The President as Taxpayer: The Accounting

For months, reports have circulated that Richard Nixon's net worth has increased dramatically during his years in the White House, and that in two of those years he paid virtually no federal income taxes. In his own defense, the President last week ordered the release of a mass of information on his private finances. What it revealed was hardly reassuring to his remaining supporters.

While he may have fulfilled the letter of the tax law--and not even that is certain--his deals and deductions raised disturbing questions about propriety.

Release of the material followed an extensive audit by White House officials and outside advisers, including Philadelphia Lawyer Kenneth Gemmill, Cleveland Lawyer H. Chapman Rose, and accountants from the firm of Coopers and Lybrand. Highlights of their authorized report on the President's intricate business activities between Jan. 1, 1969, and May 31, 1973:

During the four-year period, the President paid less than $79,000 in federal income taxes on a total income of more than $1. J million.

In fact, in 1970 he paid only $792 on a total income of $262,942; the following year he paid $878 on earnings of $262,384. His total taxes for 1970, 1971 and 1972 amounted to $5,968--the equivalent of what a family whose income was $15,000 would have paid during those years.

These low tax bills were made possible by four categories of deductions:

>> Interest payments on his properties ($257,376); >> Property taxes ($81,255); >> Miscellaneous deductions for items ranging from "unreimbursed official expenses as President" to the use of his property at San Clemente and Key Biscayne for official purposes (total: $142,700).*

>> Most important, deductions for the donation of his vice presidential papers to the National Archives ($482,019). The voluminous papers, which date back to Nixon's years in the Senate and include his experiences as Vice President, had been privately evaluated at $570,000. The evaluation was done by Ralph Newman, a presidential papers scholar, whom Nixon paid $12,783.

It is the last item that has stirred the sharpest criticism and inspired an investigation by Republican Senator Lowell Weicker of Connecticut, who has promised to forward the results of his investigation to the Internal Revenue Service and to demand action on the case this week. The White House claims --without substantiation so far--that the President merely followed "the tradition of his six predecessors" in giving his private papers to the Government.

Later the White House explained that the six predecessors had also given papers to the Government, not that they had profited by doing so. But Nixon reaped a tax windfall of almost $235,000, by White House estimate.

Beyond the question of whether it is ethical for a President to charge the Government such a huge amount for his papers, there is also a legal problem for Nixon. In December 1969, Congress amended the tax law to forbid such deductions and made the amendment retroactive to July 25 of that year. The White House claims the gift was made on March 27, 1969, but a serious doubt exists over whether a transfer of the property took place before the deadline.

During the four-year period, Nixon's net worth increased from $307,141 to $988,522.

As President, he gets $200,000 a year in salary and a $50,000 annual expense allowance for gifts and a host of relatively small items. Of the $200,000 that Nixon received in expense funds over the four-year period, he actually spent only $108,000. He is permitted by law to keep the rest--as he did--and pay taxes on it.

The President also made a bundle in private business dealings, many of them highly complex. In 1967 he bought 199,891 shares in Fisher's Island Inc., a Miami-based real estate development firm--in which his great friend Bebe Rebozo was deeply involved--for $1 per share. Only two years later, he sold 185,891 shares back to the company for $2 per share, and paid capital gains taxes on the $185,891 that he made on the deal.

On May 31, 1969, he sold his Manhattan co-op apartment (which had cost him $100,000 in 1963, and on which he had spent $66,860 in improvements) for $312,500. Profit: $142,912.

In April 1967, Nixon had bought two undeveloped lots in Florida for $38,080. The following month, he "entered into an oral agreement with his daughter Tricia," who was then 22. (At 21, Tricia had received the proceeds of a trust fund that had been given to her nine years earlier by Nixon's wealthy friend Elmer Bobst, then the chairman of the Warner-Lambert pharmaceutical company.) Tricia lent her father $20,000 for purchase of the Florida property, and Nixon promised to repay her that amount plus 40% of whatever profits he might make. On Dec. 28, 1972, Nixon sold the property for $150,000, making a profit of almost 300% on his investment. Tricia received $65,000 as her share, and paid capital gains taxes of $11,617. The White House statement was aimed at refuting published reports that Tricia had avoided paying her share of the tax on the sale by allowing her father to offset the entire gain against the large deductions that he has claimed on recent returns.

Since becoming President, Nixon has concentrated his capital on his properties in Florida and California. On Dec.

19,1968, a few weeks after he was elected, he bought two adjacent properties in Key Biscayne, Fla., for $253,455. To finance the purchase, he borrowed $65,000 from the First National Bank of Miami and got mortgages totaling $ 189,966. By May 31, 1973, he had reduced these mortgages to $161,000.

Nixon's most tortuous--and mysterious--business dealings surround his estate at San Clemente, Calif. In 1969, in two separate transactions, Nixon acquired his Western White House and 28.9 acres around it for $1.5 million, largely with the help of loans from his millionaire friend Robert Abplanalp. In December 1970, he sold all but 5.9 acres of this property for $1,249,000. The buyer's legal name was the B and C Investment Co., but in reality the buyers were the President's staunch friends Abplanalp and Rebozo. Nixon had, in effect, sold his friends 80% of the land that he had bought the previous year for roughly 80% of the original purchase price. But he had retained the heart of the estate: the Western White House, plus the choicest parcel of property fronting on the beach. It appeared that Abplanalp and Rebozo had made the President a substantial gift.

The San Clemente transactions raise other questions. For instance, the President's tax advisers assert that he is not liable for California income taxes; yet he votes in the state and claims it as his legal residence.

The President declared last week that he plans to turn the San Clemente estate over to the U.S., but that he and his wife would retain the right to use it for the rest of their lives. If the deed is signed soon, the President's lawyers said, he would be eligible for an immediate tax deduction of about $120,000. But Press Secretary Ronald Ziegler noted that in the present climate it is "very unlikely that the President would seek a tax deduction for his San Clemente gift."

Even more important, why did Nixon pay no capital-gains taxes on the sale of most of his San Clemente property to Abplanalp and Rebozo? The White House conceded that the question was a bit tricky. One of Nixon's tax advisers concluded that the President had not realized a capital gain on the transaction, but another White House adviser --Coopers and Lybrand--calculated that he made $ 117,370 on the sale. While all that may be perfectly legal, it raises the question whether the President --who sets a moral tone for the nation --should have pressed every tax advantage and accepted huge loans and gifts from rich friends.

Every Loophole. After his three-week analysis, Lawyer Gemmill asserted that he was "satisfied 100%" that the President had done nothing illegal in his avoidance of taxes. But no one could say for sure on the basis of the snarl of figures released last week. What is unquestionable is that the President has taken advantage of every conceivable loophole to reduce his tax obligations. He has kept nearly half of an expense allowance provided by the taxpayers for miscellaneous official obligations.

"With regard to my tax returns," said Nixon in a statement, "the accountants who prepared them listed all of the deductions--as any accountant would and should do on behalf of his client." As for the serious questions concerning the donation of his vice presidential papers and his failure to pay capital gains taxes on the sale of his San Clemente property, the President added, he would ask the Joint Congressional Committee on Internal Revenue Taxation to review the matters--and he promised to abide by the committee's decisions. If the committee should decide against him, the President might find himself out of pocket by as much as $267,000--plus interest for delinquent payments.

* During the four-year period, in addition, the President donated $10,331 to charities. In different years, for example, he contributed to the American Legion Auxiliary ($36), the Billy Graham Evangelistic Association ($4,500), Norman Vincent Peale's Marble Collegiate Church ($50), the Southern California School of Theology ($200), the Duke University Loyalty Fund ($750).

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