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The 1099 OID Myth

We get a lot of calls at Freedom Law School about people wanting to get the IRS out of their lives and America.; very admirable goals that we support. However we get a lot of people who have been told that if they become a “sovereign state citizen” or “reclaim their strawman” or “act only in common law” or other “Patriot Mythology” theories.

Below is a sample result of following these “Patriot Mythologies”.

---------- Forwarded message ----------
To: "Larry Becraft"
Date: Tue, 19 May 2009 17:27:07 -0700
Subject: Re: 1099 OID

Mr Becraft,

I appreciate your time and concern for my situation.  I kept and keep hoping that the next person I talk to will make this mess go away. 

I filed my 1099OID/A for 2008, recieved 346,000 (that's three hundred forty-six THOUSAND dollars) into my bank account 2 days later after filing electronically.  I was told by the guy "helping" me that that was the fastest turnaround he had ever seen.  We were ecstatic, we could pay off bills, pay back people who had lent us money (my Mom) and get out of debt.  You could imagine our excitement.

That was March 29th.  April 10th the nightmare began-our bank called and told us that our account had been frozen and the funds that we had used out of that 346k were now negative (-87,000) in our account.  My heart stopped.

Then the letters began...levy notices for 500,000 dollars plus (they added fines and fees etc).  The IRS does NOT WANT YOU TO FILE 1099OID's!!!!!  DON"T DO IT!!!!!!!  My life now is consumed by the possibility of losing my home and everything I have worked so hard for and I feel like  am all alone to fend off the voracious wolves with no way out-all because I was misled to believe this whole 1099OID process was "legit".  However you can get this to people, do.  Let them know that this process is NOT EFFECTIVE- if it has worked for you consider yourself extremely lucky..I would never promote this as legitimate and when i am finally done I will also do what I can to prevent anyone I hear doing this to stop.  Fighting the IRS is not a fun thing to do as a hobby, and it is even worse when you have to do it unexpectedly. 

If  you can keep an ear/eye open for anyone who can help  we would appreciate it, as we are in the mess of our lives.   J. Macdonald  Fort Collins Colorado

if you think someone may need/want  to talk to me you can send them my email

----- Original Message -----
From: "Larry Becraft"
To: xxx
Cc: "Tommy Cryer"
Sent: Tuesday, May 19, 2009 5:19:04 PM GMT -07:00 US/Canada Mountain
Subject: 1099 OID


Tom Cryer and I are trying to expose the charlatans who are promoting the 1099 OID argument. If you can provide the details of your experience so I can distribute your story as a warning to others, I would appreciate it.





----- Original Message -----
From: TheInhabitant
To: xxx
Sent: Thursday, May 21, 2009 1:55 PM
Subject: [TheAmericanRepublic] Learn the law, or fall for foolishness in equity

You have been grossly misled by the promoters of a civil fraud.

Go; ask these Form 1099 OID promoters to produce the law that stipulates you may draw upon an exemption account.  All Federal and State public agencies are statutory creatures of legislative enactments.  When there is no statutory authority for what you intend to claim as a refund, your position is either civilly frivolous, or at its worst, an equitable fraud.

The promoters of this 1099 OID civil fraud are leading you down the road to perdition.  A road where the hopes and dreams of others reaping windfalls from a nonexistent account lead directly to civil penalties attached to unwarranted refunds.

The forms you are led to believe are viable, come at a cost of $5,000.00 per instance, which is the civil penalty authorized by statutory enactment of Congress that may be imposed by the Commissioner of Internal Revenue when its personnel determine the filing you contemplate to be frivolous.  Read Title 26 USCA Subtitle F Chapter 68 Subchapter B part I § 6702

Unemployment compensation is a civil (statutorily enacted public act) privilege that arises by a state taxing statute which was implemented as the State Plan.  Now locate that statutory act, (which was first enacted by your state legislature in the mid 1930’s) and you will discover how you have been misled by the charlatans, and deceivers that promote this civil fraud of the 1099 OID.

You acknowledge you have suffered a loss of employment.  Now you think your financial concerns will be solved by moving a fraudulent claim under Federal Law.  Well maybe you should read title 18 USCA § 371.  Do you truly wish to contemplate a tour of club fed?  Now a criminal conspiracy may not be the end result of your pending effort to defraud the United States. 

Maybe you should consider the civil side of the equation, wherein the Commissioner of Internal revenue may impose a 20 percent penalty upon the amounts you attempt to claim as your refund.

These 1099 OID promoters are communistic fools.  Why?  Well only in a communistic ideology driven public weal does the state own YOU!  You at this point in time have been led to believe the public weal (The United States) controls YOUR, how did you state it, oh yes, “private exemption account”.  In the lands of the Nationalist Socialist (communistic, statists) State there is nothing private, as all property stands under the control of the public weal.

Where do you live, in America, or a mad land, where you believe the fictional falsities of the Form 1099 OID promoters to be a truth?

Well it is quite apparent the 1099 OID promoters are dysfunctional literates promoting in equity that which they have never substantiated in law.

The founding document of the American Republic clearly states our rights are ordained by Nature’s God.

Here you are attempting to move in contradiction to that fundamental fact of the American Republic, do directly to your singular failure to pierce the deception promoted as the Form 1099 OID “refund” process.

Every week, there is an admission by those who followed this 1099 OID process who have discovered the harsh reality that the Internal Revenue Service TRACES ALL REFUNDS!  A man in Colorado, who thought he had reaped a 350 thousand dollar refund, now owes the Internal Revenue Service 500 thousand dollars.  The problem is it took the Internal Revenue Service 10 days to trace the refund activity before his bank account was frozen upon the Service’s Request.  Unfortunately, this man now suffers the insufferable, for he gleefully spent near 87 thousand dollars in less than 10 days.

Your choice, dig a pit in hell and fill it with the 1099 OID process, or take the opportunity to learn the historical fact that the Founding Fathers, knew well,  what you appear to have forgotten, our rights are ordained by God.

This 1099 OID is the worst of deceptions championed by ideologically driven dysfunctional literates, who have no understanding that the American Republic’s fundamental law, clearly states, our liberty is ordained by God.


The unanimous Declaration of the thirteen united States of America

When in the Course of human events it becomes necessary for one people to dissolve the political bands which have connected them with another and to assume among the powers of the earth, the separate and equal station to which the Laws of Nature and of Nature's God entitle them, a decent respect to the opinions of mankind requires that they should declare the causes which impel them to the separation.

We hold these truths to be self-evident, that all men are created equal, that they are endowed by their Creator with certain unalienable Rights, that among these are Life, Liberty and the pursuit of Happiness. 

You have a choice, either fall for the ideologically driven fraud known as the Form 1099 OID process, or learn to sit down in the local law library and discover the administrative due processes of law.

"Liberty cannot be preserved without a general knowledge among the people, who have a right, from the frame of their nature, to knowledge, as their great Creator, who does nothing in vain, has given them understandings, and a desire to know; but besides this, they have a right, an indisputable, unalienable, indefeasible, divine right to that most dreaded and envied kind of knowledge; I mean, of the characters and conduct of their rulers."

-- John Adams (Dissertation on Canon and Feudal Law, 1765)

Reference: Our Sacred Honor, Bennett, 253.

From: This e-mail address is being protected from spambots. You need JavaScript enabled to view it [mailto: This e-mail address is being protected from spambots. You need JavaScript enabled to view it ] On Behalf Of xxx
Sent: Wednesday, May 20, 2009 4:02 PM
To: This e-mail address is being protected from spambots. You need JavaScript enabled to view it
Subject: [1099-OID] 1099-G

Recently received 1099-G from my State's Employment Security Services department for "Unemployment Compensation." I feel in my spirit and what I have learned through this group in particular, the funds where drawn from my private exemption account. With that said, would it be it logical to say that I my use the 1099-A, 1040V etc process?



---------- Forwarded message ----------
From: Tommy Cryer
To: Larry Becraft, Bob Hurt
Date: Fri, 3 Oct 2008 22:43:03 -0700
Subject: Re: 1099 OIDs

Okay, I need a break, so this is as good a diversion as any.

Bob, maybe this will help distinguish between "alternative medicine" and "alternative law".

We didn't create ourselves, so there is still a lot about the "laws" of nature that we have yet to discover, but those "laws" exist whether we know about them or not.  There are a lot of things out there that may or may not work for reasons for which we may or may not have a clue.  Does eating a bear's gall bladder really make us more virile?  Maybe, although our breath would probably prevent us from finding out.  But the laws of physics, chemistry and biological interactions of the two determine the outcome of whatever we put into our systems.

We didn't come with an instruction manual that reveals all the answers on what is or isn't medical Truth.  So an alternative medical procedure or treatment can't be excluded without experimentation and waiting to find out what results from it.

But we did create secular law.  We know the full extent of it because we made every bit of it from the ground up.  It is not an unknown realm of study and experimentation although it does allow for growth and development because no two cases are alike and no law covers every possibility.

So there is no such thing as "alternative law".  Something either has a basis in law or it doesn't.  If a law exists we know it exists and how it came to be the law.  There is no ethereal zone of law where no man has ever gone.  There is no uncharted law.

A new argument has to be based upon existing law.  An example is the development of law on products liability.  It has evolved and expanded with exceptions and distinctions drawn with every new configuration of case.  But if one were to go to the courts with the argument that manufacturers must be subjected to the same physical injury their products caused the customer, that would not have any basis in law and would be at best, frivolous.

What about the 1099 OID, then?  Is there any basis in law for the claim that a 1099 OID form can be used as a form of payment or offset for a debt?  Let me take you on a lawyer's investigation, the way we research any question to determine whether there is any basis for a proposition.

Let's start out by remembering that the federal system is a civil law system.  If Congress didn't enact it then it isn't law.  So, let's search the U.S.C. and the Statutes at Large for "1099 OID".  Our result?  Zip.  Nada.  Nichts.  Not one single reference to 1099 OID, much less legal authorization to use it to offset or pay a debt with.

What, then, about regulations?  The Treasurer has the authority to promulgate regulations and designate forms and maybe some other cabinet department can dovetail off the Treasury regs, so let's search the CFR, all of it, for "1099 OID".

We get two hits and two hits only:  26 CFR 1.6049-1 and 26 CFR 1.6049-3.  (see attached)

These regulations designate the 1099 OID form as the proper form for a corporation to use in reporting discounted interest on an "original issue discount" debenture, bond, etc.

Its use is limited to corporations and corporations only.  I'm not a corporation, I'm a corpus, a living, breathing and real human being, a body, not an embodiment by charter of the state.  So 1099 OID's have nothing to do with me unless a corporation issues one to me because I am the holder of an "original issue discount" bond as specified in the two regulations.

Once you read the two regulations you can see exactly what a 1099 OID really is.  It is a way for corporations to tattle on bond holders for interest they never received as they don't receive it.  Confusing?  The 1099 OID applies to corporate issues of bonds, debentures, notes or other evidences of indebtedness that are issued at a discount instead of issued for face value.

When a company borrows money by issuing bonds it can do it a number of different ways.  One, it can sell a bond at face value and pay interest on a monthly, quarterly or annual basis until the bond is redeemed for face value plus any additional interest accrued since the last payment.

Another way, though, is to issue the bond for less than its face value, discounting the interest from the sale price instead of paying it out during the life of the bond.  The bond starts out at the sale price and "grows up" to its face value during its term.

A good example that most of us are familiar with is a U.S. Savings Bond.  When you purchase a $100 savings bond you don't pay $100 for it.  You pay a good bit less.  Those bonds are sold for an amount which, when interest is added over the ten year period, would have a future value of $100 at ten years (or whatever the life of the bond is).

Although interest on U.S. Savings Bonds is exempt, interest from corporate bonds is not exempt.  So, when that unpaid interest, which was, instead, discounted from the face value at time of issue, accrues, increasing the redemption value of the bond by some increment each year, the government wants it's cut now, not at maturity.  So it requires corporations who have any "original issue discount" method of interest "payment" to report that accrued value or interest as earnings even though it was never actually paid or received.  The form to use for that is a 1099 OID (original issue discount).  If the bond were sold at face value and interest actually paid out each year, then they would have to report that, too, but on a different version of 1099.

But what isn't in those two sections is any way anyone other than a corporation can issue a 1099 OID and what else isn't in there is any way to use a 1099 OID as a form of payment or offset of a debt.  It's tedious reading and you'll probably drop off to sleep a few times before you get to the end, but it isn't there.

So now we know there is no basis for using a 1099 OID for payment or offset in the statutory law and we know there is no basis in federal regulations, either.  So far there is no basis found, making the notion . . . well . . . baseless.

What, then, about case law?  Where the law is silent, where there is a hiatus in the law, the courts can resort to "equity".  So at least theoretically the courts could recognize a 1099 OID as a form of payment.  What do the courts have to say?

Well, let's do a search of all federal courts for "1099 OID" and see what we get, and lo and behold and harken all ye within hail!!!  We get four whole hits.  Four cases dealing with the 1099 OID.  (see attached)

Let's roll our sleeves up and dig in. 

The first one is a bankruptcy court ruling, Harrison.  I don't subscribe to bankruptcy cases because I don't do those, so we don't have the full text of the case.  But the summary let's us know that the 1099 OID, along with the $3 million "Registered-Discharging and Indemnity Bond" drawn on Harrison's "account" with the "Department of Treasury" was not "accepted for value" and that Mr. Harrison has been moved from the waiting for a discharge in bankruptcy line to the waiting for his cell assignment line.  Nope, no help there.

The second case, Neal, is really entertaining.  Mr. and Mrs. Neal and their conglomeration of trusts and foundations were defendants in a federal foreclosure action.  The Neals sent notice of a "bonded promissory note" purporting to evidence a loan to the court, the attorney for the government and the clerk of court in the amount of $50,000,000 (I thought it was $25,000,000--wait, Mr. AND Mrs., so it's $25,000,000 each!) accompanied by a 2008 1099 OID showing $50,000,000 withheld from the loan proceeds for "taxes".  We loaned you $50,000,000 but we've withheld 100% of the proceeds of the loan, which isn't taxable, for taxes.  (I wonder if they paid in the withheld funds, and if they didn't . . . whooee!  They're in some Dutch, now!)

But wait, it gets better.  The court also received by mail a notice from a notary (who was stupid enough to put her name on the document) notifying the court of its "non-performance" on the "bonded promissory note".

This is definitely some "alternative law" if I've ever seen it.  Remember, a 1099 OID is issued by the BORROWER, the corporation issuing the bond, etc., to the LENDER, but in this case two people, not corporations, are claiming to be the LENDER and issuing the 1099 OID to the purported BORROWER.  Alternative, indeed.

But the court didn't order payment of the note.  Instead it referred the matter to the DOJ for prosecution for mail fraud, tax fraud and obstruction.  The Neals (and their notary) don't need to worry about the foreclosure because they probably won't need that house for some time, anyway. 

I think we can count this case as not providing any legal basis for similar use of the 1099 OID.

Now, the third, Mr. Martineau, was already in jail, so at least he didn't have to pack.  He filed a civil rights action, pro se, and attempted to pay the filing fee with a 1099 OID.  Didn't work there, either.

Still no basis.

How about the fourth case, Microdot?  Well, that one deals with a corporation that issued debentures in exchange for stock but at an "original issue discount".  This case doesn't deal with the "alternative" application of the form, so no basis here, either.

Now, we've exhausted all law.  The Code, the Statutes at Large, all regulations and case law.  There is no basis for the use of a form 1099 OID by anyone other than a corporation issuing bonds and such at "original issue discount".  And there is no legal basis for anyone, not even a corporation, using a 1099 OID as a form of payment.  If there were any legal basis we would have found it.

These folks have the inane idea that they can invent law (which is convenient, since they want to claim some proprietary interest in their "discovery").  Law isn't invented, it's enacted, and none of us can merely issue proclamations, making new law, although if that were true it would allow for some pretty interesting arguments. 

This reminds me of the series M.A.S.H. where Hawkeye and his buddy played a game called "Triple Cranko".  It was played with a chess board, chess pieces, checkers and a deck of cards and there were no rules.  Someone with some comic talent could probably build a pretty funny skit involving a couple of lawyers arguing before a judge, all three just making up laws as they go.

As for the other component, the "$25,000,000 bonded promissory note", stop and think about that for a minute.  In the current myth the note is issued by the debtor but purports to evidence a debt owed by the creditor, who never signed it.  "Well, you want me to pay my car note?  Check this out, sucker!!  I'm writing a note for twice that amount from the bank to me!  Now give me my change and make it snappy or I'll write another note for triple what I owe the bank."  Double Cranko at the very least.

I can't write and issue a note that makes anyone liable but me.  And who is bonding it?  If this note is bonded there is an insurance company or bank that is certifying that it has the money to pay the note off and if the note is dishonored it will turn that money over to the creditor.  Who bonds these notes? 

A bond, a promise to pay the debt or meet the obligation of another must be in writing.  Where is the writing?  Where is the bond?  Who signed it?  Where is the money backing it up?

All of this is as bogus as it gets.  The saddest part, though, is that people are eating it up and it's getting them in trouble.

Hope this sheds at least some light.


PS  Looking forward to meeting you in Houston.  I want to discuss your court observer project.  We need to team up on that and make it happen.

In a message dated 10/2/2008 6:45:24 P.M. Central Daylight Time, Larry Becraft writes:

Like Tommy said: you accept without challenge or proof anything asserted
in the movement, and then any dissenters must disprove your argument.
That is not the way it works: he who asserts must prove. That whole 1099
OID issue is the most baseless legal argument I have ever encountered.
Just because a guru speaks convincingly to those without legal training
and makes it sound good, does not make it legally correct. Frankly, that
whole argument is based on fabricated facts and legal arguments.

Lawyers can spot the con of flaky legal arguments, and even tho you may
be deceived, does not mean that we have to be equally deceived. This is
not the fault of the lawyers: it is the fault of the American public who
did not give a damn about the condition of the legal system in this
country until it touched them personally. Then when it does, it is the
fault of everybody else that you get screwed. they only scream and
complain when it hurts them.

I have tried for years to get people to act. The only time they do is
when their tit is in the wringer. When you get up in the morn and look
in the mirror, you see the party at fault.


Bob Hurt wrote:
> I don't have the legal skills to make the determination that the 1099
> OID issue is baseless, nor that the work presented in the documents
> you attached has no merit.  In fact, they seem pretty much okay to me,
> but the allude to things I don't know much about, like the $25,000,000
> bonded promissory note.  Why can't a bonded promissory note discharge
> a debt?  It seems to me to have as much or more value than federal
> reserve notes which are not bonded at all and have no redeemable value
> that I know of and do not constitute "lawful money" or Article I
> Section 10 constitutionally "legal tender".
> These documents prove so far that the federal court does not intend to
> honor that bonded note, and I don't see the lawful basis for that
> dishonor.
> In addition to this matter containing much more that meets the eye,
> including unproven theories, we must remember that federal courts are
> crooked as the Mississippi River and we cannot trust anything any
> judge or US attorney says or does because they are in cahoots with one
> another as part of the very government that foists the funny money of
> Federal Reserve Notes off on the people of our nation.  As we can see
> in the Margy Flynn issue I just posted, the courts (including federal
> courts) are utterly and hopelessly criminal, particularly against pro
> se litigants.
> So how can you in honesty declare that an action of a federal judge in
> any way proves the 1099 OID issue baseless.  The principles of an
> unapportioned, directly on-the-people imposed, levied, and collected
> income tax are baseless too, but they exist and the courts support it
> in spite of the crystal clear language of the Constitution prohibiting
> it.  Possibly the 1099 OID issue has a very sound base, but the judges
> and government attorneys just don't want to admit it.  Did you see the
> nonsense from the Florida Supreme Court last week about the loyalty
> oaths issue?  They ruled that they don't have to obey the law.  Don't
> worry, it wasn't the first time they ruled that way and it won't be
> the last.
> You and I need to peer into the issues of 1099 OID and make a
> determination of its validity from a full examination of the
> principles and their application to the circumstances.  You and I
> agree that the normal use of the form helps people buying discounted
> bonds pay tax on the discounted amount (because effectively, it is
> income - they pay 60% of the bond value for the bond, accept no coupon
> payments, and then cash it in for the full amount later, so they
> declare that 40% difference as income).
> However, on House (TV show) a regulator wanted to penalize Dr House
> for prescribing Viagara to a 2-month old boy until the doctor pointed
> out that the boy's problem of constricted blood vessels and bad blood
> pressure precluded other medications, and Viagra, though intended to
> help erectile dysfunction actually did cure the boy's dilemma with no
> adverse side effects. 
> Similarly, I have emphysema and showed my pulmonary research physician
> clinical trials that proved sildenafil citrate effective in
> alleviating exhaustion in people with pulmonary hypertension doing
> strenuous exercise (like hot sex or walking on a treadmill).  So my
> lung doctor prescribed Viagra for me, to be used during exercise.
>  That's an off-label use of the drug, but it was effective, in more
> ways than one.
> What, therefore, is wrong with off-label use of the 1099 OID?
> Bob Hurt
> On Thu, Oct 2, 2008 at 3:22 PM, Larry Becraft wrote:
>     Bob Hurt,
>     I was contacted by Mac MacPherson, a lawyer from Phoenix, who is a
>     friend of mine. He told me about the Pertile case out in LA. I
>     attach certain pleadings I just pulled down from this case via
>     Pacer. Notice that the 1099 OID issue was raised here. This
>     resulted in revocation of Pertile's bond.
>     Is this not proof that the 1099 OID issue is baseless?
>     Larry
> --
> Bob Hurt
> 2460 Persian Drive #70
> Clearwater, FL 33763
> +1 (727) 669-5511, FAX +1 (206) 600-5958
> Donate here:
> Study Jurisdictionary:
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1099 OID Search Results

Peymon Mottahedeh
President - Freedom Law School
(813) 444-4800 |

Last Updated on Tuesday, 12 April 2016 09:50