At first glance, income tax data released this week by a US House committee seems to show a turnaround in 2018 for former President Donald Trump. After a decade in which he reported no taxable income, his 2018 return reported taxable income of more than $24 million. He paid nearly a million dollars in federal income taxes.
In fact, his year in the black appears to have been largely a result of recent profits from the large inheritance that financed much of his career as an entrepreneur, more than $14 million in proceeds from the sale of the investment over the years. 1970s made by his father in the Brooklyn real estate development called Starrett City.
But soon the precedent was imposed again. Due to business losses, he paid no income taxes in 2020, the last year he was in the White House.
That year, after obtaining more than two decades of Trump’s tax returns, The New York Times traced the up-and-down arcs that characterized his financial history: dubious tax evasion, huge losses and a life backed by an inherited fortune. Recently released tax information, from 2015 to 2020, shows how that pattern extended through his years in Washington.
The new materials, which were obtained by the House Ways and Means Committee after a years-long legal battle, cast a host of questions about the methods used by Trump as president to reduce his income and income taxes. failures of the Internal Revenue Service (IRS) when investigating such deductions.
The congressional Joint Committee on Taxation, a bipartisan panel known for reviewing the impact of tax legislation, whose staff have deep knowledge of tax law, reviewed Trump’s statements and found dozens of red flags it said required further investigation.
One of them involved transactions with his children. According to tax data, Trump received tens of thousands of dollars in interest income annually from three of his adult children — Donald Jr., Ivanka and Eric — money that had come from what the statements said were personal loans to them. The committee questioned whether the loans were actually “gifts in disguise” to evade gift taxes and allow the sons to pay off interest payments to their father.
The congressional report said the IRS reviewed whether Trump had correctly deducted the $21 million he had paid to settle a series of fraud claims against the now-defunct Trump University. It was not clear, according to the report, whether Trump had received any insurance proceeds that offset part of the settlement. The outcome of that review is unknown.
The committee also questioned whether Trump had charged travel expenses from his personal life and hobbies as business travel expenses, citing in particular travel on his plane. The 2020 Times investigation found that he had often deducted questionable expenses, including more than $70,000 for hair styling during his years on The Apprentice.
A potentially troubling issue for Trump emerged from the report. The IRS is considering annulling $21 million that Trump claimed in 2015 for agreeing not to develop much of the land on a sprawling property in Westchester County, New York, known as Seven Springs. After not examining the transaction for a period of time, the agency is exploring whether the value Trump claimed was based on a qualified appraisal.
The committee requested that the IRS also verify charitable donations that Trump reported making in cash, checks and credit cards.
In addition to Trump’s statements, the Ways and Means committee obtained approximately 1,100 electronic files containing work papers, memos and other internal documents showing how they had been handled by the IRS. The records, according to the report, show an agency that seemed reluctant to aggressively vet a wealthy taxpayer who was difficult to deal with and filed complex returns.
After the Times published its investigation revealing years of Trump’s tax data, IRS officials met to decide how to respond to the many disclosures, including questionable deductions, tax credits and debt cancellation. However, the agency set a high bar for what to examine.
For example, the Times reported that Trump had a pattern of deducting payments to unnamed consultants, totaling $26 million over nine years across all his projects, and that at least some of that money had gone to his daughter. Ivanka, despite the fact that she received a salary as an executive of her company. That raised the question of whether the payments reflected actual consulting work or were simply a way to claim an unwarranted tax deduction.
The IRS appeared to find such payments worthy of scrutiny but was concerned that because they were spread over many years and had been made to numerous corporate entities, “the resources required to review them would far exceed any potential benefit,” the report said. . In a bit of circular reasoning, the agency ultimately determined that the fees were too “difficult to examine unless they were found to be fraudulent payments.”
Similarly, agency officials first flagged a detail in Times reporting about how Trump had used $9.7 million in business investment loans, in part related to the renovation of the Old Post Office hotel. in Washington to eliminate their tax liabilities for 2016 and 2017. But, to dig deeper, they concluded, “the credits would have to be material” and the committee found that the IRS was “not interested” in the end. Trump is currently seeking a refund of nearly all of the $641,931 he paid in 2015 income taxes using the same credit for historic rehabilitation, the report noted. He wants a refund for the entire amount minus $750, the same total income tax he paid in the following two years.
Internal reports indicated that, in determining which issues to investigate, IRS agents discussed “the history of difficult negotiations between Trump’s lawyers and IRS staff” and worried that opening new reviews of past tax returns could harm the “good relationship” they had recently established with Trump representatives.
Steven M. Rosenthal, a senior fellow at the Tax Policy Center, said the committee’s findings “just show how far behind the IRS is.”
“It’s unfortunate that they simply don’t have the resources or the expertise to keep up with a sophisticated taxpayer like Trump,” he said, “much less a sophisticated taxpayer like Trump who specializes in obstruction and delay.”
