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On December 14, 2001, in response to respondent’s notice of
Federal tax lien filing, petitioners filed with respondent a
request for a hearing, which was held on October 17, 2002, with
respondent’s Appeals Office in Portland, Oregon.
At the Appeals Office hearing, petitioners argued that they
were not taxable on their income. Petitioners did not claim any
error had occurred in respondent’s collection procedures, nor did
petitioners raise any collection alternatives.
On November 19, 2002, respondent mailed to petitioners a
notice of determination in which respondent determined that
respondent’s tax lien constituted a valid and appropriate
collection activity against petitioners.
On December 11, 2002, petitioners filed their petition
herein in which petitioners claim only that they are not subject
to the income tax. Petitioners make no claim of irregularity in
respondent’s collection procedures. Quoting from petitioners’
pretrial memorandum, petitioners argue that –-
A careful examination of 26 C.F.R. sec. 1.861-8, (as well as
over 80 years of predecessor statutes and regulations) shows
that taxable sources of income are limited to the following
types of commerce:
(1) Certain foreign income of U.S. citizens (26 C.F.R.
sec. 1.861-8(f)(1)(i));
(2) The domestic income of foreigners (26 C.F.R.
sec. 1.861-8(f)(1)(iv));
(3) Certain income related to federal possessions
(26 C.F.R. sec. 1.861-8(f)(1)(vi)(E)).
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Last modified: May 25, 2011