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Question 13 of 19

INCORRECT

Which of the following information forms may contain the declaration of someone that your earnings are "income" because they derive from federal privilege?

Correct answer:
D)
W-2, 1099, K-1, 1040
Discussion:
Each of these information forms may contain someone's testimony that your earnings derive from federal privilege, and, if so, can be used by the IRS and in court as evidence of such. On a 1040 with non-zero entries for any of the taxable amounts, it is your testimony.

In some cases, the testimony is correct; federal salaries, interest payments from government bonds and federally chartered banks, federal retirement payments such as Social Security, and many other payments from federally-connected activities do indeed derive from federal privilege.

But the larger share of individuals' earnings is not federally-connected and this testimony is in error. However, the courts do not care.

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