“Whatever loophole existed was not ‘exploited’ here, but stretched beyond any recognition,” said Steven M. Rosenthal, a senior fellow at the nonpartisan Tax Policy Center who helped draft tax legislation in the early 1990s.
.. Moreover, the tax experts said the maneuver trampled a core tenet of American tax policy by conferring enormous tax benefits on Mr. Trump for losing vast amounts of other people’s money — in this case, money investors and banks had entrusted to him to build a casino empire in Atlantic City.
.. Mr. Trump financed his three Atlantic City gambling resorts with $1.3 billion in debt, most of it in the form of high interest junk bonds.
.. According to assessments of his financial stability by New Jersey casino regulators, there were times in the early 1990s when Mr. Trump had no more than a few million dollars in his various bank accounts. He was so strapped for cash that his creditors were apoplectic when they learned that Mr. Trump had bought Marla Maples an engagement ring estimated to be worth $250,000.
.. The company would simply swap stock for the $40 million in debt it could not repay. This way, it would look as if the entire $100 million loan had been repaid
.. Best of all, it did not matter if the actual market value of the stock was considerably less than the $40 million in canceled debt. (Stock in an effectively insolvent company could easily be next to worthless.)
.. Wealthy families like the Trumps often own real estate and other assets through partnerships rather than corporations. Mr. Trump, for example, owned all three of his Atlantic City casinos through partnerships, an arrangement that allowed casino profits to flow directly to his personal tax returns when times were good.
.. the I.R.S. frowned on partnership equity-for-debt swaps for the same reason it objected to corporate stock-for-debt swaps. “The fiction is that the partnership interest has the same value as the debt,” he said.
.. Before proceeding with his plan, Mr. Trump did what most prudent taxpayers do: He sought a formal tax opinion letter. Such letters, typically written by highly paid lawyers who spend entire careers mastering the roughly 10,000 pages of ever-changing statutes that make up the United States tax code, can provide important protection to taxpayers. As long as a tax adviser blesses a particular tax strategy in a formal opinion letter, the taxpayer most likely will not face penalties even if the I.R.S. ultimately rules the strategy was improper.
.. the phrase “substantial authority” is a red flag that the lawyers believe the I.R.S. can be expected to rule against the taxpayer roughly two-thirds of the time.
.. In other words, Mr. Trump’s tax lawyers were telling him there were at least six different reasons the I.R.S. would probably cry foul if he were audited.
.. In other words, Mr. Trump’s tax lawyers were telling him there were at least six different reasons the I.R.S. would probably cry foul if he were audited.
.. “He deducted somebody else’s losses,”
.. By that, Mr. Buckley meant that only the bondholders who forgave Mr. Trump’s unpaid casino debts should have been allowed to use those losses to offset future income and reduce their taxes. That Mr. Trump used the same losses to reduce his taxes ultimately increases the tax burden on everyone else, Mr. Buckley explained. “He is double dipping big time.”
.. Among the members of Congress who voted to finally close the loophole: Senator Hillary Clinton of New York.
How Rich Do You Have to Be to Not Pay Taxes?
Stephen Cohen, a law professor at Georgetown University, says Trump could have declared losses from money he borrowed, as part of a provision in the tax code that favors real-estate developers. Normally, if someone borrows money that they can’t pay back, the lender will sometimes forgive the debt (in whole or in part), but that debt is generally considered taxable income. There are a few exemptions, Cohen says, and the tax code states that someone doesn’t have to pay taxes on forgiven-debt income if it’s related to certain types of real-estate deals. “Let’s say he borrowed $900 million for the Trump casino and it becomes virtually worthless. He could deduct the entire $1-billion-dollar loss, even though he only invested $100 million [of his own money].”
Donald Trump Tax Records Show He Could Have Avoided Taxes for Nearly Two Decades, The Times Found
Ordinary investors in the new company, meanwhile, saw the value of their shares plunge to 17 cents from $35.50, while scores of contractors went unpaid for work on Mr. Trump’s casinos and casino bondholders received pennies on the dollar.
“He has a vast benefit from his destruction” in the early 1990s, said one of the experts, Joel Rosenfeld, an assistant professor at New York University’s Schack Institute of Real Estate. Mr. Rosenfeld offered this description of what he would advise a client who came to him with a tax return like Mr. Trump’s: “Do you realize you can create $916 million in income without paying a nickel in taxes?”
.. Nor does the $916 million loss suggest that Mr. Trump was insolvent or effectively bankrupt in 1995. The cash flow generated by his various businesses that year was more than enough to service his various debts.
.. Mr. Trump may have benefited from a tax provision that is particularly prized by America’s dynastic families, which, like the Trumps, hold their wealth inside byzantine networks of partnerships, limited liability companies and S corporations.
The provision, known as net operating loss, or N.O.L., allows a dizzying array of deductions, business expenses, real estate depreciation, losses from the sale of business assets and even operating losses to flow from the balance sheets of those partnerships, limited liability companies and S corporations onto the personal tax returns of men like Mr. Trump. In turn, those losses can be used to cancel out an equivalent amount of taxable income from, say, book royalties or branding deals.
.. He recalled, for example, that when Donald and Ivana Trump came in each year to sign their tax forms, it was almost always Ivana who asked more questions.
.. Mr. Mitnick, though, said there were times when even he, for all his years helping wealthy New Yorkers navigate the tax code, found it difficult to face the incongruity of his work for Mr. Trump. He felt keenly aware that Mr. Trump was living a life of unimaginable luxury thanks in part to Mr. Mitnick’s ability to relieve him of the burden of paying taxes like everyone else.
Donald Trump’s Wild Night
He has made outrageous commonplace on the trail. And he went for it again on the debate stage.
he tried to interrupt 25 times in the first 26 minutes of the debate, according to Vox—and say a lot of wild, perplexing and untrue things that may well overstimulate the national fact-checking economy
.. Trump came off as an overconfident blowhard, the mouthy guy at the office meeting who never knew much about the topic, didn’t try to get himself up to speed in advance, interrupts all his female colleagues anyway, then tells them to wait until he’s done when they try to get a word in edgewise.
.. he scored points portraying her as a tired politician who had stayed in the game too long. But he did seem a lot less comfortable and more agitated than he does at his rallies, as if mass adulation suits him better than one-on-one confrontation
.. there does not seem to be a lot of recognition of just how remarkable some of Trump’s comments were. Some of those comments have become familiar through repetition, like his suggestion that in America’s minority neighborhoods, you can’t walk down the street without getting shot, or his claim that American jobs are “leaving in bigger numbers than ever,” when in fact unemployment has been cut in half since 2010. But as I’ve discovered after attending Trump rallies, many of us have become so desensitized to his outrageousness that it no longer sounds as abnormal as it is.
.. Janet Yellen is widely considered one of the least political people in Washington, but it barely seemed to register last night when Trump accused her of keeping monetary policy loose for purely political reasons—even though the policy should presumably be even looser if the economy were really in the shambles Trump says it is.
.. Trump also tried to push the preposterous notion that Clinton was a fervent birther, but a less effective one than Trump
.. And when Clinton insinuated that maybe he still isn’t paying the federal taxes that support troops, schools and health care, he again took the bait, not to deny that he’s a free rider, but to scoff that his taxes would just be wasted if he did pay them.
That was a pretty damning non-denial.
.. When Clinton pointed out that it would be a disaster if the country declared bankruptcy the way Trump’s companies have, he said he had just taken advantage of the laws for his own benefit, because “that’s what I do.”
.. it’s hard to imagine another presidential candidate expecting brownie points for allowing blacks in his club.
.. He denied last night that he had ever called global warming a Chinese hoax, even though the evidence remains on his Twitter account. He also clung to his disproven claim that he always opposed the war in Iraq, citing Sean Hannity as his character witness. Trump just keeps blustering through, never admitting error, always assuming his confidence projects authority.
.. “Because I settled that lawsuit with no admission of guilt…It’s just one of those things.”
It’s one of those things that won’t make the news tomorrow, even though “no admission of guilt” at least partially captures the Trump approach to politics.
.. He’s going to keep saying things that normal politicians don’t. He won’t apologize for them. He’ll attack the media for even questioning them. And his supporters will continue to love him for them.