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Irwin Schiff Calls Otto Skinner A Liar

You be the judge
(Revised 11-30-98)

An Introduction and comments by Otto Skinner...

A friend of mine in Las Vegas sent me a copy of a tape of an Irwin Schiff radio show which was, according to the date marked on the tape, aired on 1-8-98. I had another friend transcribe the relevant portion of the tape for your review. Although this friend is a very capable secretary, absolute accuracy of the transcription, which you see below, is not guaranteed.

The main issues discussed in the tape involve my very strong disagreement with Irwin Schiff regarding the "zero" tax return (which is an idea he promotes) and his interpretation of the definition of "income" for income tax purposes. According to the tape, a caller had called his show the week before and had also disagreed with Schiff on these issues and had referred to my latest book, The Biggest "Tax Loophole" of All. I have very strongly disagreed with the Irwin Schiff material for many years.

There are many supposedly "legally valid" arguments promoted throughout the patriot community which I strongly believe to be legally invalid arguments, i.e., arguments with no legal foundation. I so strongly believe these arguments are not legally valid, that I list 18 of them in a chapter titled: "WHY SOME PEOPLE GO TO JAIL." If you compare material which Schiff has promoted with the 18 arguments that I list as flawed arguments, I believe you will find that Schiff has promoted about 15 of these as if they are legally valid arguments, and which I strongly consider to be legally invalid arguments. For example, Irwin Schiff has for years promoted the idea of filing W-4 forms claiming to be "exempt". It is my estimate that hundreds of thousands, if not millions, of people have suffered $500 civil penalties, and hundreds, if not thousands, of people have been convicted and incarcerated for having followed such advice. In my books, I explain why I believe a W-4 form should not be used by an individual who is not liable for a tax.

If one doctor recommends that you get an operation, it is usually a good idea to get a second opinion. My books certainly provide a second opinion. My strongly held personal opinion is that one should not follow the advice of Irwin Schiff. It is further my opinion that anyone who promotes Irwin Schiff's material doesn't even understand the nature of the so-called "income" tax, and further they do not really understand the precise difference between direct taxes and indirect taxes as ruled by the United States Supreme Court.

Schiff leads his followers to believe that certain court cases stand for the proposition that "zero" tax returns are legitimate returns. One such case is United States v. Moore Case, 627 F.2d 830 (7th Cir. 1980). If you read the case for yourself, you will see that the Court clearly did not hold to the proposition Schiff claims. In fact, the Court discusses "zero" returns and considers such returns to be invalid returns. Why, then, does Schiff call me a liar?

Moore actually had entered the word "none" in the spaces on his return rather than zeros. In my book, The Biggest "Tax Loophole" of All, at page 209, I mistakenly used the word "zeros" instead of correctly using the word "none". The important fact is that the 7th Circuit Court of Appeals considered returns with just zeros entered in the spaces just as invalid as they considered returns with the word "none". (The People who know me know that I try very hard to word things as accurately as I can. The mistake will certainly be corrected in the next printing.) Apparently, for this mistake, Schiff calls me a liar.

If I had used the correct word ("none"), the point I was making would have been made better; that is, the Court, in United States v. Moore Case, 627 F.2d 830 (7th Cir. 1980), did not hold that "zero" tax returns qualify as returns, contrary to what Schiff leads his followers to believe.

We pick up the tape just before Schiff enters the program. Two of Schiff's people are talking. I will make my comments as we go along.

Read the following and enjoy.

Schiff's nonsense...
Elizondo:Who's on the air? Hello.
Richard: Yeah, this is Richard.
Elizondo: Yes, Richard, give us an update.
Richard: We're on our way right now to Flamingo and Maryland Parkway.
Elizondo: Flamingo and Maryland Parkway.
Richard: We will be passing out free tapes -- tapes.
Elizondo: And what is contained in those tapes, Richard?
Richard: Uh, we'll be there til 5:30 --
Elizondo : O.K., tell us what's in those tapes.
Richard: It's everything that you need to know about the income tax itself, and if you're not thoroughly convinced that there is no law that requires anybody to pay income tax, just return the tape.
Elizondo: There you go --
Richard: Uh, just suppose, John, I told you that I could give you an immediate raise. Would something like this be of immediate interest to you?
Elizondo: Oh, you bet it would be.
Richard: Well, that's what we're talking about folks. There is no law that requires anybody to even file an income tax form, let alone to pay one.
Elizondo: Now, right --
Richard: However, we do file one for the simple reason that they cannot prosecute an individual that files a legitimate tax return. A zero return, has been declared a legitimate return not only by the 9th Court of Appeals right here in San Francisco, but also by Congress.

Otto Skinner's Comments...
The 9th Circuit Court of Appeals did not say a "zero" return was a legitimate return. The Court said:
Nothing can be calculated from a blank, but a zero, like other figures, has significance. A return containing false or misleading figures is still a return. False figures contain false information, but they convey information.
United States v. Long, 618 F.2d 74 (9th Cir. 1980)
In other words, the false information creates a false return; not a legitimate return. A person with no "gross income" is not required to file in the first place.

Schiff's nonsense...
Elizondo : Right, and we're in the 9th Circuit, too, right.
Richard : Right. And the term "income" defined by Congress means corporate profit.

Otto Skinner's Comments...
Congress has not, and cannot, define the term "income". I think even Schiff acknowledges the case of United States v. Ballard which stated that Congress had not defined the term "income", and the case of Eisner v. Macomber, wherein the United States Supreme Court explained why Congress has no constitutional power to adopt their own definition for a term used in the Constitution.

The Eisner Case not only explains a very sound principle of constitutional law, the Court explains the principle in such a way that almost anyone should be able to understand it. Apparently, Elizondo and Richard haven't read the cases for themselves. Yet, they are talking other people into following Schiff's material. The blind leading the blind.

Schiff's nonsense...
Elizondo : Right. Now, all --
Richard : Now if anybody thinks that they're a corporation, I've got news for them. O.K?
Elizondo : Yeah, well --
Richard : They are not.
Elizondo : The information is on that free sampler tape. You're going to be out at Flamingo and Maryland Parkway, and you'll see the public alert sign. Honk your horn if you want to stop paying income taxes and Richard will be out there with some volunteers. Thank you, Richard. Thank you for your telephone call. Let's go -- we also have a public alert system clear out in Henderson on Boulder Highway and Lake Mead and we're waiting for Wayne to give us a call, not unless he's already called in, but Wayne give us a call, give us an update. And, just walking in the studios -- Hello, Irwin Schiff. You just got off one radio show and here you are again.
Schiff : Yes, well -- ha, ha, ha --
Elizondo : You never stop, never stop.
Schiff : I was just interviewed -- nice station, it's a big station, KPRC in Houston, and it's going to be aired Saturday or Sunday, so when we go to our satellite and short wave I'll be able to notify our listeners in the Houston area that they can hear me. It's going to be aired either Saturday or Sunday. I don't know the time, but they're going to have to call KPRC if they want to hear the interview. But, pardon me -- what I would like to do right now is that last week, Sam the Radio Man, and I hope he's listening, called this show and he brought up the question of Otto Skinner and his book. Uh, and his latest book is called The Biggest "Tax Loophole" of All."
Elizondo : Who is Otto Skinner?
Schiff : Otto Skinner is an individual who has written a few books, a couple of books on the income tax, and in my view, he has really confused a lot of people and led them astray. But, in any case, I said last week, and I was criticized by a couple of people for doing so, that Otto Skinner was a liar.
Elizondo : Yeah --
Schiff : Now, frankly, I'm not the most diplomatic guy in the world, and I think I'm honest, and when a man comes out and lies, uh, you know, he's a liar. Now I know that you're maybe not supposed to call people liars. I once heard Thatcher -- what's her name --
Elizondo : Margaret --
Schiff : Margaret Thatcher called a guy a liar, but didn't say he was a liar. She was, uh -- this was in Parliament -- and she called him a liar in such diplomatic terms it was beautiful. But I'm not -- I don't have the eloquence of a Margaret Thatcher. So, --
Elizondo : Can I interrupt you for just for one minute.
Schiff : Yes.
Elizondo : Our Public Alert System out at Henderson we're expanding. Before you get into that subject, let's go to Wayne. Wayne, are you there? Wayne Shenk?
Wayne : Yes, I'm right here. Yes, I'm right here
Elizondo : Wayne, am I pronouncing your last name right?
Wayne : That's correct.
Elizondo : All right, Wayne, tell our folks out there where you're located.
Wayne : We're on the corner of Lake Mead and Boulder Highway right across from the Circle K.
Elizondo : O.K.
Wayn : Uh, also catycorner to St. Rose Dominican Hospital --
Elizondo : Uh, huh --
Wayne : And if you're looking for us, we're on the southeast corner, and we've got our public alert sign up --
Elizondo : Great --.
Wayne : And we have tapes to give away to give away to the people in Henderson.
Elizondo: Now, you can pick us up there. KLAV reaches out there to Henderson, right?
Wayne:It works excellent here.
Elizondo: Good. O.K. So honk your horn. Go out there. Do you have other volunteers with you, Wayne?
Wayne:Yes. We have two other volunteers and we're passing out tapes right now.
Schiff: Great. Now I want to tell the people who may be turning to tune us in for the first time because they heard the Public Alert. We're going to be explaining, folks, how you can file a tax return this April 15th and get back all the income taxes that you paid in 1997. And we're also going to explain how you can stop your employer from withholding taxes from your pay. In other words, there is no law requiring people to pay income taxes and this is what this show is all about. But, I want to explain, and I told Sam --
Elizondo: Wayne, thank you very much for your phone call. Keep us informed in another thirty minutes, O.K.?
Elizondo: Thank you, sir.
Schiff: Now when Sam brought up Otto Skinner and his new book, and I said he was a liar, again I was criticized. But if you have actual documented proof that the man is not telling the truth, and let me read --
Elizondo: You have documentation?
Schiff: Oh, yeah, right here, now listen. I'm quoting from his book, uh, The Biggest "Tax Loophole" of All, and if you want to write for his book, I'll even tell you the price he's charging, but --.
Elizondo: Why would you want to waste your time?
Schiff: No, no. I'm going to give -- P.O. Box 6609, San Pedro, CA
Elizondo: You're too fair.
Schiff: And he charges for the book, let me see, $39.95 he gets for this book plus $5.00, so it would be over $40.00 bucks.
Elizondo: Why fill your head with garbage. I don't understand this.
Schiff: Will you give me a chance? I don't want anybody to think that the reason I don't want him on --
Elizondo: It's your show, you can do it --
Schiff: If I had him on it would just waste time. Let me -- I'm going to read from this book. Now this book supposedly is exposing various, uh, various incorrect procedures in the claiming of taxes. So, flawed argument #12, he says -- and I'm reading right from the book. "The individuals file tax returns with zeros into the spaces provided under the theory that the zero tax return satisfies the requirement of making a required return." First of all, he quotes required as if you're required to file a return. Maybe, no, you're not required to file a return maybe that's why he has quotes. Let me read what it -- I'm going to read right from his book. "To support this frivolous and dangerous position, the promoters --" meaning me -- "list three appellate court cases, namely, the United States vs. Moore, United States vs. Long and United States vs. Kimball. This position is further supported with the flawed claim that the term 'income' only means corporate profit." Now this is coming from a person who is holding himself out, folks, as --
Elizondo: As an expert--
Schiff:: Yes. "By submitting such forms, the individual is setting himself up for a $500 civil penalty for filing a frivolous return for each return filed, along with the distinct possibility of criminal charges for attempted tax evasion and also for filing false and fraudulent returns." Now each one of these statements, I want to comment, is incorrect. First of all, he should know that the IRS is not even authorized to impose a civil penalty. Secondly, he should also know that there is no statute making anything in connection with the income tax criminal. And, thirdly, he says (inaudible) attack by filing a false and fraudulent return. You can't be file -- if you file my zero return, you can't be prosecuted for filing a false and fraudulent return because on the attached pages we say this return is not being filed voluntarily. We're filing it to avoid being charged with willful failure to file. So he should know that all of these statements are incorrect or misleading. Now, but listen to this -- now he cites the three cases that I cite, and this is what he says. "The Moore case simply does not support --" oh, in my zero return, we cite U.S. vs. Moore as one of the cases which, uh, states that filing a zero return is a legitimate return. Now he's trying to refute that. He says, "The Moore case simply does not support the proposition that is purported by the promoters." Now listen to this -- "Moore was convicted for failure to file returns. He had entered zeros on returns for the years 1972, 1973 and 1974." So he says that Moore had entered zeros on his returns for 1972, 1973 and 1974. Now he goes on to say, "The 7th Circuit of Appeals held, 'it is not the false data which makes these returns defective but the fact that there is no real attempt to comply with the filing requirement of filing a return. The conviction is affirmed.'" So now, here is Otto Skinner saying that Moore filed a zero return. That is a false statement. Let me read from the case itself, and now I'm reading from the case of U.S. vs. Moore, 627 F.2d 830. I'm reading from the case, "In April 1973, defendant and his wife submitted a joint return for the year 1972. This form contained only their names, occupation, social security number and the number of dependents. Fifth amendment objections were written across the form and a packet of tax protester literature was attached. The form was signed by the defendant and his wife. But the verification was scratched off." Incidentally, we don't scratch off the verification.
Elizondo: Uh, huh.
Schiff:"The IRS notified defendant in August 1973 that the forms were not sufficient returns. In a rather contemptuous January 1974 letter, defendant replied to the IRS stating that he considered dollars to be worthless and his tax return to be adequate. In May 1974, however, defendant submitted an amended 1040 form for the year 1972. This form was filed for himself only. On the amended form defendant filled in the various blanks for numerical information with 'None', except that under interest income he put $41.00 and in the dividend income he placed a figure at $22.00. The Fifth Amendment objections were retained and more tax protester material was appended. Although signed, the certification on the form was again marked over. In 1974, defendant also filed a return for the year 1973 which was substantially the same as his amended form in 1972. It contained a small amount of interest income and the certification was scratched off. The IRS notified defendant by letter in July 1974 that it did not consider this to be a return. In 1975 defendant filed a similar return for the 1974 year. The IRS again informed him that it did not consider this to be a return." So at no time did Moore file zero returns. He filed returns in which he showed None, he put Fifth Amendment, he inserted small amounts --
Elizondo: Right --
Schiff:At no time did he file a zero income return. Now either, um --
Elizondo: Skinner can't read --
Schiff: If Skinner commented on the case, how could he have said that Moore filed zero returns? He didn't. He claimed the Fifth Amendment, he inserted $22.00, $41.00. He did not file a zero return at all. So in his book, Otto Skinner says, "Moore was convicted for failure to file. He entered zeros on returns for the years 1972 --
Elizondo : That's a lie. That's an absolute lie.
Schiff: Am I wrong?
Elizondo: No, you're not wrong. He is a liar.
Schiff: Now let's continue. Let me read from the Moore case. See, the Moore case found Moore guilty because he didn't file a zero return. Now, let me read from the case. "It may have not even been necessary for the District Court to give this instruction. The IRS" -- oh, that's not -- Here, let me get -- Oh, let me find where they say -- Oh, now here's what he says in the Moore case. "The Ninth Circuit, however, has taken the opposite position. In United States vs. Long" (and he cites the case) "the taxpayer submitted a form with zeros in all the blanks. The court held that even if this information were false, a tax liability could be computed from it and it was, therefore, an adequate return. Part of the court's rationale appeared to be that a different penalty could be levied against those who took the chance of supplying false information." He says, "Where the same court affirmed the" -- in other words, the Ninth, and then he goes on to say, "The Ninth Circuit is clearly correct in stating that a tax liability could be computed from zeros." So, therefore, I cited the Ninth Circuit in my attachment by simply showing that the Ninth Circuit -- uh, that the Seventh Circuit agreed with the Ninth Circuit that filing a zero return was an adequate return. Now we're claiming that all the government can do is say -- well, the information is false and, therefore, charge us with tax evasion or, uh, charge us with perjury. But, this is proof that a zero return is a return. So, uh, Otto Skinner totally misrepresents the Moore case in his book. Now, let's continue. So now he totally misrepresents the Moore case and he lies about the return that was filed in this particular instance. Now, let's continue from his book. "The Long Case presents a different situation. The government claimed that they had no record of Long having filed returns. Long claimed that he had filed returns with zeros in the space provided. The court explains that during the years in question, 1972, 1973 and 1974, the Internal Revenue did not always keep copies of documents it considered invalid returns. Because of this, the government was not able to prove that Long had or had not filed, taking a different position than did the Seventh Circuit in the Moore case." Well, they didn't take a different position. The Ninth Circuit explains that since the zeros could be calculated, even a return containing false information is still a return." That's our point. So even Skinner acknowledges that. "The court goes on to explain that if the Service had kept the papers Long claimed he had filed, it could have brought some other charges." Well, O.K., sure. They can bring other charges. If they want, let them charge that the person filed -- let them charge him with tax evasion or charge him with committing perjury. But none of the people here or anybody else who has filed zero returns, and I'm sure we've filed thousands, nobody has been charged with tax evasion or perjury. Incidentally, if anybody's going to be charged with anything in connection with the zero return, it will be me. Because Section 7206 states that it is a crime for anybody to counsel or advise anybody to submit false claims to the government. And since I am the developer of the zero return, we've got hundreds of thousands of people filing claims to the government to get their money back --

Otto Skinner's Comments...
The facts are that the 9th Circuit in Long held that returns with just zeros on them would be considered returns, even if the information were false, and the government could bring other charges if they actually had the returns for evidence. The 7th Circuit disagreed with the 9th Circuit. The 7th Circuit points out, at page 834 of the Moore Case, that:
Varying positions have been taken by the Courts of Appeals.
United States v. Moore, 627 F.2d 830, 834 (7th Cir. 1980).

At page 835, the Court states:

The government should not have to guess whether it should take the position that a form is not a return and charge the taxpayer with failure to file, or that the form is a return and charge him with filing a false return or tax evasion. If the Courts of Appeals continue to disagree the Supreme Court will eventually have to decide the question, but it is our view that when it is apparent that the taxpayer is not attempting to file forms accurately disclosing his income, he may be charged with failure to file a return.
United States v. Moore, supra, at 835. (Emphasis added.)
The 7th Circuit considered returns with just zeros entered in the spaces provide as being no better than returns with "none" in some spaces and just a small amount of income reported in other spaces; which was one kind of return Mr. Moore had submitted.

In the three cases regarding the "zero" returns to which Schiff refers in supposed support of his argument, not a single one of these cases involved a hard-copy of a "zero" return. Moore had entered a small amount of income for interest and dividends, and he was convicted. Kimball had entered asterisks in the spaces provided. In United States v. Kimball, 896 F.2d 1218 (9th Cir. 1990), the 9th Circuit originally considered these to be returns, but after rehearing the issue in United States v. Kimball, 925 F.2d 356 (9th Cir. 1991), the Court stated:
We hold that the district court correctly ruled that Kimball's 1040 forms do not constitute returns.
United States v. Kimball, 925 F.2d 356, at 358 (9th Cir. 1991).
Long merely claimed he had filed "zero" tax returns, but the IRS had not kept these papers, and therefore, had no evidence to use against him in order to bring charges of filing false returns.

Schiff's nonsense...
Elizondo: That follow your method -- right, right --
Schiff: And if that's a crime, I'm the first one in line to be prosecuted. O.K. As it's said, could have brought some other charge. This, of course, would be felony charges for attempted tax evasion and filing false and fraudulent returns, but nobody has been charged for doing these things. Let's continue from the book -- from Otto Skinner's book. "We now come to the Kimball case. Kimball did not enter zeros on the returns which he filed but, instead, asterisks. At first, in United States vs. Kimball, the court held that the returns containing asterisks were valid returns. However, what the promoters of this flawed argument failed to say is that the Ninth Circuit changed its mind. On rehearing the issue in United States vs. Kimball on the re-hearing the court determined that because asterisks could not be used to calculate even a false return, returns containing only asterisks did not constitute returns. In other words, while zeros report zero income, asterisks do not report any income at all." Well, it's not important for me to have pointed out that this was reversed because this particular case involved asterisks. They first ruled that the asterisks were returns then they changed their mind. Uh, well this has nothing to do with the observation that had -- which Kimball said. Here's what Kimball said. "So even if a return contained only zeros it is considered a return it can be considered frivolous." So here is Kimball saying while though it can be a return, it still can be considered frivolous for the purposes of $500 civil penalty. But it's not frivolous because if he had looked at the 12 page -- 12 paragraph attachment, a zero return does not fall within the law talking about frivolous returns because the word frivolous means something silly -- something without any legal foundation. In our attachment on the zero return we cited no less than four Supreme Court cases which ruled that income is a corporate profit. Incidentally, on the new attachment we're increasing the number of Supreme Court cases to ten. So, we're going to on ten cases --
Elizondo: Oh, addition huh?

Otto Skinner's Comments...:
People who are considering filing "zero" returns should look up section 6702 of the Code. It explains quite clearly that for civil penalty purposes, if the return on its face indicates that the self-assessment is substantially incorrect, or that the position is frivolous (no foundation in law) a $500 civil penalty can be imposed.

When one claims he has zero wages, salary, tip, etc., and claims that this inaccurate information constitutes a legitimate return, and further claims that court cases hold what they do not really hold, thus providing a return based on no foundation in law, it is pretty easy consider such a return a frivolous return.

Also, Schiff apparently does not tell his listeners that there is currently a man in Michigan facing felony charges under section 7206 of the Code for filing "zero" 1040 returns. I suggest the readers look up both sections 6702 and 7206 in the Code.

Schiff's nonsense...
Schiff: Yeah. O.K. "A frivolous return is a document which purports to be a return but does not contain information on which the substantial correctness of the self-assessment can be judged." But our filing of zeros does contain accurate information because we say we have zero income because income is a corporate profit. "A position is considered frivolous when it is something that is contrary to established law and unsupported by reason (inaudible) argument for a change in the law." Well, who says our zero return is frivolous? We point out -- not only do we cite four Supreme Court cases, but we're upping this to about ten now in the new updated page, but we also cite no less than nine code sections, we cite about three or four references to Treasury Regulations and there's two or three references to the Privacy Act Notice -- so it's not frivolous, and in order to be frivolous it would have to be filed to delay the payment of the tax. Now, our statement makes it clear, we're not delaying the payment of the tax -- we're not paying. As a matter of fact, we want all our money back. Now, let's continue with this. So he's misrepresenting and misleading; every paragraph on here is either a lie or false or what have you. Now let's go to the next paragraph. "Now to the supposed supporting argument claimed that the term "income" only means corporate profit. The promoters cite the case of Merchants Loan & Trust Company vs. Smietanka, 255 U.S. 509 where the court held that the word income '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 what that meaning is has now become definitely settled by decisions of this court.'" That was the most extensive -- that's correct -- he cited that correctly --
Elizondo: Quoted it, yeah --
Schiff: Yeah, he cited it correctly, but what did the courts say? The word income means a corporate profit. The word income means the same thing as the word income meant in the Corporation Excise Tax Act of 1909. Incidentally, not only do we cite this case but we cite about three or four other supporting cases. But now we're going to cite about nine, O.K.? Now, the above case he mentions that Merchants Loan & Trust refers to the Eisner case previously discussed, which shows that the term income means profit or gain. Now again he's admitting that in Eisner the Supreme Court said that income means profit or gain. "But promoters of this flawed argument make a leap in logic to conclude that the term income only means corporate profit." Well, what else can it mean? Now, here is Otto Skinner who, Sam the Radio Man, wants to put some credibility in, and apparently Otto Skinner doesn't even understand that the word income does mean a corporate profit. So here he says that, "But the promoters of this flawed argument make a leap in logic to conclude that the term income only means corporate profit." Well, why would that mean a leap in logic if the Supreme Court said in Merchant's Loan & Trust Co. that the word income must be given the same meaning in all of the Income Tax Acts of Congress that was given to it in the Corporation Excise Tax Act of 1909? Now he says, "This is truly a frivolous position." Well, again, how can it be -- it could be wrong, incidentally, but how can it be frivolous? Frivolous means based on nothing, it means silly. Well, let's assume I was wrong, O.K.? Well if I were wrong, it was certainly not frivolous. I could have misread the Merchant's Loan & Trust Co. vs. Smietanka, but how can you misunderstand what they said. They said income means a corporate profit. He says, "This is truly a frivolous position because the United States Supreme Court has never held that the term income is limited to corporate profit." Yes, they have. Well, how could it be -- how could it mean a corporate profit and not mean a corporate profit? If the Supreme Court in Merchant's Loan & Trust Co. says "must be given the same meaning -- what that meaning is has now become definitely settled by decision of this court" -- if they said the word income means a corporate profit, then if it can mean a corporate profit, what have they said? It means a corporate profit sometimes, but sometimes it doesn't mean a corporate profit? Sometimes she's pregnant and sometimes she's not pregnant? Sometimes it's white and sometimes it's black, but sometimes we can't tell what it is? O.K., let's continue with this Otto Skinner --
Elizondo: With this frivolous book, ha, ha, ha --
Schiff: And he charges, what, $38.00 for this book. O.K., let's continue.
Elizondo: Are the sheets real soft?
Schiff: "The above case refers to the Eisner case previously discussed which shows that the term income means profit or gain. But the promoters of this flawed argument make a leap in logic" -- O.K. "This is truly a frivolous position because the United States Supreme Court has never held that the term income" -- sure, sure they have. Other cases try to hide the true meaning of income, but Merchant's Loan & Trust Co. vs. Smietanka, if you want to Shepardize it, has never been reversed, never been repealed, never been overridden. "It has essentially held that income means what ordinary dictionaries say it means." That's nonsense. The word income cannot mean what an ordinary dictionary says. And if any court says that, then Otto Skinner should also know that that judge is not telling the truth. It can't mean what the ordinary dictionaries say it means. For tax purposes the word income means a corporate profit because when the government puts a tax on corporate profit it is taxing income separated from the source. A tax on wages or a tax on dividends is a tax on the source. See, Otto Skinner doesn't even know there's a difference between income as used in our tax statutes and sources of income. Now let's continue, this is the final paragraph. "The zero income return appears innocuous on its face, but will lead the follower down a primrose path which can place him in harms way of $500 civil penalties" -- meanwhile, look at all the money we've gotten back from people. Somebody even called my office today telling me he got back $8,000.00 with the zero return. He never told me this before. I mean I have --
Elizondo: Let them try to take $500, do it. We'll sue them.
Schiff: Yeah, let them take $500 -- he's way ahead -- "and the possibility of some very serious criminal charges." Nobody has been charged criminally for filing a zero return. "It would help if individuals remembered that tax forms are for those who are subject to (liable for) a tax." Meaning, don't file anything. Now, the reason why we file a zero return, we point out in the zero return - I know I'm not required to file, I know I'm not liable for the tax, but I am filing in order to prevent myself from being illegally prosecuted for failure to file. So there's Mr. Otto Skinner in every paragraph dealing with the zero return, he either didn't tell the truth -- deliberately didn't tell the truth -- or he filed false and fraudulent comments with respect to the zero return. So now you tell me what kind of a label you might put on Mr. Otto Skinner who has the nerve to want to charge for this new book -- what does he want to charge for this book?
Elizondo: Let me see, $38.00 something --
Schiff: Oh, let me see -- Folks, if you want to order his book --
Elizondo: Use it for camping.
Schiff: Yeah, wait a minute. If you want to order his book, wait a minute, what is he--Oh, yeah, he's getting for this book $39.95 --
Elizondo: Forty bucks, huh?
Schiff: And $5.00 shipping
Elizondo: For false information. What a deal. What a deal!
Schiff: If his book is worth Forty bucks then my book is worth no less than $200.00, probably more. Now just think of all the misleading and false information he was able to cram in -- in two pages of text. Now I defy anybody to take the Federal Mafia which is over 300 pages, I defy them to read me one sentence in that book that is misleading or not accurate.

Otto Skinner's Comments...
First, regarding the dictionaries, the Supreme Court did indeed use dictionaries to determine the meaning of the term "income". The Supreme Court said:
For the present purpose we require only a clear definition of the term "income" as used in common speech, in order to determine its meaning in the Amendment; and, having formed also a correct judgment as to the nature of a stock dividend, we shall find it easy to decide the matter at issue.

After examining dictionaries in common use (Bouv. L.D.; Standard Dict.; Webster's Internat. Dict.; Century Dict.), we find little to add to the succinct definition adopted in two cases arising under the Corporation Tax Act of 1909 (Stratton's Independence v. Howbert, 231 U.S. 399, 415; Doyle v. Mitchell Bros. Co., 247 U.S. 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).

Brief as it is, it indicates the characteristics and distinguishing attribute of income essential for a correct solution of the present controversy. The Government, although basing its argument upon the definition as quoted, placed chief emphasis upon the word "gain," which was extended to include a variety of meanings; while the significance of the next three words was either overlooked or misconceived. "Derived-from-capital"; - "the gain-derived-from-capital," etc. Here we have the essential matter: not a gain <>iaccruing 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.
Eisner v. Macomber, 252 U.S. 189 at 206-207(1920). (Emphasis added.)
In spite of a somewhat lengthy explanation of the definition of "income" for purposes of the Eisner Case, the most important point here is that the Court has stated that to determine the meaning of the term "income" as used in the Sixteenth Amendment, it only required the definition as used in common speech. The documents the Court relied on for the "common speech" were the dictionaries. I submit you will not find a court case that limits the definition of "income" to corporate profit or gain, contrary to what Schiff claims.

You will notice that "income" is received or drawn by the recipient (taxpayer) for his own use or benefit. By the Code's definition, a "taxpayer is one who is subject to (meaning liable for) a tax (See Houston Street Corp. v. C.I.R., 84 F.2d 821, at 822). The Eisner Court did not limit the term "income" to mean just corporate profit.

I wonder how many people who start filing "zero" tax returns, at Schiff's urging, actually go to a law library and read the court cases. I wonder how many of these people know just what it was that was being taxed in the Corporate Excise Tax of 1909? It sure wasn't "income" and it sure wasn't "corporate profit". Do you know what it was?
The tax under consideration, as we have construed the statute, may be described as an excise upon the particular privilege of doing business in a corporate capacity, i.e., with advantages which arise from corporate or quasi-corporate organization; or, when applied to insurance companies, for doing the business of such companies.
Flint v. Stone Tracy Co., 220 U.S. 107 at 151 (1911). (Emphasis added.)

Conceding the power of Congress to tax the business activities of private corporations... the tax must be measured by some standard...
Flint v. Stone Tracy Co., supra, at 165. (Emphasis added.)

It is therefore well settled by the decisions of this court that when the sovereign authority has exercised the right to tax a legitimate subject of taxation as an exercise of a franchise or privilege, it is no objection that the measure of taxation is found in the income...
Flint v. Stone Tracy Co., supra, at 165. (Emphasis added.)
As you can see, the "income" was merely the measurement of the tax. Actually, the so-called "income" tax is now measured by the gross earnings (such as wages) minus whatever deductions Congress has allowed the "taxpayer", as that term is defined in the Code. See Code sections 1313(b) and 7701(a)(14). "Income" is simply profit or gain derived by the recipient. Also, you can see that the argument that "income" for income tax purposes means only corporate profit is indeed frivolous, i.e., it has no foundation in law. (See any law dictionary.)

Schiff asks: "What else could it be?" This shows that it is merely his assumption when he claim that "income" for tax purposes only means corporate profit.

Schiff also claims in his books and articles that the federal district courts do not have criminal jurisdiction over alleged violations of Title 26. However, the United States Criminal Code states:
The district courts of the United States shall have original jurisdiction, exclusive of the courts of the States, of all offenses against the laws of the United States.
18 U.S.C. 3231. (In Part. Emphasis added.)
For a full explanation of this issue, see United States v. Sasscer, 558 F.Supp. 33 (1980). Actually, I think Schiff knows Mr. Sasscer personally.

If you read my books and check out the information in a law library, you might have fun taking Schiff up on his challenge to find misleading or inaccurate statements in his book called The Federal Mafia, as well as in his other books.

In December 1997, I received a phone call from a lady who identified herself as Sally Burkhart, a co-host on a talk show on KLAV, Las Vegas. She stated she worked closely with Schiff and she wanted to have me on a show with him. I declined. I remembered an old saying that went something like this: "Never argue with a fool in public because some of the public will not be able to tell which one is the fool."

Since I have already declined to be on a show with Schiff, it seems to me that he is now protesting too loudly. He knows very well that I strongly disagree with most of his asserted "legal conclusions".

If anyone has been damaged by following Schiff's advice, let me know. I would like to add up some numbers.

Schiff's nonsense...
Elizondo: Come on, you attorneys, we'll open up that phone line -- 731-1230 --
Schiff: So, Sam, you're the one who suggested I get Otto Skinner on the program -- Why? Why?
Elizondo: We don't want to waste time, we want to take phone calls. All right, we're going to take a quick break. If you have a question or comment, those phone lines are open -- 731-1230. This is the time to call right now -- not later on in the program -- right now. The phone lines are open. 731-1230. This is Freedom Now. We'll be right back, stay with us.

Otto Skinner's Final Comments...
The Moore Case did not involve "zero" returns. Why, then, does Schiff reference this case as if it supports his "legitimate 'zero' return" theory?

The Moore Case states at page 835, "The Ninth Circuit has taken the opposite position." Why, then, does Schiff claim that the 7th Circuit agrees with the 9th Circuit?

The Kimball Case involved asterisks. Why, then, does Schiff reference this case as if it supports his "legitimate 'zero' return" theory?

The Long Case did not involve any hard-copy evidence of "zero" returns actually filed by Long which could be used against him in a criminal case. Why, then, does Schiff use this case to claim "zero" returns are legitimate?

The Moore Case shows that the 9th Circuit held that even if the information was false, a return with just zeros is an adequate return for purposes of calculating a tax liability. Why, then, does Schiff refer to such returns as legitimate returns?

Line 7, on Form 1040, asks for wages, salaries, tips, etc. In other words, it asks for gross earnings; not "income" or "profit" or "gain". By reporting "zero" in the blank on line 7, the individual is reporting that he had zero wages, salaries, tips, etc. If this report is false, it is still reporting false information. Just because a report of zero earnings is considered by the 9th Circuit to be an adequate return (an official or formal report) from which calculations can be made, it does not necessarily mean it is a legitimate report. This is certainly something to consider before filing returns with zeros in the spaces provided.

Before an individual relies upon any court case, he should get a copy of the case and study it for himself. This includes the cases I cite in my books.

It is my personal belief that many people who read Schiff's books will be so filled with incorrect legal conclusions that they may never get the facts straight.

Because there is so much confusing and misleading material being perpetrated throughout the nation, I strongly believe that people should not take anyone's word on anything that has to do with the so-called "income" tax, but instead, they should check out all the material and cases for themselves.

Schiff offers a $5,000 reward if anyone can find a law that requires the payment of the tax. I consider this to be an empty offer. Just because there is no such law, it does not prove that a tax is not owed. If a person owes a tax, but simply cannot pay it, he cannot be legally incarcerated. We do not have debtor's prisons in this country. Because of this, there could be no law requiring the payment of a tax. Schiff's offer might sound impressive, until you analyze it. Will Schiff's nonsense never stop? You should be aware of the fact that section 7203 does make it a crime for a person to willfully fail to pay a tax that is owed. If a person owes a tax and can pay it, but willfully does not pay it, he can be charged with 7203.

I submit that not one (I repeat, not one) of the cases Schiff supposedly relies upon to support his "Zero" tax return theory stands for the proposition Schiff claims it stands for.

Note: Of all the people I have talked to who followed Schiff's advice and filed "Zero" tax returns, not one these people had even bothered to actually read the court cases they supposedly relied upon before they filed those forms. These people did not call me until after they had been hit with the IRS penalties. This is very unfortunate.

Otto Skinner is the author of the following three books:

The Best Kept Secret, "Taxpayer" V. Nontaxpayer" (1986, revised 1996) - $24.95
If You Are the Defendant (1989, revised 1996) - $24.95
The Biggest "Tax Loophole" of All (1997) (A 2 pound book.) - $39.95

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