Summer 2026
—William H. Darling, CPA – Chairman & CEO
—Jeanne M. FitzGerald, CPA – Tax Manager & Vice President
There are currently two types of retirement accounts labeled “Trump.” One is TrumpIRA, which is a “government website (TrumpIRA.gov) that provides links to and information about IRAs from private-sector financial institutions that meet certain Treasury-specific criteria.” The program is “set to launch by January 1, 2027, (and) the site will allow savers to compare IRAs from different financial institutions based on criteria such as fees and investment options. The site will also share information about eligibility and instructions for claiming the Saver’s Match, which would match eligible savers’ contributions up to certain thresholds, depending on their income.”[1] There is some criticism of these plans, appearing to center on government interference in private markets and, also, on the potential bidding up of government liability for the success of these plans by competing political parties.[2]
The second type of retirement accounts bearing the Trump label are Trump Accounts, which are “designed exclusively for US citizens under age 18. Parents or guardians can serve as custodians and funds can be utilized after age 18 for expenses like higher education or purchasing a home.”[3] It is important to check the exact details if these are of interest to you. One of the advantages of Trump Accounts is that employers can make tax deductible contributions up to $2500 per child for employee’s children or dependents per year. When the child or dependent turns 18, the accounts convert to traditional IRAs, but there is an election allowing the accounts to convert to Roth IRAs at the 18-year-old’s tax rate.[4] This would seem to present an attractive investment opportunity.
“Economic Substance” Challenges
The US tax code seems to be governed by strict due dates and complex compliance rules. However, the preamble or initial paragraph of a tax law might say something like, “Depreciation of equipment is meant to approximate the equipment’s useful life.” Incentives can be added by the legislative process to help the economy or tax collection, but at its base the law is trying to be practical. Taxpayers can use the “preambles” to argue their position before the IRS but it is usually safer and cheaper to fit within the dates and rules.
Of course, an aggressive IRS could work backwards from the dates and rules and challenge transactions on the basis of the “economic substance doctrine.” This is a common law doctrine, codified into US tax law in 2010, that seeks to disallow favorable tax treatment for transactions, which on their face meet date and rule requirements but lack “an objectively reasonable expectation of profit, apart from the tax benefits from the transaction” and lack “a substantial non-tax business purpose in entering the transaction.”[5] These are the two tests.
However, there are many common transactions allowed by statutes that do not meet the two-part test. A business electing to file as an S Corp rather than a C Corp, moving money from a brokerage account to a Roth IRA, or using historic rehabilitation credits might all fail the two-part test because they are mainly, if not exclusively, used for tax benefit purposes.[6]
There is a complex balancing act necessary by taxing authorities that want to maintain a mostly voluntary system of taxation, rather than incur excessive enforcing compliance costs. Why not make it practical, simple and fair? The economic substance argument seems to violate that balance.
We are reminded by a letter writer to the WSJ that “legitimate tax deductions are not loopholes. A loophole would refer to a flaw in the law that allows a work-around to circumvent the intent of the law. Legitimate tax deductions are entirely different.”[7]
If you or any other advisors have questions about the issues raised here, please contact your investment manager or one of us.