Posted by Common Right Group on July 28, 1997 at 18:42:01:
In Reply to: Are stock investment gains income? posted by Dan on July 22, 1997 at 22:03:27:
: Can they be taxed?
This has been a good question going to the issue of "Capital Gains" Taxation.
In a very simplistic nutshell, we cannot tell you what is taxable or not. Much depends on your status, what you believe you are obligated to do by way of filing and assessing yourself, etc.
Our take on this issue comes from the Supreme Court opinion that the lawful definition of "income" is "gains derived from capital or labor, or a combination thereof, but detached thereform..." [not direct quote ==>] 'gains in the worth of the capital are not income.'
This would seem to say that 'interest' is income, but increases in stock value, whether from market fluctuations or reinvested dividends MAY not be income. However, we notice that dividends are one way a corporation reduces its tax liability by passing its 'income' to the stockholder by way of a dividend. Thus, if the dividend reflects a gain or profit derived from the capital, but detached from the capital, it may be well within the definition of 'income' as intended in the Internal Revenue Laws. Many corporations are U.S. Corporations subject to taxation on the basis of the [taxable] activity of exercising and excise (privilege) of doing business as a corporation, thus enjoying limited liability and being protected under the law.
Thus, the question seems to be one of whether one has 'earned' the income as compensation for labor, or has found the income to be in the form of a 'windfall' or 'unearned.'
No-one can make any determination on your behalf as to what is taxable and what is not, not even the District Director of the IRS. Their job is solely to administer the tax laws. You have to make the determination on your own. You know, that foreign and brand-new concept called personal responsibility. [The sarcasm is meant 'tongue-in-cheek'. Don't take it as a personal slam.]
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