{"id":16398,"date":"2016-12-03T04:59:13","date_gmt":"2016-12-03T04:59:13","guid":{"rendered":"http:\/\/www.biphoo.com\/bipnews\/?p=16398"},"modified":"2016-12-03T04:59:13","modified_gmt":"2016-12-03T04:59:13","slug":"trump-cabinet-could-avoid-millions-in-taxes-thanks-to-this-little-known-law","status":"publish","type":"post","link":"https:\/\/www.biphoo.com\/bipnews\/news\/trump-cabinet-could-avoid-millions-in-taxes-thanks-to-this-little-known-law.html","title":{"rendered":"Trump, Cabinet could avoid millions in taxes thanks to this little-known law"},"content":{"rendered":"

Trump, Cabinet could avoid millions in taxes thanks to this little-known law<\/span><\/strong><\/span><\/h2>\n

Trump, Cabinet could avoid millions in taxes thanks to this little-known law:-<\/strong> President-elect Donald Trump\u2019s ultra-wealthy Cabinet nominees will be able to avoid paying millions of dollars in taxes in the coming weeks when they sell some of their holdings to avoid conflicts of interest in their new positions.<\/span><\/p>\n

The tax advantage will allow Trump officials, forced by ethics laws to sell certain assets, to skip the weighty tax bills they would otherwise owe on the profits from selling stock and other holdings.<\/span><\/p>\n

The benefit is one of the more subtle ways that the millionaires and billionaires of Trump\u2019s White House, which already will be the wealthiest administration in modern American history, could benefit financially from their transition into the nation\u2019s halls of power.<\/span><\/p>\n

The legal tax maneuver, offered for years to executive-branch appointees and employees, was designed to help ease the sting of being forced to suddenly sell investments.<\/span><\/p>\n

But the federal program, encoded in Section 2634 of federal ethics laws and known as a \u201ccertificate of divestiture,\u201d has never been tested quite like this. Trump\u2019s Cabinet picks have amassed assets worth billions of dollars from lifetimes in banking and investing, much of which they will be able to sell tax-free.<\/span><\/p>\n

Trump has not committed to divesting his fortune. But if he does, federal ethics advisers said, the self-described billionaire could potentially reap the same tax advantage. The Office of Government Ethics, which leads the program, said this week that it was researching whether the \u00adpresident-elect could qualify.<\/span><\/p>\n

The benefit was used to great effect when Henry Paulson, then chief executive of Goldman Sachs, was nominated by President George W. Bush to serve as treasury secretary. Paulson sold roughly half a billion dollars\u2019 worth of Goldman stock and used the benefit to avoid what the Economist estimated was $200 million in taxes.<\/span><\/p>\n

Some ethics advisers defend the tax benefits as a smart way to ensure new government officials can avoid heavy tax burdens on holdings they are required by law to sell.<\/span><\/p>\n

\u201cYou don\u2019t want someone, just because they\u2019ve done well in the private sector, to pay a penalty for taking a job in the government,\u201d said Ken Gross, a former Federal Election Commission enforcement official who has advised candidates of both parties.<\/span><\/p>\n

\u201cSome of these people are some of the most valuable public servants, who know how things are run on the private side,\u201d Gross added. \u201cTo jeopardize their ability to serve by hitting them with a massive tax bill is not good public policy.\u201d<\/span><\/p>\n

Trump transition and company representatives did not respond to requests for comment. Trump, in a New York Times interview last month, suggested divesting would be \u201ca very hard thing to do\u201d because of his broad holdings in real estate and other assets.<\/span><\/p>\n

When new officials join the government, federal ethics advisers review their holdings and instruct them on how they should cut through entanglements, such as recusing themselves or divesting stocks and other assets in cases where potential conflicts could arise.<\/span><\/p>\n

People who sell company stock typically have to pay taxes on any profits, known as capital gains. But the divestiture benefit allows officials to skip that tax bill, as long as they reinvest the gains into assets where conflicts are less likely, such as U.S. Treasury bonds or diversified mutual funds.<\/span><\/p>\n

It is unclear what Trump officials will be asked to divest, but the tax savings on sold-off holdings could be monumental. Trump\u2019s choice for education secretary, Betsy DeVos, is the heiress of a family Amway fortune worth roughly $5 billion.<\/span><\/p>\n

The heads of financial divisions, including the Treasury Department, are traditionally advised to sell stocks, bonds and other instruments affected by the country\u2019s fiscal policy. Upon his appointment in 2009 as treasury secretary, Timothy F. Geithner pledged to divest his holdings in several investment funds and college-savings accounts, an ethics letter from the time shows.<\/span><\/p>\n

That could mean big tax benefits for Trump\u2019s financial leaders. Steven Mnuchin, Trump\u2019s pick for treasury secretary, is a hedge-fund founder and former Goldman Sachs banker who has made tens of millions of dollars on Wall Street. His portfolio includes about $100 million of stock in banking giant CIT Group, according to compensation research firm Equilar.<\/span><\/p>\n

Trump\u2019s nominee for commerce secretary, billionaire investor Wilbur Ross, has a net worth nearly 10 times that of all of Bush\u2019s first Cabinet in 2001 combined, including tens of millions of dollars in stock and more than $1 billion in cash and assets, Bloomberg data show.<\/span><\/p>\n

Capital gains are taxed at a far lower rate, 15 percent, than the typical income most people make from working. Mitt Romney, the 2012 Republican presidential candidate, was criticized because his tax rate was so low, largely as a result of the capital gains from his investing career.<\/span><\/p>\n

The tax benefit has been offered since 1989 by the Office of Government Ethics. The federal agency said in a tweet Wednesday that the only way for Trump to fully avoid conflicts of interest is to divest his assets.<\/span><\/p>\n

Some ethics experts say the benefit has practical value for officials at all levels. Many agencies have their own conflict-of-interest rules prohibiting the ownership of certain stocks. For example, Environmental Protection Agency employees in the office that regulates toxic chemicals are banned from owning pesticide-company stock.<\/span><\/p>\n

\u201cIf you suddenly had to absorb the capital-gains taxes of substantial parts of your holdings, it would be a real body blow to some people financially,\u201d said Robert Lenhard, a campaign-finance lawyer and former FEC chairman. \u201cI just think of it as an act of fairness for those people entering public service.\u201d<\/span><\/p>\n

The stock-selling demand could come at a fruitful time. The Dow Jones industrial average has in recent weeks hit all-time highs.<\/span><\/p>\n

But it could prove most lucrative for top officials with broad holdings in stocks and bonds.<\/span><\/p>\n

Trump\u2019s tax plan has called for \u201cacross the board\u201d cuts, which means administration officials could preside over the same \u00adcapital-gains tax cuts from which they could later benefit.<\/span><\/p>\n

Whether Trump could qualify for the tax advantage if he divests his assets remains unclear. The law says it must be ruled \u201creasonably necessary\u201d for an official to divest shares, but the president is exempt from conflict-of-<\/span>
\ninterest laws that bind most other government officials.<\/span><\/p>\n

Trump said in a financial disclosure filing in May that he owned up to $40 million of stock, including in companies whose value could rise as a result of his policies. Divesting those shares, if he qualified for the benefit, could prove deeply lucrative.<\/span><\/p>\n

Whether Trump pays any federal income taxes is another question entirely. He has refused to release his tax returns and for many years used real estate and other deductions to drop his tax bill to zero.<\/span><\/p>\n

Some who have criticized Trump\u2019s stance on conflicts of interest would be happy if he reaped the tax advantage. At least then, they said, they would know he had agreed to divest the assets that could create conflicts down the road.<\/span><\/p>\n

\u201cI\u2019d be the first to stand up and applaud if the president-elect\u201d divested, said Norm Eisen, a former chief White House ethics lawyer for President Obama. \u201cAnd I\u2019d be the first to defend his right to the certificate of divestiture.\u201d<\/span><\/p>\n

Source:- https:\/\/www.washingtonpost.com\/business\/economy\/trump-cabinet-could-avoid-millions-in-taxes-thanks-to-this-little-known-law\/2016\/12\/02\/509d009a-b7f5-11e6-959c-172c82123976_story.html?utm_term=.9192f9de2db1<\/span><\/p>\n

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