Let’s get back to the real rub on Trump’s taxes

The Washington Post Sunday - - BUSINESS - AL­LAN SLOAN Derek Kravitz of Pro-Publica con­trib­uted re­search to this re­port. For pre­vi­ous col­umns, visit wash­ing­ton­post.com/busi­ness

Ev­ery week seems to bring yet an­other rev­e­la­tion about pos­si­ble re­la­tion­ships be­tween Rus­sia and peo­ple close to Don­ald Trump. Com­bine that with the fact that this is the height of tax prepa­ra­tion sea­son, and you can see why lots of peo­ple seem ob­sessed with find­ing a sup­posed Rus­sian con­nec­tion in Trump’s tax re­turns.

Hence the in­creased de­mands for Trump to make his re­turns pub­lic the way that pres­i­dents and pres­i­den­tial can­di­dates have done since Richard Nixon but that Trump has re­fused to do, de­spite ini­tially say­ing he would.

How­ever, even if Trump has busi­ness ties with Rus­sian oli­garchs or the Rus­sian gov­ern­ment — please note the “if,” be­cause there is noth­ing sug­gest­ing that is the case — it’s highly un­likely that ev­i­dence of that would show up in his per­sonal tax re­turns. That’s the unan­i­mous opin­ion of three re­spected tax ex­perts I con­sulted, none of whom is an apol­o­gist for Trump.

A pri­mary rea­son, they told me, is that Trump does busi­ness through hun­dreds of en­ti­ties, in­clud­ing part­ner­ships, cor­po­ra­tions and LLCs (short for lim­ited li­a­bil­ity com­pa­nies).

If you could read the rel­e­vant doc­u­ments — IRS Forms 1040 and 8938 and Sched­ules C, E and S — you would see that un­less the pres­i­dent has a per­sonal Rus­sian bank ac­count or shows a gain or a loss on the sale of a Rus­sian se­cu­rity or prop­erty, fi­nan­cial re­sults of Rus­sian deal­ings (if they ex­ist) would prob­a­bly be lumped in with hun­dreds of other deal­ings rather than be­ing bro­ken out specif­i­cally.

In fact, search­ing for a Rus­sian con­nec­tion in Trump’s re­turns is a di­ver­sion from the real rea­sons the Amer­i­can pub­lic has a stake in see­ing them.

We’ll get to those. But first, let’s see what the ex­perts have to say.

“Tax forms don’t re­quire much speci­ficity,” said Steve Rosen­thal, a se­nior fel­low at the Ur­ban-Brook­ings Tax Pol­icy Cen­ter. Rosen­thal, who has helped news or­ga­ni­za­tions that in­clude The Wash­ing­ton Post and the New York Times parse Trump tax doc­u­ments, says, “You’re not go­ing to see an en­try that says, ‘Loan from Rus­sian oli­garch.’ . . . Even if you bor­rowed money di­rectly from the Rus­sian gov­ern­ment, you don’t have to say to whom you paid the in­ter­est.”

“Trump’s in­come is de­rived from the busi­ness en­ti­ties — LLCs, cor­po­ra­tions and part­ner­ships — in which he owns in­ter­ests,” says Bob Lord, a tax lawyer and an as­so­ciate fel­low with the In­sti­tute for Pol­icy Stud­ies who was an in­for­mal ad­viser on tax mat­ters to Bernie San­ders’s cam­paign.

“It is pos­si­ble, al­beit un­likely, the tax re­turns of the busi­ness en­ti­ties in which Trump owns an in­ter­est might re­veal a re­la­tion­ship with Rus­sia or a Rus­sian oli­garch,” Lord added. “Be­cause Trump’s per­sonal tax re­turn will re­flect only the in­come or loss flow­ing to Trump from those en­ti­ties, his per­sonal tax re­turn would not be a re­li­able in­di­ca­tor of whether such a re­la­tion­ship ex­ists.”

And now, to our third ex­pert: Bob Wil­lens of Robert Wil­lens LLC, who for decades has helped jour­nal­ists, in­clud­ing me, un­der­stand com­plex tax and ac­count­ing is­sues.

“I’m sure that what­ever he’s done — if he’s done any­thing — is through LLCs. It would likely not show up on his re­turns,” Wil­lens said. “Even if there aren’t any men­tions of Rus­sia on his re­turn, it doesn’t mean that he doesn’t have re­la­tion­ships with Rus­sia. Or that he does.”

If we are highly un­likely to find a Rus­sian con­nec­tion (should it ex­ist, and again, there is no ev­i­dence that one does) in Trump’s tax re­turns, why do we have a stake in see­ing them?

For the same rea­son it’s in our in­ter­est to see the tax re­turns of pres­i­dents, vice pres­i­dents and can­di­dates for those of­fices: It’s im­por­tant to see what kind of peo­ple they are, and to what ex­tent they’re help­ing to pay for the coun­try they’re run­ning (or want to run).

That’s es­pe­cially im­por­tant in Trump’s case, given how he and his fam­ily are im­pos­ing un­prece­dented costs on tax­pay­ers for travel and se­cu­rity. The par­tial Trump tax re­turns that have sur­faced show him pay­ing no fed­eral in­come tax in past years be­cause of highly in­ven­tive and ag­gres­sive strate­gies. (Le­gal, yes, but shock­ing just the same.) And he may well not be pay­ing sig­nif­i­cant fed­eral in­come tax now.

Dur­ing the cam­paign, Trump ex­co­ri­ated hedge-fund and pri­vate-eq­uity man­agers who use the “car­ried in­ter­est” loop­hole to pay only the 23.8 per­cent cap­i­tal gains rate on their share of their in­vestors’ long-term prof­its rather than the 39.6 per­cent they’d pay if car­ried in­ter­est were treated as an in­cen­tive fee.

Given those at­tacks — and given the fact that Trump is propos­ing to en­act ma­jor changes in our tax laws — it seems only right for us to know what Trump’s tax rate is. If any­thing.

Based on what the three ex­perts told me and on my own ex­pe­ri­ence, I think the likely rea­sons Trump won’t re­lease his tax re­turns are that he may pay lit­tle or no in­come tax; may make few, if any, char­i­ta­ble con­tri­bu­tions; and his re­turn might have en­tries that aren’t con­sis­tent with his claim to be worth more than $10 bil­lion.

In ad­di­tion, al­though his re­turns are un­likely to show a Rus­sian con­nec­tion, they may of­fer hints of how to dig out in­for­ma­tion that Trump doesn’t want us to see.

The risk of ob­sess­ing about a Rus­sian con­nec­tion is that if Trump’s tax re­turns should sur­face and Rus­sia’s not in them, Trump will be able to say, “See? Rus­sia is fake news, time to move on.”

So let’s re­mem­ber that we should see Trump’s tax re­turns for the same rea­son we got to see Barack Obama’s or Ge­orge W. Bush’s or Bill Clin­ton’s: They tell us a lot that it’s good for us to know about the per­son run­ning our coun­try.

Deals AL­LAN SLOAN

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