Serious question Re: Ivanka and her tax issues

[RazzleCat]

My big question is, she worked for the Trump Organization, how can you be hired by your own organization to do consulting work? If I already work someplace it just not an added job responsibility, or special project? I am unaware of someone being hired from within to work at the same company. Transferred, new job position, adjusted position, but not work and consult at the same tame for the same company.

Explain this and then I can understand if its a tax avoidance scheme.

[Karadeniz]

1. Did she work for Trump O. or was she a partner?

[C_U_L8R]

2. Welcome to the private equity racket.

The consulting fee structures are designed to make your head spin

[russiamommy]

3. I think we need more details of the structure

It all does sound fishy. The point of the Partner status would make sense, but I don’t believe the Trump Corp is a partnership. It’s a regular corporation. Ivanka would have been on salary. I suppose she could have been hired as an outside consultant as well, but an outside consultant is normally paid for a specific project and is paid for that project. It also has to be outside of her normal duties as an employees.That’s why they’re looking for the work product. Where is the contract and where is the result?

It sounds to me like they’re looking at this as a scheme to avoid inheritance/gift taxes. She would have to pay taxes on either kind of compensation. And the company would get a deduction for both. But the compensation has to be reasonable and paid for real work in order to be deductible. Otherwise it’s a way to reduce the income of the company subject to income tax and ultimately reduce the worth of the company that would be subject to inheritance taxes.

[Ms. Toad]

4. I don't see any inherent issues.

You are employed to do a job that presumably involves specific tasks or particular responsibilities. Your employer wants you to do more than those tasks or responsibilities - so you retain them as an independent contractor to do that additional work.

I taught high school for years. I also had computer expertise. So, in addition to my teaching duties I was given a second contract to perform administrative duties so the full time administrator could take a summer break. I don't recall whether that second was as an independent contractor or a supplemental contract - but the arrangements are similar: The duties of computer administrator were outside of my job description - so I was retained separately to perform those extra duties.

As a private entity - there is no law against paying someone twice for doing the same work. If she isn't truly an independent contractor, there are IRS mechanisms to ensure that the appropriate FICA taxes have been paid - and generally, if the worker doesn't complain - and pays the taxes - everyone is happy.

There may be statutes governing campaigns that would limit this, but outside of election laws there is no legal barrier to hiring someone and also retaining them as a consultant.

[russiamommy]

5. I agree that there's not an inherent issue here, but...

The fees have to be ordinary, necessary and reasonable in order to be deductible for income tax purposes. If they weren’t, that’s income tax fraud. If it turns out that there was no substantive work done under this contract, or the compensation was excessive, given the closely held nature of the company, there are also potential estate/gift tax issues because they are reducing the value of the estate that would be subject to the estate tax. If it was done intentionally, that’s criminal fraud.

[Ms. Toad]

6. Agreed - I was answering the simpler question I've seen several times -

suggesting that it is somehow illegal to be both an employee and and independent contractor for the same entity.

The estate/gift tax issues is more of a stretch than the others since she was retained by the entity, not Trump. It would take a lot more to connect those dots.

[russiamommy]

7. Not sure I agree on the estate tax issue

This is a closely held corporation. Not sure if it’s an S or C Corp. I suspect it’s a C. In either case, Donny is the shareholder and his stake in the company is likely a large part of his estate. I think it would be a relatively straightforward case if it’s shown that this was a way to move money to his daughter and not be subject to gift tax.

Another reason for doing this would be to pull cash out of the company, give it to his daughter, and thereby keep it out of reach of the company’s creditors. We all know there’s lots of them, and that he personally guaranteed the loans. Moving the money to Ivanka keeps it out of reach. It’s no longer in the company and Donny doesn’t have it.

[Ms. Toad]

9. A lot depends on the nature of the entity.

Pulling cash out of the company is a lot more likely. Keep the money in the family, rather than going to creditors.

I'm still not convinced as to the estate tax.

[Poiuyt]

8. But isn't Ivanka a senior officer of the corporation?

And does that make a difference?

[russiamommy]

10. I'm not sure

A little rusty on my tax law. But either way it looks like this is a way to bleed cash from the company, either to avoid estate taxes or keep it from creditors. Probably both.

[Ms. Toad]

11. I don't know the details of the corporation -

but I don't believe the nature of her compensation inherently matters (strictly employee, independent contractor, or both).

Without more details there's no inherent smoking gun.