disagrees at the grates nae. 35mm of Representatives re. 5: amov. Tami. NUNES. VERN V.KE - A at - 3. Am, COMMITTEE ON WAYS AND MEANS Elf-4551; NEW :?L?J?ll-f 4? 1 1 102 LomewoarH House OFFICE BUILDING was (ELtr Pawns?! -L JEI - {hum-3 (202i 225?3625 jflPilii-E?SPrl?DWGS NORTH . .5, - :i 5:01;: TOM site. some: cat-Iowa mm? Washington, DE 20013?0348 Desert-mewrecurrences? momma .u'm I AHDUD Juuvmu hm]? Wavsandmeanshousegov BRAD c' Anamotom r-us BANK-LDEE. MICHIGAN Ceca ransom-N BHENQJN BOYLE, can seem. qutNiA a evens, . . sans son-moss ILLIMJIS :4er TOM suozzi. New YORK oiascroa hum smart-1. calmer-mm STEPHMHE FLOP DA Jimmv GOMEZ, c-xtlronrv A STEVEN Housman. NEVADA July 23, 2019 BRANDON .3 gamut! MLThornas A. Barthold Chief of Staff Joint Committee on Taxation 502 Ford House Of?ce Building Washington, DC. 20515 Dear Mr. Barthold: In 1973 President Richard Nixon released to the public copies of his tax returns for the years 1969, 1970, 1971, and 1972, along with other ?nancial information. In a letter to Wilbur D. Mills, the Chairman of the Joint Committee on Internal Revenue Taxation (?the Joint Committee?), the President described certain transactions and tax positions that had raised controversy. He requested that ?the Joint Committee on Internal Revenue Taxation examine both of these transactions and . .. inform me whether, in itsjudgment, the items have been correctly reported to the Internal Revenue Service." The Joint Committee decided to conduct a comprehensive examination of the President's income tax returns for the years 1969 through 1972, not limited to only the two issues identi?ed by President Nixon. The Joint Committee directed its staff to undertake the investigation and prepare a report. The Joint Committee voted to submit the staff report to the Congress. While President Nixon made a public disclosure of his tax returns for the years 1969 through 1972, I would like to know if, in addition to the publicly disclosed information, the Joint Committee staff sought information, as necessary, directly from the Internal Revenue Service under its legal authority under the Internal Revenue Code (?the Code?). I request that you review available records and ?les (if the Joint Committee related to the investigation and report whether you can state that the Joint Committee staff sought and received, under its legal authority, con?dential information directly from the Internal Revenue Service. If documentation of any Joint Committee request or any correspondence from. the IRS acknowledging such Joint Committee request(s) exists, I reapectfully request a copy of such materials. Sincerely, I The o??iiue Ric at E. eal, Chairman 1 16TH CONGRESS. IST SESSION THOMAS A. CHEF CIF STAFF HOUSE SENATE noaear P. HARVEY RICHARD NEAL MASSACHUSETFS CHUCK GRASSLEY, Iowa. CHIEF or STAFF CHAIRMAN VICE CHAIRMAN - JOHN LEWIS MIKE Cam-o LLoro DDGGETF. TEXAS MICHAELB ENZI. WYOMING at the multeh gt?t?g KEVIN BRADY TEXAS HON vaEN. OREGON NUNEE CALIFORNIA EHBIE STABENCW, MICHIGAN JOINT COMMIT-TEE ON TAXATION 502 FORD HOUSE OFFICE BUILDING WASHINGTON. DC 20515?6453 I202) 225?3521 gov JUL 2 3 2019 Honorable Richard Neal Committee on Ways and Means 1102 Longworth House Of?ce Building Washington, DC 20515 Dear Chairman Neal: In response to your request of July 23, 2019, my colleagues and I have reviewed certain Joint Committee on Taxation?s ?le materials relating to the report: Joint Committee on Internal Revenue Taxation, Examination of President Nixon '3 Tax Returns for I 969 through 1972 (JCS- 9?74), April 3, 1974 (?Joint Committee staff Based on this review, I can state that the Joint Committee staff sought and received, under its legal authority, con?dential information directly from the Internal Revenue Service that was used in the analysis presented in the report. I enclose two sets of documents in support of my conclusion. Selected pages from a public copy of the Joint Committee staff report comprise the ?rst set of documents; President Nixon had made public his tax returns for the years 1969, 1970, 1971, and 1972, and certain other ?nancial information. I have highlighted pertinent statements from the Joint Committee staff report indicating that the staff reviewed return information for tax years and taxpayers beyond that included in the publicly released material. a On pages 3 and 4, the Joint Committee staff report states was necessary to consider a limited number of items relating to prior years? returns.? a On pages 10. 11, and 12, the Joint Committee staff report speci?cally refers to use of information from President Nixon's return for the year 1968 in reference to the staff?s analysis of the charitable deduction claimed for the gift of certain pre?presidential papers. 0 On pages 41 and 42. the Joint Committee staff report speci?cally refers to use of information from President Nixon?s return for the year 1968 in reference to the staffs analysis of the charitable deduction claimed for the gift of certain pro-presidential papers. 1 The Joint Committee on internal Revenue Taxation voted to submit the Joint Committee staff report to the House of Representatives and to the Senate. On April 4, 1974, Congressman Wilbur Mills submitted the Joint Committee staff report to the House of Representatives and Senator Russell Long submitted the Joint Committee staff report to the Senate. of the ?tlniteh ?rms JOINT COMMITTEE ON TAXATION Washington. ZBQE 20515?6453 Honorable Richard Neal Page 2 US. House of Representatives On page 113, the Joint Committee staff report states, ?For example, on his 1968 return, the President deducted On page 1 18, footnote 13, the Joint Committee staff report states, ?The staff has examined the President?s tax returns and/or the accountant?s work papers for the years 1964 through 1968 On page 155, the Joint Committee staff report refers to tax positions taken by Patricia Nixon Cox and her husband Edward Cox, suggesting that the staff had examined return information related to these individuals. On page 209, the Joint Committee staff report states, ?The staff has examined Patricia [Nixon]?s tax returns and continued this information.? The second set of documents is copies of certain Joint Committee staff correspondence. This material includes return information that is subject to the con?dentiality restrictions of section 6103 of the internal Revenue Code and its attendant civil and criminal penalties for unauthorized disclosure. Brie?y described the enclosures are: A letter dated December 13, 1973, from the Joint Committee?s Chief of Staff, Laurence N. Woodworth to the Commissioner of the Internal Revenue Service, Donald Alexander, and Commissioner?s reply (without the enclosure provided by the Commissioner). A letter dated January 31, 1974, from the Joint Committee?s Chief of Staff, Laurence N. Woodworth to the Commissioner of the Internal Revenue Service, Donald Alexander, and Commissioner?s reply (without the enclosure provided by the Commissioner). (?0an at the ?tlm?teh ?atates JOINT COMMITTEE ON TAXATION Washington. E0: 20515?6453 Honorable Richard Neal Page 3 US. House of Representatives 0 A letter dated March 30, 1974 from the Joint Committee?s Chief of Staff, Laurence N. Woodworth to Senator Carl Curtis, 3 member of the Joint Committee on Internal Revenue Taxation. Sin erely, Thomas A. Barthold Enclosures 3 helpful in the staff examination of the President's returns, and have supplied most of the information recmested.1 .. In its examination of the President?s tax returns, the staff conducted approximately 30 interviews with persons involved in different as? pects of the President?s tax matters. In a number of cases, this repre- sents more than one interview with the same person. In addition, the staff has made contact with numerous other possible sources of infor- mation, has on two occasions sent. staff members to California to consider various tax issues. and on another occasion has sent staff per- sonnel to New York to carry out the examination. This is in addition to information the stall received through numerous investigations made by the Internal Revenue Service personnel. Finally, the stafi? has employed experts to help it appraise the value of the San Clemente property?an engineering rm and an appraisal ?rm, both in Cali- fornia. The staiif believes that it has conducted an extensive examination. . As is true in any examination of a tax return, however, it is not possible to give assurance that all items of income have been included. The staff report contains on two categories of income which it believes should have been included but were not; namely. improvements made by the Government to the San Clemente and Key Biscayne properties which the staff believes rimarily re resent personal economic bene?ts to the President, and) economic ne?ts obtained by family and friends from the use of Government aircraft for ersonal purposes. staff did not examine the President?s income tax returns for ..ears prior to 1969. In the course of its examination of the returns lot-19694972. however. the staff found that because of interrelation- ships of prior years? returns it was necessary to consider a limited umber of items relating to prior year's" returns, since they affect the 1 The exceptions are listed here. (1) The Chairman of the Joint Committee requested in- formation on ?ights taken by the President and his family on Government airplanes. This Information was supplied only with respect to ?ights where the family were passengers but the President was not. The President's counsel responded to Chairman Longs letter on April 1. 1914. that this information would not be furnished and indicated the reasons. The response is shown in the Appendix to (2) Because of the absence of the normal contact with the taxpayer. toward the and of its investigation the stall! also submitted a series of questions for con- sideration hr the President. The questions submitted relate to issues still not fully answered after man interviews were conducted with other persons involved in one way or another with the resident?s tar: matters. These questions are shown in the Appendix Exhibit The star! recognizes that these questions were submitted late In the examination period and that this may well account for the fact that the staff has not yet received an answer. It is still hoped. however. that answers will be forthcoming and that these can he made public. . information from the President representatives with respect to Fund." The staff was made aware that certain expenditures out or this fund possibly had been made for personal items of the President relating to his San Clemente residence. For this reason. the stat requested a statement from the Presl- dent?s representatives on which of the expenditures made out of that food were for the President's personal bene?t. The stairs letter to the Presidents representatives on this matter is shown in Exhibit On April 1, 1974. the Presidents counsel responded to this request and indicated that on the basis of an investigation there was found onll' one pussiblr occasion on which a personal expense of President Nixon was paid out of the Special Projects Fund. This was for $6.30. which was a reimbursement for an expenditure for light bulbs at San Clemente. The staff has no *wnr to verify whether these werc'nll the expenditures made other than the letter. The letter is shown in Exhibit a returns tor the years in question. In addition. the staff has limited its recommendations to income tax matters, although in this enamination it found instances where the employment taxes were not pald and gift tax returns not ?led. The staff has made no attempt in this report to draw any conclu- sions Whether there was, or was not, fraud or negligence 3 involved in any aspect of the returns, either on the part of the Pres1dent_or his personal representatives. The staff believes that it would be m- appropriate to consider such matters in view of the fact that the House Judiciary Committee presently has before it an impeachment investigation relating to the President. and that members of the omt Committee on Internal Revenue Taxation, along with members of the House and Senate. may subsequently be called upon to pass judgment on any charges which may be brought as a result of that investigation. The staff believes that neither the House nor the Senate members of the Joint Committee would want to have pre?'judged any issue which might be brought in any such proceedings. The sta?' in preparing this report recognizes that an examination by a committee sta?, possibly with the publication of the recommenda- tions does not retain for the taxpayer his usual rights of review which are available to him under the appellate procedure in the Internal Revenue Service and through the courts. For this reason. the staff has attempted to examine matters with great care before making a recom- mendation which will result in greater tax payments. At the same time, however. the staii' has attempted to follow the standards which it be- lieves. under the law. are. required to be applicable to taxpayers generally. and the staff has not withheld recommendations because of the of?ce of the taxpayer involved. The staff, in any case. believes it should be emphasized that this is a report only. It is not a demand for payment. of taxes. Any tax payment is a matter for consideration by the taxpayer and the Internal Revenue Service. SUMMARY OF RECOMMENDATIONS The report which follows is divided into ten separate parts. Each of these deals with one or more major questions with respect to the tax returns of the President. In most cases the report indicates ?rst the scope of the eramination and then presents an analysis of points of law which may be involved. This is followed by a summary of staff recommendations, and ?nally the stud presents an analysis of these recommendations. The staff recommendations would make the following increases in the President?s taxes for the years involved Year ?nanced De?ciency interest! De?ciency plus interest 1969.. - 5171.055 2 I . . 93,410 315,553 31101033 lilil 89. 66? 10. 541 lilo. 234 1972.- . - . I.I0 5.2m 35.114 Total $944, 022 $32. 409 $475. Iili?ll. I Interest in April 3. 15M. Since 1569 is a closed year and any payment by its President would be voluntary. the staff did not include an lniarasl payment in: the de?ciency in this year. However. ii interest were to lie included. the amount would be $40,132. 2The addition to tax for negliwence itself of course. is not a fraud issue. and - when there is no intent to defraud'laee LIME. liectioa 6653 applies 10 The staff has also looked into the events relating to the deed. In addition, questions have been raised'about certain restrictions on access to the papers that were imposed in the deed. On this latter point, the question arises whether the restrictions are such that the gift should be treated as a gift of a future interest, which would not be c(iieductible under the tax laws regardless of when the gift was me e. In its examination of this matter, the staif has interviewed the representatives of the President who were involved in the gift, includ- ing White House staff, the President's attorneys (both former and present), and the President's accountants (both former and resent). In addition, the sta?" has interviewed personnel at- the atioual Archives, the General Services Administration, and all other indi- viduals who (as best the staff can determine) had some involvement in this matter. In some cases witnesses have submitted written state- ments of their recollections following their sta? interviews. In the discussion set forth in this report, the sta? has made use of all the memoranda, letters, and other data furnished to it. and in addition has reproduced the relevant documents in full in the appendix so that the public will have the opportunity to form its own impres? sions from seeing the entire document rather than from relying on the sta??s summary of the document. 2. 1968 Gift of Papers President Nixon made his ?rst gilt of papers to the United States at the end of 1968 and tool: a charitable contribution deduction for this gift on his tax return ?led for 1968. The 1963 tax return indicates that this gift consisted of ersonal pa era, manuscripts, and other materials; that the date of the was ecember 30, 1968; and that this market value at the time the gift was $80,000. The tax return also indicated that there were no restrictions on the gift and that the gift was free and clear, with no rights remaining in the taxpayer. The amount of the gift was in excess of the maximum charitable contribu- tion deduction available to President Nixon on his 1968 tax return and consequently a portion of the amount was available as a carryover to future years. The following is a brief summary of the manner in which President Nixon made his 1968 gift of papers and a discussion of what was done by those involved. This is important to the stall examination relating to the 1969-1972 returns for two reasons. First, it is necessary to see the procedures followed for the 1968 gift since this indicates what information the people handling the President's personal ?nances had about gifts of papers in early 1969. In the absence of information to the contrary, it is reasonable to assume that the intended procedure for a 1969 gift would be similar to that for the 1968 gift. This is suggested, ior example, by the fact that on the President?s tax return the giit of papers claimed in 1969 was viewed as a second installment of President Nixon?s pro-Presidential papers. The second reason for interest in the 1968 gift is that, since a carryover of the charitable contribution deduction taken on the 1968 tax return is available for tutu-re years (up to 1973), the staff must review the 1968 gift to deter- mine if the amount available for carryover from 1968 is deductible for tax purposes for the years under examination by the Joint Com- 11 Buttes. Fi?he Joint Committee staff did not examine the tax returns of the President for the years prior to 1969 except to review the effect any of the items on the prior years? returns may have on the tax returns under examination. The flollowmg is a summary of those procedures followed by Presi? dent Nixon?s representatives for his gift of papers in 1968. A full discussmn oi .the staff View on whether this gift is deductible for tax purposes 13 discussed in Section 5 of this report. Procedures jollowedfor 1.968 gift First consideration of 1.968 gift?According to public statements made by Freeident Nixon, at a meeting he had with President Johnson after the election in late November or early December 1968, President Johnson told him that he could obtain tax deductions for gifts of his papers. John Ehrllichman told the staff that President Johnson gave reeldent-elect Nixon the name of an appraiser, Ralph Newman, whom he had used.2 People assigned to work on gift?Richard Ritzel, President Nixon?s former law partner at what is now Mudge, Rose, Guthrie 6: Alexander, told the staff that on December 15 or 16, 1968, he was asked President-elect Nixon to look into the possibility of making a g' of papers in 1968. Mr. Ehrlichman told the staff that he was also asked by Mr. Nixon to look into the desirability of making 3. "ft of papers, and Mr. Ehrlichman assigned Edward L. Morgan and gil Krogh of his staff to this task. Decision to make a gift?Mr. Ritzel told the staff that on December 22, 1968, he met with President-elect Nixon and reported that it was feasible to make a gift but that, since it was close to the end of the year, time would be a problem. Mr. Nixon told him to go ahead. Determination of amount of gift?Mr. Ritzel told the staff that an accountant with the firm handling Mr. Nixon?s taxes at that time called him and said that they would need a proximately $60,000 to Lise up the maximum deduction allowable ibr 1968 (36 percent of Mr. Nixon?s adjusted gross income). Mr. Ritzel said that he came up with a ?gure of $80,000 for the size of the gift because he wanted to make sure that they had enough for the maximum deduction. Mr. Ritzel said that a decision was made not to make a larger gift with a larger carryover at that time because Mr. Nixon was thinking of assigning to charity income from certain royalties which he behaved might not be appropriate for him to receive while sermn as Freeident. Mr. Ritzel said that for this reason, and because of a short tune period during which they had to make the arrangements for the it, they decided only to make a gift larger than that needs to use up the maximum deduction for 1968 and to wait for the future ior other gifts. . Segregation of material for gift?The Iii-Presidential own papers were stored in a warehouse near the 0 cos of Madge, Rose in New York. During the week of December 23, 1968, a number of boxes of these papers were transported from the warehouse to the o?ces of the law ?rm. On December 26 and 27, the boxes of pa ers were reviewed to isolate those that were sensitive in any way. hose who in full discussion of the practices of President Johnson and his stair on his pro-Presl- deotial papers is set forth in Section a. 12 worked on this included Lois Gaunt, who had been with Mr. lNixon most of the time since 1951 and was the person most familiar with the boxes of papers, since she had been involved in organizing 1113 files and had a list of the contents of the boxes; Messrs. Morgan and Krogh of Mr. Ehrlichman?s staff; and James P. (Pat) Tannian, a member of the Mudge, Rose ?rm who assisted Mr. Ritzel with the papers. On December 29 (Sunday), Ralph Newman, an appraiser, arrived and was told by Mr. Bitzel the amount needed for gift. Mr. Newman told the staff that he worked with the group reviewing the material to remove the more sensitive papers and then proceeded to identify suf?cient material to cover the re aired amount that was to be included in the gift. He said he identi ed the boxes by putting Roman numerals on them and made an estimate of the value of each box. 1963 deed?Mr. Ritzel told the staff that on or about December 26, 1963, he drafted two deeds of gift, one containing restrictions on access and the other without restrictions. He said that his associate, Pat Tannian, came to Washington to meet with Sheldon Cohen, the Commissioner of Internal Revenue, on December 28, and that Mr. Cohen assured Mr. Tannian that either version of the deed would be acceptable for a tax?deduotible gift. (Mr. Cohen has told the staff that he met with Mr. Tannian but did not give this opinion, and Mr. Tannian has told the staff that he does not recall that he, in fact, showed the deeds to Mr. Cohen.) Mr. Ritzel said that Mr. Tannian also went to the General Services Administration to have them review the deed and that they requested an additional provision in the deed with restrictions to allow em loyees of the Archives to catalog the papers. Mr. Ritzel said that resident?elect Nixon was unhappy with the language of the unrestricted deed, so he signed the one with the restrictions. Mr. Ritzel said Mr. Krogh, who had taken the deeds to Key Biscayne for signin came back immediately so that the gift with the deed could be ?nalized. The 1968 deed is Exhibit 1?1 in the Appendix. Delivery of opera?On December 30, 1968, a representative oi the National Arc ives, Peter Iacullo, who had been authorized by Lawson Knott, the Administrator of General Services, accepted the gift by writing ?aces ted? and countersigning the deed on the last page opposite Mr. ixon?s signature. The papers were icked up at this time by the General Services Administration an were transferred to the Federal Records Center in New York. Treatment {ft on. ten: returns?Ralph Newman valued President Nixon?s 1963 gi at $80,000. Of this, $70,552.27 was deducted on the President?s 1968 tax return and $9,447.73 was available for carryover to future years. The treatment of this available carryover to 1969 is discussed in Section 5 below. 3. Documents on the Second Gift of Papers Furnished the Joint Committee hy President Nixon?s Representatives President Nixon?s re resentatives have released to the public or submitted to the Joint ommittee three documents setting forth facts and legal opinions on the validity of the charitable contribution deduction taken by President Nixon on his 1969 tax return for the 41 them. In addition the restrictions a to all donated a . rs though Presrdent Nixon has no copyright inlingieiy alibi; ggfefs. For example, a sizable portion of the ?General Correspondence donated in 1969 and all of the ?Children?s Letters? collection donated in 1968 contest of letters received by the President. The com? mon law copy right to these letters belongs to the writers of the letters not to the resrdent. (This point is discussed in detail in the analysid of Professor Wright, which is set out in Exhibit In these cases, the restrictions on access and the rights retained by the President must relate to the tangible personal property since the restrictions in fact apply. to these letters and since the Firesident has no intangible property rights in the letters. For these reasons, the staff believes that the gifts 0 1968 and 1969 aregifts of future interests in tangible gel-sonal property for which section 170(a) (3) prevents an income tax eduction until the end of Mr. Nixon?s presidency. Deduction for gt? of papers in 1969 As indicated above, the staff elieves that a valid gift of pa era was not made prior to July 25, 1969, and, therefore, recommends enial of the charitable contribution deduction for 1969 and the carryovers in subseguent years. Also, the staff believes that a deed is necessary for this gift because of the restrictions and that since delivery of the deed conveying title of the papers to the United States, was not made until after .Ap?l 10, 1970, the gift was not valid before July 25, 1969. But, even if the staff believed that a valid gift had been made before July 25,.1969, it believes that the gift re resents a gift of a future interest in property and, therefore, that charitable contribution deduction would in any event not be allowable for 1969 and subsequent years. Carryover- of excess deduction for 911th of papers in 1.968 The staff did not examine President Nixon?s tax returns for any year prior to 1969 for any purpose other than to determine the effect certain items on rior tax returns had on the tax returns under examination by staff. The charitable contribution deduction taken with respect to the gift of papers in 1968, however, was in excess of the maximum amount deductible in that year; consequently, an amount (the excess was $9,447) was available as a carryover to 1969 and the four succeeding taxable years. This amount was not taken as a deduction in 1969 or in the subsequent years because the deduction claimed by the President on his 1969 tax return was large enough to cover the maximum amount available in 1969 and in succeeding years since then. Since the staff believes that the charitable contribution deduction for the gift of papers in 1969 should be disallowed, this would have the effect of making the carryover of the excess deduction from the 1968 tax return available in 1969. It is for this reason that the staff believed it was necessary to make a recommendation with respect to the 1968 gift. Because the staff behaves that the restrictions contained in the 1968 chattel deed make the gift a gift of a future interest in property, it also behaves that the carryover, which would otherwise be available for 1969 (since the deduction for the gift of papers in 1969 is dis- allowed), is not available. 42 Statement on tea: return on restrictions of gift The Internal Revenue Service?s regulations require anyone'taking an income tax deduction for a gift of property to a charity to include on the tax return certain information, including any restrictions that me be attached to the gift. The President's tax return for 1969 he an information sheet consistent with what was required by the regulations, setting forth a brief description of the relevant informa- tion about the gift. As to any restrictions, it was stated on the tax return: ?None. The gift was free and clear with no rights remaining the taxpayer." This is essentially the same statement that was contained in the 1958 tax return relating to the gift of papers in that year. The staff believes that this statement on the tax return is inaccurate. The staff has no conclusive evidence, however, that the statement was made intentionally by those preparing the President?s tax returns or any evidence that the President was aware of this statement on his tax return._ This statement on the 1969 return was prepared primarily by Frank DeMarco, according to his statements and the statement of Arthur Blech, the President?s accountant, to the Joint Committee staff. Mr. DeMarco states that he knew of the 1969 deed and its contents at the time the statement was prepared, but that since the 1968 deed contained similar restrictions and the 1968 tax return contained the statement of no restrictions, he believed that a similar statement was appropriate on the 1969 return. 6.. Staff Analysis of Facts Relating to the Second Gift of Papers Apart From the Deed A. INTENTIONS 0F PRESIDENT NIXON TO MAKE A GIFT IN EARLY 1969 During the course of its investigation into the validity of the deduction for the second gift of papers, the sta? made an effort to determine whether President Nixon intended to make a gift of his pa ers in the early part of 1969 and the amount of the intended gift, me uding whether thinking at this time was to make a bulk gift (that is, one large enough to ermit a carryforward) or a one-year gift for tax purposes. The staff discussed this issue with several members of President Nixon?s staff who were handling his personal ?nances in earli 1969, other individuals who were involved in President Nix-en?s legs and ?nancial matters at that time, and personnel at the National Archives who Were inVOlved in the discussions and arrangements with the White House staff relating to the gift. The following discussion of intentions is based on the information the stall? has received in the interviews with these people and in the various items of correspondence and memoranda that the staff obtained. The sta? has 5 eci?cally asked the President's counsel to furnish all materials whic may in any way provide information on the intent to make a gift in the early part of 11969, but as yet at least, the staff has not received any infor- mation other than what is summarized below. During our interviews, there were references to other internal White House memorands not referred to below, but the staff has not been furnished cepies of them. 113 basis inf-he ew York property, the President failed to take account of certam downward adjustments in his basis in that preperty which are required under the law. The President?s 1969 tax return contained a statement that both his new and old roperties were used as a principal residence and that no part of sitter residence was ?rented or used for business purposes at any time.? As discussed below. these statements are subject to serious challenge. Bus-in ess use of the old and new property. The statement on President Nixon?s 1969 return that no rooms in either the old residence or the new residence were used for business purposes at any time is inconsistent with other statements made and deductions taken on the 1969 return and on earlier and later returns. For eaatuple, on his 1968 return, the President deducted 25 percent of the maintenance costs (other than real estate taxes and mortgage interest) on his New York City cooperative apartment. The amount deducted in that year was $3,231. The deduction was for use of the a artment for business purposes}I Similar amounts were deducted for 10 New York City apartment in earlier years at least as far back as 1965. The committee staff has no authority to examine the appropriate- ness of these deductions and has no'reason to question them. If the deductions were correctly taken. they indicate that approximately one?quarter of the New York City apartment was used for business purposes. Thus, the gain from the sale of the apartment attributable to that portion of the property cannot quality for nonreccgnition treatment under section 1034.4 Furthermore, the. statement on the President?s 1969 tax return that none of the San Clemente property Was used for business purposes is inconsistent with deductions taken on that same return. On the 1969 tax return, a deduction was claimed for ?25 percent of the mainte? nance costs of the. San Clemente residence as "expenses incurred in connection with the use of residences for o?cial government functions.? Depreciation was taken on 25 percent of the lnuldmg on the property because a similar business use was claimed? Obviously, the. statement on the President?s 1969 tax return that neither the New York nor the b'an Clemente residences were used for business purposes is not correct since deductions were taken for business use of the New York apartment in pl'lOI? years and for busmess use. of the San Clemente residence in 1969. . The President?s representatives explain the discrepancy on the President's 1969 tax return with respect to the busmess use of the San Clemente property by stating that the property was, 131 fact, used for business purposes and by admitting that the statement to the contrarr on the. return Was incorrect. They state that this misrepresen- tation ivi'th respect to the property was a nustalre on their part and was not made intentionally. l? r. Blech, the Presidents accountant in rlsulrut could also hiilile on approximately - . h' arlrnenl. In fact. the theatrical11: the regulations under se.llon 1031 clearly state that Itthe old lendeuce !5 used only partially [or residential purposes, ?only '2 section. . . (Regs. . - said: $133.1. ll. Rept. 58c. 32d Coug., lat Sees. [1951). p. 109; S. Rept. :37 (Part 2) 82d Cong., 15:. this report. the staff does question the of the 196?.) deductions taken with respect to the San Clemente property. 3 the dedurtlou is corn-ct. the 1? 118 occupancy requirement. There are certain exceptions under section 1034, but. these have been carefully speci?ed in the statute. For example, in cases Where the taxpayer begins construction of 1113 new residence within the required one-year period. the statute allows him 18 months in which to occupy the property (sec. 1034(c)(5)). Also, members of the Armed Forces who serve on extended active dut are allowed a 4?year period under the statute in order to comply not the purchase and occu ancy requirements (see. 1034(h)). In the most relievant case (cited by the President?s counsel on this point), United States v. Shoahan, 12 AFTR 2d 5654, 323 F. 2d 383 (5th Cir. 1963), the court held that the taxpayer was not entitled to nonrecognition treatment. There the taxpayer, a civilian Army doctor, sold his home in Missouri in antici ation of his retirement from his Army post. The Army told him that he would be free to leave as soon as a replacement physician could be found. The taxpayer then purchased a residence in Atlanta, Georgia. He did not occupy the premises within the required period, however. Although the court did not question the taxpayer?s good faith and intent to occupy the prop- erty, it held that this was not enough to override the clear statutory mandate concerning occupancy.12 See also Rev. Rul. 69?434, supra (where the taxpayer?s failure to comply was not excused even though he was prevented from occu ying his new property because he was on a 2?year assignment in cent or city). Basie adjustment for "allowable? depreciation The President reported $142,912 of gain from the sale of his New York apartment on his 1969 tax return (then seeking nonrecognition treatment of this gain). This ?gure was based on the sales price for his coo erative apartment of $312,500 less $169,588, consisting chie?y of the esident?s acquisition cost of the stock, the costs of certain improvements to the apartment and miscellaneous items. There were no downward adjustments made to this basis because of depreciation resulting from the claimed partial trade or business use of the property. As discussed above, for the years from 1963 through and including 1988,13 the President deducted a portion (approximately one-fourth) of the maintenance or enses of the apartment as trade or business do? ductions. Thus, the resident was entitled to deduct an allowance for depreciation based on approximately one?fourth of-the value of the apartment and its improvements (under sec. 167 of the In fact, the President did not claim a deduction for depreciation in 1968 or earlier years. onetheless, the allowable depreciation must reduce the President?s basis in his stock and other property. Section 1016(a) (2) of the Code provides for an adjustment to basis for deprecia? tion and amortization to the extent that such depreciation and amorti- II At least part of the delay in occupying the new residence was caused by the fact that the turnover was released from his Army post as quickly as he had expected. The taxpayer apparently did not rely On this argument, but. the court was aware at this fact when it. made its decision. II The staff has exercised the Freedom's tax returns andior the accounlant's work papers for the years 19H through are and has continued or is satis?ed that maintenance expenses were taken as business deduc- ?onalhreueheithesa years. The staff hcsyaaked for the in: return andior the work papers [or the teachings? [in which the cooperative apartment was by the President}. but have not been ?installed smear of them. Based on whaL the stud has ox nod for the taxable years 1964 through 1968 and from its interview with the President's accountant, the stud has no indication that a. similar deduction for business use of the apartment was not. taken in was and, accordingly, has used this year as well in recompili- ing the allowable depreciation. This remit is not changed because the President held the apartment through means of ate all in a co- operative housing corporation since section 216(2) of the Internal Revenue Code allows a pass-through of (gardens: allowable depreciation to the tenant?stockholder cl a cooperative housing unit, in this case the an . 155 ment was before the sale, or at the time of the sale. Again, because of the lack 'of ev1denee and the need to have clear evidence in intrafamily transactlonsh the staff believes this issue must be resolved against Freeident Nixon. Consequently, the staff concludes that President Nixon should report all of the gain realized on the sale of the Cape Florida lots in 1972 as his income. There is a question whether he should report the transfer to Patricia Nixon Cox (less $20,000 plus 6 percent per annum from Jul)r 1, 1967, to the date of pavment) as a gift _to her. (Presadent Nixon, of course, would be entitled to a deduction for the interest paid in the year 1973.) Tax adjustment The President reported on his 1972 Federal tax return that $11,616.59 was the allocated portion of pro?t from the installment sale of the Cape Florida lots due his daughter Patricia. (The sta? understands, however, that President Nixon did not distribute an)r of this gain to Patricia in 1972 although he did receive $39,150 as an initial down payment.) The stall believes that the $11,616.59 allocated to Patricia should have been reported by the President as his gains, thus increasing his total gain on this installment. sale from $17,424.88 to $29,041.47. The sta? believes that the remaining gain on the installment sale of the Cape Florida lots, amounting to $82,228.38, should be treated as taxable income to the President on his 1973 tax return. On this basis, Patricia and her husband (with whom she filed a ioint return for 1972) should ?le an amended Federal income tax return for 1972 and eliminate the ca ital gain relating to the install? {:1th sale of the Ca Florida lots. dditionally, the Federal income tax return of Patricia and her husband for 1973 should not include any income from the installment sale from the Cape Florida lots. The President?s note to Patricia, which amounted to $20,000 and which called for an interest payment of 6 ercent per annum, was liquidated on March 12, 1973. Patricia, ould, therefore, report interest income from that note which was aid to her in 1973. Finally, on this same basis, because President?s payment to Patricia was in the amount of $65,000 and she loaned the President $20,000, she may have received a gift from the President in 1973 amounting to $45,000, less interest on the note at 6 percent per annum from May 1967 to March 1973. Accordm ly, the question arises whether President Nixon should also file a g' tax return for 1973 for this gift to Patricia. 299 refused to accept income due them from an employer, the. courts have held that no taxable income should be attributed to the employee, Commissioner v. Giannini. 129 F.2d 638 (9th Cir. 1942). On these grounds the stall believes that the President ?3 agreement did not. give rise to taxable income to him. 2. Dependency for Patricia Nix-on In 1969 and 1970. President Nixon claimed his daughter Patricia as a de enden-t. Under sections 151 and 159. of the Internal Revenue Code. '18 was entitled to do this if he supplied more than half of Boti'iela?s support and if she either had gross income of less than $600 nil 1969 ($625 in 1970) or if she was a student or was less than 19 years 0 age. Arthur Blech informed the staff that P-atricia?s income was less thatr$600 in 1969 and less than $625 in 1970. The stat? has examined Patrrcia-?s tax returns and coirttrined this termination. Therefore. the Presrdent was entitled to a dependency exemption for her in those rears. 3. Sale of stock in Fisher?s Island. Inc. The December 8, 1973, White House statement on President ixon?s personal ?nances states the following about the sale of his stool: in Fisher?s Island, Inc.: ?The only stock that President Nixon owned upon taking of?ce was in Fisher?s Island, Inc. isher?s Island. Inc. is a corporation in Florida formed in 1957 for the purpose of acquiring and de- veloping Fisher?s Island in Biscayne Bay. Mr. Nixon bought 199,891 shares in the company in 196T and prior years for $199,891. After he became President. Mr. Nixon decided to limit his invest- ments to real estate. Government bonds. and cash or its equimlent. President Nixon transferred 14.000 shares for $13.00!) net to ?ll options given by him to others in 1967. sold 185.891 shares of Fisher?s Island stock back to the company on May ?22, 1969 for His 1969 Fedeml income tax return shows a capital gain from that sale of $181,891 and tax paid on that. amount." The staff has examined this transaction and veri?ed the amounts stated. It ?nds nothing improper with the way President Nixon re ported the transaction on his 1969 tax return. Deductions on Whittier property President Nixon claimed losses totalling between 1969 and 1972 in connection with a house in "Whitter, California. which he owns and rents out at a nominal rent. The staff believes this property was treated correctly on the President?s tax returns. Under section 91?. of the Code, eapenses of maintaining property held for investment pur- poses can be deducted even though the amount of 111come received from the property is less than total expenses. _Slnce the staff believes that President Nixon holds the property for investment purposes, 1t views these deductions as properly taken. 5. of empense allowances President. Nixon included his $50,000 expense allowance as income. and deducted his employee business expenses as itemized deductions. Under section 62(2) (A) of the Internal Revenue Code, trade and hue}- @mmress at the wraith ?tates Jam-r COMMITTEE on INTERNAL REVENUE TAXATION 'uzbingtun. EAL 20515 331913 J.- Banald C. Alaxan?nr Camuiasianar Internal Revenue ?ervica mainstan n. C. Dranr 3r. Goa-miss inner: 1110 Joint Unwanted on Internal Remuo Tmttan has racently unread to I roquost Iran the of tho united States to 9113159 h1- tax roturnn for tho ylatl 1989 through 1912. In v10! at vuuld 11k. to request icon you comm of his returns for tho run 1968 thraugh 1972. Thole should bu authenticated copies. and i? would 113: any other material which you nay have uhiah bears on this stheat.' in this. 11 poaaihla, should ha a copy or thu Iltlrill lent to you by Sumter ?taker relative to the Prnidant'n charitable contributinn deduction. 1 an tha 1963 return on an. President not becaulo we lutead tn exitina it a: such but bananas 1t uncand appropriate to as. what ralatiannhip this raturn might have to his 1989 and later natural. 11 the Internal Revenue Service is roamnniuinc any or the returns I have referred to nbovu, I scald opportunity of having a caufareace with saints asaignmd ta such examinatigma. Sinuarely yours. Laurence H. Ubodtorth Lam/aw 12f13/73 {gr epartment of the Treasury Internal Revenue Service Washington, D.C. 20224 Commissioner December 13, 1973 Dr. Laurence N. Woodworth, Chief of Staff Joint Committee on Internal Revenue Taxation 1015 Longworth House Office Building washington, D. C. 20515 Dear Larry: Attached, in reaponse to your December 13, 1973, request, are true copies of the original joint federal income tax returns filed by Richard M. and Patricia R. Nixon for the taxable years ending December 31, 1968, through December 31, 1972. Also attached is a photocOpy of a letter dated December 10, 1973, addressed to me by Lowell Weicker, Jr., United States Senator, together with a l6?page memorandum that accompanied that letter, which is referred to on its face as a Summary of Facts Re Income Tax Deduction by Richard Nixon. At such time as the conference referred to in the last paragraph of your letter is held you may review other materials in the hands of the Revenue Agents assigned to the examination of these returns. Should you desire c0pies of any or all of that material we can make them available to you at that time. With best wishes, Sincerely, Attachments Walgreen at the ?nite}: ?tatzs JOINT COMMITTEE on INTERNAL REVENUE TAXATION Washington,m?. 20515 JAN 31 1974 Honornhle Donald 0. Alexander Connissioner Internal Revenue Service Washington, D. C. ?our or. Connissioner: In connection with the Joint Committee on Internal Revenue Taxation's examination of the tax returns of the President of the united States, I had previously requested copies of his returns for the years 1968 through 1973. I would like to request from you at this tine copies of his returns for the years 1963 through 1967. As.indicated in my request for the 1968 return of the President, we do not intend to examine these prior returns as such but believe it is appropriate to review these returns to determine that relationship, if any, they might have to his 1969 and later returns. I would also like to request the ten returns filed by Tricia Einon and, after her marriage, the returns filed by her and her husband, Edward Cox, for the years 1968 through 1972. we do not intend to examine these returns except to determine what relationship, if any, they might have in connection with our of the President's returns. Sincerely yours. {Signed} Laurence N. Woodworth Laurence H. Woodsorth 1/19/74 [I?ll/nix I February 11, 1974 Dr. Laurence H. Woodworth Chief of Staff Joint Committee on Internal Revenue Taxation 1015 Longworth House Office Building Washington, D. C. 20515 Dear Dr. Woodworth: In accordance with your request, I am enclosing certified copies of the income tax returns of Richard H. and Patricia R. Nixon for the calendar years 1967 and 1966. We do not have the taxpayers' returns for years earlier than 1966. I understand that these returns have been destroyed, in accordance with our regular procedures. We are taking steps to obtain the tax returns that on requested for Patricia (Tricia) end for herself and her usband, Edward Cox. Sincerely yours, js/ Denali Ga Air?eudeg Donald 0. Alexander Enclosures 2 Gimme? of the ?nite!) 5mm JOINT COMMITTEE ON INTERNAL REVENUE TAXATION Washington. ?61. 20515 Hareh 38, 1974 Honorable curl T. Curtis United States Senate malngten, D. e. Dear Senator Curtis: Re: Attached material I as giving you the enclosed factual material ta be included in the report on the Preeldent?a returns at the direct instruction of-Cheir?an Long. Hn-onn else 1: the material at this ttne (elthough the President?s attorney: will probably receive it uneasy). This-laterlal is confidential end not t0 be seen by nayene other than the etterneye yen consult according to a: instructions fro: Chairlen Lang, This natarial is prellninlry and subject to chance altheugh I do not believe it will be changea in any substantive way. This contains interial taken from a taxpayer a return and therefore its uneuthorleed release tould.be Bthect tn penalties a! law. This 15 being given tn you only to aid you in the executive session discussinn as authorined by It: with respect to tax returns. Sincerely yam Laureece H. Yoadewrth 3/30/74