No surprise – Larken Rose guilty of all counts!

August 12, 2005


A Philadelphia jury August 12 convicted section 861 proponent Larken Rose for not filing back taxes, bolstering the IRS’s efforts to fight ongoing doubts about the validity of the code. Former IRS agent turned anti-tax advocate Joseph R. Banister walked away from a similar tax fraud indictment earlier this summer (for coverage, see Doc 2005-13738 or 2005 TNT 121-1), a legal coup heralded by leaders of the so-called tax honesty movement as confirmation their controversial views are gaining ground. Rose was charged with willfull failure to file after refusing to submit federal returns from 1998 through 2002

He has openly admitted to not filing federal or state taxes since 1997 and has actively invited goverment prosecution since at least 2001. The conviction could land Rose in prison for up to five years (one year per count). He was placed under house arrest until his sentencing on November 15.

His wife and business partner, Tessa R. David, will face the same charges in a separate criminal proceeding tentatively set to begin as early as August 19. Rose has for years raised questions as to whether specific foreign sourcing rules trump the broader income filing requirements. He maintains that the current system misconstrues gross and taxable income — a distinction which he claims places domestic earnings outside the reach of the existing income tax structure — and insists the Service has never adequately refuted his interpretation of 861 regulations. The prosecution team split their time between establishing that Rose and David received enough income from their home-based medical transcription business during the years in question to warrant filing a return (IRS records project joint earnings of approximately $500, 000 across the five-year timeframe), and chronicling a half-dozen instances when IRS officials attempted to convince Rose about the limited scope of the 861 provision.

During the trial, various IRS agents testified that the 861 rule

Pennsylvania Tax Detractor Convicted for Not Reporting Back Taxes
A Philadelphia jury August 12 convicted section 861 proponent Larken Rose for not filing back taxes, bolstering the IRS’s efforts to fight ongoing doubts about the validity of the code. Former IRS agent turned anti-tax advocate Joseph R. Banister walked away from a similar tax fraud indictment earlier this summer (for coverage, see Doc 2005-13738 or 2005 TNT 121-1), a legal coup heralded by leaders of the so-called tax honesty movement as confirmation their controversial views are gaining ground.
Rose was charged with willfull failure to file after refusing to submit federal returns from 1998 through 2002. He has openly admitted to not filing federal or state taxes since 1997 and has actively invited goverment s apply specifically to the calculation of foreign tax credits. Assistant United States Attorney Floyd J. Miller introduced a string of IRS notices and other official correspondence amassed by Rose as proof he knew the 861 position was invalid, but noted that Rose chose not to file anyway. Miller also touted a number of adverse district and tax court rulings which Rose had been a party to as additonal justification that his 861 position was flawed. “This is a case about a man who doesn’t want to pay his fair share,” Miller argued, and lampooned the one-time groundskeeper for holding himself out as the “supreme interpreter of the internal revenue code.” While acknowledging that the judiciary had considered aspects of his 861 position, Rose stressed that the recent decisions failed to counter his understanding of the underlying income statutes. “I was told by the judges that domestic income is taxable. I was told by the law that it wasn’t,” he stated, adding, “I want to be convinced by evidence, not an assertion.”
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