Department of the Re1100ue ServlGe

Amended U.S. Individual Income Tax Return

OMB No. 1545..0091
(Rev. November 2001)
..,._ See instructions.
This return is for calendar
r .,._ , or fiscal ear ended .,._


For P"f""Work Reduction Act
Notice, see page 6.

A If the name or address Shown above is different from that shown on the original return, check here . . ..... )rJ
B Has the original return been changed or audited by the IRS or have you been notified that it will be? . . 0 Yes No
C Filing status. Be sure to complete this line. Note. You cannot change from joint to separate returns after the due date.
On original rewm ._ 0 Single filing joint return D Married filing separate rewm D Head of housetlold 0 Qualifying wldow(er)
On this return .,. 0 Single Mamed fir.ng joint return 0 Married ll6ng separate rerum 0 Head of household* 0 Qualifying widow(erj
If the qualifying person is a chifd but not your dependent, see page 2.
B. Net d'Jange-
Use Part II on the Back to Explain any Changes I": Origin;>l- ex amoum of increase c. """""'
--------,---------:-::-::--:---::--------::-::;-------,----las adjusted or (t:le<:fflase}-
lncome and Deductions (see pages

:0

1 Adjusted gross income (see page 3) . . . _ 1
2 Itemized deductions or standard deduction (see page 3) . !
3 Subtract line 2 from line 1 _ . _ . . _ tm
4 Exemptions. If changing. fill in Parts I and 11 on the back _ 4 *+------j-..... r<f----
5 Taxable income. Subtract line 4 from line 3 . . . _ :
6 Tax {see page 4). Method used in col. c ______________________ _
7 Credits (see page 4) _ _ 7
8 Subtract line 7 from fine 6. Enter the result but not less than zero 8
)C 9 Other taxes (see page 4) _ _ 9
10 Total tax. Add lines 8 and 9 . . _ . . . . . . . 10
11 Federal income tax withheld and excess SOCial security and
RRTA tax withheld. If changing, see page 4 _
12 Estimated tax payments, including amount applied from prior
year's return _ _ _ _ _
13 Earned income credit (EIC) . . .
14 Additional child tax credit from Form 8812 . _
11
12 'J..O, S"7'f
13
14
15
Credits from Form 2439 or Form 4136. . . . . '-'1'5..!. _______ -Jc_ ___ .,-::;-+-------
16 Amount paid with request for extension oftime to file (see page 4) 16 fT
11 Amount of tax paid with original return plus additional tax paid after it was filed . . 17
18 Total oavments. Add lines 11 thmuah 17 in column C _ .. _ 18
Refund or Amount You Owe
19 Overpayment. if any, as shown on original return or as previously adjusted by the IRS
20 Subtract line 19 from line 18 (see page 5} . _ _ _ _ _
21 Amount you owe. If fine 10, column c, is more than line 20. enter the differeflce and see page 5
22 If line 10, column c. is less than line 20, enter the difference _
23 Amount of line 22 you want refunded to you . . . . . . . . . i -.
1
- -
24 Amount of line 22 You want to yOur estimated tax 24 1
19
20
21
22 lfS. "iOO 'k
23 1Z 1::: too
.,. ..
Sign Under penalties of peljury, I dedare IITat I have an onginal return and IITat I have examined liTIS amended retum. accompanymg schedule-s
to the best of my knowledge and belief, liTIS amended rewm 1S true. carect. and cornpi!!OO DeclaratiOn of !ftparer (other than
Here "'""''"" '"'
1.-. .[)_
Paid
Preparer's
Use Only
Preparer"s a.._
r
Firm's name (or
yours if
and ZIP Code
-
Check if , 1 Preparer"s SSI\I or PTIN
self-employed 0 I
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Phone no. (
Cat. No. 11360L Form 1040X (Rev. 11-2001)
* A: ),0(.\ M(" 0\MtO
' = ' " ' " " " ~ T t\tJO Q ~ A.. cw-<torJ
lfii'TI Explanations (continued from Parts I and/or II}
Form 8275 jRev. 5-2001)
f<7!Tl1040X {Rell. 11-2001) ,.,,
25
26
27
28
29
30
31
. See Form 1040 or 1040A;
A. Original
If you are not changing your exemptions. do not complete this part.
number of
c."""""
exemptions
If daiming more exemptions, complete lines 25-31.
"'#))Oted or as
B. Net change number of
""""""'"
exemptions
If claiming fewer exemptions, complete lines 25-30.
adjusted
Yourself and spouse . . . . . . . . . . . . A
caution. If your parents (or someone else) can claim you as a dependent
(even if they chose not to), you cannot claim an exemption for yourself.
2ti
Your dependent children who lived with you . . . . . .
Your dependent children whO did nor live with you due to divorce or
27
separation . . . . . . . . . . . . . .
Other dependents . . . . . . . . . . . .
I 20
Total number of exemptions. Add lines 25 through 28 . . . .
29
Multiply the number of exemptions daimed on line 29 by the amount listed
below for the tax ye<lr you are amending. Enter the result here and on line 4.
But see the instructions for
Ta. Exemption line 4 on page 3 if the
,.....
amount on line 1 is owr:
"'"'
$2,900 $99,725
2000
'"""
96,700
""'
2.750 94,975
1998 2.700 93,400
I
Dependents (children and other) not claimed on original (or adjusted) return:
No. ofym.-
children on line
31 who:
D
{b) Dependent's social
(d) ./ if quallfyi1g
lived with
child 1a>:
secliity number <oy<ru
ln'dit (see fl'l!ll! 5)
"""
. .

(o) First name

lfod not liv-e
with you due to
divorce or
D
separation (see
S) .

Dependents
D
on line 31 not
entered 8bcNe
1 of to ,and
Enter the line number from the front of the form for each item you are changing and give the reason for each
change. Attach only the supporting forms and schedules for the items changed. If you do not attach the required
information, your Form 1040X may be returned. Be sure to include your name and social security number on any
attachments.
If the change relates to a net operating foss carryback or a general business credit carryback, attach the schedule or form
that shows the year in which the foss or credit occurred. See page 2 of the instructions. Also, check here _ . . . . D

ii.MJII!I Presidential Election Campaign Fund. Checking below will not increase your tax or reduce your refund.
If you did not previously want $3 to go to the fund but now want to, check here . . . . . . . . D
If a joint return and your spouse did not previously want $3 to go to the fund but now wants to, check here _ . . .,_ D
* Foon 1040X (Rev. 11-2001)

8275
Disclosure Statement
OMB No. 1545-0889
!Rev. May 2001)
Do not use this fonn to disclose items or positions that are contrary to Treasury
regulations. Instead. use Form 8275-R, Regulation Oi5Ciosure Statement.
See separ.rte instructions.
Attachment
DepMment ct tile 11easuy
Sequence No. 92
ln!erll<ll Revenue Service ... Attach to your taJ: return.
1'" _ht!Q_ P.
(uii'IW
lK, 7,-"'7i( 1
ltijl General Information {see instructions)
.,
(o) (o)

"""'ocGroup
Detailod Descriplian
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Rev. Rul., Rev. Pmc.. etc.
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3
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lfilli Detailed Explanation (see instructions)

1
2
3
1:&111!1 Information About Pass-Through Entity. To be completed by partners, shareholders, beneficiaries, or
residual interest holders.
Complete this part only if you are making adequate disclosure for a pass-through item.
Note: A pass-through entity is a partnership, 5 corporation, estate, trust, regulated investment company (RIC}, real estate investment
trust (REm, or real estate mortgage investment conduit (REMJC)
1 Name, address, and ZIP code of pass-through entif,y 2 Identifying number of pass-through entity
3 Tax year of pass-through entity
I I to I I
4 Internal Revenue Service Center where the pass-through entity filed
its return
For Paperwork Reduction Act Notice. see separate instructions. Cat- No. 61935M FOWl 8275 (ReV. 5-2001)
Tom Clayton, MD
15 Mirror Ridge Drive
The Woodlands, Texas 77382
Date: 4-6-2002

RE: Attachment to 1998 1040X Tax Return
Charles Thomas Clayton, MD
SS # 462-78-5051

I, Charles Thomas Clayton, MD, SS # 462-78-5051, formally request that this
1998 1040X return and all accompanying documents be made a part of my permanent
administrative record pursuant to the provisions of the Privacy Act of 1974, as codified
at 5 U.S.C. 552a of the United States Code. At the end of this attachment, I have
listed specific information that I am requesting from the Internal Revenue Service,
including a demand for production of documents and/or records.

Congress has incorporated Section 1203 in the 1998 Restructuring and Reform
Act, which specifically makes IRS personnel liable for not complying with mandates
and prohibitions of the Internal Revenue Code. Specifically, such employees are
required to obey the Treasury regulations as written, as well as published policy,
meaning that such employees are now individually responsible for the accuracy of their
decisions, and such decisions must be backed by specific citations of law.

When my 1998 1040 federal income tax return was filed on the advice of my
CPA, I had never seen the law that others told me required me to pay federal income
taxes. A fundamental error has been made by most US citizens for nearly 87 years,
including myself prior to 1998, either because they relied on tax professionals who did
not understand a critical section of the law, or simply assumed that the receipt of
income was the same thing as gross income, when this is not the case.

The federal income tax (26 USC 1) is imposed on the taxable income of US
citizens. In order to completely understand exactly what the law means by gross
income and taxable income, a US citizen (like myself) with sources of income from
within the 50 states must use 26 USC 861(b) and 26 CFR 1.861-8 (specifically 26 CFR
1.861-8(b)(1), 1.861-8T(d)(2)) to determine whether or not their income becomes
taxable income with the legal meaning of 26 USC 1.

Therefore, the Internal Revenue Service is required to administer the federal
income tax laws and seek income tax returns from those who have taxable income
sources. As a result of past federal income tax returns that I am now aware were filed
in error, the IRS already knows and has known that I am a US citizen who receives
my income entirely from intrastate sources of income within Texas.

Tom Clayton, MD 1998 1040X return 4-6-2002 2
The IRS is or should be aware that such sources of income earned by US
citizens are not taxed under federal law. Why then have I never been notified that I
have been paying federal income taxes in error all these years and the moneys returned
to me? Accepting an income tax return obviously in error is a direct violation of 26
USC 7214, as well as a violation of Section 1203 of the IRS Restructuring and
Reform Act.

You can confirm the accuracy of the citations of law that I am relying upon by
contacting Mark Weinberger, Assistant Secretary of the Office of Tax Policy in the
Treasury Department, because he is the person in charge of all of the federal income
tax regulations. This 1040X return is being mailed to him as well. His address is as
follows:
Mark A. Weinberger
Assistant Secretary Office of Tax Policy
Department of the Treasury
1500 Pennsylvania Avenue, NW
Washington, D.C. 20220

My Position:

I was not required by law to file a 1040 federal income tax return for 1998
because I did not receive gross income within the meaning of 26 USC 61 in excess
of my exemption amounts (see 26 USC 6012).
The items of income I received in 1998 were excluded for federal income tax
purposes, pursuant to 26 CFR 1.861-8(b)(1), 1.861-8T(d)(2). I did not receive any
taxable income from sources within the United States in 1998 pursuant to 26 USC
861(b) and 26 CFR 1.861-8.

Explanation:

The above conclusions were arrived at after I studied the full text of the actual law
itself (now available in its entirety on the Internet), which I had never before seen.
Even more astonishing was that the accountants and lawyers had not bothered to look at
the full text of the income tax law and were making recommendations without
bothering to see if the law really did state what they assumed that it did.

Although the above citations alone prove my position, it is important that every
citizen, including IRS employees, understand exactly how the federal income tax law
was reorganized, renumbered, and rewritten in 1954, making it very difficult for the
average reader to find ALL parts of the law that must be used together to determine if
a person has taxable income or not within the meaning of 26 USC 1.

The reason why this is so important is that I have become aware that many IRS
employees are using the statutes alone without the 861 regulations in determining if a

Tom Clayton, MD 1998 1040X return 4-6-2002 3
US citizen has taxable income, when such determination cannot be made without
these regulations under 26 USC, Subchapter N, Section 861 and following.

Recently I became aware that the true legal nature of the income tax is an excise
tax, where what is actually being taxed are certain specific sources of income (the
activity that generates the income), and the income is only the measure of the amount
of (taxable) activity that is occurring.

After searching for the taxable sources of income under federal law, I discovered
(as shown in the above citations), that my income does not derive from a taxable
source under federal law. The truth of the law is found in the full text of the federal
income tax statutes and regulations, particularly the interpretive regulations under
Section 861 and following.

Excises, generally speaking, are taxes imposed on certain activities or privileges.
In the Congressional Record from March 27, 1943 (page 2580), there is a statement by
a Mr. F. Morse Hubbard, formerly of the legislative drafting research fund of
Columbia University, and a former legislative draftsman in the Treasury Department
(clearly someone whose job would require a comprehensive understanding of the proper
application of the law). His comments include the following:
The income tax is, therefore, not a tax on income as such. It is an excise tax
with respect to certain activities and privileges which is measured by reference
to the income which they produce. The income is not the subject of the tax: it
is the basis for determining the amount of the tax.
I then discovered Treasury Decision 6258, which specifically stated what part of
the law I was to go to in order to determine whether I had taxable income or not.
Rules are prescribed for determination of gross income and taxable
income derived from sources within and without the United States, and for
the allocation of income derived partly from sources within the United
States and partly without the United States or within United States
possessions. 1.861-1 through 1.864. (Secs. 861-864; 54 Code.)
[Treasury Decision 6258]

Therefore, the correct sequence of all parts of the law that must be used to first
determine if a US citizen has taxable income within the meaning of 26 USC 1 is as
follows:

26 USC 1, Subtitle A, Chapter 1:

Subchapter A. Determination Of Tax Liability
Subchapter B. Computation Of Taxable Income

Tom Clayton, MD 1998 1040X return 4-6-2002 4
Subchapter N. Tax Based On Income From Sources Within Or Without The
United States

1. 26 USC 1 imposes the income tax on taxable income.
2. 26 USC 61 defines gross income as income from whatever source
derived.
3. 26 USC 61 cross-reference (under notes at the bottom, which directs the
reader to where the law treats income from sources):

Income from sources -
Within the United States, see section 861 of this title.
Without the United States, see section 862 of this title.
4. 26 USC 63 defines taxable income as gross income minus deductions.
5. 26 USC 861 and 26 CFR 1.861 determine the taxable sources of income.
6. 26 CFR 1.861-8 shows that the taxable sources of income from within the
United States apply only to those engaged in international or foreign commerce
(including commerce within federal possessions).

There is an even simpler way to summarize; the tax is upon "taxable income," and
citizens are taxed on their taxable income, whether it is "from sources within or
without the United States."
1. The tax imposed is upon TAXABLE INCOME (determined by
subtracting the allowable deductions from gross income)." [26
CFR 1.1-1(a)]
2. "In general, all citizens of the United States, wherever resident,
and all resident alien individuals are liable to the income taxes
imposed by the Code whether the income is received FROM
SOURCES WITHIN OR WITHOUT THE UNITED STATES."
[26 CFR 1.1-1(b)]
3. "The taxpayer's TAXABLE INCOME FROM SOURCES WITHIN
OR WITHOUT THE UNITED STATES will be determined under
the rules of Secs. 1.861-8 through 1.861-14T." [26 CFR 1.863-
1(c)]
This allows the all important question to be correctly answered: to whom does this
income source excise tax apply? While there are some complicated rules about
various foreign tax credits, various federal possessions, etc., the statutes and
regulations, past and present, show that there are only three situations in which there
can be taxable income subject to the federal income tax:


Tom Clayton, MD 1998 1040X return 4-6-2002 5
1. Nonresident aliens and foreign corporations receiving income
from within the United States.
2. Citizens of the United States receiving foreign income.
3. Domestic corporations receiving a large percentage of income from
within federal possessions (which are technically foreign to the 50
states).
This begins to make perfect sense, because under the Constitution, the federal
government was to be funded by exports and foreign commerce. The Income Tax Act
of 1913 did not change that fact, as the law itself clearly shows, and the 16
th

Amendment is irrelevant to the federal income tax. The rules that a direct tax must
be apportioned and that an indirect tax must be geographically uniform apply only after
a tax is imposed; these rules have nothing to do with WHAT Congress can tax.

Why under the Constitution did the federal tax law have to be written this way? The
sections of the Constitution that restrict WHAT Congress can tax are found in the
Constitution under Article 1, Section 8 and the 10
th
Amendment; Congressional
jurisdiction extends only to foreign and international commerce, not intrastate
commerce. As the Supreme Court has ruled countless times, Congress has no business
in states business, and what could be more states business than their commerce? It is
astonishing to me that Constitutional experts could have missed this fundamental
concept. The law itself proves that this taxation restriction exists.

And, without these very specific regulations that clearly show the limited scope of the
federal income tax, I came to an incorrect conclusion about my federal income tax
liability in 1998, here corrected. These regulations clearly show that:
1. The income I receive comes from activities which do not constitute
source[s] of income for purposes of the income tax (26 CFR 1.861-
1), and;
2. I engage in no activities which generate taxable income, according to the
section for determining taxable income from sources within the United
States (26 CFR 1.861-8), and;
3. The income I receive is excluded from the list of non-exempt income
(26 CFR 1.861-8T(d)(2)) (due to being exempted by Article I, Section 8
and the Tenth Amendment to the Constitution).

The critical part of the law where the tax professionals and most of the public
make a mistake in reading occurs in 26 USC 61, where gross income is defined as
all income, from whatever source derived. The reader cannot simply conclude that

Tom Clayton, MD 1998 1040X return 4-6-2002 6
this means, no matter where it comes from, but they must let the law tell them what
it means by income source.

Indeed, the law does tell the reader what it means by source in the Cross
References at the bottom of Section 61, where it specifically directs them to go to
Section 861 and following [and the regulations thereunder].
CROSS REFERENCES [26 USC 61]
Capital gains and losses, see section 1201 et seq. of this title. Guaranteed
payments to partner for services or use of capital considered as made to one
not member of partnership for purposes of this section, see section 707 of this
title. Income from sources - Within the United States, see section 861 of this
title. Without the United States, see section 862 of this title. Items [Notes,
then cross references under 26 USC 61]
At this point it then becomes crystal clear to the reader (in Section 861 and
following and the regulations thereunder) that from whatever source derived does
NOT mean, no matter where it comes from under federal law. This is also
consistent with the fact that the income tax is an excise tax on certain specific sources
of income, and so it makes sense that there is a part of the law that specifically talks
about the sources of income for purposes of the income tax. The reader can then
specifically determine if they have any taxable sources of income or not, and such
determination is impossible to make by the statutes alone. Again:

Income from sources

Within the United States, see section 861 of this title.
Without the United States, see section 862 of this title
[26 USC 61 cross-reference]
The reader is then able to understand the critical concept of federal income taxation
of US citizens:
A US citizen with income is taxed by the federal income tax law on that
income only if the income is derived from a taxable source, as outlined in
26 USC 861 and following and the regulations thereunder, and only then
does an item of income listed in 26 USC 61 and following become taxable
gross income.
To review, the law treats the taxable sources of income for purposes of the income
tax in Subchapter N, Section 861 and following and the regulations thereunder. When
I get to Section 861 and following, and the regulations thereunder, I find that I am
indeed in the right place because the correct citations are all over the place, the law
really does mean what the words say:

Tom Clayton, MD 1998 1040X return 4-6-2002 7
"Determination of taxable income. The taxpayer's taxable income from sources
within or without the United States will be determined under the rules of Secs.
1.861-8 through 1.861-14T for determining taxable income from sources
within the United States." [26 CFR 1.863-1(c)]
"Sections 861(b) and 863(a) state in general terms how to determine taxable
income of a taxpayer from sources within the United States after gross income
from sources within the United States has been determined." [26 CFR 1.861-
8]
"The taxable income from sources within the United States shall be
determined by deducting therefrom, in accordance with sections 861(b) and
863(a), [allowable deductions]. See Secs. 1.861-8 and 1.863-1." [26 CFR
1.861-1]
"Sec. 1.861-8 [is the section] for determining the taxable income from sources
within the United States." [26 CFR 1.862-1]
"Secs. 1.861-1 to 1.863-5 [give the principles] for determining the gross and
the taxable income from sources within and without the United States." [26
CFR 1.863-6]
And when I worked my way through these sections, I discovered that the only
taxable sources of income have nothing whatsoever to do with the domestically earned
income sources of US citizens earned exclusively from within the 50 states (such as the
sources of my income from within Texas).
The specific list of taxable sources is found in 26 CFR 1.861-8(f)(1), which are
the specific sources subject to the income tax:
The operative sections of the Code which require the determination of taxable
income of the taxpayer from specific sources or activities and which gives rise to
statutory groupings to which this section is applicable include the sections
described below.
(i) Overall limitation to the foreign tax credit
(ii) [Reserved]
(iii) DISC and FSC taxable income [international and foreign sales
corporations]
(iv) Effectively connected taxable income. Nonresident alien individuals and
foreign corporations engaged in trade or business within the United States
(v) Foreign base company income
(vi) Other operative sections. The rules provided in this section also apply in
determining--
(A) The amount of foreign source items

Tom Clayton, MD 1998 1040X return 4-6-2002 8
(B) The amount of foreign mineral income
(C) [Reserved]
(D) The amount of foreign oil and gas extraction income
(E) (deals with Puerto Rico tax credits)
(F) (deals with Puerto Rico tax credits)
(G) (deals with Virgin Islands tax credits)
(H) The income derived from Guam by an individual
(I) (deals with China Trade Act corporations)
(J) (deals with foreign corporations)
(K) (deals with insurance income of foreign corporations)
(L) (deals with countries subject to international boycott)
(M) (deals with the Merchant Marine Act of 1936) [26 CFR 1.861-8(f)(1)]
None of these sources apply to United States citizens who live and work
exclusively within the United States, such as myself. (Federal possessions, such as
Guam, Puerto Rico, etc., are considered foreign under the law.) This is the only list of
sources in Part I of Subchapter N, or the regulations thereunder, which (as the
regulations say) determine the sources of income for purposes of the income tax.
The regulations under Section 861 twice define the term class of gross income,
saying that a class of gross income may consist of one or more items of gross
income enumerated in section 61. The regulations then refer the reader to paragraph
(d)(2) of this section which provides that a class of gross income may include excluded
income.
In other words, the items of income listed in Section 61 are not necessarily
taxable, but may be exempt or excluded from the federal income tax. Paragraph
(d)(2) states only [Reserved] (meaning there is no current regulation) but refers the
reader to paragraph (d)(2) of the temporary regulations at 26 CFR 1.861-8T. That
section describes what is meant by exempt income.
(ii) Exempt income and exempt asset defined--(A) In general. For purposes of
this section, the term exempt income means any income that is, in whole or in
part, exempt, excluded, or eliminated for federal income tax purposes. [26 CFR
1.861-8T(d)(2)(ii)]
The section then goes on to specify what is not exempt. The following should be
read carefully, since it starts with a double negative. If a certain kind of income is not
exempt, it means it is subject to the federal income tax. Therefore, after being told
that there are items of income (which make up classes of gross income) that may
not be taxable, a list is given of the types of income that are subject to the federal
income tax:
(iii) Income that is not considered tax exempt. The following items are not
considered to be exempt, eliminated, or excluded income and, thus, may have
expenses, losses, or other deductions allocated and apportioned to them:

Tom Clayton, MD 1998 1040X return 4-6-2002 9
(A) In the case of a foreign taxpayer
(B) In computing the combined taxable income of a DISC or FSC
(C) ...the gross income of a possessions corporation
(D) Foreign earned income as defined in section 911 [26 CFR 1.861-
8T(d)(2)(iii)]
This is the entire list of non-exempt income; notice once again that this only has
to do with foreign and international commerce, and has nothing to do with the
sources of my income from within Texas. The idea that other types of income are also
taxable (not exempt), despite not being listed, is contradicted by the regulations stating
that paragraph (d)(2) provides that a class of gross income [consisting of the items
of income listed in 26 USC 61] may include excluded income.
Unless those types of income not listed are exempt, paragraph (d)(2) does not
show that the items of income listed in Section 61 may be exempt. (A basic principle
of law is that such a list is assumed to be exclusive and complete, unless a phrase such
as including, but not limited to is used.)
This part of the law clearly shows that Congress did not tax such income
sources in the law, which is consistent with the fact that (under the Constitution)
Congress could not and cannot do so for the simple reason that Congress has no
business in states business. Intrastate commerce is NOT under Congressional
jurisdiction, and the law must be constitutional (which it is because it is so limited).

I have also discovered (on the Internet) that the US Attorney prosecution manual
is severely flawed because it is incomplete in telling the US Attorneys what the law
means by gross income. Those sections (6001, 6011, and 6012) are specifically
refuted here by the interpretive regulations under Section 861:

"Sections 6001, 6011, and 6012 create the requirement to file"
On close examination, Sections 6001, 6011, and 6012 do not create the requirement to
file, because they are conditional. What are those conditions? Sections 6001 and 6011
require the filing of a return by those liable for a tax, and 6012 requires the filing of a
return by individuals who receive a certain level of "gross income" (26 CFR 1.6012-
1). The filing requirement depends upon "gross income" received, NOT "income" per
se. Some income is "excluded by law" from being "gross income" (26 CFR 1.61-1).
While most IRS employees and tax professionals incorrectly assume that the only
certain "items" specifically exempted by statute (e.g. 26 USC 101) are "excluded
income," and assume that the "items" listed in 26 USC 61 are always taxable, the
Treasury regulations state otherwise.
According to 26 CFR 1.861-8(a)(3) and 1.861-8(b)(1), the "items" of income listed in
26 USC 61 (such as "compensation for services," "interest," etc.), which make up
"classes of gross income," may include income that is "excluded" for federal income
tax purposes (see also 26 CFR 1.861-8T(d)(2)(ii)). The regulations then go on to
give a list of those circumstances in which the "items" in Section 61 would NOT be

Tom Clayton, MD 1998 1040X return 4-6-2002 10
"excluded by law" (i.e. when they WOULD constitute taxable "gross income"). That
list, found in 26 CFR 1.861-8T(d)(2)(iii), excludes the income of most Americans.

Information Requested and Demand for Production of Documents

Finally, as of this date, the IRS has not informed me that I became liable for any
federal income taxes for the 1998 calendar year. Although the above citations are very
clear, I must be certain that no liability exists for calendar year 1998 relating to my
income source, therefore I respectfully request/demand:

Pursuant to 26 CFR 301.6203-1, a copy of any record(s) of assessment,
including the pertinent parts of the assessment which set forth the name of
the taxpayer, the date of assessment, the character of the liability assessed,
the taxable period, if applicable, and the amounts assessed.

In connection with these record(s) of assessment, I am specifically
requesting the following forms: verified, certified copies of Form 23C
Summary Record of Assessment, Form 17 or 17A Notice of Assessment
and Demand (or successor form). Form 4340 Certificate of Assessments
and Payments.

Obviously, this information is critical to making certain that such a determination is
absolutely correct, and I would not want to file or submit any documents that were not
true, correct, and complete, especially since those documents are required to be signed
under penalty of perjury. It is a felony to swear under penalty of perjury that
something is true when the person knows and can prove that it is not true. Unless this
information shows that I have a federal income tax liability, this completes my final
determination that I am exempt from federal taxation.

If I am shown any part of the law that creates such a federal income tax liability,
then I will of course pay what I owe. I am personally convinced that most IRS
employees are honest and try to do the best job that they can, and that they are only just
now becoming aware that they have been deceived, just like the general public. Most
IRS employees have been misinformed about what the law truly requires because they
have been misdirected to use the statutes alone, when as you can see above, the
regulations must be used as well.

In years past, the public is supposed to have read the law as I have done, and that is
what the government says as well, but prior to the Internet, this was rarely done
because access to the law was limited and the public was deliberately kept in the dark
about the organization of the law and how to read it; statutory law is really quite
logical and makes good sense. But the law means what the words say, not what some
courts think the law says.


Tom Clayton, MD 1998 1040X return 4-6-2002 11
A fundamental distinction separates the language of the legislature-the body
(such as Parliament or Congress) which institutes a legal text-and the language
of the judiciary-the body (the law courts and judges) which interprets and
applies that text. A pivotal role is played by the set of constitutional
statements, statutes (Acts), and other documents which come from the
legislature. In these cases, the words, literally, are law. [The Cambridge
Encyclopedia of The English Language, 1995]

Finally, case law below the level of the Supreme Court is worthless, as it is full
of mistakes. The IRS ignores such law and so do I. If case law does not correlate
with and come to the same conclusions as statutory law, then it is wrong, pure and
simple. The law does not need to be interpreted by judges, because the official
interpretation has already been done by the Secretary of the Treasury in the regulations;
the truth is in the regulations.

And these regulations are binding on the public, the IRS, and the courts. I enclose
a complete report (Taxable Income) that explains exactly how the law says what I
have concluded above, and how it has ALWAYS said this, once you know where to
look and what to look for.
By signing below, I hereby swear under penalty of perjury that the above
information is true and correct to the best of my knowledge. If the Service disagrees
with these conclusions, then I hereby request the citations of law that refute my
findings and an in-person conference to discuss the matter.
If you have any questions, please contact me in writing at the address listed on the
letterhead, so that there is no misunderstanding.
Thank you for your assistance in this matter.

Sincerely,


________________________________

Charles Thomas Clayton, MD
SS# 462-78-5051
Email: ironman@excessiron.org
Enc: Taxable Income
1998 1040X Return
Form 8275
Critical Section 61 and 861 regulations