Author : MARK LANDLER and ERIC LIPTON

Posted : MAY 12, 2017

 

 

 

WASHINGTON — President Trump’s lawyers say his income tax returns do not show income from Russian sources or debt owed to Russians, with the exception of $95 million paid by a Russian billionaire for a Trump-owned estate in Florida and $12.2 million in payments in connection with holding the Miss Universe pageant in Moscow in 2013.

The statements are contained in a letter from two lawyers, Sheri A. Dillon and William F. Nelson, to Mr. Trump, which the White House released Friday. The president cited the letter in an interview with Lester Holt of NBC News, amid a political firestorm over his firing of the F.B.I. director, James B. Comey, as proof that there were no hidden financial ties between Mr. Trump and Russia.

In addition to the Florida estate and the beauty pageant, the lawyers said Mr. Trump had received undisclosed payments over 10 years from Russians for hotel rooms, rounds of golf or Trump-licensed products, like wine, ties or mattresses. But they said those amounts were “immaterial” and would not have been identified as coming from Russian sources in the tax returns.

The lawyers noted that their statement covers only the period dating back a decade, after their firm, Morgan Lewis & Bockius, began representing Mr. Trump and the Trump Organization. It leaves other questions unanswered, including whether Mr. Trump or his firms received Russian income or loans from entities registered elsewhere or whether he derived income from Russian-linked partnerships that file their own returns.

“This is an artfully written letter, covering a limited time period,” said David Cay Johnston, an expert on taxes and a former New York Times reporter who has written extensively about Mr. Trump. “Much of what we need to know about Trump and Russian money — and that includes money from Kazakhstan, Turkey and other places where Russian oligarchs operate — involves transactions prior to 10 years ago.”

Still, the details in the letter are generally consistent with what Mr. Trump’s sons, Eric and Donald Jr., have said in recent interviews regarding income associated with Russian entities.

They acknowledged the considerable profit gained from the 2008 sale of Maison de L’Amitie, a beachfront estate in Palm Beach, Fla., which the Trump family acquired for about $41 million in 2005 and sold for more than double that, in what was then the most expensive residential real estate transaction in history. The buyer was a Russian billionaire, Dmitry Rybolovlev.

Previous reports have estimated that Mr. Trump was paid $14 million to $20 million to take the Miss Universe pageant to Moscow; the letter claims the actual income was slightly lower than that.

Mr. Trump’s sons also acknowledged that wealthy Russians were often bidders on Trump Organization condominiums, in apparent contrast to the lawyers’ statement that any other Russian income from real estate sales was immaterial.

But it is possible, because of the way real estate depreciation rules work, that profits from an individual sale might not show up in a way that has major tax implications.

Mr. Trump’s previously released financial disclosures also have not given any indication that corporate entities he directly controls or owns entirely had taken loans from Russian lenders.

Yet the Trump Organization could still be an investor in other entities for which he is not the sole or principal owner, and which have Russian debts. These types of loans have never been made public, as the financial disclosure report issued during the election campaign detailed only loans given to companies he controls.

Some tax-law experts questioned key parts of the letter, including how the lawyers defined “Russian” sources and lenders. Major companies in Russia frequently use subsidiaries in other jurisdictions, like Cyprus, the Netherlands or the British Virgin Islands, to conduct overseas business. Moreover, it was unclear what the lawyers meant by asserting that the tax returns did not “reflect” any income from Russian sources.

The letter also restricts itself to income on Mr. Trump’s returns, with no exploration of underlying transactions of other entities that file their own returns, such as partnerships.

You would have to dig down to books and records of underlying entities to see components” of various sources of income, said Edward Kleinbard, a tax law professor at the University of Southern California. Without seeing the actual returns, he said, “asserting that TTO counterparties are not ‘Russian’ is genuinely meaningless,” using an abbreviation for the Trump Organization.

In March, Reuters reported that at least 63 individuals with Russian passports or addresses had bought at least $98.4 million worth of property in seven Trump-branded luxury towers in southern Florida.

“All they’re saying is that income or expense related to Russia doesn’t show up on the return, but it doesn’t mean it isn’t there,” said Stephen Breitstone, the head of the private wealth and taxation group at Meltzer, Lippe, Goldstein & Breitstone.

On Friday, The New York Times asked the Trump Organization about Russian money that might have come through offshore corporate entities, as well as Russian-related loans to entities in which the Trump Organization is invested.

Eric Trump, an executive vice president at the company, said he did not want to address specific questions, as doing so would lead to more unfounded speculation.

“We have no projects in Russia, no financing from Russia, no business ties to Russia,” he said in an email. “It is a false narrative created by a faltering political party, and it is simply not true.”

In President Trump’s interview with NBC, he said he had sent a certified copy of the letter to Senator Lindsey Graham, Republican of South Carolina, who has questioned the president’s business dealings with Russia. A spokesman said Mr. Graham had no comment on the letter.

The president referred to the Florida estate and the Miss Universe pageant in the interview, but said the letter — “from one of the most prestigious law firms in the country” — demonstrated “that I have nothing to do with Russia.”

“I have a certified letter, just so you understand,” Mr. Trump said. “I’m not just saying that.”

 

 

 

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