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On September 18, 2000, Mr. Sulla filed a status report with
the Court advising the Court of petitioner’s “newly-revealed”
interpretation of the Internal Revenue Code and supporting
regulations, i.e., that, under regulations interpreting section
861, “remuneration for services earned in the United States by a
United States citizen from a United States employer was not an
operative source of gross income under IRS [IRC] Section 61, and
hence exempt income.” Notwithstanding such new interpretation
(hereafter, sometimes, the 861 argument), Mr. Sulla continued:
“Petitioner does not want to waive or withdraw his two previously
set forth arguments.”
By letter to Mr. Sulla dated October 4, 2000, respondent’s
counsel advised Mr. Sulla that “the arguments presented by or on
behalf of Mr. Takaba to date have been found to be frivolous.”
By letter to Mr. Sulla dated February 5, 2001, respondent’s
counsel reiterated his advice that petitioner’s arguments
(including the 861 argument) were frivolous. He quoted from and
referred Mr. Sulla to section 1.1-1(a), Income Tax Regs., which,
in pertinent part, provides: “Section 1 of the Code imposes an
income tax on the income of every individual who is a citizen or
resident of the United States”. He analyzed in detail the 861
argument, advising Mr. Sulla that he had misread section 861 and
the associated regulations. He provided citations to cases
rejecting the argument that the regulations under section 861
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