New York authorities put Trump’s clandestine tax dealings under the microscope
The New York tax department has opened an inquest following
explosive revelations about the US President’s financial history in the New
York Times

As well as the potential illegality, the
newspaper's report casts significant doubt on much of Trump’s rhetoric
regarding his status as a self-made man
New York state tax
officials have opened an inquiry into the Trump family’s business dealings,
prompted by the results of an extensive investigation by the New York Times, released on October 2.
The centerpiece of the
material comprised tax returns from the president’s father, which substantiate
claims that Trump avoided tax through a variety of deceptive practices
The investigation challenges
Trump’s claim that he is a ‘self-made billionaire’ by revealing that he
received at least $413m in today’s currency from his father’s property empire,
much of it as a result of fraudulent tax dealings in the 1990s.
The paper trail
journalists at the New
York Times studied over 100,000 documents that detailed the
machinations of Trump’s father’s business empire. These included documents from
public sources such as mortgages and deeds of properties owned by the family,
as well as confidential files including bank statements and invoices.
The centerpiece of the
material comprised over 200 tax returns from Fred Trump, the president’s
father, which substantiate claims that Trump avoided tax through a variety of
deceptive practices.
The investigation
highlights ‘dubious tax schemes’ as well as ‘instances of outright fraud’ that
the family engaged in. These include the establishment of a sham corporation by
the president and his siblings to conceal millions of dollars of gifts, as well
as the filing of incorrect property valuations to reduce tax bills.
Over the course of their
lifetime, Mary and Fred Trump transferred over $1bn in wealth to their various
children, which under the 55 percent tax rate imposed on gifts and inheritances
at that time, should have incurred a tax bill of over $550m. However, Donald
and his siblings paid a total of $52.2m, only around 5 percent, according to
tax records seen by the publication.
A firm rebuke
Charles J. Harder, a lawyer representing the president, provided the following statement on October 1: “The New York Times’ allegations of fraud are 100 percent false and highly defamatory. There was no fraud or tax evasion by anyone. The facts upon which the New York Times bases its false allegations are extremely inaccurate.”
This statement would
suggest that the president is employing his typical ‘fake news’ rhetoric to
pour scorn on these allegations. The President’s dislike for liberal media
outlets such as the New York Times is well-documented and he
has been known to accuse the paper of falsifying reports on various occasions
in the past.
Many others, however,
are not willing to set aside these allegations so lightly. One of those parties
includes the New York State Department of Taxation and Finance. It told World
Finance: “The Tax Department is reviewing the allegations in the New
York Times article and is vigorously pursuing all appropriate avenues
of investigation.”
The US tax system is
filled with loopholes, and enterprising tax lawyers cautiously walk the line
between legal tax avoidance and illegal tax evasion to get the best deal for
wealthy clients. The investigation indicates, however, that the Trump family
may have trespassed into illegal territory on multiple occasions.
It remains to be seen whether
there will be any penalties for Trump as a result of this investigation.
Professor Alex Raskolnikov, a specialist professor in international tax law at
Columbia University, explains: “The internal revenue code does have a statute
of limitations for civil offenses and for criminal ones as well. Both
statutes have run for returns discussed in the New York Times article.”
He added: “However,
civil fraud is not subject to the statute of limitations. Moreover, even
when a tax return is audited and ‘closed’ by the IRS, if the IRS later
discovers fraud it can reopen the tax year. If it does and finds fraud
(civil), the penalty is 75 percent of the underpayment. That penalty, plus
interest for many years, can amount to a large sum.”
There are also other
ways in which Trump could be investigated for these claims. Alistair Bambridge,
Director of Bambridge Accountants said “It is well-documented that one of the
main things that Trump relies upon financially is a series of losses and credit
from carryovers. No-one knows when these carryovers started, due to the fact
that Trump has not released his tax returns to the public, so they could date
back to 20 or 30 years ago.
Therefore, although the statute of limitations has
run out on the original losses, if they were carried over into any of the past
three years, the IRS could still investigate. The same goes for any of the
allegations relating to Fred Trump – although the IRS cannot posthumously
investigate his tax record, if Donald Trump or any of his siblings have
received benefits from Fred’s assets or trusts in the past three years that
would be grounds for an enquiry.”
Bambridge added: “The
question is whether the IRS has the appetite to pursue the President of the
United States – they may opt to go after periphery figures instead.”
The self-made fantasy
the investigation also calls into question much of Trump’s rhetoric surrounding his status as a self-made man. It also brings to light the inaccuracy of his well-rehearsed story that he accepted a $1m loan from his father and transformed it into a $10bn empire.
The New York
Times states in its report: “what emerges from this body of evidence
is a financial biography of the 45thpresident fundamentally
at odds with the story Mr. Trump has sold in his books, his TV shows and his
political life.”
Much of Trump’s
presidential campaign rested on his supposed responsibility for his own
success. He has previously claimed that he received very little financial help
from his father. However, the documents examined by the report highlight that
the president was earning $200,000 annually by the time he was three years old,
and was a millionaire by the age of eight. The financial aid that he received
from his father continued to grow year on year until his death in 1999.
Change of fortune
the release of the New York Times investigation findings also coincided with a Forbes report stating that Trump has fallen 138 spots on the publication’s list of the richest people in the US.
Forbes’ valuation of the
president’s net worth is also at odds with Trump’s own declaration. In a break
with decades of precedent set by past presidential nominees, Trump refused to
release his income tax when he ran for office, instead electing to disclose his
net worth, which he claimed to be “$10bn”.
However, according to
the Forbes 400 list, Trump was only worth $4.5bn in 2015 when he ran for
office, and since becoming president, that number has fallen to $3.1bn.
this is not the first time that Trump’s credibility with regards to the financial transparency of his business dealings has been challenged. An investigation by the Palm Beach Post found that Trump and his lawyers had omitted details from a written agreement with Palm Beach officials to ensure that he would get a $5.7m tax break on his Mar-A-Lago property back in 1993. This tax break deduction previously appeared on the IRS’ list of “Dirty Dozen Tax Scams.”
The New York
Times’ investigation, though, is the first significant assembly of
documents of this sort and represents a huge investment of time and manpower by
the paper. It is also the first time that a sitting president has been accused
of a personal financial scandal of this scale.
Responsibility to decide
on the appropriate legal proceedings now lies with the New York tax department.
But decisions on the larger moral implications of this investigation lie with
the American people. Tax evasion is not usually a partisan political issue, but
in the US’ current, highly polarized political climate, it may become one.
Personal implications of
this allegation for Trump himself could be two-fold. Concerning the legal
aspect, this could force the president into being more transparent about his
own business dealings.
With regards to his reputation, the impact of these
revelations on voter confidence will be borne out in his approval ratings, as
well as in the run-up to the 2020 election. In the meantime, while the White
House brushes off the claim in a vain attempt to move on to the next news
cycle, many others will not be so dismissive.
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