Brian G. Takaba - Page 13




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          a citizen of the State of Hawaii, he worked in the State of                 
          Hawaii, his employer is from the State of Hawaii, his employment            
          activity took place in the State of Hawaii, and he was paid in              
          the State of Hawaii.  He agreed with the following summary by the           
          Court of his argument:  “I take your argument to be that a United           
          States citizen, a resident of Hawaii, working in Hawaii for a               
          U.S. corporation, earning a salary or wages, is not taxable under           
          the Internal Revenue Code on that compensation as income, is that           
          your position?”  He responded:  “Yes, Your Honor.  My position is           
          that it is intrastate income and that the Internal Revenue Code             
          does not reach intrastate income.”  He further explained:  “I               
          can’t find a constitutional power of Congress to tax that                   
          [intrastate] income.”  He added:                                            
               [I]n essence, Your Honor, I am stating that a U.S.                     
               person earning income from a U.S. source, whether it be                
               interstate or intrastate, while he’s in the United                     
               States, as long as it’s not from a federal possessions                 
               corporation or a –- involved, or federal government                    
               involved, that would not be taxable income as defined                  
               and as stated in the regulations, Code of Regulations;                 
               and it would * * * be considered * * * exempt income.                  
                                                                                     
          He stated that he found support for his analysis in section 861             
          and the regulations thereunder.  He agreed with the Court that              
          his analysis led to the conclusion that a vast amount of the                
          wages and interest paid to U.S. citizens and residents is not               
          taxable under the Internal Revenue Code.  He conceded, however,             
          that he found no support for his reading of section 861 and the             
          regulations in any reported case.  Indeed, he stated that he had            





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