Can someone elaborate on the Ivanka aspect of NYT?

[intrepidity]

I understand that one item relates to a 700k consulting fee, paid for by Trump Org (TO), to Ivanka through a consulting company. As she's employed by the TO, the idea is that she's getting paid twice (I guess?)

It must be more nuanced though. I can imagine someone working for a company and also doing consulting on the side for them too, so that can't be the problem (right?).

So in terms of reducing tax liability on income to TO, the 700k+ consulting expense is a business expense write-off.

Aren't employee salaries also tax writeoffs? Like, TO could have just given her a 700k bonus instead, right?

What am I missing?

[unblock]

1. There are some tax advantages to getting paid as a consultant instead of as an employee

One is to evade payroll taxes. Probably doesn't really apply in her case if she's maxed out on salary. But it's possible she gets a $1 salary and all her real money as a consultant.

More likely, she can deduct some expenses as a consultant that she couldn't as an employee, such as meals and travel to the work site.

I suspect that variants of taking business money for personal use and calling it a deductible business expense is rampant in the trump family.

[intrepidity]

6. Got it, thanks

devil is in the details, as they say

[greenjar_01]

2. Think of it as a Brewster's Millions problem

In the movie Brewster's Millions, Brewster (Richard Pryor) had to spend $30 million in 30 days, have no assets at the end of that 30 days to inherit the actual prize of $300 million. So, every expense had to be accounted for, and there could be no self-dealing. He couldn't hide an asset or spend it on something that was not of reasonable market value; otherwise, he would forfeit the inheritance. A paralegal kept track of his receipts for the law firm.

Expenditures listed for tax write off purposes have to operate the same way. It's not enough to say, "Oh, I can imagine paying an employee on the side as a consultant." Sure, we can imagine anything, but would that have qualified as a good spend in Brewster's Millions? No. You actually have to spend the money at a reasonable market rate for a specific service, and there have to be clear and distinct records of that. The question then is this: could Ivanka through her LLC have provided consulting services that would have equaled the write off amount at fair market value for billable hours at the same time that she was drawing salary at fair market value for billable hours? Brewster couldn't just hire a juggler and pay him $30 million. The point is that any fair audit would reveal the whole consulting pay-off as a sham; it's not fair market value for consulting--indeed, on a number of projects, nobody involved remembers any "consultants" at all. What billable hour rate would yield that $732,000, or whatever? Are there invoices? What were her salaried duties, and how many hours did those account for? By the way, none of these are tough questions - anybody running any business of any consequence can account for the billable hours or specific dollar amounts of expenses with documentary evidence.

Could he have paid the money as a bonus t Ivanka, then declared that an expense. Sure, I guess. But that would also fall under the Brewster's Millions rule, in that the bonus has to have been for some service. An outsized bonus to the principle's daughter would, of course, raise a flag that a consulting fee to an unknown LLC would not - remember that the consulting fee-Ivanka payment was only really discovered by the Times because the amounts were the same; the tax filing doesn't actually name Ivanka as the recipient, which is rather the point. Why not just pay a bonus? Because then the person keeping track at IRS might say, "Hey, is this a proper bonus or a gift or fraudulent expense?" Of course, that's precisely what it was, but it's harder to see when it's "Consulting to TTT LLC" rather than "Bonus Payment to My Daughter."

[intrepidity]

4. Really great explanation, many thanks!

I knew I was missing something.

(however, what about "finder's fee" type situations, where market rate and billable hours don't apply?)

[greenjar_01]

7. Finder's fees are a bit more complicated but wouldn't apply in this case

because Ivanka can't be both an executive of Trump Org and an intermediary on a Trump Org deal. In any case, the tests for an appropriate deduction would be even more arduous for a finder's fee than for the consulting fee.

[lapfog_1]

3. huge tax difference

As a consultant you are paid by the company as if you were a supplier i.e. hours x rate (no taxes).

It is up to the consultant to pay income tax, etc... and if they are smart, they incorporate so they can defer income tax and deduct expenses related to the company (your consulting company).

The company you consult for pays no SS tax, no payroll tax, no deductions of any kind.

so that means there are RULES that must be obeyed to avoid being viewed as an employee instead of as the consultant you claim to be... for example, you can't work at the offices at the company you are consulting for, you must have a consulting contract with a SOW (Statement of Work), etc.

All of which is complete bullshit if you are also an employee at the company you are consulting for (generally to get some corporation benefits such as group insurance, profit sharing, etc.).

Having had to live by these rules for years... it galls me that her ass (and Trumps) isn't in jail for this. It is highly illegal

[intrepidity]

5. Thank you so much

Between yours and the posts above, now I get it.

Much appreciated!

[Hamlette]

8. Trump Org is an LLC, Ivanka was a "member" of the LLC thus she was paid a "share" of the profit

she was NOT an employee. (The President of a corporation is an employee of the corporation, but not for a LLC.)

The share paid to the member or partner of the LLC is NOT subject to some taxes like FICA and you don't have to pay workers comp or unemployment taxes for that member or partner. The share of profits are not a wage and hence not subject to many laws. About 10 years ago one county in my state had about 60 LLCs and a year latter that number went up to 600. We (the state) investigated and found out most of the increase was construction companies. They made their undocumented workers "members" of the LLC so didn't have to check legal status, pay taxes, pay minimum wage, etc on them. We changed the law to make that illegal. At one point we got a tea party Director in our office. She thought all the workers cheated the system and started giving money to employers. It was a disaster because the employers were ripping us off. She was told over and over of their fraud, which we corrected for, but if you asked her today, she'd probably deny the employers were the ones that majorly ripped off the government, not the workers. Her mind was made up and she was not going to be bother by the facts.

As a partner or member of an LLC you cannot, by law, receive other compensation from the LLC.

[intrepidity]

9. Thank you for the input

My takeaway is that it is a whole lot more complicated than I imagined. No doubt John Q Public will be just as confused, if they even think about it at all.

If the Trumps spent half as much time and effort on just running a normal business as they do on grifting and cheating, they'd probably be more successful and have spared this country (not to mention, the world; and saved 200,000+ lives) a whole lotta grief and pain.

[Sherman A1]

10. Agreed

They seem to spend a whole lot of time trying to find ways to bend the rules.

[lettucebe]

11. Pretty sure if you're on the payroll you cannot also be a consultant for the same company

That's considered double-dipping and not okay.

[pecosbob]

12. My take is that there is whole lot of campaign cash not accounted for

and presumed to be floating around in various shell corporations so that they take all the cash for themselves. We will find in most cases that they were double-dealing from the very beginning. Remember Ivanka's wedding-planner friend hired to plan the inauguration?

[Demsrule86]

13. She is not supposed to be paid to begin with...that was the deal. Also, no you don't get to

deduct salaries nor not pay payroll taxes. It is criminal.