Loans to his kids and huge business losses: Tax experts raise red flags after review of Trump tax returns
According to a report from Politico, the non-partisan Joint Committee on Taxation has already been poring over Donald Trump's tax returns that were finally turned over after the Supreme Court spurned the former president's efforts to keep them secret -- and they have raised five "red flags" so far.
The report from Politico's Brian Faler notes that House Ways and Means Committee -- which pushed to have access to Trump's tax documents -- turned the documents over in an effort to decipher and unwind the complex claims made by the former president's accountants.
To date, Faler reports, there are five lines of inquiry recommended which could be headed for deeper scrutiny and more questions about Trump's financial picture.
As the report notes, the documents have been being reviewed by tax experts since late last month, and there are now questions being posed in a report from the JCT.
At the top of the list is Trump's use of massive business losses that allowed him to pay "little or no tax between 2015 and 2020."
According to the Politico report, "Businesses are taxed on their profits, so if they can show their earnings are being swamped by their expenses, they can erase their IRS bills," before adding, "Without those losses, Trump’s taxes would look fundamentally different. In 2016, for example, when he paid just $750 in federal income taxes, he reported $30 million in earnings but also $60 million in losses."
With Politico's Faler asking "The big question is whether those losses are legitimate," Steve Rosenthal of the Tax Policy Center remarked, "It’s the elephant in the room.”
Loans to Trump's children are also being questioned.
"Trump reported receiving hundreds of thousands of dollars in interest payments on loans he gave Ivanka Trump, Donald Trump, Jr. and Eric Trump. That raises eyebrows because that could be a way to get around the gift tax. If he gave money outright to his kids, it would likely be subject to a stiff 40 percent tax. The gift tax is designed to prevent people from escaping the estate tax by giving money away to their kids, for example, while they’re alive," the report states, before adding, "Calling that money a loan would avoid the gift tax while also allowing his children to deduct from their own taxes the interest they paid him."
The former president's penchant for mingling expenses is also being cited in the report stating, "In 2016, for example, the filing for DT Endeavor I LLC (aviation) reported gross income of $680,886 and expenses that also totaled $680,886. A filing for Melania Trump (modeling) said it took in $3,848 and reported the same amount of expenses. A filing for Donald J. Trump (speaking) reported $50,000 in gross income and $46,162 in travel expenses. Aside from the unlikelihood of income and costs exactly equaling, it raises the question of whether someone would bother with a business in which their expenses consumed every dollar they made."
According to the JTC, "Audits of closely held entities often find personal expenditures being improperly deducted as business expenses.”
The other two lines of inquiry involve land conservation used for tax breaks and taxes paid overseas with the report stating, "Trump didn’t pay much U.S. tax in the returns examined — just $1.8 million over the six-year period. But in 2018 he claimed a foreign tax credit for paying $1.3 million to other governments. People can claim a credit for paying levies elsewhere, something that’s designed to spare people from having to pay taxes twice on the same dollar. The question here is whether those are legit. The IRS should be asking to see the receipts, says JCT."
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