Trump can write off $25 million fraud settlement as tax deduction
On Friday, President-elect Donald Trump settled his multiple fraud cases over Trump University. Of the $25 million settled out of court for two class-action suits and an additional suit filed by New York’s Attorney General Eric Schneiderman, approximately $4 million goes toward Schneiderman’s claims — $1 million of which is for penalties for the State of New York for violation of education laws. As for the remaining $21 million, the lawyers representing the victims of Trump University are not charging their clients fees; they are only seeking costs.
And, with just another 74 more pending lawsuits to go, Trump, who is probably not a billionaire like he says he is, may very well need more walk-around money to handle any forthcoming legal fees or settlements. Fortunately for American history’s finest grifter, Trump will likely be able to write off most of the settlement.
Most business settlements are fully tax deductible… Companies often deduct ‘compensatory penalties,’ a maneuver affirmed in a recent Circuit Court ruling. Some defendants insist that their settlement agreement confirms that the payments are not penalties and are remedial. Conversely, some government entities insist on the reverse. Explicit provisions about taxes in settlement agreements are becoming more common.
Fortune notes that the $1 million going toward the state of New York cannot be deducted since section 162(f) of the tax code does not allow deductions for “any fine or similar penalty paid to a government for the violation of any law.” So, hey, maybe Trump will have to pay taxes for the first time in years after all! But, given that Trump won’t have to account for at least $24 million of the Trump University scam on his tax return, it seems a bit early to celebrate. The game is still very much rigged in his favor, though, fortunately, that’s an item on the agenda that President-elect Trump has promised to reform.
“Nobody knows the system better than me, which is why I alone can fix it,” Trump addressed attendees of the RNC back in July. “I have seen firsthand how the system is rigged against our citizens.”
Holding our breath over here.
[Fortune | photo: Getty]