How Trump avoided paying taxes on nearly $1 billion# Stock
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How Trump avoided paying taxes on nearly $1 billion
By Jeanne Sahadi November 01, 2016 00:07AM EDT
Donald Trump used an aggressive tax strategy to avoid paying taxes on
hundreds of millions of dollars in income in the 1990s, according to a new
report in the New York Times.
The tactic, the Times said, involved losses from his Atlantic City casinos.
As a real estate developer, Trump would have been allowed to use his losses
to offset taxes he may have owed on other business income.
At the same time, his creditors forgave much of his debt on the properties
when they went bankrupt. Forgiven debt is normally treated as income for tax
purposes. Instead, the Times said Trump may have used a complicated
maneuver in which his real estate partnership issued stock— to erase the
taxes owed on his forgiven debt.
The stock wasn't worth much, but for tax purposes, that didn't
matter.
"This particular maneuver was about as close as a company could get to
waving a magic wand and making taxes disappear," the Times said.
Related: How Donald Trump could have - legally - paid no taxes
Last month, the Times obtained a few pages from Trump's 1995 state tax
returns, which showed a $916 million business operating loss.
The Times said it based its new report on documents recently discovered
during a search of the casino bankruptcy filings, which offer only a "
partial description of events."
The report included letters from tax lawyers who warned that the strategy
was not explicitly permitted and may not pass muster with the IRS.
The Times said it was unclear whether the IRS challenged Trump's use of
the strategy.
Related: How Trump could lose a billion bucks but still live a billionaire
life
The fundamental problem according to one expert the Times quoted is that
Trump claimed losses on properties that were financed with money raised from
investors and loans from banks.
"He deducted somebody else's losses," said John L. Buckley, who
served as the chief of staff for Congress's Joint Committee on Taxation
in 1993 and 1994. Since the bondholders were likely declaring losses for tax
purposes, Trump shouldn't be able to as well. "He is double dipping
big time," Buckley told the Times.
Congress acted to ban the maneuver of swapping equity for debt in 2004,
according to the Times.
In a statement to the Times, Trump's spokeswoman Hope Hicks said: "
Your e-mail suggests either a fundamental misunderstanding or an intentional
misreading of the law. Your thesis is a criticism, not just of Mr. Trump,
but of all taxpayers who take the time and spend the money to try to comply
with the dizzyingly complex and ambiguous tax laws without paying more tax
than they owe. Mr. Trump does not think that taxpayers should file returns
that resolve all doubt in favor of the I.R.S. And any tax experts that you
have consulted are engaged in pure speculation. There is no news here."
By Jeanne Sahadi November 01, 2016 00:07AM EDT
Donald Trump used an aggressive tax strategy to avoid paying taxes on
hundreds of millions of dollars in income in the 1990s, according to a new
report in the New York Times.
The tactic, the Times said, involved losses from his Atlantic City casinos.
As a real estate developer, Trump would have been allowed to use his losses
to offset taxes he may have owed on other business income.
At the same time, his creditors forgave much of his debt on the properties
when they went bankrupt. Forgiven debt is normally treated as income for tax
purposes. Instead, the Times said Trump may have used a complicated
maneuver in which his real estate partnership issued stock— to erase the
taxes owed on his forgiven debt.
The stock wasn't worth much, but for tax purposes, that didn't
matter.
"This particular maneuver was about as close as a company could get to
waving a magic wand and making taxes disappear," the Times said.
Related: How Donald Trump could have - legally - paid no taxes
Last month, the Times obtained a few pages from Trump's 1995 state tax
returns, which showed a $916 million business operating loss.
The Times said it based its new report on documents recently discovered
during a search of the casino bankruptcy filings, which offer only a "
partial description of events."
The report included letters from tax lawyers who warned that the strategy
was not explicitly permitted and may not pass muster with the IRS.
The Times said it was unclear whether the IRS challenged Trump's use of
the strategy.
Related: How Trump could lose a billion bucks but still live a billionaire
life
The fundamental problem according to one expert the Times quoted is that
Trump claimed losses on properties that were financed with money raised from
investors and loans from banks.
"He deducted somebody else's losses," said John L. Buckley, who
served as the chief of staff for Congress's Joint Committee on Taxation
in 1993 and 1994. Since the bondholders were likely declaring losses for tax
purposes, Trump shouldn't be able to as well. "He is double dipping
big time," Buckley told the Times.
Congress acted to ban the maneuver of swapping equity for debt in 2004,
according to the Times.
In a statement to the Times, Trump's spokeswoman Hope Hicks said: "
Your e-mail suggests either a fundamental misunderstanding or an intentional
misreading of the law. Your thesis is a criticism, not just of Mr. Trump,
but of all taxpayers who take the time and spend the money to try to comply
with the dizzyingly complex and ambiguous tax laws without paying more tax
than they owe. Mr. Trump does not think that taxpayers should file returns
that resolve all doubt in favor of the I.R.S. And any tax experts that you
have consulted are engaged in pure speculation. There is no news here."