Current News

/

ArcaMax

Trump tax moves stir questions about potential legal exposure

By Laura Davison, Allyson Versprille and Aysha Bagchi, Bloomberg News on

Published in News & Features

WASHINGTON - Deductions for haircuts, consulting fee write-offs, a family estate that is treated as a business property and an aggressive refund claim could open President Donald Trump to legal risks once he's out of office.

An analysis published by The New York Times based on more than two decades of Trump's tax returns the news organization obtained show that Trump took aggressive tax positions and that the IRS is challenging a $72.9 million refund claimed a decade ago in an audit that has yet to be resolved.

If the Internal Revenue Service ultimately prevails, Trump could be liable for millions of dollars in penalties. He potentially could be subject to criminal prosecution if the IRS mounted a case that he knowingly violated the law, though that would be very difficult to do, according to tax professionals.

"Any taxpayer that would have these issues before the IRS should be rightfully concerned," said Joseph Opich, a tax partner at law firm Paul Hastings. "The law places strict liability on the taxpayer. You are responsible for what goes on your return. There is no defense for 'my accountant did it.'"

The revelations about Trump's tax returns and finances unfolded just two days before the first debate between the president and Democratic nominee Joe Biden and 36 days before the election. Trump, who has struggled with persistently low public approval ratings throughout his presidency, trails Biden in every recent national poll.

Trump has called the New York Times reporting "fake news" but hasn't offered a rebuttal on the substance. In a tweet Monday he said he was "entitled, like everyone else, to depreciation & tax credits."

 

Tim Murtaugh, a spokesman for Trump's reelection campaign, said in an interview on Fox News on Monday that "the president has paid tens of millions of dollars in taxes" and the Times story is "not accurate."

He didn't say which parts of the story are wrong, and he didn't specify whether Trump has paid tens of millions of dollars in income taxes. Trump's conglomeration of businesses, the Trump Organization, has likely paid tens of millions of dollars in payroll taxes over the years.

Several things in The Times' reporting would be "ripe for review" by the Internal Revenue Service, Robert McKenzie, a partner at law firm Saul Ewing Arnstein & Lehr LLP, said. Paying consulting fees to employees to generate business deductions, as Trump allegedly did with his daughter Ivanka Trump, is likely to run afoul of tax rules, he said.

Plus, he said the IRS is closely watching so-called conservation easement deals, like the one Trump did with his Seven Springs estate in Westchester County, New York. That generated a $21.1 million charitable tax deduction for Trump. The location also created other tax savings because Trump reportedly treated it an investment property for tax purposes while public statements on the Trump Organization website say it was used as a family retreat.

...continued

swipe to next page
(c)2020 Bloomberg News, Distributed by Tribune Content Agency, LLC.