MEMORANDUM OF LAW IN SUPPORT OF 1099OID – ORIGINAL ISSUE DISCOUNT

1. Is the Form 1099OID applicable to individuals?
2. Are taxpayers the issuer of the obligation in question?
3. Is the law on this subject matter found at AmJur 2d 12400-12415?
4. Can an individual file a Form 1099OID to recover expenses?
5. Does P.L. 97-258 Section 3101, 31 USC apply?
6. Can the United States of America enter into Treaty agreements for the benefit of the United

   States citizens?

7. Is there a grantor trust relationship with the taxpayer beneficiary?

8. Is there a different mechanism for recoupment?
9. Does Title 15 USC 1692 apply?

10. Is there a bond price differential between the securities spent and the original security known as a Birth Certificate (BC)?
11. Is the taxpayer legally allowed to file forms 1099OID, 1099-A, 1096, 1040v and Form 1040 for redemption and return of funds?

12. Can the IRS stop said method of filing and restrict an unrestricted right for collections and return of funds/securities?

STATEMENT OF THE ISSUES
13. The taxpayer filed forms 1099OID, 1099-A, 1096, 1040v and Form 1040 for redemption and return of funds.
14. The IRS is questioning said method and restricting an unrestricted right for collections and return of funds/securities.

STATEMENT OF THE FACTS
15. When a child is born in the United States at a hospital in the United States a process occurs whereby a BC is issued. Said certificate becomes a registered security that represents that child’s life-long labor on a general average basis is admiralty /maritime law. Said Certificate is run through various United States Administrative agencies.

16. Said process creates a trust agreement with the United States Attorney General, see Trust Memorandum.
17. Said process starts at the local hospital, which notifies the local COUNTY for its records, which notifies the STATE SECRETARY OF STATE (birth STATE), which notifies the United States Department of Commerce, which transfers the Certificate to the United States Treasury. The United States Treasury issues approximately nine (9) work orders to various other agencies. One of those is to the Social Security Administration to create (but not necessarily issue) the Social Security card for privileges and benefits with the first bond number listed on the back of the card. One work order

is issued to the Internal Revenue Service to enter into their computer to start looking for tax filings in relation to said number among other issues. One work order is issued to the Department of

Engraving and Printing (DEP). The DEP in turn issues a work order to the New York Federal Reserve to issue Federal Reserve Notes (FRNs) into circulation using the number on the backside of the Social Security number as law of future interest securities property to back the FRNs placed into circulation.
18. The Social Security Account has ten (10) separate bonds that are held at the Depository Trust Company and noted on the backside of the SS Card, a letter with eight digits. The CUSIP number is a zero plus the eight digits that can be tracked by referencing a NASDAQ computer search.
19. Title 14 Statutes at Large 4 states that U.S. citizens are stockholders of the United States of America.
20. The funds expended by the corporation known as the United States aka United States of America (capitalized or not) are obtained through the birth certificate process of using law of future interest securities to back that nation’s currency.

21. Black’s Law Dictionary 8th Edition, page 1133, defines “original-issue discount. The difference between a bond’s face value and the price at which it is initially sold. – Abbr. OID.”
22. The Internal Revenue Service (IRS) Form 1099OID is form used to report “The difference between a bond’s face value and the price at which it is initially sold.”

23. Barron’s Law Dictionary (1991) defines, on page 422, “Redeemable Bond a bond that is callable for payment by the issuer.”
24. Said FRNs are fungible property.
25. Barron’s Law Dictionary (1991) defines, on page 216, “Fungible a term applied to goods that are interchangeable or capable of substitution by nature or agreement.” “Securities of the same issue are considered fungible; hence a person obligated to deliver securities may deliver any security of the specified issue. U.C.C. 8-107(l).”

26. The older UCC 8-107(1) stated, “(1) Unless otherwise agreed and subject to any applicable law or regulation respecting short sales, a person obligated to transfer securities may transfer any certificated security of the specified issue in bearer form or registered in the name of the transferee, or indorsed to him or in blank, or he may transfer an equivalent uncertificated security to the transferee or a person designated by the transferee.”

27. The current section of the UCC regarding transfers is sections UCC 8-209 and 8-303.
28. Encyclopedia of banking and Finance, by Glenn G. Munn, 8th Edition, (1983), page 817, defines “Redeemable. Both bonds and preferred stock are sometimes issued with the redeemable feature- that is, optional retirement before the obligatory maturity.”
29. The number on the backside of the Social Security card shows a number. Said number is eight

(8) digits with a letter in front. The letter represents which Federal Reserve banking center holds those funds in trust on that bond. For example, the letter “F” would be the Atlanta, Georgia, Federal Reserve center.
30. Whether a party with a Social Security number is using a check book or cash in the form of FRNs, the FRNs are registered securities and the check currency is treated as FRNs. When said party uses said FRNs in commerce they are “redeemed” in the sale/transfer for that party who’s Social Security (backside number) Bond is on file with the Depository Trust Company (DTC).
31. The party “born” (The Source) or whose name appears on the Birth Certificate is the source of

the original issue of the securities known as FRNs.

32. The birth certificate based “funds” are kept at the DTC and invested in various transactions on planet earth by investment “managers.”
33. The total number of bonds or Social Security card numbers (backside) is ten (10); hence there are allegedly 10 different bonds in investment/placement gaining interest.

34. Therefore, it appears that The Source is the ultimate Creditor/Lender and Recipient in some relations and Payor in others.
35. The redemption procedure or process of filing a [1040] “Return” is the process by which The Source makes claim to the fungible bonds (FRNs) exchanged are redeemed back to The Source. 36. A bank/bailee is defined as a party or institution that holds property in trust a grantor or third party bailor.

37. Therefore, when a party of The Source applies to a for-profit, licensed institution called a “bank” holding registered securities called FRNs for grantors/beneficiaries who may be first party bailors.

38. Barron’s Law Dictionary (1991) defines, on page 157, “Draw see draft.” On page 156, “Draft an order in writing directing a person other than the maker to pay a specified sum of money to a named person;…”
39. For example, when a party of The Source seeks the assistance of a Federal Reserve chartered Bank for a “loan” what is really happening is the applicant is seeking a draw/draft from his own fungible trust funds to use to acquire a product/service. The

40. The method of redemption of The Source’s future interest is the filing of IRS Form 1099OID. This shows what was expended by The Source that is being redeemed.
41. In Title 33A American Jurisprudence (AmJur) section 12400 et. seq. the Original Issue Discount is discussed.

In section 12430 “Cash method debt instrument defined. For purposes of the issue price as 12429, a cash method debt instrument is a debt instrument issued in exchange for property (other than new section 38 property) if:

(a) The stated principle amount doesn’t exceed a specified dollar limit [Code Sec. 1274A(b); Code Sec. 1274A(c)(2)(A)] ($3,307,400 for sales and exchanges in 2006); [Rev. Rul. 2005-76, 2005-49 IRB 1072]

2. (b)  The lender doesn’t use an accrual method of accounting;
3. (c)  The lender isn’t a dealer with respect to the property sold or exchanged; [Code Sec.

1274A(c)(2)(B)]
(d) The regular Code Sec. 1274 issue price rules would otherwise have applied to the debt

instrument; [Code Sec. 1274A(c)(2)(C)] and
(e) An election to have the debt instrument treated as a cash method debt instrument is made (see 12431) jointly by the
(f)
(g) borrower and lender. [Code Sec. 1274A(c)(2)(D)]

“A debt instrument issued in a debt-for-debt exchange that qualifies as an exchange under Code sec. 1001 is eligible to a cash method debt instrument if the requirements are met.” [Reg. 1.1274A-

1(c)(3)]

1. In the post-1930s New Deal the UNITED STATES OF AMERICA is a parent company (28

USC 3002(15)(c)) to the STATES of that private Federal Union and is demonstrated by the case of Dyett vs. Turner, 439 P2d 266 (1968). This is significant in that the STATE BIRTH CERTIFICATE represents a future interest in securities by The Source and is lent to the STATE and therefore, to the UNITED STATES OF AMERICA and its alleged parent relations.

2. On STATE OF CALIFORNIA Birth Certificates in the bottom left hand corner it states, “American Bank Note Company.” This writer believes that to be a tacit empirical admission that The Source is the ultimate creditor.

8. FACT: The individual Social Security grantor trust is not domiciled in the continental United States (aka CONUS).
9. FACT: The individual Social Security grantor trust is in most cases domiciled in the United States Virgin Islands (USVI).
10. FACT: Trusts are corporations, Bl. Comm. Vol. 1, Chapter 18.
11. FACT: said trust domiciled in the USVI is a foreign trust to CONUS.
12. FACT: said trust is a grantor trust.
13. FACT: Grantor trusts are trusts whereby the grantor is the same man/woman as the

    beneficiary.

14. FACT: the object of a grantor trust is to split/separate legal title (decision authority)

    from equitable/beneficial title (authority to use said property) while protecting said property from third parties via the Trustee.

15. FACT: The People can individually elect to revest title of the Social Security grantor trust by revesting legal title back from the USAG and merging it with their individual beneficial property.
16. FACT: The People operating through the individual Social Security grantor trust can elect to year-by-year collect on the difference of the bonds (BC vs. FRN) by using the 1099OID process to collect on their expenses and offset any existing excise tax liabilities.
17. Therefore, unless the agency and its personnel known as the Internal Revenue Service and the US Treasury can demonstrate that the 1099OID process is incorrect.
18. It is a matter of historical record that today’s taxpayers are using registered securities

    for acquisition of goods and services.

19. Said securities were originally issued by the taxpayer as a result the taxpayer’s future

    labor being paced into commerce by way of the securities known as Federal Reserve Notes being placed into commerce by and through that security instrument known as the BC.

20. The BC is a recognized registered security by the DTC, Federal Reserve, United States Coast Guard, among other administrative agencies and financial institutions.

1. The Internal Revenue Code, if viewed through the “lenses” of the Social Security trust agreement demonstrates; 1) that a security interest was established at birth, 2) said personal property (labor) was placed in trust with the USAG, 3) the Social Security Administration’s job is to track covered employment wages, 4) the IRS’s job is to track excise taxable activities and keep an accounting of the trust’s activities, 5) the Department of Justice’s job is to keep track of the trust’s accounting during criminal investigations to pay/setoff expenses and reimburse for administrative/court costs as well as reimburse victims from the

perpetrators trust account.
2. Title 26 of the United States Code (USC) is the Internal Revenue Code (IRC).

Subpart E – Grantors and Others Treated as Substantial Owners
Sec. 671. Trust income, deductions, and credits attributable to grantors and others as substantial owners.
Sec. 672. Definitions and rules.
Sec. 673. Reversionary interests.
Sec. 674. Power to control beneficial enjoyment.
Sec. 675. Administrative powers.
Sec. 676. Power to revoke.
Sec. 677. Income for benefit of grantor.
Sec. 678. Person other than grantor treated as substantial owner.

Sec. 679. Foreign trusts having one or more United States beneficiaries.

Title 26 USC Sec. 163. Interest
(d) Limitation on investment interest
(4) Net investment income
For purposes of this subsection –
(C) Investment expenses. The term “Investment expenses” means the deductions allowedunder this chapter (other than for interest) which are directly connected with the production of investment income.

(e) Original issue discount

(1) In general
In the case of any debt instrument issued after July 1, 1982, the portion of the original issue discount with respect to such debt instrument which is allowable as a deduction to the issuer for any taxable year shall be equal to the aggregate daily portions of the original issue discount for days during such taxable year.

(2) Definitions and special rules
For purposes of this subsection –
(A) Debt instrument
The term ”debt instrument” has the meaning given such term by section 1275(a)(1).

(f) Denial of deduction for interest on certain obligations not in registered form

(1) In general

Nothing in subsection (a) or in any other provision of law shall be construed to provide a deduction for interest on any registration-required obligation unless such obligation is in
registered form.
(2) Registration-required obligation

For purposes of this section –
(A) In general
The term ”registration-required obligation” means any obligation (including any obligation issued by a governmental entity) other than an obligation which –

(i) is issued by a natural person,
(ii) is not of a type offered to the public,
(iii) has a maturity (at issue) of not more than 1 year, or (iv) is described in subparagraph (B).

(B) Certain obligations not included
An obligation is described in this subparagraph if –

(i) there are arrangements reasonably designed to ensure that such obligation will be sold (or resold in connection with the original issue) only to a person who is not a United States person, and

(ii) in the case of an obligation not in registered form –
(I) interest on such obligation is payable only outside the United States and its possessions, and
(II) on the face of such obligation there is a statement that any United States person who holds such obligation will be subject to limitations under the United States income tax laws.
(C) Authority to include other obligations
Clauses (ii) and (iii) of subparagraph (A), and subparagraph

(B), shall not apply to any obligation if – (i) in the case of –

(I) subparagraph (A), such obligation is of a type which the Secretary has determined by regulations to be used frequently in avoiding Federal taxes, or

(II) subparagraph (B), such obligation is of a type specified by the Secretary in regulations, and (ii) such obligation is issued after the date on which the
regulations referred to in clause (i) take effect.

(3) Book entries permitted, etc.
For purposes of this subsection, rules similar to the rules of section 149(a)(3) shall apply.

(g) Worthless securities

(1) General rule
If any security which is a capital asset becomes worthless during the taxable year, the loss resulting therefrom shall, for purposes of this subtitle, be treated as a loss from the sale or exchange, on the

last day of the taxable year, of a capital asset. (2) Security defined

1. Title 26 USC Part V lays out the rules for bonds and other debt instruments. The Federal Reserve Notes (FRNs) and the BC are debt instruments. The FRNs are public debt instruments from the Federal Reserve to the US Treasury. The BC is a future interest bond lent from the taxpayer to the US Treasury through the Bureau of Public Debt and the DTC

supporting the public registered securities known as FRNs. However, the time span from original issue of the BC and the use of FRNs by the tax payer is at least 18 years. In that time to maturity (literally) the difference between Original Issue and redemption with the expansion of the FRNs in circulation is quite large because of the expansion and monetization of said securities/ FRNs. Therefore, what is being spent by the taxpayer is a diminished security. Therefore, the refund of Original Issue being discounted applies to a transaction by the taxpayer whose funds have been reduced in value. Therefore the following IRC sections apply and support this premise of refund.

2. And, if any party (IRS included) charges the taxpayer’s account (Social Security Account) for any issue (Liens, Levies, etc.) said party is tapping into the taxpayers account. And, therefore, the 1099OID, 1099-A, etc. forms would apply towards refund.
3. PART V – SPECIAL RULES FOR BONDS AND OTHER DEBT INSTRUMENTS

Subpart
A. Original issue discount.
B. Market discount on bonds.
C. Discount on short-term obligations. D. Miscellaneous provisions.

Subpart A – Original Issue Discount

Sec.
1271. Treatment of amounts received on retirement or sale or exchange of debt instruments.
1272. Current inclusion in income of original issue discount. 1273. Determination of amount of original issue discount. 1274. Determination of issue price in the case of certain debt instruments issued for property.
1274A. Special rules for certain transactions where stated

principal amount does not exceed $2,800,000. 1275. Other definitions and special rules.

(a) General rule
For purposes of this title –
(1) Retirement
Amounts received by the holder on retirement of any debt instrument shall be considered as amounts received in exchange
therefor.

(2) Ordinary income on sale or exchange where intention to call
before maturity
(A) In general
If at the time of original issue there was an intention to call a debt instrument before maturity, any gain realized on the sale or exchange thereof which does not exceed an amount equal to –

(i) the original issue discount, reduced by
(ii) the portion of original issue discount previously includible in the gross income of any holder (without regard to subsection (a)(7) or (b)(4) of section 1272 (or the corresponding provisions of prior law)), shall be treated as ordinary income.
(B) Exceptions
This paragraph (and paragraph (2) of subsection (c)) shall not apply to –
(i) any tax-exempt obligation, or
(ii) any holder who has purchased the debt instrument at a premium.
(3) Certain short-term Government obligations
(A) In general
On the sale or exchange of any short-term Government obligation, any gain realized which does not exceed an amount equal to the ratable share of the acquisition discount shall be treated as ordinary income.
(B) Short-term Government obligation
For purposes of this paragraph, the term ”short-term Government obligation” means any obligation of the United States or any of its possessions, or of a State or any political subdivision thereof, or of

the District of Columbia, which has a fixed maturity date not more than 1 year from the date of issue. Such term does not include any tax-exempt obligation.
(C) Acquisition discount
For purposes of this paragraph, the term ”acquisition discount” means the excess of the stated redemption price at maturity over the taxpayer’s basis for the obligation.

(D) Ratable share
For purposes of this paragraph, except as provided in subparagraph (E), the ratable share of the acquisition discount

is an amount which bears the same ratio to such discount as –
(i) the number of days which the taxpayer held the obligation, bears to

(ii) the number of days after the date the taxpayer acquired the obligation and up to (and including) the date of its maturity.
(E) Election of accrual on basis of constant interest rate
At the election of the taxpayer with respect to any obligation, the ratable share of the acquisition discount is the portion of the acquisition discount accruing while the taxpayer held the obligation determined (under regulations prescribed by the Secretary) on the basis of –

(i) the taxpayer’s yield to maturity based on the taxpayer’s cost of acquiring the obligation, and
(ii) compounding daily.
An election under this subparagraph, once made with respect to any obligation, shall be irrevocable. (4) Certain short-term nongovernment obligations
(A) In general
On the sale or exchange of any short-term nongovernment

obligation, any gain realized which does not exceed an amount equal to the ratable share of the original issue discount shall be treated as ordinary income.
(B) Short-term nongovernment obligation

For purposes of this paragraph, the term ”short-term nongovernment obligation” means any obligation which –
(i) has a fixed maturity date not more than 1 year from the
date of the issue, and

(ii) is not a short-term Government obligation (as defined in paragraph (3)(B) without regard to the last sentence thereof).
(C) Ratable share
For purposes of this paragraph, except as provided in

subparagraph (D), the ratable share of the original issue discount is an amount which bears the same ratio to such discount as –
(i) the number of days which the taxpayer held the obligation, bears to
(ii) the number of days after the date of original issue and up to (and including) the date of its maturity.

(D) Election of accrual on basis of constant interest rate
At the election of the taxpayer with respect to any obligation, the ratable share of the original issue discount is the portion of the original issue discount accruing while the

taxpayer held the obligation determined (under regulations prescribed by the Secretary) on the basis of –
(i) the yield to maturity based on the issue price of the obligation, and

(ii) compounding daily.
Any election under this subparagraph, once made with respect to any obligation, shall be irrevocable.
(b) Exception for certain obligations

(1) In general
This section shall not apply to –

(A) any obligation issued by a natural person before June 9, 1997, and
(B) any obligation issued before July 2, 1982, by an issuer which is not a corporation and is not a government or political
subdivision thereof.
(2) Termination
Paragraph (1) shall not apply to any obligation purchased (within the meaning of section 1272(d)(1)) after June 8, 1997.
(c) Transition rules
(1) Special rule for certain obligations issued before January 1,
1955 Paragraph (1) of subsection (a) shall apply to a debt
instrument issued before January 1, 1955, only if such instrument
was issued with interest coupons or in registered form, or was in

such form on March 1, 1954.
(2) Special rule for certain obligations with respect to which
original issue discount not currently includible
(A) In general
On the sale or exchange of debt instruments issued by a government or political subdivision thereof after December 31, 1954, and before July 2, 1982, or by a corporation after December 31, 1954, and on or before May 27, 1969, any gain realized which does not exceed –
(i) an amount equal to the original issue discount, or
(ii) if at the time of original issue there was no intention to call the debt instrument before maturity, an amount which bears the same ratio to the original issue discount as the number of complete months that the debt instrument was held by the taxpayer bears to the number of complete months from the date of original issue to the date of maturity, shall be considered as ordinary income.
(B) Subsection (a)(2)(A) not to apply
Subsection (a)(2)(A) shall not apply to any debt instrument
referred to in subparagraph (A) of this paragraph.
(C) Cross reference
For current inclusion of original issue discount, see section
1272.
(d) Double inclusion in income not required
This section and sections 1272 and 1286 shall not require the
inclusion of any amount previously includible in gross income.

(a) Original issue discount on debt instruments issued after July
1, 1982, included in income on basis of constant interest rate
(1) General rule
For purposes of this title, there shall be included in the gross income of the holder of any debt

instrument having original issue discount issued after July 1, 1982, an amount equal to the

sum of the daily portions of the original issue discount for each day during the taxable year on which such holder held such debt instrument.

(iii) Treatment of husband and wife
For purposes of this subparagraph, a husband and wife shall be treated as 1 person. The preceding sentence shall not apply where the spouses lived apart at all times during the taxable year in which the loan is made

Sec. 1273. Determination of amount of original issue discount

(2) Other debt instruments not issued for property
In the case of any issue of debt instruments not issued for

property and not publicly offered, the issue price of each such instrument is the price paid by the first buyer of such debt instrument.
(3) Debt instruments issued for property where there is public trading

In the case of a debt instrument which is issued for property and which –
(A) is part of an issue a portion of which is traded on an established securities market, or

(B)(i) is issued for stock or securities which are traded on
an established securities market, or
(ii) to the extent provided in regulations, is issued for
property (other than stock or securities) of a kind regularly
traded on an established market, the issue price of such debt instrument shall be the fair market value of such property.

Sec. 1275. Other definitions and special rules

(a) Definitions
For purposes of this subpart – (1) Debt instrument
(A) In general

Except as provided in subparagraph (B), the term ”debt
instrument” means a bond, debenture, note, or certificate or
other evidence of indebtedness. [a Federal Reserve Note would qualify under this definition]

(C) Other debt instruments
In the case of any debt instrument not described in subparagraph (A) or (B), the term ”date of original issue”
means the date on which the debt instrument was issued in a

sale or exchange.
(3) Tax-exempt obligation

The term ”tax-exempt obligation” means any obligation if –
(A) the interest on such obligation is not includible in gross income under section 103, or
(B) the interest on such obligation is exempt from tax (without regard to the identity of the holder) under any other provision of law.
(4) Treatment of obligations distributed by corporations Any debt obligation of a corporation distributed by such corporation with respect to its stock shall be treated as if it had been issued by such corporation for property.
(b) Treatment of borrower in the case of certain loans for personal use
(1) Sections 1274 and 483 not to apply
In the case of the obligor under any debt instrument given in consideration for the sale or exchange of property, sections 1274 and 483 shall not apply if such property is personal use property.
(2) Original issue discount deducted on cash basis in certain cases

In the case of any debt instrument, if –
(A) such instrument –
(i) is incurred in connection with the acquisition or carrying of personal use property, and
(ii) has original issue discount (determined after the application of paragraph (1)), and
(B) the obligor under such instrument uses the cash receipts and disbursements method of accounting, notwithstanding section 163(e), the original issue discount on such instrument shall be deductible only when paid.
(3) Personal use property
For purposes of this subsection, the term ”personal use property” means any property substantially all of the use of which by the taxpayer is not in connection with a trade or business of the taxpayer or an activity described in section 212. The determination of whether property is described in the preceding sentence shall be made as of the time of issuance of the debt instrument.

Sec. 1283. Definitions and special rules

(a) Definitions
For purposes of this subpart –
(1) Short-term obligation
(A) In general
Except as provided in subparagraph (B), the term ”short-term obligation” means any bond, debenture, note, certificate, or other evidence of indebtedness which has a fixed maturity date

not more than 1 year from the date of issue.
(d) Other special rules
(1) Basis adjustments
The basis of any short-term obligation in the hands of the holder thereof shall be increased by the amount included in his gross income pursuant to section 1281.

(2) Double inclusion in income not required Section 1281 shall not require the inclusion of any amount previously includible in gross income.
(3) Coordination with other provisions

Section 454(b) and paragraphs (3) and (4) of section 1271(a) shall not apply to any short-term obligation to which section 1281 applies.