Wednesday, October 03, 2018

The NYT's Trump tax fraud story

In an alternative reality that I very much wish was our actual one, today's lead story in the New York Times, "Trump Engaged in Suspect Tax Schemes As He Reaped Riches From His Father," would be a political bombshell. In our actual reality, it may get drowned out, but it shouldn't.

Suppose that this story were about any other twenty-first century major party presidential candidate, premised on his or her having been elected. That is, suppose we had this story about either actual President George W. Bush or Barack Obama, or hypothetical Presidents (because they lost the elections) Al Gore, John Kerry, John McCain, Mitt Romney, or Hillary Clinton. This would be a bombshell story - tax fraud connived at by the president! Talk of impeachment by the other party. Demands for investigations, etcetera.

But in the world we find ourselves living these days, it risks being just another story. We've got credible suspicions of obstruction of justice and collusion with a hostile foreign power to hijack an election. There are immigrant children living in prison camps. We have a Supreme Court nominee who has been accused of sexual assault and perjury. There are Emolument Clause issues that may involve corruption, bribery, and the outright sale of foreign policy favors, etcetera, and on and on. Against that background, investigative journalism that appears to show decades of tax fraud is a bit like someone's kitchen oven exploding in Pompeii on the same day as the Vesuvius eruption. It gets lost in the din.

This whole environment, by the way, has tended to discourage me from commenting actively here on current politics. If you've read this blog for long enough, you may recall that I was a bit harsh at times on Mitt Romney during the 2012 campaign. But this was premised in part on the fact that I actually expected better from him. Plus, while he engaged in some quite aggressive tax planning that seemed open to question and audit challenge, it was well within the bounds of what well-advised people in his industry, working with the leading firms, were doing.

I don't believe that the same can be said of the tax maneuvers described in today's NYT article. Consider the discussion of All County Building Supply and Maintenance, using padded bills to transfer millions of dollars from Fred Trump to his children. As described in the article, fraud is the only word for it. Likewise, while self-serving, somewhat lowball valuations are nothing new in the estate and gift tax planning field, there is a limit. Reputable taxpayers, advised by reputable firms, don't claim values that are only 5 or 10% of the lawful number. And they don't set up clearly sham corporations, although there might be a case where the IRS claimed sham and the taxpayer had opinions from reputable (but well-compensated) tax lawyers explaining why they believed it had economic substance.

There will be a tendency for cynical people to say: "All very rich people do this." I don't think that's correct, at least to anything like this degree. It's partly about very rich people's self-interest. Why commit fraud with all its downside risk, when there are plenty of lawful tax planning opportunities that can significantly reduce one's liability anyway? (If not to the same degree.) And likewise, practitioners in the leading firms generally don't get engaged in this stuff, which would be bad for their professional reputations (and which they might personally find offensive).

In this regard, recall the Panama Papers. Not a whole lot of outright tax fraud by rich Americans was revealed therein - it was more about rich people from other countries. Or the enactment of FATCA to address secret offshore bank accounts. This was generally thought to be about people with high-flying (or mid-flying) cash businesses, not about the names in the New York social register, if such a thing still exists, or Page Six of the New York Daily News.

So if Trump's peer group is very rich people, what the NYT article describes does not appear to be anywhere near "par for the course." On the other hand, if his peer group is criminals - and he has, of course, expressed outrage about Al Capone's being convicted of tax fraud - then this is indeed the sort of behavior about which one would tend to suspect that they're all doing it.

What about very rich people in NY real estate? Here I think it is well beyond the norm, but I admit that I don't know with the same degree of confidence. I am certain that these people are not using people from the leading law firms to engage in tax fraud, but that doesn't rebut the possible existence of a norm more dishonest than that which is followed by rich people generally. I recall, for example, that Jared Kushner's dad was jailed on tax fraud charges, among others.

But I don't think it would be much of a moral defense of Donald Trump to say that rampant criminality and blatant tax fraud were common among NYC real estate tycoons, even if this proved to be the case (and again, my point here is just that I can't say from personal knowledge that it ISN'T the case). It would still be exceptional for people at his wealth level

How could the IRS have missed all this? I don't know the answer to that, but if the Trumps were extreme outliers compared to the peer groups that the tax authorities had in mind, that might offer a partial explanation. Auditors may not try so hard to look for things that they don't expect to find. They're presumably not asking, for example, whether Jeff Bezos got paid $100 in cash to mow someone's lawn and then didn't report it. And while they may audit GE and question its transfer pricing, they're probably not looking for off-the-books transactions in which GE was paid cash and didn't report it. So analogously, by transgressing peer group norms (at least, as defined by the tax authorities), the Trumps may have benefited from the auditors' assuming relatively normal behavior.

What are the tax consequences today? I'd like to hear from estate and gift tax lawyers about that, as it's outside my area of personal expertise. But what I believe to be the case is as follows. Say Fred Trump filed a fraudulent gift tax return in 1990, or fraudulently failed to file. The fraud means that the tax return remains open, and this may support collecting the amount due from the beneficiaries, without any need to prove for this purpose that they were engaged in the fraud. But again, this needs verification from someone who knows more directly about all that.

Last point, are there income tax implications? Suppose that, having in mind here All County, $X was fraudulently diverted from Fred Trump to a company owned by his children. It's treated as a payment for goods, or perhaps alternatively as a salary payment, whereas in fact it's just a concealed gift via the markup. In this scenario, the correct income tax treatment would be that Fred doesn't deduct it (or has higher gross income) and All County doesn't include it, by reason of its actually having been a gift. But if their marginal tax rates are the same, the net effect on their combined income tax liability might be a wash. E.g., if both sides had a 40 percent marginal rate at the time, then Fred would have paid .4X too little in tax, and All County .4X too much. But it would be interesting to know more about All County's tax planning, e.g., did it actually report the transaction consistently with this, if so did it deploy tax shelter losses to offset it, etc.

But here's a further income tax angle suggested by the article. It says that, by age 3, Trump was earning $200,000 per year (in current dollars)  from his dad's real estate empire. If this was being treated as salary, and being deducted by the father and included by the toddler-aged Trump, it could potentially have been criminal income tax fraud. A three-year old generally can't perform services of sufficient economic value to support that salary. And there would be a purported income tax saving from the child's having been able to benefit from the lower tax brackets with the respect to the amount at issue. But that's not to answer the separate question of what would be the IRS's legal recourse today, as the crucial fraud part would have been the deduction on Fred's return, since Donald's return would have involved over-reporting, not under-reporting, of taxable income.

10 comments:

Jim Wetzler said...

Regarding New York, note that NY does not impose a gift tax and its estate tax law provides that the state must accept federal determinations of value; therefore, there's not much to investigate on those taxes. Funky real estate valuations would have implications for NYS and NYC real estate transfer taxes. So it's unfair to criticize the NYS tax department for lax enforcement.

Daniel Shaviro said...

Ah, sorry about that. Knowing that I didn't know, I actually referred a reporter to you. I'll check what I said and amend as needed.

Jim Wetzler said...

NY didn't repeal the gift tax until 2000, so the gifts were subject to NY tax. The gift tax statute remains open in the case of fraud.

burnspbesq said...

The transfer pricing abuse engaged in by All County is as old as the transfer pricing rules. On occasion (Sunrider) people have gone to prison, but it takes really egregious facts to get CI’s attention.

Unknown said...

CLASSIC HACKS
How well are you prepared for a cyber incident or breach? Is your data safe?, the more you know, the better you can react.
Strengthen your cybersecurity stance by contacting, Classiccyberhacks@gmail.com for a Perfect, Unique, Classic and Professional Job in securing your Network against Breaches of All Sort.
We do virtually All kind of Cyber Jobs, be it Cyber Security or Hijack without trace and utmost professionalism
We offer Services such as:
✅ Tracking GPS location,
ank Account Hacks,
✅ Bank transfer, Western Union, Money Gram, Credit Card transfer,
✅ Increase credit score,
✅ Increase University Grade,
✅ Social media platform hack
✅ Email hack: Gmail, AOL, Yahoomail, Proton-mail etc,
✅ Phone hack,
✅ Spyware installation,
✅ ATM hack, Issuing of Blank ATM,
✅ Retrieval of lost documents, etc..
✅ Clearing of Criminal records thoroughly,
✅ Recovery of lost funds on Binary Option
✅ BTC Mining
✅ and many more......
✅ We're Classic Hacks✅

Feel free to 💻 📱 us @:

Classiccyberhacks@gmail.com,
Classiccybernotch@gmail.com,

any time, any day to get the Best hands involved in putting a smile ☺ on your face.

Signed,
Collins .A.

joemill00077711 said...

This website can be a stroll-through for the entire data you needed about this and didn’t know who to ask. Glimpse here, and you’ll positively discover it. casino bonus

Unknown said...

ARE YOU WILLING TO HIRE THE REAL HACKERS TO GET YOUR CYBER PROBLEMS FIXED WITH SWIFT RESPONSE?
AND ARE YOU A VICTIM OF THE BINARY OPTION SCAM?
Solving a problem for which you know there’s an answer is like climbing a mountain with a guide, along a trail someone else has laid.
You can put a stop to your anxiety and constant fear of you getting ripped off by forgeries. 
This post is actually for those who are willing to turn their lives around for the better, either financial-wise or relationship-wise or businesses.
Our primary reason for this development is to ensure that those in need of help don’t get ripped off by forgeries.
This is a global idea that navigates a newbie to a prominent encounter ( Fully immersed to a degree that the subject in question Is a disorienting worthwhile experience on merits).
Who are the GlobalHackers?
We are group of skilled professional hackers driven by passion to make the internet a safer place and render proficient services to those having cyber problems.
Globalhackers has grown and expanded since it formation over the years due to the experience and professionalism of our management and technical staff. Our strength is based on our ability to bring together active cyber security professionals who individually has acquired enormous exposure in the world of HACKING
As part of our corporate goals, providing value added services to meet our client needs and requirements has been our sustaining impetus.
The new development on the Globalhackers platform is to assign to you the right HACKER to deal with your Particular kind of cyber issues depending on the kind of cyber problems you are willing to get fixed.
Here, you would be refer to a legit professional hacker known for massive skills and security abilities.
Skilled and trained on
▪Social media hacks (facebook, twitter, instagram,snapchat)
▪Email hacks
▪phone hacks
▪bitcoin hacks.
▪verified PayPal account hacks
▪database hacks
▪credit card top up
▪university score upgrade
▪money transfer
▪binary option funds recovery. ( recovered $4,372,063 million)
The binary option scam is another problem facing the internet today.
How do you avoid binary option scam and what do you do if you are a victim of the scam.
Be wary of adverts on the internet and mostly on social media promising high returns from binary options trading. The binary option is one of the highly recorded scam on the internet.This are a form of fixed-odds betting.
People investor their hard earned funds in the scammers website and at the end, they wouldn't be able to take their profit plus their investment too. The Globalhacks are breeding effort to put an end to these unbearable swindle scheme taking over the intenet and taking a solid step forward to render solution to those affected by the fleece… we have striven to make tenacious effort to relief those who were victims off their traumatic feeling of loss. ( We Are Here To Help Recover Your Stolen Funds).
Here would be our cybersecurity techniques to retrieving back the victims stolen funds.
●The binary broker website would be traced down using a game over peer to peer network via a bug attack,
The bug network secure an SQL trace on a hiding server, decentralizing it and redirecting the server to a soft plus network. A soft plus network enable varieties of unique web coding languages, Through that process reveals thier hidden networking source, displaying the changed web page made default.
This unveil the hiding information traceable to track down the scammers and their embezzled central fund reserve system.
HOW DO YOU STAY AWAY FROM FALSE BUSINESSES ONLINE?
* Making enquiries for their firm reference number (FRN)
* Contact details and barter their calls on the switchboard number and also
* Never make use of the link in a website or an email from the firm propitiating you for an investment.
For more enquiries and help, contact:
Info.globalhacks (at) gmail. com
globalhacktech (at) protonmail. com
HackerOne©️LLC 2030.

Anonymous said...

i really like this post. keep it up don't waste your time Visit Here Vet Recommended Puppy Food

AdamsG said...

Finding out that your husband or wife has been unfaithful isn’t just a time of profound heartbreak and shock, it’s also a time of intense confusion . At certain points desperate measures are our only resort and we take them, finding a trustworthy infiltrator can be a lifeline and I sure used one to save my relationship, business and sanity. I was having real life problems when my friend recommended Zion to me. I contacted him because my business partner was shaking me, stealing money from the business. Also my spouse was always up at odd hours clearly this is a sign that my spouse is cheating, so the hacker cloned/hacked into their devices and granted me total access to their devices without their knowledge. I was overwhelmed that I could see my business partner hidden finances that were off records and read their old and new text messages, see new and deleted pictures, emails, call logs, Facebook, messenger, WhatsApp, Snapchat, GPS location in real time among other things off my spouse phone. If you require the services of a private investigator (EC council certified personnel), you can speak to Zion at Remotespytech(@) Gmail, com . You will be glad you did. For the purpose getting him comfortable working with you, it is advisable you make reference to this post as it would save you a lot of back and forth while ensuring you are not some kid playing around. I do hope this helps.

Email: REMOTESPYTECH (@) GMAILCOM

WhatsApp: +1 (689) 247-7465


They can help you recover lost or stolen bitcoins and funds in one swipe. He assisted my friend recover his stolen $155,000 savings from a faux forex broker.

Send your complaint to this great team now!!!

Reliable Service

AdamsG said...

Finding out that your husband or wife has been unfaithful isn’t just a time of profound heartbreak and shock, it’s also a time of intense confusion . At certain points desperate measures are our only resort and we take them, finding a trustworthy infiltrator can be a lifeline and I sure used one to save my relationship, business and sanity. I was having real life problems when my friend recommended Zion to me. I contacted him because my business partner was shaking me, stealing money from the business. Also my spouse was always up at odd hours clearly this is a sign that my spouse is cheating, so the hacker cloned/hacked into their devices and granted me total access to their devices without their knowledge. I was overwhelmed that I could see my business partner hidden finances that were off records and read their old and new text messages, see new and deleted pictures, emails, call logs, Facebook, messenger, WhatsApp, Snapchat, GPS location in real time among other things off my spouse phone. If you require the services of a private investigator (EC council certified personnel), you can speak to Zion at Remotespytech(@) Gmail, com . You will be glad you did. For the purpose getting him comfortable working with you, it is advisable you make reference to this post as it would save you a lot of back and forth while ensuring you are not some kid playing around. I do hope this helps.

Email: REMOTESPYTECH (@) GMAILCOM

WhatsApp: +1 (689) 247-7465


They can help you recover lost or stolen bitcoins and funds in one swipe. He assisted my friend recover his stolen $155,000 savings from a faux forex broker.

Send your complaint to this great team now!!!

Fantastic Service