It's highly unlikely that Donald Trump actually lost

[MineralMan]

almost $1 billion. Not real dollars, anyway. More likely, it was a purely paper loss that affected his actual wallet not at all.

Some numbers on paper moved around, but no actual money. Creative accounting works that way, sometimes, if you're really clever at working loopholes.

I can't say for sure, since there are no supporting documents for this "loss." But, given the man, I'm virtually certain that there was no actual monetary loss involved at all. Just numbers on paper.

We may find out, or we may not. In any case, there is real ethical wrongdoing in this. Truly.

[guillaumeb]

1. The loss could be a depreciated asset loss. That loss can be used to offset other earnings.

[MineralMan]

3. Yes, that's one way to do it.

However, no actual money is involved. Just numbers on paper, as I said.

[guillaumeb]

7. True. And taking that type of loss applies to rental property.

I could not use the depreciated value of my home to shelter my income for 18 years. Plus that seems to indicate that he was able to avoid paying tax on nearly a billion dollars of income from 1995 to 2013.

Another way the rich pay off politicians to write loopholes into the tax code.

[Hortensis]

11. That's no doubt a yoooge part of it, but The Donald also had a lot

of big failures leading up to that. That filing was before he switched to mostly just selling his name for others to put on their projects. His dad, who'd helped keep him from disaster in earlier decades, was suffering from Alzheimer's in the 1990s and died toward their end, just before this filing.

[Adrahil]

14. Yeah, and property depreciation is utter bullshit....

It's one reason why it's generally fairly easy to make a mint in real estate if you can get access to nice chunk of capital to start.

[guillaumeb]

15. True. The depreciation is for income property.

Imagine if homeowners could have used their lost value (after the real estate crash) and used that loss to write off their income. Tax receipts would have plummeted.

[Adrahil]

16. Exactly. And further...

The whole point of investing in property is that tends to appreciate.

Even if someone holds the property as an income property, its intrinsic value tends to increase, which can be levered for additional capital. The depreciation of real property is a complete fantasy. That's not to say a property can't lose value. It can. But that loss is not experienced until a sale, just like any other asset. This is a MAJOR LOOPHOLE intended to serve the interests of the very rich landholders.

[guillaumeb]

17. Plus Trump went public and the losses were actually passed on to shareholders

because he paid himself huge "fees" and salary in his role of CEO. So he externalized his losses and internalized his profits.

[Dump The Rump]

2. WHY would T RUMP tell the truth about his taxes

I think he would tell a lie to the IRS. Wouldn't you rather he be caught telling the truth?

[Wounded Bear]

4. True, but it doesn't matter...

he used it to his advantage, and any claims of his that he will change a system he used to his advantage are kind of weak.

[MineralMan]

5. All of Trump's claims are kind of weak.

In fact, they're demonstrably weak.

[Wounded Bear]

8. Well, to the clinically sane, yes they are...

his supporters? Not so much.

[underpants]

6. swag has a post that explains it - in accounting language and actual language

http://www.democraticunderground.com/?com=view_post&forum=1016&pid=167858

[sunnystarr]

9. maybe it was a paper loss but

the write-off resulted in real dollars that he didn't have to pay.

[MineralMan]

10. Indeed. No actual loss, but a big gain for him.

Creative accounting based on loopholes. It's how the wealthy do it. First, you overvalue assets and then sell them for far less than your inflated valuations. You take the "loss" and charge it off against your actual income.

That's what Trump did, in a nutshell.

[Kensan]

13. That's not what he did in a nutshell...

Generally, a tax loss is not triggered by "overinflated values." There were abusive tax shelters for a time that did utilize some accounting tricks with basis/debt transfers, but the IRS has shut those down. This $916M loss would have been traced to his economic at-risk basis in the assets. Under IRC 1231, the loss would have been treated as an ordinary loss for tax purposes (instead of a capital loss). This has a huge impact on the ability to utilize this loss, as was outlined in the article. It created a net operating loss (NOL) in the year it was generated, and IRC 172 allows for a very long time frame to use the NOL to offset other income (back then it had a 2-yr lookback and 15-yr carryforward).

Trump, however, did take advantage of specific insolvency provisions in IRC 108 that allows business property owners to reduce their property basis instead of recognizing the cancellation of debt income. What Trump did was allowed under the tax law, and believe me it has been utilized by real estate persons for decades. The insolvency rules are not just for real estate moguls. As a CPA, I've advised clients in many different professions on using these rules to mitigate or eliminate their tax liabilities.

What I can't fathom is that he was able to foist his tax liability on outside investors. He contributed his property (basis reduced by the $916M) to a corporation, and issued stock to new investors. I don't know what kind of prospectus he provided, but they should have understood they were buying into assets with a potential built-in-gain of $916M. So their return on investment was going to be reduced by the fact that annual depreciation deductions were going to be smaller than normal, and a huge gain subject to tax was going to be realized upon ultimate sale. Of course, that assumes you have a prudent and smart business person running the show to see this deal generates the returns everyone expected.

Trump turned around and charged these investors for his services, and even borrowed money that likely financed his own compensation. Everyone walked away a loser on this deal, except for the Donald who stripped out compensation along the way that was sheltered by the $916M NOL deduction. Why anyone would want to do business with this man is beyond me.

This wasn't intended to be a dig at you MM. I've just seen a lot of posts about taxes on this board that are clearly not from people who work in the profession. The primaries even saw a completely bogus "tax calculator" that made many here believe that Bernie's tax plan would increase their taxes by tens of thousands of dollars. So anyway...just trying to be helpful.

[mopinko]

12. i am hoping the additional docs that was winked at

are the audit reports.
we dont even know if he actually got away w this. maybe there is an audit record where he got his hand slapped and promised not to do it again. until the next year.

that had to have raised audit flags. especially if he already had a rap sheet.

[JTFrog]

18. Some folks are born silver spoon in hand.....

Some folks are born silver spoon in hand
Lord, don't they help themselves, oh
But when the taxman comes to the door
Lord, the house looks like a rummage sale, yes

[CajunBlazer]

19. Mineral Man, here's what probably happened

Until 2002 when the tax laws were changed there was a loophole where an real estate investor who lost money on a real estate venture could take as a loss the entire amount lost, including money borrowed for the deal.

Let's take an imaginary example: Let's say that in 1994 Trump had put up $1 Million dollars of his own money to build a new $100 Million hotel and borrowed the rest, $99 Million, from a bank. Then let's say that the project went belly up in 1995 and all of the money invested was lost. The tax laws at the time would allow Trump to show a $100 Million loss even though he had put up only $1 Million if the bank wrote off the other $99 Million.

Then Trump could use the $100 Million loss to offset profits he made in future years. That is a heck of a deal if a $1 Million actual loss allowed Trump to avoid paying taxes on $100 Million in profits in future years. A less honest man than The Donald might have "engineered" such a loss. (wink, wink)

[MyNameIsKhan]

20. We donot know how much was agreed between IRS and him after audit

I cannot believe IRS would have accepted this return without a thorough review.

[Madam45for2923]

21. This Wash Post Page has a 2 minute video explaining the 1 billion loss

https://www.washingtonpost.com/opinions/donald-trumps-contempt-for-american-democracy/2016/10/03/809b1e06-89a8-11e6-bff0-d53f592f176e_story.html?tid=sm_tw&utm_term=.77e48332f401

Is this what you're saying too?