UNITED STATES DISTRICT COURT

NORTHERN DISTRICT OF NEW YORK

________________________________________
)
WILLIAM M. GREENE and )
KAREN M. GREENE, )
)
Plaintiffs, )
) Case No. 1:08-cv-0280-LEK-DRH
v. )
)
INTERNAL REVENUE SERVICE, )
)
Defendant. )
_________________________________________ )

REPLY TO PLAINTIFFS’ RESPONSE TO THE UNITED STATES’

MOTION TO DISMISS

The United States hereby submits its reply to plaintiffs’ response to the government’s

motion to dismiss.

Plaintiffs assert in their response to the United States’ motion to dismiss that they are not

taxpayers subject to the provisions of the Internal Revenue Code and therefore this action should

not be dismissed pursuant to the Declaratory Judgment Act. (See Docket Entry No. 19, at 20-

30.) They also conclude that their right to earn income cannot be taxed as a privilege. (Id. at 26-

28). Plaintiffs, however, admit that they “were born and lived most of their lives in the State of

New York . . . and are currently employed as truck drivers involved in interstate commerce.” (Id.

at 26.)

For federal income tax purposes, "gross income" means all income from whatever source

derived and includes compensation for services. 26 U.S.C. § 61. Any income, from whatever

source, is presumed to be income under § 61, unless the taxpayer can prove that it is specifically
exempt or excluded. See Reese v. United States, 24 F.3d 228, 230 (Fed. Cir. 1984). Plaintiffs

have not provided any proof that their compensation as truck drivers is exempt or excluded. All

compensation for personal services, no matter what the form of payment, must be included in

gross taxable income. This includes salary or wages paid in cash, as well as the value of property

and other economic benefits received because of services performed, or to be performed in the

future. See Commissioner v. Kowalski, 434 U.S. 77, 82 (1977); Commissioner v. Glenshaw

Glass Co., 348 U.S. 426, 431 (1955) (income not limited to gains or profits); Connor v. Comm’r,

770 F.2d. 17, 20 (2d Cir. 1985) (“Wages are income.”); Ficalora v. Comm’r, 751 F.2d 85, 88 (2d

Cir. 1984) (same). Therefore, plaintiffs’ claims that their personal labor is not taxable and that

they are not taxpayers have no merit.

Plaintiffs also assert that the government has admitted that the Internal Revenue Service

(“IRS”) is not an agency of the United States. (See Docket Entry No. 19, at 30-33.) The

government has not made any such admission in this case.

Finally, plaintiffs erroneously contend that the IRS is not authorized to operate within the

fifty states. (See Docket Entry No. 19, at 30-33.) The IRS’ right to assess and collect federal

income taxes is undisputed in law. “Under Article I, Section 8 of the United States Constitution,

there can be no question that Congress has the power to tax citizens of ‘the 50 states.’ The

Sixteenth Amendment extended that power further to income taxes. Thus, the federal

government exercises ‘sovereignty,’ albeit dual sovereignty over the fifty states with respect to

taxes.” United States v. Webb, No. 06-CV-5317(SLT)(RER), 2007 U.S. Dist. LEXIS 93491, at

*14 (E.D.N.Y. Sept. 5, 2007) (internal citations, quotations and footnote omitted).

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 Otherwise, the government relies on its Memorandum of Law in Support of its Motion to

Dismiss.

Respectfully submitted,

GLENN T. SUDDABY
United States Attorney

/s/ Lisa L. Bellamy

LISA L. BELLAMY (514173)
Trial Attorney, Tax Division
U.S. Department of Justice
P.O. Box 55
Washington, D.C. 20044-0055
Telephone: (202) 307-6416
Facsimile: (202) 514-5238
E-mail: lisa.l.bellamy@usdoj.gov

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 CERTIFICATE OF SERVICE

I CERTIFY that on July 2, 2008, I electronically filed the foregoing United States’ Reply

to Plaintiffs’ Response to the United States’ Motion to Dismiss and the copy of the following

case cited in the United States’ Reply – United States v. Webb, No. 06-CV-5317 (SLT)(RER),

2007 U.S. Dist. LEXIS 93491 (E.D.N.Y. Sept. 5, 2007) – using the CM/ECF system. Notice of

this filing will be sent by e-mail to all parties registered to receive electronic notification. I have

mailed by First Class United States mail, postage prepaid, the foregoing document to the

following non-CM/ECF participants:

William M. Greene
P.O. Box 279
Voorheesville, NY 12186

Karen M. Greene
P.O. Box 279
Voorheesville, NY 12186

Parties may access this filing through the Court's CM/ECF System.

/s/ Lisa L. Bellamy

LISA L. BELLAMY (514173)
Trial Attorney, Tax Division
U.S. Department of Justice
P.O. Box 55, Ben Franklin Station
Washington, D.C. 20044-0055
Tel.: (202) 307-6416
Fax: (202) 514-5238
e-mail: Lisa.L.Bellamy@USDOJ.gov