The report by the New York Times based on an anonymous source who gave them three pages of the 1995 joint tax return filing by Donald and his then-wife Marla Maples is both revealing and puzzling. You can see the document there and the main item that the media has focused on is that they declare a loss of $916 million.
The reporters say that Trump would be able to off-set this massive loss against any and all future earnings for the next 18 years, thus enabling him to avoid having any taxable income even if he earned an average of $50 million each year over that period.
It turns out that people in the real estate business, thanks to their very powerful lobby, have managed to get legislation passed that gives them much greater freedom in offsetting losses in one year against income in other years than people in any other profession. NPR’s Scott Horsley explains.
MONTAGNE: So if you lose money one year, you can deduct it from your taxes in subsequent years. I mean, depending on who you are and how that money was lost.
HORSLEY: That’s right, Renee, within some limits. And the limits are especially flexible for people in the real estate business like Donald Trump. Now, if you were a doctor, for example, who happened to own a rental property on the side, and you lost money on the rental one year. You could only use that loss to offset income from the rental property. You couldn’t deduct it from the money you make practicing medicine.
But real estate professionals play by a different set of rules. So in theory, Trump could have used that massive $916 million loss to escape tax liability on all kinds of income, including the money he made starring on “The Apprentice” television program or licensing the Trump name to people who make neckties.
All of that is legal. You have to understand, the real estate lobby is a powerful force here in Washington. And so as a consequence, the tax code is quite generous to real estate professionals.
Well, the tax code at the time allowed Trump to stretch out losses for up to 18 years. So even if he made, say, $50 million a year for almost two decades, he could have had no tax liability.
According to the tax form on the NYT website, these are personal tax returns for the state of New York, the city of New York, and one of its boroughs. But news reports keep referring to them as also for the states of New Jersey and Connecticut, and I don’t understand that. Can anyone explain?
Trump’s main defender Rudy Giuliani has been working overtime trying to spin away this tax issue. He claims that this massive loss is a sign that Trump is a tax genius and a brilliant businessman to be able to come back from such a loss. But he also made the odd claim that Trump was forced to take all the deductions that was available to him as part of his fiduciary duty to his investors and that he could have been sued by them if he failed to do so. I understand that argument for corporations. But as far as I can see, these are personal tax returns, not corporate ones. Surely no one can be sued by others if they pay more taxes than they need to? Can anyone explain?
Seth Meyers discusses Trump’s tax and other problems.
Jimmy Kimmel has produced a new ad for use by Trump with the message that all Trump’s failures will be why he will make a good president: He broke it so he can fix it