Donald Trump’s tax returns, long the subject of speculation as well as a three-year legal fight, are now in the public eye for anyone to examine. After releasing a summary of the IRS’ efforts to audit the former president last week, as well as some details about his earnings in recent years, the House Ways and Means Committee released Friday morning six-year redacted versions of his statements.
Whether Americans learn much from the mass of information released today is another matter. As with many ultra-wealthy people, Trump’s finances are dauntingly complex — indeed, the IRS itself has already remarked on the difficulty of examining every entity from which he has derived income over the years. .
Here are some of the areas tax professionals said they are focusing on.
What do the returns really show about his finances?
That might be hard to gauge given Trump’s sprawling business empire. The former president is financially tied to more than 400 separate entities, including trusts, limited liability companies and partnerships, according to House researchers.
Of these, however, only seven were considered in the Ways and Means Committee report earlier this month. While statements released Friday will likely name those entities and show income or loss for each, additional details are likely to be limited, experts said.
“When it comes back, there will be a white paper schedule on the back — it can be five or 10 pages — it will list all of these entities,” said Bruce Dubinsky, forensic accountant and founder of Dubinsky Consulting.
“We are not going to know what these [entities] done. You’ll just see a line, and an amount—which could be income, could be loss—for that year. We would then need those LLC or S corporation returns to see, OK, what’s going on?”
Such a large number of entities makes it more likely that some sources of Trump’s income, loss or wealth could be omitted, providing a misleading picture of his tax status. The IRS pointed to the complexity of performing a comprehensive review of Trump’s income and tax liability.
“With over 400 flow declarations reported on Form 1040, it is not possible to obtain the resources available to review all potential issues,” says an IRS memo cited in the Ways and Means report. .
Like all of the tax professionals interviewed for this story, Dubinsky noted that he had no specific understanding of Trump’s statements and based his assessment strictly on his knowledge of the tax code and published excerpts from Trump’s finances. .
But a preliminary review of Trump’s 2020 tax return released Friday by the House panel shows the kind of ordinary income gains and losses any major real estate developer might report, Dubinsky said. These include significant losses from more than 100 business entities as well as credits for taxes he paid on his businesses around the world, including golf courses in Scotland and Ireland.
In contrast, the releases show that in 2015 alone, Trump paid $573,000 just to have his individual Form 1040 prepared, highlighting the enormous costs of preparing such complex tax returns.
How much money has Trump made being famous?
the report of the Joint Committee on Taxation said Trump paid no federal income tax in 2020, the last year of his presidency. The former president paid just $750 net in income taxes in 2017. He paid $1.1 million in net federal income taxes combined in 2018 and 2019.
Although Trump early in his career made money primarily from his family’s real estate empire, over time he capitalized on his stardom to generate income, earning hundreds of millions from the best-selling book. “Art of the Deal” and other books, as well as NBC. TV hit “The Apprentice”.
“I’m going to look at Appendix C, I want to see if there’s anything in publishing, book deals, that sort of thing,” Dubinsky said. “Did he receive royalties on ‘The Apprentice’? If so, there could be royalties coming in and being reported on the return.”
According to the New York Times, “The Apprentice” alone won Trump $200 million between 2005 and 2018. If he continued to earn royalties while in office, he wouldn’t be the first. Former President Barack Obama also benefited from publishing, although on a much smaller scale. While in office, Obama earned twice as much from book royalties as from his presidential salary, Forbes calculated.
In one statement sent by the Trump campaignthe former president said his returns showed “how proudly I have achieved”.
“The Democrats never should have done it, the Supreme Court should never have approved it, and it’s going to lead to horrible things for so many people,” Trump said.
How charitable is Trump?
The businessman-turned-president’s charitable activities are sure to generate considerable interest, said E. Martin Davidoff, founder and managing partner of Davidoff Tax Law.
“I might look at his personal statements just out of curiosity — I’ve never seen a billionaire’s tax returns,” Davidoff said. “What is he deducting? How much is he giving to charity? That would be an interesting thing because it could be a really big deduction.”
Davidoff expects to see limited information about types of charitable contributions.
“You’ll know if it’s cash or property because there are two separate forms to do that and two separate line items for Schedule E,” he said. “If he’s disposed of appreciated stocks, if he’s disposed of real estate, that will be listed – that’s required in the details.”
As to exactly where Trump directed his charitable contributions, that may not be clear, tax experts said. Although many people list recipients of charitable donations on their returns, it is not required. Meanwhile, many ultra-wealthy people form a charitable trust or private foundation to keep the details of their donations secret.
Another question likely to remain unanswered at this time is whether Trump has accurately claimed the value of all of his donations, tax experts said. One question the ways and means committee has raised is whether a type of deduction known as a conservation easement that Trump said was worth $21 million was really worth that much.
“The IRS allows this deduction, but the IRS may question the value of it. And we won’t know the outcome until the audits are complete,” Dubinsky said.
How lucrative is it to be a real estate developer?
Previously released excerpts from Trump’s returns focused on the years in which he reported big financial losses. In the 80s and 90s, the Time concluded, Trump “appears to have lost more money than almost any other individual American taxpayer.”
Trump’s longtime accountant also recently testified to the Trump Organization recent criminal trial that the real estate developer reported losses on its tax returns every year for a decade, including nearly $700 million in 2009 and $200 million in 2010.
Many have questioned the fairness of a self-proclaimed billionaire allowed to avoid income tax, with one columnist calling him a “national disgraceBut tax pros point out that this reflects questions about the tax code, which offers a range of ways for wealthy Americans, including real estate moguls, to legally protect their income.
“The obvious question is, how can a guy pay such a small amount of tax when he’s so rich? By design, real estate harbors income,” Davidoff said.
“If I have real estate and there is positive cash flow, the depreciation of that real estate houses some of that income,” he added. “The obvious question people will ask is, why is the amount he pays so low? It’s the tax law.”
For example, depreciation is an artificial calculation designed to account for the fact that assets like buildings lose value over time. Dubinsky illustrated this with the example of a developer who builds a project worth $50 million and, as is common, invests $1 million of his own money for the project, while borrowing the rest.
“A thirtieth of this building gets written off every year,” Dubinsky said. “If I have no income from this building in the first year and I have operating expenses, I now have a loss. [And] I have all the interest I pay on it.”
These tax breaks – deliberately designed to encourage real estate projects – may seem foreign to most people whose main source of income is their work.
“The average person doesn’t do that,” Dubinsky said. “They get a W-2 for $85,000. And they’re like, ‘Well, I pay taxes on $85,000. Why doesn’t this guy who makes billions, or is supposed to be worth billions, pay he not his fair share?’ I mean, I hate to go back to it, but unfortunately, that’s how the tax code was designed.
—The Associated Press contributed to this story