Following up on my previous post, Trump’s Emolument Tax Problem: Steven M. Rosenthal (Tax Vox), Could President Trump Sell His Business, Tax Free?:
Yesterday, President-elect Trump tweeted he would leave his businesses “in total” to reduce his potential conflicts as President. The Office of Government Ethics (“OGE”), tweeted its praise for his remarks, and encouraged him to divest his interests rather than merely transfer control. But could Trump avoid paying tax on any profits from the sale of his businesses? Surprisingly, the answer may be yes. The law is ambiguous, a 50/50 proposition in my view.
In the Ethics Reform Act of 1989, Congress strengthened a variety of ethics rules, including those that prohibited federal officials and employees (other than the president and vice-president) from participating in official acts in which they have a financial interest. To soften the blow, Congress added Code section 1043, which allows officers or employees of the executive branch (including political appointees) to sell property, deferring taxation, to avoid potential conflicts if they reinvest the proceeds in either Treasuries or diversified mutual funds (and carryover their basis from the prior property). The deferral has been especially valuable to appointees like former Treasury Secretary Henry Paulson, who had large concentrated holdings that appreciated over many years.
Very little of the ethics law extends to the president or vice president, because of concerns over the separation of powers. But Code section 1043 does not expressly exclude the president or vice president from its benefits, including the ability to sell assets tax-free. ...
Applying section 1043 to the president would be novel. It would be enormously controversial, and might be considered aggressive. And, thanks to this law’s ambiguity, it may be his choice. But, to maintain public confidence, perhaps Trump should simply defer to OGE, or to another agency, like the IRS (or, perhaps, to a new, and more independent, person or body to review).
Update: New York Times Deal Book: How an Everything-Must-Go Trump Sale Might Look, by Steven Davidoff Solomon (UC-Berkeley) & Michael J. de la Merced