One of the puzzlements over the Trump tax stuff from the New York Times is the meal people are making out of the consulting payment that – apparently – went to Ivanka. It’s something I’ve seen around the place and from two who are normally rather more clued in than this. Two who are in fact intelligent however much they might, in this election season, be in the hole for political reasons.
There are some consulting payments made. Which look about the same amount that Ivanka got paid as a consultant. No, it’s not known they’re the same payments but let’s ride with the idea that they are.
Apparently this is now proof of criminal tax fraud.
Here’s Matt Yglesias:
One of the most intriguing revelations in the Times’s reporting on Trump’s long-hidden tax returns is that money he gave his daughter Ivanka was treated as a tax write-off.
Well, sure, that would be bad, gifts don’t attract write offs.
The full details are not available on Trump’s tax returns. They show instead that his company once paid $747,622 to an unnamed consultant for hotel projects in Hawaii and Vancouver. Payments to consultants can be legitimate business expenses, and there’s nothing unusual about deducting something like that. But in this case, the consultant appears to have been his daughter, whose own public financial disclosures show receipt of $747,622.
This is the kind of thing the IRS could easily overlook because it requires checking two different forms, realizing that the numbers match, and then seeing that the $747,622 payment was almost certainly to Ivanka. There’s nothing wrong with giving your daughter a six-figure gift if you are rich enough to do so. But when you receive gifts of this size, you need to pay a gift tax on them. If you structure your gift as a consulting fee, it passes to your heir untaxed. Taking what’s really a gift and pretending it’s a business expense is against the law.
Well, no, the gift tax is normally paid by the donor – they’re certainly responsible for making sure it is paid – not the donee. But there’s a mistake being made here. As with David Cay Johnson over at Salon:
And he gave daughter Ivanka more than $700,000. The president called the money Ivanka got a fee, but it looks like a disguised gift in which Trump both evaded the gift tax and deducted it as a business expense. That’s also a no-no.
Well, no, you see it has to be proven that it’s a gift before this all comes into play. And that’s something of a problem.
As Yglesias says, if it’s a payment to a consultant then it’s just fine as far as Trump’s taxes are concerned. And as long as the consultant pays the income tax – whatever that is – due on it then that’s fine from that end too.
OK. And Ivanka does actually do consulting sorta stuff on design, fashion and the rest. You and I might not be likely purchasers of the advice but so what? So, it’s entirely reasonable that someone pay her for that sort of advice.
Which leaves, well, did she get paid for consulting to her father’s business? Well, why not?
No, I don’t say that she did. Only that it’s entirely possible that she did. Went out and picked the cushion covers or something. And got paid for doing so.
So, is that tax dodging? Nope, nope it ain’t. As the IRS says:
What is considered a gift?
Any transfer to an individual, either directly or indirectly, where full consideration (measured in money or money’s worth) is not received in return.
How much do consultants get paid?
Note that the important distinction here isn’t that Ivanka is family. The gift tax would apply to anyone offered the sum who didn’t do the work.
Also note that a consulting payment isn’t tax free. Ivanka pays tax – well, yes, I know, given the family and all that, laugh here – on that consulting income just like she does on any other.
Just to hammer this home.
A gift. Not deductible and the gift tax applies and income tax doesn’t for Ivanka
A consulting payment. Deductible from Trump’s taxes and subject on Ivanka’s to income tax.
As long as it really is consulting, payment for work done, then the gift tax doesn’t apply. Clearly can’t for if that were true, that payments to family always do attract the gift tax, then no one could ever work in a family owned business, could they?
Chuntering along about tax fraud here is, hmm, well it’s politics. Which is a pity because normally Yglesias and Johnston are better than that. Hmm, well, capable of being better than that.