189 pg 205 (1920) The Sixteenth Amendment must be construed
in connection with the taxing clauses of the original Constitution and the effect attributed to them before the Amendment was adopted. In
Pollock v. Farmers’ Loan and Trust
- it was held that* taxes upon rents and profits of real estate and upon returns from investments of personal property were in effect direct taxes upon the property from which the income arose,
***imposed by reason of ownership; and that ***
Congress could not impose such taxes without apportioning them among the states
according to population, as required by Art 1 Sect. 2 Cl. 3 and Sect. 9 Cl. 4 of the original Constitution.
Afterwards,* and evidently* ***in recognition of the limitations upon the taxing power of Congress thus determined, the Sixteenth Amendment was adopted: ***. . .
As repeatedly held,
this did not extend the taxing power to new subjects,
but merely removed the necessity which might otherwise exist for an apportionment among the states of taxes laid on income. . . .
it becomes essential to distinguish between what is and what is not "income’, as the term is there used;
***After examining dictionaries in common use we find little to add to the ***
succinct definition adopted in two cases arising under the Corporation
(Excise) Tax Act of 1909 (Stratton’s Independence v. Howbert 231 US 399, 415; Doyle v. Mitchell Bros. Co. 247 US 179, 185)
"Income may be defined as the gain derived from capital, from labor, or from both combined",
provided it be understood to include profit gained through a sale or conversion of capital assets,
to which it was applied in the Doyle case pp. 183, 185.
*“Derived – from – capital”; – "*
the gain – derived – from – capital," etc. Here we have the essential matter: not a gain accruing to capital, not a growth or increment of value in the investment; but a gain, a profit, something of exchangeable value proceeding from the property, severed from the capital however invested or employed, and coming in, being “derived,” that is, received or drawn by the recipient (the Taxpayer) for his separate use, benefit and disposal; – that is income derived from property. Nothing else answers the description.
That Congress has power to tax stockholders upon their property interests in the stock of corporations is beyond question; and that such interests might be valued in view of the condition of the company, including its accumulated and undivided profits, is equally clear. But this would be taxation of property because of ownership, and hence would require apportionment under the provisions of the Constitution, is settled beyond peradventure by previous decisions of this court.
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Merchants’ Loan & Trust Co. v. Smietanka
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255 U.S. 509 (1921) "It is obvious that these decisions in principle rule the case at bar if the word “income” has the same meaning in the Income Tax Act of 1913 that it had in the Corporation Excise Tax Act of 1909,
and that it has the same scope of meaning was in effect decided
*in Southern Pacific Co. v. Lowe 247 U.S. 330, 335, where it was assumed for the purposes of decision that **there was no difference in its meaning as used in the act of 1909 and in the Income Tax Act of 1913. ***
There can be no doubt that the word must be given the same meaning and content **in the Income Tax Acts of 1916 and 1917 that it had in the act of 1913. **When to this we add that in Eisner v. Macomber, supra, a case arising under the same Income Tax Act of 1916 which is here involved, the definition of “income” which was applied was adopted from Strattons’ Independence v. Howbert, arising under the Corporation Excise Tax Act of 1909, with the addition that it should include “profit gained through sale or conversion of capital assets,” there would seem to be no room to doubt that
the word must be given the same meaning in all the Income Tax Acts of Congress that was given to it in the Corporation Excise Tax Act, and that what that meaning is has now become definitely settled by decisions of this Court."
