A surprising discovery in the New York Times history of President Donald Trump's taxes is that the long-claimed "audit" he has claimed has prevented him from bringing his tax returns public. It turns out that the IRS perked up when Trump claimed business losses during the Great Recession of 2008 and 2009. So great were the losses that they could be applied retrospectively to previous years and offset the millions of dollars in tax liability from his time as the apprentice's host.
It is legal to use large business losses to offset other income (although it is a different question whether it should be), but it is not at all legal to boil the books to generate paper accounting losses to avoid taxes . It's not clear whether Trump broke the law, but the existence of the year-long litigation over the audit suggests that the IRS has reason to believe he did. And some of the accounting practices documented on his tax returns are extremely lazy – they characterize aspects of his lifestyle and the transfer of wealth to his heirs as business expenses.
There is nothing stopping you from taking your taxes off the test, but it seems unwise to do so. The IRS has limited investigative powers, while journalistic and academic interests endeavor to provide resources for the hunt through Trump's tax returns. What the Times story and previous newspaper coverage of Fred Trump's taxes have shown is a lot of seedy tax avoidance.
But as long as Trump is president, he can protect himself from accountability for tax crimes. He can also likely protect himself from debt collection agencies that appear to have significant claims due in the next four years. From obstruction of justice to sexual assault allegations to campaign finance violations, Trump counts on being president to prevent the law from coming after him.
As he prepares to take the stage to debate former Vice President Joe Biden on Tuesday night, he pleads not only to continue his governance approach, but also to maintain his personal immunity from legal liability. The tax issue increases the stakes in elections and gives a president who has rarely been law-abiding more reason to bend and break the rules in order to maintain power.
Tax-free gifts for children
One of the most intriguing revelations in the Times' coverage of Trump's long-hidden tax filings is that money he gave his daughter Ivanka was treated as a tax write-off.
You won't find the full details on Trump's tax returns. Instead, they reveal that his company once paid $ 747,622 to an unnamed consultant on hotel projects in Hawaii and Vancouver. Paying to consultants can be a legitimate business expense, and it's not uncommon to deduct such a thing. In this instance, however, the advisor appears to have been his daughter, whose own public financial statements show she received $ 747,622.
This is the kind of thing the IRS could easily overlook as it has to check two different forms to see that the numbers match and then see that the $ 747,622 payment almost certainly went to Ivanka. There is nothing wrong with giving your daughter a six figure gift if you are rich enough to do so. However, if you receive gifts of this size, you will have to pay a gift tax on them. If you structure your gift as an advisory fee, it goes untaxed to your heir. It is against the law to accept what is really a gift and pretend it is a business expense.
Gifts as corporate payments are not unprecedented in the Trump family. An earlier New York Times story of Trump's father's taxes showed that not only did the president inherit a vast fortune, but he did so largely without paying estate taxes. Some of these involved the aggressive use of avoidance strategists, which experts consider legal. But one thing Fred Trump did was set up his kids to own a company called All County Building Supply.
All County supplied Fred Trump buildings with building materials at inflated prices. This resulted in tax-free gifts for the Trump children and deductible expenses for Fred, and was even used in filings to New York state regulators as a reason to increase rents for rent-stabilized units. When this story emerged, the statute of limitations had expired making it impossible to hold anyone criminally accountable. But Trump's sister was a high status federal judge at the time, so a petition was filed to initiate an ethical investigation into her potentially illegal behavior – behavior she would have shared with her brother. But the moment the ethics committee agreed for an investigation to proceed, it withdrew from its position.
It is possible that a thorough investigation would reveal that the payments to Ivanka were legitimate. But it is also possible that this is not the case. Now that the returns are public, we know an investigation is warranted. And that goes for many of Trump's claims.
The news that Trump has deducted $ 70,000 worth of hairstyling expenses also begs the question of whether such a deduction is valid.
The law of personal appearance is both vague and at least theoretically quite strict. Bench, a provider of bookkeeping services to small businesses, warns that "Hair care costs will only qualify as a tax deduction if they are specifically intended for work-related photo shoots or shows."
"You can write off makeup for a stage or photo shoot, but not if you wear the same makeup on your normal day," said Chuck Sloan of Backpage, an actor magazine. "The same goes for your hair care costs."
That doesn't mean abuse isn't a routine. Ryan Grim, DC office manager for Intercept, reports that a certain tax advisor who is widely used by DC writers regularly recommends clients who frequently appear on TV to claim these deductions.
The DC helmsman who does a lot of media work always recommends it. @jamieson and I were just talking about how upset he would be at the low cost of our cuts and the lack of frequency. Just leave money on the table!
– Ryan Grim (@ryangrim) September 28, 2020
However, this does not mean that it is actually legitimate. For example, the IRS home office tax deduction rules state, "You must use part of your home regularly for business purposes only." serve, still request a deduction as it is difficult to prove you are lying about it.
But the rules are the rules. Much of Trump's lavish lifestyle seems to be deliberately blurring the lines between personal and business expenses. If you own a luxury golf resort in Scotland, taking your private jet to Scotland for a week's vacation can be quite business as long as you have discussed matters with the property manager and had a few meetings with local officials.
If someone says Trump is rich, it likely means they have wasteful consumption habits. When Trump tells the IRS that he is "poor," it does not mean that he is "a bad businessman" who pretends to be rich. This means that he has managed to classify a large chunk of wasteful personal consumption – from haircuts to flying on his giant private jet – as business expenses.
Get away with something
According to the FBI's uniform crime reports, fewer than 14 percent of car thefts or break-ins are actually solved by the police. But in elite circles, the fact that these crimes are relatively easy to get away with does not mean that they aren't really crimes, that there is no ethical problem with committing them, or that the difficulty of breaking the law against theft enforcing cars, this implies The whole charade is pointless and car theft should be legalized.
Unfortunately, people who never advocate burglary often fail to take this approach to tax fraud, where they tend to adopt the "whatever you get through is fine" mentality. As Trump said four years ago about his tax avoidance: "That makes me smart."
However, a concerted effort has also been made to make it easier to cheat your taxes. The IRS used to routinely conduct "lifestyle audits" when a person appeared to live too high on the pig, but Congress banned the practice in the 1990s. Natasha Sarin and Lawrence Summers estimate that there is roughly $ 1 trillion in unrecovered taxes from rich people that the IRS could get their hands on with a larger enforcement budget. Instead, as Paul Kiel and Jesse Eisinger reported for ProPublica, the agency's budget was cut by 20 percent after Republicans took control of Congress in 2010 – meaning many people get away with various types of abuse.
In other words, while it is possible that Trump's meager tax payments are a situation where the real scandal is legal, it is also possible that he is simply one of the many wealthy Americans who cheated on taxes and got away with it. Trump has appointed an IRS chief and chief IRS attorney with business ties to him, and a whistleblower within the IRS has told Congress that political officials have disrupted the audit of Trump's taxes. If so, it would be just one of several cases in which Trump's status as president protects him from the law.
If Trump had lost, he would have dealt with the law
Trump's personal attorney Michael Cohen is currently serving a sentence for three different crimes, one of which – as my colleague Andrew Prokop wrote – "arranges six-figure hush money payments for two women accusing Trump of sexual encounters – well above the federal law limit for one Campaign contribution. The first was a payment to Karen McDougal from the parent company of the National Enquirer, and the second was a payment to Stormy Daniels from Cohen himself. "
These payments were made after Cohen's affidavits, accepted by the prosecution and court, on instructions from Trump.
In a normal law enforcement situation, this would mean that the next target of investigation would be the candidate himself. However, it is the Justice Department's policy that a seated president not be charged with a crime. The Southern New York District Attorney's Office that brought the case against Cohen simply dropped him. Similarly, then Special Adviser Robert Mueller, in his report to Congress, describes Trump as guilty of the actual elements of obstruction of justice. But Müller felt that he should just describe the facts and leave it to Congress what to do with them.
In either case, the House could have indicted Trump, but the Democrats decided it would be politically unwise. The fact remains, however, that even when there is no major conspiracy, it is not uncommon for a person to be charged with obstruction of justice or campaign funding crimes. Trump is passing by because the DOJ's policy is not to indict the president, not because the material isn't there for an indictment.
Similarly, E. Jean Carroll has an ongoing defamation lawsuit against Trump that stems from his response to her claim that he raped her in the 1990s. At first glance, this is not a concern of the American government. However, Attorney General Bill Barr's Department of Justice took over the case from Trump's private attorneys, and arguments related to his status as president are being used in court to explain why he is not required to provide DNA samples and otherwise cooperate with the litigation. The president is also being investigated by the New York attorney general on alleged bank fraud and the Manhattan district attorney on charges of related financial crimes. In both cases, Trump fights subpoenas with arguments based on his status as president.
Trump also has hundreds of millions of debts due over the next four years – debts that banks are far more lenient with when the debtor is also the president.
6. Trump is personally responsible for a total of $ 421 million in loans, with the majority maturing within four years. Should he win re-election, his lenders could be put in an unprecedented position to weigh a seated president out of the office. Https://t.co/wAZnwT02Ap
– Yashar Ali (@yashar) September 27, 2020
In other words, Trump may not be able to afford defeat.
Trump is in a very dangerous place
Jimmy Carter and George H.W. Bush left both of them defeated and unpopular. But they left without complaint and quickly rebuilt their reputation. They became widely admired personalities as former presidents whose children later made careers in public life.
Trump's prospects as a former president are nowhere near as good.
He is the target of investigations into several financial crimes and the potential target of campaign funding and obstruction of justice charges. Regardless, he is facing civil litigation and the bill is due for his significant debt. As president, he has significant powers that can block accountability on all of these fronts. And as president, he commands the allegiance of the Republican Party, which believes that Trump's accountability would undermine its larger partisan political and ideological projects. Even if a Biden government prefers to look at the loose threads in the Mueller and Cohen cases, the rest of these allegations are unlikely to magically go away.
All of this provides a relevant context for the President's various reflections on how “electoral fraud” could give him reason to refuse to admit defeat in November. Nobody likes to lose. But Trump has reasons that go well beyond pride, bad manners, or even lust for power.
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