When New York prosecutors are finally able to examine former President Donald J. Trump’s federal tax returns, they will discover a real practical guide to getting rich while losing millions of dollars and paying little or no income tax.
If they do find evidence of crime, however, it will also depend on other information not found in the actual statements.
The United States Supreme Court opened the way on Monday for Manhattan district attorney Cyrus R. Vance Jr. to obtain eight years of Trump’s federal income tax returns and other records from his accountants. The decision ended a long legal battle over prosecutors’ access to information.
The New York Times last year gave more or less a preview of what it expects from Vance, when it obtained and analyzed decades of income tax data for Trump and his companies. The tax records provide an unprecedented and highly detailed view of Trump’s Byzantine world of finance, which for years he boasted about and sought to keep secret.
The Times examination showed that the ex-president reported hundreds of millions of dollars in business losses, spent years without paying federal income tax and faces an IRS audit of a $ 72.9 million tax refund he claimed a year ago. decade.
Among other things, the records revealed that Mr. Trump paid only $ 750 in federal income tax in his first year as president and no income tax in 10 of the previous 15 years. They also showed that he had written off $ 26 million in “consulting fees” as business expenses between 2010 and 2018, some of which appear to have been paid to his eldest daughter, Ivanka Trump, while she was a salaried employee of the Trump Organization.
The legitimacy of the fees, which reduced Mr. Trump’s taxable income, has since become a subject of Mr. Vance’s investigation, as well as a separate civil investigation by Letitia James, the New York attorney general. Mrs. James and Mr. Vance are Democrats, and Mr. Trump has sought to portray the various investigations as politically motivated, while denying any wrongdoing.
Mr. Vance’s office has issued subpoenas and conducted interviews in the past few months, while examining a variety of financial issues, including whether the Trump Organization has misrepresented asset values by borrowing or paying property taxes, as well as paying $ 130,000 in secret money during the 2016 campaign for Stephanie Clifford, the porn actress whose stage name is Stormy Daniels. Among those interviewed are employees of Deutsche Bank, one of Trump’s biggest creditors.
For all his revelations, Trump’s tax records are also notable for what they don’t show, including any new details about the payment to Mrs. Clifford, who was the initial focus of Vance’s investigation when he started two years ago.
Tax returns represent self-reported income and expense accounts and often lack the specificity needed to know, for example, whether legal costs related to secret payments have been claimed as a tax break, or if money from Russia is at all time moved by Mr. Trump’s bank accounts. The absence of this level of detail underscores the potential value of other records to which Vance gained access with Monday’s Supreme Court decision.
In addition to tax returns, Mr. Trump’s accountants, Mazars USA, must also produce business records on which these returns are based and communications with the Trump Organization. This material can provide an important background and background to the decisions Mr. Trump or his accountants made when preparing to declare tax payments.
John D. Fort, former head of the IRS’s criminal investigation division, said tax returns are a useful tool for discovering clues, but can only be fully understood with additional financial information obtained elsewhere.
“It’s a very important personal financial document, but it’s just a piece of the puzzle,” said Fort, an accountant and director of investigations at Kostelanetz & Fink in Washington. “What you find in the return will need to be followed by interviews and subpoenas.”
Still, The Times’ investigation of Trump’s returns exposed a series of misleading claims and falsehoods that he propagated about his wealth and business acumen.
Numerous Mr. Trump allegations of generous philanthropy collapsed after examining his tax returns, which raised questions about the value of certain donations and the general nature of his tax-deductible donations. For example, $ 119.3 million of the roughly $ 130 million in charitable deductions he has claimed since 2005 turned out to be the estimated value of pledges not to develop real estate, sometimes after a planned project failed.
At least two of these land-based charitable deductions, one related to a golf course in Los Angeles and the other to a Westchester property called Seven Springs, are known to be part of Ms. James’s civil investigation, which she is examining. whether assessments support tax cuts have been inflated.
More broadly, the tax records showed how the public disclosures he presented as a candidate and then as president offered a distorted view of his overall finances, reporting brilliant figures for his golf courses, hotels and other businesses based on the gross revenues that collected every year. The end result, after losses and expenses, was much more bleak: in 2018, while Trump’s public records showed revenue of $ 434.9 million, his tax returns declared total losses of $ 47.4 million.
And those terrible numbers were not an anomaly. Trump’s many golf courses, a central component of his business empire, reported losses of $ 315.6 million from 2000 to 2018, while revenue from licensing his name for hotels and resorts had nearly dried up when he entered the White House. In addition, Mr. Trump has hundreds of millions of dollars in loans, many of which he personally secured, with maturity in the coming years.
The Times investigation also found that he faces a potentially devastating IRS audit focusing on the huge refund he claimed in 2010, which covered all of the federal taxes he paid from 2005 to 2008, plus interest. Mr. Trump has repeatedly cited the ongoing audit as the reason he was unable to release his tax returns after initially saying he would, although nothing about the audit process has prevented him from doing so.
If an IRS decision were finally against him, Mr. Trump could be forced to pay more than $ 100 million, including interest and possible penalties, in addition to about $ 21.2 million in state and local tax refunds with based on the numbers in your federal files.
Russ Buettner and Susanne Craig contributed reports.