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Tuesday, March 20, 2018

After The New York Times published tax documents from 1995 revealing that Republican presidential nominee Donald Trump lost nearly a billion dollars and could as a result have avoided paying any federal income tax for “up to 18 years,” Trump and his campaign surrogates have claimed he had a “fiduciary responsibility” to reducehis personal tax liability to the smallest amount possible under law. Veteran tax law experts tell Media Mattersthis explanation is “silly,” “complete nonsense,” and “almost incomprehensibly incoherent.”

In a front page Sunday article, the Times reported, “The 1995 tax records, never before disclosed, reveal the extraordinary tax benefits that Mr. Trump, the Republican presidential nominee, derived from the financial wreckage he left behind in the early 1990s through mismanagement of three Atlantic City casinos, his ill-fated foray into the airline business and his ill-timed purchase of the Plaza Hotel in Manhattan.”

The Trump campaign issued a statement in response that said, among other things, that Trump “has a fiduciary responsibility to his business, his family and his employees to pay no more tax than legally required.” Leading campaign surrogates including former New York City Mayor Rudy Giuliani have made similar claims during media appearances. Giuliani told CNN, “If you have a set of laws, you live by those laws. And the reality is, you are ignoring completely the fiduciary obligation he has to all the people around him to run his business at the lowest possible expense.”

But respected tax attorneys and others who teach tax law said this defense doesn’t pass the smell test.

“That’s nonsense,” said Rutherford B. Campbell, a corporate law professor at the University of Kentucky College of Law. “He has a fiduciary responsibility to reduce the corporation’s tax liability. … The notion that somehow he owes an obligation to the corporation to reduce his own taxes doesn’t make sense.”

Jeff Scroggin, a tax attorney with Scroggin & Co., P.C., of Roswell, GA, agreed.

“I don’t see that as a legitimate argument,” said Scroggin. “The only way I can see that argument working is to say he is going to take the dollars he saves and invest them back in the business and I doubt seriously he is doing that. I doubt seriously anyone is expecting him to do that, take the savings and put them back in the business.”

He later added, “If you lose a billion dollars can you really be a successful businessman? It has to raise questions about the viability of what he’s been doing over those years.”

Martin McMahon, co-author of law school textbook Federal Income Taxation of Individuals, said having the responsibility to pay as little corporate taxes as possible does not extend to personal taxes.

“I’ve never heard of any legal principle that the owner of a business has an obligation to the employees of the business or the directors to minimize the owner’s personal tax liability,” McMahon said, calling it, “complete nonsense, there is absolutely no legal principle to support that.”

Edward Kleinbard, a tax law professor at the University of Southern California Gould School of Law, echoed that view.

“He owes no fiduciary duty to anyone else not to pay personal income tax. It is an almost incomprehensibly incoherent argument,” Kleinbard said via email. “No, it’s just plain silly. No one is under a fiduciary duty to lose nearly $1 billion of other people’s money. He made very bad investment decisions, he skirted with bankruptcy, his lenders forced him to unload several of his properties at pennies on the dollar, and as a result he claimed a $900+ million tax loss attributable to losing his lenders’ money. What’s hard about that?”

Roberton Williams, a senior fellow at The Tax Policy Center, a joint venture of the Urban Institute and the Brookings Institution, called Trump’s claim “kind of odd.”

“It is his own tax return, he is the one who personally benefits from it,” Williams said. “He has this other income that normally people would have to pay tax on.”

Reprinted with permission from Media Matters For America.

IMAGE: Republican presidential nominee Donald Trump walks off his plane.  REUTERS/Mike Segar





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31 Responses to Legal Experts: “Fiduciary Responsibility” No Excuse For Tax Avoidance

  1. I am making something like $6 thousand-$8 thousand /a month with an internet task. So if you are prepared to do easy freelance task for 2-5 hrs each day at your home and get solid benefit for doing it… Test this invitation

  2. I believe, ladies and gentlemen, the more appropriate term for Teflon Donnie’s methods refer to the excrement secreted by male bovines from their anal orifices.

    • Teflon Donnie? Isn’t that what Bill and Hillary have been called for years? I can understand Bill though, if I had to look at Hillary every day, I would be permanently turned off without any other distractions.

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  3. Don’t we all just love a college professor that has never had a job in private industry or hired employees telling how to live in the real world. Maybe these over educated do nothing professors should be forced to live in the real world and try to earn a living before telling us how to live.

    • Guess you missed the lawyer that was quoted in the article has his own law firm and the professors have written best selling tax text books. Tax and business professors normally work in the real world also. Certainly my professors at Arizona State University School of Business did. Every single one of them had either worked for a tax firm, ran a business, or consulted with companies on their tax issues. Most people that get CPAs have to work in the real world to get the audit experience necessary to meet the CPA requirements.

    • Maybe you should read the article before claiming that someone is way too much smarter than you to be trusted. I mean, I get that you’re anti-intellectual – stupid people often are – but come on.

  4. I was laughing at the low information liars when they started making the claim that an individual taxpayer has a fiduciary duty to anyone other than him or herself. Corporations have a fiduciary duty to investors. When Trump incorporated 2 of his casinos, he had a fiduciary duty to the stockholders. He demonstrated how he fulfills his fiduciary duties. He sold stock at $35 per share and then bankrupted the corporation leaving the stock worth 17 cents per share leaving those to whom he owed a fiduciary duty and taxpayers to suffer due to his horrible business acumen. True to his concern about his fiduciary duties, Trump earned $82 million as CEO. Everyone else lost.

  5. Here’s what’s really funny though:
    Trump continually says that his understanding for the tax code makes him uniquely able to fix it…. But does anyone believe “The Donald” has ever studied the Tax code?
    Does anyone believe that he does anything more than just hire good accountants?
    Does anyone believe if you asked him about a particular deduction on his return he would actually be able to answer you? (And not just suggest you contact his accountant)

    He has made several statements so far that hint he has no idea about tax. I’d be curious to see Hillary press him on details of Tax law and see exactly how much he “knows”.

    I suspect the answer is some broad knowledge about Real Estate taxes in general for strategic business reasons and otherwise: nothing.

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