Tax Return Report: Did Trump Go Beyond His Legal Limits?
DAVID GREENE, HOST:
President Trump reportedly made hundreds of millions of dollars, lived a lavish lifestyle but yet paid little to no federal income taxes in recent years. That's according to a New York Times investigation. So was Trump taking advantage of legal loopholes or might he have broken the law somehow? Well, Lee Sheppard is a contributing editor at the publication Tax Notes and has a law degree from Northwestern University and is here. Thanks for being here this morning.
LEE SHEPPARD: Hi.
GREENE: So as you've dug into this reporting in The New York Times, do you see evidence that President Trump might have broken laws here?
SHEPPARD: I see mostly factual issues. We sort of have a mixed question of law and fact on his big abandonment loss, which is kind of a hard thing to know because we don't know the circumstances. And because it was a big loss, as The Times says, it has to get a lot of approvals, so the IRS might be nervous about it, so there would be a lot of arguing about it. You also have a bunch of factual questions. Like, did he pay Ivanka a consulting fee? And, you know, was - did she do work? You know, was that work worth that kind of money? Things like that.
GREENE: So, I mean, presumably, some of these questions would be answered in an audit. And when you talk about factual questions in taxes, I mean, would it just be a matter of you should not have done that, you need to pay a big fine now? Or could there be places where they would say, well, this was some sort of evasion that went beyond that and was more serious?
SHEPPARD: When you're in an audit, it doesn't mean you did something bad. It means you did a lot of stuff and you have a big tax return. And they're curious about it and they want to make sure everything's all right. If you did something that they don't agree with and they think, you know, you really, really should have known better, we have civil fines in our law. We have a whole bunch of them, but they are just fines. But, yes, on audit, you argue about those, too.
GREENE: I mean, the president has said he was smart. He said that in the past about finding loopholes in the tax system to try and take advantage of. Would you agree with that? I mean, did he do smart things here or not so smart and potentially, you know, as we said, (unintelligible) wrong?
SHEPPARD: Loss carryovers are not loopholes. I mean, this is the way the law works. The question is did your behavior fit into, you know, deductible expenses? Did you prove the amount of this loss? You know, are you entitled to carry this loss back?
GREENE: A $70,000 deduction for hairstyling for time on a television show - I mean, that was sort of eye-popping to a lot of people. Is that the kind of thing you would see on a lot of people's tax returns if they're...
SHEPPARD: Well, not people but entertainers, yes. Entertainers fight about that kind of stuff routinely.
GREENE: That would be common in the entertainment industry.
SHEPPARD: Oh, good Lord, yes. And he's also in a weird position 'cause - and The Times points this out - he sells his lifestyle as - that's his image. Even when he was just a real estate developer, that's what he was doing. So, you know, a certain amount of what looks personal may be deductible.
GREENE: So much to dig into here, and we're going to learn a lot about the tax system potentially. Tax analyst Lee Sheppard is a contributing editor for Tax Notes. Thanks so much for talking to us this morning. We appreciate it.
SHEPPARD: Thank you.
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