Now we know: Donald J. Trump racked up losses so huge in the early 1990s that he wouldn’t have had to pay federal or New York State income tax on nearly a billion dollars in income. None of this seems to have made the slightest dent in Mr. Trump’s opulent lifestyle over the years. At the nadir of his personal financial crisis in the early 1990s, his lenders put him on an annual “budget” of $450,000 in personal expenses — more than enough to sustain his lifestyle of lavish homes, private jets, country clubs and golf courses — even as he was using the tax code to avoid paying any federal income tax.
It’s hard to imagine a starker contrast with the vast number of Americans who struggle to both pay taxes and make ends meet, or a more damning indictment of a tax code that makes that possible. “If it wasn’t clear before, it is now: The tax code is tilted toward the rich in its statutory framework, its exceptions, and in how it is enforced and administered,” said Steven M. Rosenthal, a real estate tax specialist and senior fellow at the Urban-Brookings Tax Policy Center.
If Mr. Trump’s pattern of generating losses and using them to offset other income has continued, as seems likely, it’s obvious why he has not released his tax returns: not because he is being audited, or because the returns are too complicated, but because he hasn’t paid any taxes. The latest revelations, in an article published by The New York Times, make a “compelling” case for more disclosure, said Michael Knoll, professor of law and real estate at the University of Pennsylvania Law School. “If his loss was so massive that he didn’t pay federal income tax for 15 to 20 years, that’s surprising. It’s even more surprising that someone in that situation would run for president.”
Even if Mr. Trump was correct when he asserted that he only took advantage of what the law allows, such a huge loss undermines one of his central campaign themes, which is that he is an astute and successful businessman. Given the size of the loss that Mr. Trump reported, “it’s clear he was a spectacularly disastrous businessman,” Mr. Rosenthal said.
There are a number of accounting tactics that Mr. Trump might have used to generate such a huge loss, some of them considered highly aggressive and of dubious legitimacy, accounting experts said. Given the dire state of Mr. Trump’s businesses at the time, he might have been able to record write-downs of assets under a doctrine known as “abandonment,” an aggressive accounting tactic used when an investor walks away from a worthless or nearly worthless asset and writes off the entire capital investment in the property.
There is also the question of Mr. Trump’s debt. Mr. Trump personally guaranteed $832 million of debt related to his casinos and other assets. Under tax code provisions available to real estate developers, he could take the full amount as a deduction even if he didn’t invest a dime of his own money.
Ordinarily, that deduction would be recaptured when the debt was forgiven or the underlying assets sold. If the debt were forgiven, Mr. Trump would have to report that as income. But there are various exceptions. If Mr. Trump was insolvent at the time — if his debts exceeded his assets — he might have avoided having to report the forgiveness of debt as income. Of course, if that was the case, it further undermines his claims to being an astute businessman.
http://www.msn.com/en-us/money/mark...nto-a-giant-tax-shelter/ar-BBwUYBj?li=BBnb7Kz
It’s hard to imagine a starker contrast with the vast number of Americans who struggle to both pay taxes and make ends meet, or a more damning indictment of a tax code that makes that possible. “If it wasn’t clear before, it is now: The tax code is tilted toward the rich in its statutory framework, its exceptions, and in how it is enforced and administered,” said Steven M. Rosenthal, a real estate tax specialist and senior fellow at the Urban-Brookings Tax Policy Center.
If Mr. Trump’s pattern of generating losses and using them to offset other income has continued, as seems likely, it’s obvious why he has not released his tax returns: not because he is being audited, or because the returns are too complicated, but because he hasn’t paid any taxes. The latest revelations, in an article published by The New York Times, make a “compelling” case for more disclosure, said Michael Knoll, professor of law and real estate at the University of Pennsylvania Law School. “If his loss was so massive that he didn’t pay federal income tax for 15 to 20 years, that’s surprising. It’s even more surprising that someone in that situation would run for president.”
Even if Mr. Trump was correct when he asserted that he only took advantage of what the law allows, such a huge loss undermines one of his central campaign themes, which is that he is an astute and successful businessman. Given the size of the loss that Mr. Trump reported, “it’s clear he was a spectacularly disastrous businessman,” Mr. Rosenthal said.
There are a number of accounting tactics that Mr. Trump might have used to generate such a huge loss, some of them considered highly aggressive and of dubious legitimacy, accounting experts said. Given the dire state of Mr. Trump’s businesses at the time, he might have been able to record write-downs of assets under a doctrine known as “abandonment,” an aggressive accounting tactic used when an investor walks away from a worthless or nearly worthless asset and writes off the entire capital investment in the property.
There is also the question of Mr. Trump’s debt. Mr. Trump personally guaranteed $832 million of debt related to his casinos and other assets. Under tax code provisions available to real estate developers, he could take the full amount as a deduction even if he didn’t invest a dime of his own money.
Ordinarily, that deduction would be recaptured when the debt was forgiven or the underlying assets sold. If the debt were forgiven, Mr. Trump would have to report that as income. But there are various exceptions. If Mr. Trump was insolvent at the time — if his debts exceeded his assets — he might have avoided having to report the forgiveness of debt as income. Of course, if that was the case, it further undermines his claims to being an astute businessman.
http://www.msn.com/en-us/money/mark...nto-a-giant-tax-shelter/ar-BBwUYBj?li=BBnb7Kz
