THE FEDERAL GIFT TAX

 IS UNCONSTITUTIONAL

 

The Federal gift tax is patently unconstitutional because it constitutes a direct tax that is not apportioned to the states for collection as required by the Constitution under Article I, Section 2, Clause 3 of that document, and cannot be otherwise sustained as a legitimate exercise of the federally granted power to tax indirectly.

 

The federal government has absolutely no authority what-so-ever to tax the American People simply because it does not like what we do with our money.  And believe it or not, that is the admitted basis and supposed legal justification for the federal gift tax. The federal gift tax was adopted in the early 1920’s in order to unconstitutionally attempt to prevent the American citizens from legally avoiding the newly enacted federal estate taxes.

 

Surprisingly, it is readily admitted by the federal government that the federal gift tax was specifically designed in order to prevent individuals from legally avoiding the federal estate tax by gifting away the bulk of their assets (to their children or favorite charities) just before they died.   In Estate of Sanford v. Commissioner, 308 U.S. 39, 44, 60 S.Ct. 51, 56, 84 L.Ed. 20, the Court explained that "[a]n important, if not the main, purpose of the gift tax was to prevent or compensate for avoidance of death taxes by taxing the gifts of property inter vivos which, but for the gifts, would be subject in its original or converted form to the tax laid upon transfers at death."

 

Unfortunately however, there is also NO constitutional authority granted to the federal government to tax property on this basis, in this direct manner and without indirect subjectivity under Article I, Section 8, clause 1.

 

Now, the I.R.S. blatantly states on its own web pages, in explaining the gift tax:

 

“What is considered a gift?


Any transfer to an individual, either directly or indirectly, where full consideration (measured in money or money's worth) is not received in return.”

 

Would someone mind showing me where in the Constitution it authorizes the Federal government to directly tax the American People without apportionment, simply because “full consideration is not received in return” for an exchange of property or labor?   ARE YOU KIDDING ME ? 

 

This is patently unconstitutionally direct taxation.  And I can prove it in ten minutes.

 

In America we have a limited government of specifically enumerated powers, and this, the power to tax gifts and other charitable acts made by any American, is not one of the enumerated powers granted to the federal government to exercise.

 

Article I, Section 2, Clause 3, of the U.S. Constitution requires all direct taxes to be apportioned to the States for collection.  Additionally, Article I, Section 9, Clause 4, of the U.S. Constitution requires all direct taxes to be laid in proportion to the census.  So this federal gift tax, required to be paid by the donor, not the State, and not laid in proportion to the census, cannot be perceived or claimed to be legitimate direct tax under the constraints and requirements of the Constitution addressing this subject.

 

The Constitution then divides the power to tax indirectly into three specific limited authorities: impost, duty, and excise.

 

The first constitutional category of indirect taxes, “imposts”,  are by definition, only taxes that are imposed by Congress on the importation of foreign goods entering the United States, and on foreign activity occurring and being conducted  in the United States.

 

Clearly a federal gift tax that is imposed on gifts made between American citizens in America cannot be sustained as an impost, as no foreign activity is involved in the making of the gift. 

 

The second constitutional category of indirect taxes, “duties”,  are by definition, only taxes that are imposed on the flow of goods manufactured in the United States that are being exported out of the country for sale in other parts of the world.

 

Clearly a federal gift tax that is imposed on gifts made between American citizens in America cannot be sustained as a duty, as no exportation of goods out of the country is involved in the making of the gift. 

 

So that takes us to the third and final constitutional category of authorized indirect taxation, “excise” taxes.  I have already extensively addressed the authority to tax by excise, what an excise tax legally consists of, and how the reach of this granted authority is limited in application by the nature of the underlying activity conducted, but we review it all now again.

 

Black's Law Dictionary defines excise taxes today, specifically based on the Flint v. Stone Tracy Co. ruling in 1911:

 

Excise taxes are taxes "laid upon the manufacture, sale or consumption of commodities within the country, upon licenses to pursue certain occupations, and upon corporate privileges." Flint v. Stone Tracy Co., 220 U.S. 107, 31 S.Ct. 342, 349 (1911); or a tax on privileges, syn. "privilege tax".  Black's Law Dictionary 6th Edition       (emphasis added)

 

The chief justice, delivering the opinion of the court in Thomas v. United States, 192 U.S. 363, 48 L. ed. 481, 24 Sup. Ct. Rep. 305, in speaking of the words 'duties,' 'imposts,' and 'excises,' said:

 

“We think that they were used comprehensively, to cover customs and excise duties imposed on importation, consumption, manufacture, and sale of certain commodities, privileges, particular business transactions, vocations, occupations, and the like.

 

Duties and imposts are terms commonly applied to levies made by governments on the importation or exportation of commodities. Excises are 'taxes laid upon the manufacture, sale, or consumption of commodities within the country, upon licenses to pursue certain occupations, and upon corporate privileges.' Cooley, Const. Lim. 7th ed. 680.

 

The tax under consideration, as we have construed the statute, may be described as an excise upon the particular privilege of doing business in a corporate capacity, i.e., with the advantages which arise from corporate or quasi corporate organization; or, when applied to insurance companies, for doing the business of such companies. As was said in the Thomas Case, 192 U. S. supra, the requirement to pay such taxes involves the exercise of privileges, and the element of absolute and unavoidable demand is lacking. If business is not done in the manner described in the statute, no tax is payable.

 

If we are correct in holding that this is an excise tax, there is nothing in the Constitution requiring such taxes to be apportioned according to population. Pacific Ins. Co. v. Soule, 7 Wall. 433, 19 L. ed. 95; Springer v. United States, 102 U.S. 586 , 26 L. ed. 253; Spreckels Sugar Ref. Co. v. McClain, 192 U.S. 397 , 48 L. ed. 496, 24 Sup. Ct. Rep. 376.”  Flint v. Stone Tracy Co., 220 US 107, 151-152 (1911)

 

As was identified above, it was specifically held in the Flint v. Stone Tracy Co., 220 U.S. 107 (1911)[1] ruling, that:

 

"Excises are "taxes laid upon the manufacture, sale or consumption of commodities within the country, upon licenses to pursue certain occupations, and upon corporate privileges ... the requirement to pay such taxes involves the exercise of the privilege and if business is not done in the manner described no tax is payable...it is the privilege which is the subject of the tax and not the mere buying, selling or handling of goods. " Cooley, Const. Lim., 7th ed., 680." Flint, supra, at 151       (emphasis added)

           

Clearly, from these rulings we can easily see that the federal gift tax cannot be upheld as a legitimate and constitutional exercise of the indirect federal powers to tax by excise under Article 1, Section 8, Clause 1, as it does not come within this defined purview and reach of the federal constitutional authority to tax by excise.

 

The reader should now be aware that no citizen is directly subject to any federal gift tax, allegedly imposed as an indirect excise, because under the Flint v. Stone Tracy Co decision, citizens are obviously not subject to any excise tax unless they hold some license to pursue a certain occupation, or engage in the manufacture, consumption or sale of commodities (ATF) within the country, or operate as a corporation, rather than as an individual American citizen under the Constitution of the United States of America.

 

The federal gift tax clearly does not come within the defined scope of the authority to tax commodity, license, or privilege, by “excise”.

 

This decision, under Flint v. Stone Tracy Co., is still the controlling decision and rule of law today concerning the power to tax by excise, and is in fact now recognized as Constitutional law, having been cited and followed over 600 times by virtually every court in the nation as the authoritative definition of the scope of excise taxing power.

 

Because the federal gift tax is a tax that is paid directly to the federal government by the person making the gift, as a direct consequence of making the charitable act, the federal gift tax cannot be upheld as a constitutional direct tax that has been apportioned to the States; and because it also cannot be sustained as a tax with any legitimate INDIRECT constitutional basis, as neither impost, duty, or excise as shown;

 

Finally, the gift tax cannot be legitimately argued to be part of any income tax because, as we have pointed out, the Supreme Court has declared that “income” is taken to mean “gain or profit on capital or labor, or the combination of both”

 

In Stratton's Independence v. Howbert, 231 U.S. 399; 34 S.Ct. 136 (1913) the Supreme Court stated on page 400:

 

"Income may be defined as the gain derived from capital, from labor, or from both combined."

 

and

 

" . . . and the gains derived from it are properly and strictly the income from that business; for "income" may be defined as the gains derived from capital, from labor, or from both combined,."  Id at p. 415            (emphasis added)

 

In another case, Eisner v. Macomber, 252 U.S. 189, 40 S.Ct. 189 (1920), the Supreme Court also held similarly, that:

 

". . . Income may be defined as the gain derived from capital, from labor, or from both combined," provided it be understood to include profit gained through a sale or conversion of capital assets, to which it was applied in the Doyle case (pp. 183, 185)."

 

"Brief as it is, it indicates the characteristic and distinguishing attribute of income essential for a correct solution of the present controversy. The Government, although basing its argument upon the definition as quoted, placed chief emphasis upon the word "gain," which was extended to include a variety of meanings; while the significance of the next three words was either overlooked or misconceived. "Derived — from — capital;" — "the gain — derived — from — capital," etc. Here we have the essential matter: not a gain accruing to capital, not a growth or increment of value in the investment; but a gain, a profit, something of exchangeable value proceeding from the property, severed from the capital however invested or employed, and coming in, being "derived," that is, received or drawn by the recipient (the taxpayer) for his separate use, benefit and disposal; — that is income derived from property. Nothing else answers the description." Id at 207           (emphasis added)

 

I think that everyone will concede that a “gift” involves no capital, no labor, and no assets or conversion of assets, that belong to the recipient of the gift, so the gift cannot be construed to constitute “income” to the recipient of the gift.  Of course, there is no increase in capital or financial gain to the donor as a result of making the gift, nor is there any profit that is realized by the donor in making the gift, so the donor also cannot be made the subject of any income tax imposed on the gift either.

 

The federal tax law ADMITS THAT FACT by making, not the recipient responsible for an income tax, but the DONOR, for the direct payment of a “gift” tax, not an income tax. 

 

THIS TAX IS UNCONSTITUTIONAL !

 

Where imposed on the charitable acts of American citizens in the fifty states, the federal gift tax IS OBVIOUSLY AN UNCONSTITUIONAL TAX, without legitimate constitutional basis as either a direct tax or an indirect tax.

 

This is exactly the sort of arbitrary and capricious exercise of un-granted direct powers that the Constitution was written to forever prevent.  The federal government has absolutely no legal right what-so-ever to tax you because you help someone, or give them a gift. 

 

THIS IS TRUE NO MATTER WHAT THE MOTIVATION WAS FOR YOUR DECISIONS TO MAKE THE GIFT !

 

Whether you were motivated by RELIGION, CHARITY, FAMILY needs,  or just plain LEGALLY AVOIDING ALL federal ESTATE TAXES before you die, the Federal government HAS NO CONSTITUTIONAL, and therefore, NO LEGAL RIGHT WHAT-SO-EVER, TO INTERFERE IN THE DISTRIBUTION OF YOUR WEALTH BY GIFT, as you see fit to distribute it in your lifetime.  None at all.

 

There is no federal territorial jurisdiction to tax gifts in the fifty states, no federal subject matter jurisdiction to tax the gifts of citizens to one another, no personal jurisdiction to tax the charitable acts of citizens, and no constitutional authority what-so-ever to tax any charitable act of any American citizen, directly, or indirectly, anywhere in America.

 

The federal gift tax was admittedly designed, specifically in order to prevent citizens from legally avoiding federal estate tax by finding God, days before they die, and giving away all their money before they expired, because they suddenly realized as they lay there dying that “a rich man may more easily pass through the eye of a needle than enter the Kingdom of God in heaven”.

 

So, in order to illegally prevent you from finding God, entering heaven, and effectively opposing the political policies of the U.S. government before you die, they unconstitutionally attempt to prohibit you from helping those around you by directly imposing this so-called gift tax on charitable acts of citizens.

 

There is no constitutional basis to tax charitable acts or gifts, OTHER THAN THOSE MADE BY FOREIGN “persons” present in the United States.

 

THE FEDERAL GIFT TAX IS ENTIRELY UNCONSTITUTIONAL because this form of direct, philosophically punishing taxation, is not authorized in the Constitution because the founding fathers understood perfectly that this type of taxation clearly violates your right to RELIGIOUS PRACTICE AS YOU SEE FIT, INLCUDING THE DISTRIBUTION OF ALL OF YOUR WEALTH BEFORE YOU DIE !!

 

“The two enemies of the People are criminals and government, so let us tie the second down

 with the chains of the Constitution so the second will not become the legalized version of the first.” - Thomas Jefferson

 

When it comes to the Federal Gift Tax, THE I.R.S. IS NOTHING BUT A THIEF ! 

 


[1] Again, Flint v. Stone Tracy Co. is controlling and Constitutional law, having been cited and followed over 600 times by virtually every court as the authoritative definition of the scope of excise taxing power.