ADDITIONAL TAXABLE INCOME BECAUSE OF THE EXPENDITURE OF FEDERAL FUNDS AT THE PRESIDENT'S PROPERTIES IN SAN CLEMENTE AND KEY BISCAYNE

1969

PART EIGHT

SALES TAX DEDUCTION

On his 1969 tax return, the President claimed a sales tax deduction totalling $2,528.50 which consisted of two amounts. The first amount was $650 which, according to statements made to the staff by the President's accountant, was based on a computation made from the optional State sales tax tables; the second amount was $1,878.50 which was claimed as an additional deduction because of the large furniture purchases made by the President.

The staff believes that President Nixon is entitled to a larger State sales tax deduction for 1969 than he claimed.

Information provided the staff indicates that the total sales taxes paid by President Nixon for furniture payments in 1969 amounted to $2,889.31. This includes sales taxes paid for the purchase of furniture for both San Clemente and Key Biscayne. (Since the staff recommends elsewhere in this report that no business deduction be allowed for the depreciation of this furniture, sales tax deductions are available for taxes paid in purchasing the furniture.) Also, President Nixon's accountant has been able to support an additional sales tax deduction for 1969 of $913.40. Consequently, the total sales tax deduction which should be allowed the President for 1969 is $3,802.71 ($2,889.31 plus $913.40). Since the President claimed a sales tax deduction for 1969 of only $2,528.50, this would give the President an additional deduction of $1,274.21.

1970, 1971, and 1972

For the years 1970, 1971, and 1972, the President claimed $650, $450, and $550, respectively, as his deduction for State sales taxes. These amounts are in excess of the deductions that would be allowable under the op tional State sales tax tables based on the President's adjusted gross income for those years. However, based on an examination of the accounting books and records maintained by the President's accountant, the staff is satisfied that there are sufficient purchases by the President on which State sales taxes are imposed to justify these deductions. The staff believes that if additional support for the sales tax deductions claimed in 1970, 1971, and 1972 were supplied by the President's accountant, the sales tax deduction which was claimed could be increased because significant purchases of furniture were made for the Key Biscayne properties in 1970 and significant improvements were made to the San Clemente residence in that same year. In 1971 and 1972 additional improvements were made to the San Clemente property which could yield additional sales tax and result in a total deduction in excess of what was claimed on those returns.

PART NINE

GAS TAX DEDUCTION

President Nixon's returns for 1969 through 1972 showed gasoline tax deductions. For 1969 and 1970, $73 was taken as a deduction in each year. For 1971 and 1972, $49 was claimed as a gasoline tax deduction in each year. The staff understands that gasoline tax deductions were claimed only on account of gasoline purchased for a pickup truck owned by President Nixon and used by the President's gardener in performing his duties at the San Clemente property. This pickup truck was acquired as part of the purchase of the San Clemente property in July 1969.

A taxpayer who itemizes his deductions may deduct the State and local taxes he paid during the year attributable to the purchase of gasoline, diesel fuel, and other motor fuels. The amount of this deduction may be computed either directly from a record of the gasoline taxes actually paid by the taxpayer or estimated by using the gasoline tax tables provided by the Internal Revenue Service. The taxpayer estimates his deduction by relating his calculations of the mileage driven during the year and the gasoline excise tax rates applicable in the State where the vehicle was used.

In the course of reviewing the gasoline tax deductions taken for the years 1969 through 1972, questions were raised regarding the way in which these deductions were determined. The staff was informed by the President's accountant that the gasoline tax tables were used to compute the gas tax deduction. In 1969, the deduction claimed was $73, which according to the tax tables represents 14,000-15,000 miles of driving. Since the pickup truck was not acquired by the taxpayer until July 1969, the deduction implies that this mileage was driven wholly in the last half of the year. It is also noted that the same amount ($73) also was deducted in 1970 for a full year's operation. In 1971 and 1972, $49 in gasoline tax deductions were claimed for each year. This represents 9,500-10,000 miles of driving according to the gasoline tax table. In addition, staff personnel, while at San Clemente, checked the condition of the truck and inquired about the purposes for which it was being used.

An analysis by the staff of the accounting books and records of the President prepared by his accountant for the taxable years 1969 through 1972 indicates that the following amounts were paid for gasoline purchases: 1

These amounts represent the total purchases of gasoline reflected as such in the President's accounting books and records. Because the staff elsewhere has recommended disallowance of the expenditures incurred to operate the President's personal residence, total gasoline purchases may be taken into account for this computation without involving any duplication of the deduction.