SCOTUS: Moore v United States - Tax on unrealized income

Issue before or regarding the Supreme Court of The United States

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Can the government impose an income tax when you never had income? That may seem like a trick question, but it’s exactly what happened to Charles and Kathleen Moore. In 2006, the Moores invested in a start‐up Indian company called KisanKraft, whose goal was to provide low‐cost, efficient tools to rural Indian farmers. The Moores believed in KisanKraft’s mission and retained their shares of KisanKraft for over a decade, never selling it for a profit. And KisanKraft reinvested all of its own profits in the company, never paying dividends. For that reason, the Moores never saw a dollar from their investment.

Yet in 2017, the Moores suddenly received a hefty federal tax bill for their ownership stake in KisanKraft. How could that be, if they never earned any money from their holdings? The reason is a provision of the 2017 Tax Cuts and Jobs Act called the Mandatory Repatriation Tax. For U.S. taxpayers who met a certain minimum threshold of ownership in certain foreign corporations, the Mandatory Repatriation Tax imposed a tax bill as if those taxpayers had earned a 2017 dividend from the corporation for profits going back years. Because the Moores owned roughly 13 percent of KisanKraft shares, they were taxed as if KisanKraft had paid them a 2017 dividend worth 13 percent of KisanKraft’s earnings since 2006. Even though that 2017 dividend was fictional, their tax bill was very real.
...
But since the Sixteenth Amendment was enacted, the Supreme Court has consistently held that a tax only qualifies as an “income” tax if it is imposed on money that a taxpayer has actually “realized,” in tax law parlance. The Moores argued that since they never realized any income from their ownership stake in KisanKraft, the Mandatory Repatriation Tax cannot be an “income tax.” And there is no dispute that the Mandatory Repatriation Tax was not apportioned among the states on an equal per capita basis, so if it is not an income tax, it is unconstitutional.

But a federal district court and the Court of Appeals for the Ninth Circuit both rejected this argument, holding that the Mandatory Repatriation Tax is an income tax. Surprisingly, the Ninth Circuit explicitly held that realization of income is not a requirement for an income tax. Now the Moores have petitioned the Supreme Court to take their case, and the Cato Institute has filed an amicus brief supporting that petition.
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I hope SCOTUS takes up this case. I wonder if the case might shed light on the proper tax treatment for crypto staking rewards. Crypto staking rewards are earned as the underlying crypto and aren't realized as profit/income unless the crypto is sold. At least, that's how I see it.
 
Taxation via apportionment was how the Founders sought to avoid this type of stuff.
....but the People seem to like representatives that abuse them.
 
Go back to tariffs and eliminate income tax. A flat VAT would be good too and eliminate much of the conspicuous consumption.
 
nickndfl said:
Go back to tariffs and eliminate income tax
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Absolutely. The Fed gov't. was supposed to be funded by import duties and tariffs ONLY. There would be no need for income tax. Additionally, import duties protect domestic producers of everything, so our domestic manufacturing would be completely protected from all of the cheap labor whorehouses in Asia.

Our politicians sold us out on this too. No company can make tee shirts or brooms or clothes washers or anything else here and compete. So, we are stuck with Chinese shit that wears out and needs replaced constantly. And your neighbors cannot find work that pays enough to live a standard middle class lifestyle so they depend on the government for assistance.

I live in a rust belt town. When I was a kid, everybody's dad worked. We had steel mills, coal mines, glass houses, stamping plants, chemical plants, a coke plant, a plastics plant, paper mills, and plenty more. The "NOW HIRING" signs were a permanent fixture on every building. People took pride in their homes. Lawns were manicured. The Elks, Moose, and VFW had steak dinners and bands every weekend. The churches hosted carnivals and block parties all summer long.

It's all gone. All of those businesses are empty, collapsed, rusting. Sad.
 
nickndfl said:
A flat VAT would be good
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We def don't need that. All that is, is an up-front sales tax. F' that. Europe can keep that BS.

Wellsburg said:
The Fed gov't. was supposed to be funded by import duties and tariffs ONLY.
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What about apportionment? That's in the Constitution and is the fairest tax of all.


If the People are all supposed to have equal Rights in the eyes of govt, then everyone paying an equal dollar amount is the ONLY way to go.

It's the only type of tax that can keep the govt in its britches, so to speak.

Simply put, govt and it's services need to be priced in the same manner as a gallon of milk is priced at the grocery store.
Ie: one price for all purchasers.
 
The Supreme Court announced Monday it will weigh in on the constitutionality of wealth taxes by deciding whether Congress may require taxpayers to pay their share of earnings from a foreign company, even if they received no dividends or income.

The case of Charles and Kathleen Moore, and their $14,729 tax bill, has garnered much attention on the right because of what it could mean if progressive Democrats take control of Congress.

More:

news.yahoo.com

Supreme Court will decide whether Congress can tax wealth

Conservative Supreme Court will weigh in on whether Congress can tax so-called unrealized gains from foreign companies.
news.yahoo.com news.yahoo.com
 

Supreme Court May Upend the U.S. Tax Structure​

An upcoming case that will be heard by the Supreme Court could potentially have far-reaching implications on the United States tax structure, according to a new report.

The Roosevelt Institute and the Institute on Taxation and Economic Policy (ITEP) collaborated on the report released Wednesday about Moore v. United States. The case, which is scheduled to be heard in December, deals with whether the U.S. Constitution's 16th Amendment authorizes Congress to tax unrealized sums without apportionment among the states.

Charles and Kathleen Moore are minority shareholders in an Indian farming firm, and they have disputed a provision in the Tax Cuts and Jobs Act passed by Congress in 2017 after the IRS presented them with a $15,000 bill for their investment. The Moores argue the reparation tax is not on income and violates the 16th Amendment that requires direct federal taxes to be apportioned among the states. After losing a suit in District Court in Washington state in 2022, the Moores' dispute will be heard by the Supreme Court.

More here:

 
searcher said:
The Moores argue the reparation tax is not on income and violates the 16th Amendment that requires direct federal taxes to be apportioned among the states.
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The 16th Amendment removed the apportionment requirement on direct taxes. If it didn't, everyone lible for the tax would pay the same amount. Ie: the tax would be apportioned amongst the People.

I have a feeling they're gonna lose their case.
 
Well, it's not a direct tax either, so we'll see. They are claiming a tax liability for a theoretical (unrealized) gain.
 
So we all agree the income tax is not a direct tax so it obviously is an excise tax. Excise taxes can only be levied on privileged activities.
Where is the privilege of going to work?

To stay on topic though. Where is this company located? Is this a publicly traded company? Did they sell shares?
If the SC does it's job then they have to 1st determine if there was a profit or gain from the investment. The generally accepted version of the way it works is that you recognize that profit or gain at the time you sell your shares or stake in the investment. Until then you don't really have a profit. Can you imagine the government being allowed to collect taxes on all unrealized gains in real estate and the stock and bond markets? That would be insanity.
 
Joe King said:
We def don't need that. All that is, is an up-front sales tax. F' that. Europe can keep that BS.


What about apportionment? That's in the Constitution and is the fairest tax of all.


If the People are all supposed to have equal Rights in the eyes of govt, then everyone paying an equal dollar amount is the ONLY way to go.

It's the only type of tax that can keep the govt in its britches, so to speak.

Simply put, govt and it's services need to be priced in the same manner as a gallon of milk is priced at the grocery store.
Ie: one price for all purchasers.
Click to expand...
I agree. That was the real reason for the census back then. Each state had X amount of people. The total tax should be divided up among all people in the US. Each state has a share based on how many citizens are there.
 
nickndfl said:
Go back to tariffs and eliminate income tax. A flat VAT would be good too and eliminate much of the conspicuous consumption.
Click to expand...
Eliminate much consumption, period.

I have no real issue with a POS tax on purchases; but a VAT tax is bad news. Items taxed all up and down the process.

There is a reason why Europe and other Leftist Western nations have such a lower standard of living - in spite of having minimal military budgets.

It's because of crushing taxation through VAT.

Back when I was in Toronto a lot, there was a program where a foreigner's VAT tax amount could be rebated at the Duty Free shop on exiting Canada. Part of the plan, of course, was to increase floor traffic on the Duty Free shop; and it was time-consuming and onerous. You'd check in, get a pager, and wait about 45 minutes.

If you were in Canada a couple of days with hotel and food purchases, it did add up and was worth it, in terms of cost-effectiveness.

Makes you think, how much hidden taxes can creep up when the VAT system is in place.
 
Cigarlover said:
So we all agree the income tax is not a direct tax so it obviously is an excise tax. Excise taxes can only be levied on privileged activities.
Where is the privilege of going to work?
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It's the privilege of being able to work as a recipient of government benefit.

Edited to add: figure out how to make the benefit go away, and so do the taxes. lol
 
Cigarlover said:
To stay on topic though. Where is this company located? Is this a publicly traded company? Did they sell shares?
If the SC does it's job then they have to 1st determine if there was a profit or gain from the investment. The generally accepted version of the way it works is that you recognize that profit or gain at the time you sell your shares or stake in the investment. Until then you don't really have a profit. Can you imagine the government being allowed to collect taxes on all unrealized gains in real estate and the stock and bond markets? That would be insanity.
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If they allow that, it would open the door to being able to write off unrealized loses, too.
....and what happens if this year you have unrealized gains that you must pay taxes on, but next year those gains turn into loses? Do you get last years tax money back?
 
Cigarlover said:
I agree. That was the real reason for the census back then. Each state had X amount of people. The total tax should be divided up among all people in the US. Each state has a share based on how many citizens are there.
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Per our governments Founding Documents, all of us are supposed to be equal in the eyes of gov. Which means we all have an equal liability to our government. Which means we should all be paying an equal amount in order to fund our government.
 
Joe King said:
It's the privilege of being able to work as a recipient of government benefit.

Edited to add: figure out how to make the benefit go away, and so do the taxes. lol
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Earning a living is a right that can not be taxed. The courts have been clear and consistent on that. Officers of a corporation can be taxed because the corporation itself is a privilege granted by the Gov.
 
Cigarlover said:
Earning a living is a right that can not be taxed. The courts have been clear and consistent on that. Officers of a corporation can be taxed because the corporation itself is a privilege granted by the Gov.
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Problem is, most people have taken action that converted that Right into a privilege.
 
Casey Jones said:
I have no real issue with a POS tax on purchases; but a VAT tax is bad news. Items taxed all up and down the process.
Click to expand...
And passed on to the end buyer as a POS tax of different name. All of it is f'ed up. If gov needs money, the taxes levied should be on the People themselves AND be apportioned. It's the only way to keep gov small and focused only on the most important stuff.

The only reason we have giant sized bloated gov, is due to the fact of progressive taxation that charges everyone a different price for the same services.
Get rid of that, and gov shrinks down to its appropriate size.

Edited to add: if companies tried charging different prices to everyone for the same goods and services based on their income, the gov would get 'em for that.
....but when gov does that, most everyone sees it as somehow being normal.
 
pmbug said:



I hope SCOTUS takes up this case. I wonder if the case might shed light on the proper tax treatment for crypto staking rewards. Crypto staking rewards are earned as the underlying crypto and aren't realized as profit/income unless the crypto is sold. At least, that's how I see it.
Click to expand...

I know a lawyer in Boulder CO.

I don't recall all the details, but they represent the renters.

Because property values are rising at an increasing rate, they're suing the owners who raise the rent on homes because of "unrealized gains".

Supply and demand went out the winder...
 
In Moore v. United States, the Supreme Court will decide this year whether the Ninth Circuit was right in upholding as constitutional taxes on unrealized capital gains and wealth taxes. Ed Meese, Gary Lawson, and I have written an amicus brief filed by Philip Williamson urging the Supreme Court to overrule the Ninth Circuit on both points. Our brief presents the original public meaning of the Sixteenth Amendment and of the requirement that direct taxes be apportioned among the States. We urge the Supreme Court to ignore bad caselaw and to stick to the original public meaning of the constitutional text.
...
The Ninth Circuit took a different, unprecedented view. The court of appeals concluded that realization is not a precondition for income, and so the Moores could be taxed on unrealized gains in wealth. That rationale is not limited to the Moores, or to the particular tax, which the court applied in their case. Rather, under the Ninth Circuit's analysis, investors might be taxed on their unrealized capital gains in their Vanguard funds or their stock portfolios. Moreover, homeowners might be taxed on their unrealized capital gains in their houses and land. The Ninth Circuit is the only federal court of appeals to so hold. The Supreme Court should reverse the Ninth Circuit and restore the original, commonsense meaning of the Sixteenth Amendment.
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More:

reason.com

Taxes on Wealth and on Unrealized Capital Gains Are Unconstitutional

Congress's power to tax is limited and enumerated just like all of Congress's other powers. Congress does not have the power to tax unrealized capital gains or wealth.
reason.com reason.com
 
Unfortunately, just because something is unconstitutional doesn't mean it won't happen
 
JayDubya said:
Unfortunately, just because something is unconstitutional doesn't mean it won't happen
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Yep, because finding creative ways to defeat its Constitutional limits is what our gov does best.
 

Billionaire Tax Rests on a Disputed $14,729 Refund at the Supreme Court​

(Bloomberg) -- Democratic dreams of imposing a wealth tax on the richest Americans risk being snuffed out by the US Supreme Court in a dispute over a $14,729 bill.

Calls to tax assets in addition to income have grown since Senator Elizabeth Warren ran for the White House on the issue in 2020, with President Joe Biden’s 2024 budget requesting a “billionaire minimum tax” to ease the federal deficit. But in a case set for argument Tuesday, the justices will consider whether the Constitution effectively precludes Congress from putting a levy on stock holdings, real estate and other wealth.

Read the rest:

 
A key issue in Moore v. United States is whether income has to be realized to be taxable. An amicus brief in the case was filed by Professors of linguistics who did a 1913 search of the use of the words "income" and "derived" from the Sixteenth Amendment and found that overwhelmingly Americans thought income has to be realized to be taxable. ...
...
The United States should lose this case. Income literally has to "come in" before it is taxable both as the word was used in 1913 and based on its etymology.
Click to expand...

reason.com

Moore v. United States: Income must be realized

A key issue in Moore v. United States is whether income has to be realized to be taxable. An amicus brief in...
reason.com reason.com
 
Yeah, but since when has the Supreme Court applied logic to any of its rulings?
 
From Market Watch

The Supreme Court could gut wealth taxes before they exist — and upend the rest of the tax code​

TAXWATCH
After years of debate on wealth taxes, the fight over how to increase taxes for the country’s richest people could be spilling into the U.S. Supreme Court.

On Tuesday, the court will hear arguments about one part of the 2017 Trump tax cuts, which levied a tax on foreign subsidiary earnings of U.S. parent companies.

The arguments hinge on the deeper question of whether the Constitution allows the the government to tax gains that never become a real-world payout.

The idea of taxing “unrealized income” is the premise of several proposals targeting super-rich households, including President Joe Biden’s Billionaires Minimum Income Tax. Congressional Democrats reintroduced the tax proposal last week. Biden touted the tax to Colorado crowds the same day.

More:

 
First, the government and the Wall Street Journal are trying to persuade the Supreme Court to decide this case extremely narrowly after very publicly calling into question the ownership by private homeowners and stockholders of the unrealized gains on their assets thus limiting the ability of owners to borrow against those gains. This is completely unfair because word that this case was pending in the Supreme Court caused those assets to be less highly valued than would otherwise be the case. Justice should be done to all the millions of homeowners and owners of small amounts of stock who never knew that the federal government claimed a power to tax unrealized capital gains or to impose a direct wealth tax. The Supreme Court owes 330,000,000 Americans a clear affirmation of their right not to have unrealized capital gains or wealth directly taxed.
...
Click to expand...

More:

reason.com

Final Post on Moore v. United States

First, the government and the Wall Street Journal are trying to persuade the Supreme Court to decide this case extremely narrowly after...
reason.com reason.com
 
From the article:

https://www.yahoo.com/news/couple-fighting-15-000-taxes-102229733.html

A narrow ruling for the Moores could cost the government billions of dollars and provide a path for challenging other provisions of the tax code, said Josh Odintz, a lawyer at Holland & Knight who helped craft a brief supporting the government’s position. A wide-ranging ruling, he said, could “invalidate large parts of the Internal Revenue Code” and cost the government more than $5 trillion.

“A broad holding would be very destabilizing and many taxpayers could file refund claims for taxes previously paid,” Odintz said.

This is why I think the court will rule in favor of the U.S., and the Moore's, while being in the right, will be SOL.
We can't have someone upset the apple cart, especially over a measly $15K.

"Appreciation in the value of a home or other asset is not income − at least, not until it is sold and the gain is realized," lawyers for the Moores told the Supreme Court. "Realization is not only what distinguishes income from property in general, but what makes income income."

This is why I think the court SHOULD rule in their favor. It's simply a very straightforward, logical assertion, that speaks for itself. Were this case about $15K and only $15K I think they'd win. But I sincerely doubt they'll let that camel stick its nose under the tent.
 
Obligatory:
KBwbj4mo.gif
 
If we could just get back to US Notes we could eliminate all this falderal...
 
Goldhedge said:
If we could just get back to US Notes we could eliminate all this falderal...
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What, you don't think Treasury could just print/digitize a flood of new fiat?

Wait until the MMT idiots convince Ma Yellin to mint a handful of Trillion-Dollar platinum coins, to be deposited in the "Treasury" as backing for whatever kind of paper, digital, or crypto money they're eager to flood their supporters with.
 
Casey Jones said:
What, you don't think Treasury could just print/digitize a flood of new fiat?

Wait until the MMT idiots convince Ma Yellin to mint a handful of Trillion-Dollar platinum coins, to be deposited in the "Treasury" as backing for whatever kind of paper, digital, or crypto money they're eager to flood their supporters with.
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They could, BUT it won't be at interest! That is the difference between the private Federal Reserve note and US Notes.

That's what JFK attempted to do backed by the National strategic silver stockpile (80M oz?).
 
Goldhedge said:
They could, BUT it won't be at interest! That is the difference between the private Federal Reserve note and US Notes.

That's what JFK attempted to do backed by the National strategic silver stockpile (80M oz?).
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With many hands, a check. To print like drunken DemocRats, they need the cooperation of the Fed chair, and the banksters...AND it costs, as you say.

They got it, because we're either in Mass Formation psychosis, or Jab-happy, or both. But it's not as likely as installing one corrupt, retarded political hack (like Aye-Ochk in the future) as Treasury exchequer. ("Secretary" is too dignified for what they're doing now, and indicates subservience - which is not there).

I don't think concentrating MOAR power in FEWER hands, those of obvious political hacks who've climbed to the top...makes anything better.
 
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