Trump’s Abuse of Trump Foundation — Criminal Tax Implications?

[Madam45for2923]

Much attention is being paid to how Donald Trump could have amassed a $900 million NOL in the mid 90s. I remain laser-focused on the Donald J. Trump Foundation. For this blog post I ask the question: could Mr. Trump’s misuse of the private foundation that he leads result in criminal sanctions under tax law?

I think there is enough evidence to open a criminal investigation into his activities. Nevertheless, a criminal prosecution is highly unlikely for both political reasons and issues of proof (ignorance of the law is a defense). Still, I think the IRS has a duty to open an investigation under the egregious set of facts I lay out.

Here is the important thing to keep in mind as you consider the arguments I lay out in this post: Donald Trump does not own the Foundation and its property does not belong to him. It does not matter from whom the money came. He is the president of a nonprofit organization that is entrusted with money to be used for charitable purposes that benefit the public.

When I first wrote about the Foundation we knew that in 2013 it had improperly paid $25,000 to Pam Bondi’s political campaign for AG of Florida. I noted then the potential application of tax criminal law because there was a false statement on the Foundation’s Form 990PF, (the Foundation claimed the money went to a KS charity “Justice for All”) but said it was highly unlikely under the circumstances that the IRS would invoke criminal sanctions in a single situation.

Today, we know a lot more about Foundation’s highly questionable transactions largely due to the intrepid work of Washington Post reporter David Fahrenthold. For instance: the Foundation purchased expensive portraits of Trump and sent those to Trump’s private clubs; it has paid money to settle Trump Organization private lawsuits; it has acted as the receiver of what appears to be Trump income, but counted it as a donation from the payors.

In this post, I first discuss the criminal statutes most likely to apply and then consider the broad themes of violations upon which a case might be built. At the end of the piece, in an appendix, I list all the questionable acts by year with links to sources to show the quantity and quality of the violations.

Continues: https://surlysubgroup.com/2016/10/03/trumps-abuse-of-trump-foundation-criminal-tax-implications/

[Madam45for2923]

1. List of questionable transactions with the Foundation.

2007: (1) Trump Foundation paid $100,000 to Fisher House a veterans charity. The Foundation filed a Form 990PF describing this payment as a contribution or grant. However, according to the Washington Post the Foundation made the payment to settle a lawsuit against his Mar a Lago club that owed $120,000 in fines to Palm Beach. The article says the $100,000 payment was a personal obligation of Trump as a result of the settlement. Assuming, as the Washington Post reports, that this amount was paid to satisfy Trump’s legal obligation negotiated in a mediated settlement with the town of Palm Beach, this would be income to Trump instead and should have been reported as such. Given that he is president and its founder we should consider the $100,000 amount as either a dividend or compensation to him. It is also a self-dealing transaction upon which Trump would owe a 10% excise tax of $10,000. Failure to pay tax on his individual income tax or failure to pay the self-dealing excise tax could both provide the basis for finding a tax deficiency. The affirmative act could be signing a return with at least a couple of false statements including that the payment was a grant and checking a box stating there was no self-dealing during the year.

(2) It also paid $20,000 that year to acquire a painting by Michael Israel at an auction for the charity Children’s Place at Home Safe at Mar-a-Lago Club. Reporting suggests that the painting was sent to one of Trump’s golf courses. This would be an act of self-dealing. Many have wondered why this $20,000 payment was not just a grant to another charity given that no painting of Donald Trump could be worth all that much. That is not the way charity auctions work or charitable contributions or charitable grants work. To the extent there is a quid pro quo, there is no contribution. Here, the Foundation bought a painting for its fair market value and made a grant only to the extent that the payment exceeded the fair market value. The fair market value had to be at least $10,000 because $10,000 went directly to the artist. The charity that ran the auction should have set the fair market value of the painting before the event in conjunction with the artist. Assuming a fair market value of $20,000 Trump owed a $2,000 self-dealing excise tax.

2008: (3) Trump Foundation pays $107,000 for Paris Trip at auction. Not clear the Foundation used the painting for charitable purposes. Although it is not clear what the actual fair market value of the trip was, it looks like $100,000 might be in the ballpark. It included a meeting with the actress Selma Hayek. The 2008 Form 990PF claims a $107,000 donation to the Gucci Foundation. The Gucci Foundation reported a $145,000 donation. A Trump surrogate said that the Foundation deducted part of the amount. It is not clear what they mean. The amounts still should have appeared on the Form 990PF as an expense. I think the burden of proof is on the Foundation to demonstrate that the trip was used for Foundation purposes. It is difficult to imagine how a non-operating private foundation could meet this burden, particularly with this luxurious trip.

(4) Trump makes $50,000 pledge to St. Judes Foundation on behalf of Tito Ortiz on Celebrity Apprentice, but used the Trump Foundation to make that payment. You can see this amount reported in the 2008 990PF. This was not a gift but a TV promotion and he used charitable money to accomplish a TV promotion for himself. This should likely be considered income to Trump and an instance of self-dealing upon which Trump would owe a $5,000 excise tax. Some might question again whether this is really money to Trump given that the charity is just paying another charity. However, Trump is clearly using the payment and the fact that he is generous in order to promote the show and build his brand. The payment serves a substantial non-exempt private purpose to aggrandize the image of Trump.

2010: (5) Trump Foundation pays $158,000 to Martin Greenberg Foundation on behalf of the Trump National Golf Club who owed the money according to a lawsuit settlement. It paid the amount in 2012 and that is reported on its Form 990 as a grant in November 2013. Should be income to the golf club that the club should have reported. A three year statute of limitations is still open on this transaction for civil and criminal penalties and do not run until November of this year.

2011: (6) Comedy Central paid the Foundation $400,000. The Foundation reported the amount as a donation from Comedy Central. Reporting suggests this was an appearance fee for Donald Trump appearing on a Comedy Roast. He has alternatively said that he directed that money to his Foundation and his campaign has said he did not direct the money there, and then they said maybe he did direct the money there. Proper reporting of such a situation would be to include the amount in income and then maybe take a deduction.

(7) Richard Ebers Inside Sports and Entertainment paid the Foundation $450,960. Washington Post reports that this was a quid pro quo for access to Donald Trump businesses. The Foundation reported this amount as a grant to the Foundation on its Form 990PF.

2012: (8) Purchased a Tebow helmet at a Susan G. Komen live auction. The Foundation has not been able to locate the helmet. Appears to have reported the payment as a contribution, grant or gift.

(9) Trump Foundation pays 7 different charities $10,000 each as a result of a commitment Trump makes on Celebrity Apprentice.

(10) Washington Post reports Richard Ebers Inside Sports and Entertainment paid the Foundation $522,828. Foundation treats it as a contribution or grant. Washington Post reports that people in the Ebers organization say that these payments were made to acquire something from Trump.

2013: (11) Contribution to Pam Bondi’s political campaign. Reported as delivered to Justice for All in Kansas rather than And Justice for All in Florida, but delivered to And Justice for All in Florida. Trump is reported to have paid a section 4955 political expenditure excise tax on this amount this year. It is not clear why he did not also pay a self-dealing excise tax, but it is perhaps because he believes a mistake allows him an out on a self-dealing transaction. The Foundation has maintained that the payment was a mistake.

(12 TF paid $5,000 for advertisement bought at a charitable auction. The Foundation allowed Trump hotels to use this advertising.

(13) On its 2013 Form 990PF, the Foundation indicates it made a grant to a Donor Advised Fund at Fidelity Investments for $115,000. On the Form the Foundation does not check Part VII Q 12 that asks if the Foundation made a contribution to a DAF controlled by the Foundation or a disqualified person. It would be odd for the Foundation to make a contribution to a Fidelity DAF not related to the Foundation or the Trump family generally.

(14) Trump Foundation paid four different charities $20,000 each after Trump made promises to celebrities on Celebrity Aprentice.

(15) Richard Ebers Inside Sports and Entertainment paid the Foundation $435,832. Washington Post reports that this was a quid pro quo for access to Donald Trump businesses

2014: (16) Trump bids $10,000 on a portrait of himself by artist Havi Schanz at a charity auction.The Foundation makes the payment. It is featured at Trump’s private golf club named Doral. The Foundation reported this amount as a qualified distribution on its Form 990PF.

2016: Although we have no Form 990PF for 2015 or 2016 yet, there have been reports of the Foundation issuing checks at Donald Trump for president campaign rallies for photo op purposes with the Donald J. Trump campaign logo featured prominently on the check.

[NewJeffCT]

5. that's a really long list

thanks for putting it all together!

[Madam45for2923]

7. Thank You ... but it was in the article's appendix!

[NewJeffCT]

8. when I'm at work

I often don't read the entire article, as I don't have the time. So, seeing it summarized by itself is helpful.

[asiliveandbreathe]

2. Madam45for2923 - you sure do come up with some of the most interesting

articles...keep 'em comin' - especially when it has to do with trump -

[Madam45for2923]

3. Thank You! Fahrenthold referred to this article in his twitter account last night

So I bookmarked it till I got to it now.

If Trump had released his taxes from the beginning probably he wouldn't have made it this far! Hiding! Hiding!

Believe me! Believe me! Those are crooked words!

[Angry Dragon]

4. Trump has been running cons his hole life

yes I do know that hole should have a w .............. as I also know that hole should have an ass in front

[NewJeffCT]

6. This guy needs to be locked up

and his assets sold off, with any money left to pay back taxes and to reimburse people he scammed.