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13 September 2016

Trump’s Tax Returns: What Could They Possibly Reveal?

Trump’s Tax Returns: What Could They Possibly Reveal?

Steven Bankler, CPA, was recently asked to offer his expertise in an article about Donald Trump’s tax returns for the nationally known publication Tax Notes. Why the fascination with Trump’s taxes? Do we simply want to prove that Trump’s income is much lower than he advertises? (As the article states, Trump puts his wealth in the $10 billion range, while Forbes and Fortune estimate he’s worth $200 million to $4 billion).

However, for many in the tax world, the curiosity runs much deeper. In the article, contributing editor  Lee A. Sheppard asks some very important questions:

  1. Does Trump materially participate in his real estate deals or shelter them some other way? If his dozens of real estate dealings are handled through partnerships, it’s possible that their earnings and losses get “mixed together,” essentially offsetting each other so that no (or very little) income tax is due.
  2. Has Trump overvalued charitable contributions made in kind or made ineligible contributions? Many of Trump’s charitable contributions are tied to his golf courses, specifically in conservation easements. But are these contributions legitimately charitable? Are the valuations reasonable, or inflated? As Sheppard points out, “A [driving] range would not seem to be a habitable place for birds and wildlife.”
  3. Might current audits on Trump’s tax returns concern experiences related to his television show “The Apprentice”? It was professionally necessary for Trump to “keep up appearances” while his life was on display for 11 years. So are his expenses when it comes to lavish food, clothing, planes and other lifestyle expenses deductible?
  4. Might the IRS be contesting delaying income recognition for residential construction projects for years until 95% of the project has been completed and sold? The IRS could argue that revenue should be recognized as each unit is sold, rather than the project.
  5. Might the IRS be contesting contributions of image rights to partnerships? The value of Trump’s brand and image may be the biggest area that can be debated when it comes to his overall wealth.
  6. Would tax returns disclose his real wealth? This simple point is often overlooked. FEC forms and tax returns are not wealth disclosure documents. Nontangible assets—like image rights—can muddy the waters.

To read the full analysis of the questions above, read the article here. Have questions about your own tax returns? Contact us.

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