Posted by
Sean on Sunday, August 24, 2008 11:08:34 PM
Charles Ulrich is my hero. He fought the IRS...and won. A new AP article explains how the 72 year old accountant put the thuggish agency in it's place:
The accountant from Baxter, Minn., challenged the method the IRS has used for more than 20 years to tax shares and cash distributed by mutual life insurance firms to their policyholders when they reorganize as public companies.
A federal court recently agreed with his interpretation.
The dispute arose when more than 30 mutual life insurance companies became publicly traded corporations in the late 1990s and earlier this decade, in a process known as "demutualization."
Mutual companies are owned by their policyholders, so the companies provided stock and cash to compensate them for the loss of their ownership interests when they went public.
The IRS held that the recipients hadn't paid anything for the shares and owed taxes on the full amount when the shares were sold. Cash distributions also were fully taxable, the IRS said.
That didn't sound right to Ulrich, 72, an accountant for 49 years. He began researching the issue in 2001, when he received shares from two companies, Prudential and Indianapolis Life.
Ulrich concluded that policyholders had paid for their ownership rights through their premiums so the distributions should have been tax-free.
That could make a significant difference in what a taxpayer owes. If a company distributed shares worth $30 and a recipient subsequently sold them at $32, under the IRS' view they would pay taxes on all $32. Under Ulrich's interpretation, they would owe taxes only on the $2 per share gain. (emphasis mine)
Of course, Ulrich's view is completely fair, but fairness is not a virtue of the IRS. This is ultimately why the agency should be eliminated. As this case illustrates, the IRS will assume any amount of wealth, regardless of who actually created it, automatically belongs to them. The IRS will always shoot for the highest possible gain from any angle, fair or not.
This is the type of story taxpayers should keep in mind when they decide who to support for higher office. Many candidates have already voiced support for the most effective, practical, and direct way to get rid of the abusive IRS: The Fair Tax.
For those who never caught what Mike Huckabee was running on while he was a primary candidate, The Fair Tax promises to eliminate the following current burdens to individual economic freedom and prosperity:
- The individual income tax
- The alternative minimum tax
- Corporate and business income taxes
- Capital gains taxes
- Social Security taxes
- Medicare taxes (along with all other federal payroll taxes)
- The self-employment tax
- Estate taxes
- Gift taxes 1
All the above headaches will be replaced by a simple retail-level sales tax (no taxes on used goods).
Not everyone is as savvy, prepared, or patient enough to fight the IRS the way Charles Ulrich has, but anyone can vote. This year, one Presidential candidate supports increased confiscation of personal wealth to feed the IRS even more money, rewarding it's bad behavior, and willfully expanding the agency responsible for gross abuse, bullying, and corruption as endured (and overcome) by Mr. Ulrich. That candidate is, of course, Barack Obama. Most of his Democrat colleagues are with him on that.
John McCain had previously supported a clear simlification where any taxpayer could choose between the old, complicated way of paying and a new, simpler way in which a simple flat tax could be filed via a single postcard, if desired. Unfortunately, I can't seem to find it on his site anymore. McCain had also appeared to be open to the idea of The Fair Tax at one brief point during the primaries, but has since abandoned that stance. It would be nice if McCain jumped on board with it again, especially in light of a certain (mostly loathsome) third-party threat who might campaign on it. In any event, viable candidates like McCain, and most Republicans, generally support lowering the amount of your money the mostly unaccountable IRS can take from your pocket -- not unconditionally expanding it.
These are just a few things to keep in mind around election time. As our accountant hero of the day Charles Ulrich says:
"I think it's important that taxpayers' rights be protected," he said. "We should have had a Boston Tea Party over this."
That's the spirit, indeed!
1 from The Fair Tax Book, chapter 8
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