Trump’s Tax Returns: The Last Hope For His Opponents?

Now that Donald Trump has taken a commanding lead in the Republican presidential race, the best hopes for opponents to defeat the real estate mogul may lie in his tax returns.

Trump, who is largely self-funding his presidential bid, is notoriously difficult to pin down about his wealth and income, but his tax documents are certain to offer voters insight into how the leading GOP candidate manages his personal finances.

Though adversaries are pressing Trump to divulge his tax details, the New York businessman asserted in a recent primary debate that he must wait to release his tax returns because he is facing an audit. While he called it “routine,” Trump said he’s been audited by the Internal Revenue Service for “12 years in a row, at least.” Trump’s chief opponents, Sens. Marco Rubio of Florida and Ted Cruz of Texas, quickly pounced on that statement. Rubio responded that he’s “not being audited this year, or last year, for that matter.”

This week, Cruz made the wild claim that Trump’s returns could detail business dealings with the Mafia. Cruz and Rubio have released summaries of their tax returns in an effort to pressure the billionaire to make his public. Barring any genuinely scandalous revelations, opponents are hoping Trump’s supporters might find something objectionable about the way he handles his money or the extent to which he legally takes advantage of tax and accounting rules to the benefit of his personal bottom line.

After Super Tuesday, however, Trump appears unstoppable in his quest for the Republican nomination. His poll numbers are better than ever, and he racked up wins in at least seven primary contests Tuesday night, when GOP voters in 11 states cast their ballots. It’s possible the only thing that can derail Trump’s campaign is a bombshell in his tax returns — which 2012 Republican presidential candidate Mitt Romney has said “likely” exists.

E. Martin Davidoff, a tax lawyer and the former president of the American Academy of Attorney-Certified Public Accountants, told International Business Times that voters can expect to learn a number of things from Trump's tax returns. Cautioning he could only speculate as to what's in the returns, Davidoff said people "can find where his income is coming from" or if he's been paid speaking fees.

"People are going to look at what his taxes are versus his income, and they're going to say he's not paying enough taxes, possibly. They may see how much he got from 'Celebrity Apprentice,'" Davidoff said, downplaying the idea that the tax returns might include any truly shocking information.

"Is there a bombshell?" he said. "Probably not, in my opinion. Is there something that somebody can make political fodder out of? Absolutely, because no matter what's on the return, someone's going to find something."

Writing in Forbes Magazine on Sunday, tax lawyer Charles Rettig similarly cast doubt on the idea that Trump’s tax returns will include any game changers, pointing out that he’s likely relied on the advice of savvy professionals. Rettig posited Trump probably won’t release multiple years of his tax returns or work papers for his individual and his companies’ returns — meaning it’s “unlikely an accurate overall financial picture will surface by simply reviewing his return.” Rettig, however, noted that Trump’s returns are likely to show that he “pays taxes at a lesser rate than many of us, given the nature of his real estate and similar investments being subjected to lower tax rates than salaries earned by the rest of us.”

Paying a low tax rate was a problem for Romney’s 2012 presidential campaign. When he released his tax returns in January of that year, following months of criticism, the documents revealed the millionaire businessman had paid a tax rate of 14.1 percent for 2011. The former Massachusetts governor's rate was far lower than average Americans' because most of his earnings were classified as investment income. Trump’s returns could show he too has paid a low tax rate. Last summer, he told CBS he fights “like hell to pay as little as possible.”

Last week, CBS outlined a handful of tax strategies available to individuals in the real estate business that Trump might use to keep his tax burden low. He could “use loans secured by assets as income,” the network reported, because income from loans is not usually taxed.

There are also inherent advantages to the way his corporation and its subsidiaries are structured — as limited liability corporations (LLCs). Income from LLCs is taxed only once, unlike at most corporations. Using an LLC “also allows its owners to benefit from depreciation of their property,” and owners may “deduct mortgage interest on income from tenants' rent,” CBS wrote.

Though Trump’s tax returns are likely to offer only a partial snapshot of his finances, his critics contend they could clarify the long-standing questions about his true net worth. Romney, for instance, suggested last week that Trump’s returns might show “he's not anywhere near as wealthy as he says he is.”

Trump reported in his personal financial disclosure to the Federal Election Commission that he’s worth $10 billion. But there have been persistent questions raised about his wealth, most famously by journalist Timothy O’Brien, author of “TrumpNation: The Art of Being the Donald.” Trump tried to sue O’Brien for $5 billion, claiming O’Brien had libeled him by pegging his net worth in the range of hundreds of millions of dollars, rather than billions.

In depositions stemming from his lawsuit against O’Brien — which was eventually thrown out — Trump said his estimation of his net worth varies, based on his “feelings” and his “general attitude at the time that the question may be asked.” Bloomberg’s review of Trump’s financial disclosure last year projected his net worth at $2.9 billion. Forbes estimated in September that Trump is worth $4.5 billion.

On Wednesday, Fortune Magazine’s Shawn Tully reported: “Trump’s net worth is likely a lot less than what he says,” based on a careful review of his financial disclosure. The Trump campaign has said he earned $362 million in 2014, but Tully says that figure “is actually Trump’s revenues, and not his income, which should be after salaries, IT costs, interest and all other expenses.” Trump’s true income that year could be half or even a third of what he’s claimed, Tully wrote.