Allowable Deductions

• Share

(2 of 2)

Deductions were especially handy for the Clintons in those years, when they were needed to offset gains made by Hillary Clinton's foray into commodity trading. She added $26,541 to the family income in 1978 and $72,436 in 1979. Even with deductions, the growth of the Clintons' tax payments outpaced the rise of their income. For 1977, they paid taxes of $8,194 on an adjusted gross income of $41,731. By the next year, their income more than doubled, to $85,214, but their taxes grew faster, to $22,627. For 1979, when their reported income was up about 90%, their taxes increased nearly 300%, to $59,388.

McDougal is embarrassed to have claimed that the Clintons were not making Whitewater payments. "My face is red, I have to admit," he says. "I think those are legitimate deductions. I am now convinced that I have substantially underestimated the amount they put in Whitewater." There may be more to be embarrassed about. Though the Clintons' tax records show that they paid more than $10,000 to McDougal's Great Southern Land Co. in 1978, records examined by TIME indicate that the banks received no more than $5,752 in interest that year. Just how was McDougal handling the Clintons' payments?

Auditors may also question whether the Clintons could deduct the interest on the main Whitewater loan from their personal income tax report for interest payments made after September 1979, when the corporation took responsibility for the loan.

So, Mr. President, will you take another question?