The New York Times obtained three pages of Donald Trump’s 1995 state income tax return, which showed a net loss of $916 million. Because of the way the tax system is structured, a loss such as this is allowed to be carried forward to offset income for up to 18 years, and it is completely legal.
However, the reasons behind this loss are the major concern for most people, because of the devastation that Trump left in his wake. In the early nineties, he had three casinos in Atlantic City, an airline business, and the Plaza Hotel in Manhattan. Ordinary investors and bondholders received pennies on the dollar, and numerous contractors and employees went unpaid for their work.
Mr. Trump declined to comment on the documents. Instead, the campaign released a statement that neither challenged nor confirmed the $916 million loss.
“Mr. Trump is a highly-skilled businessman who has a fiduciary responsibility to his business, his family and his employees to pay no more tax than legally required,” the statement said. “That being said, Mr. Trump has paid hundreds of millions of dollars in property taxes, sales and excise taxes, real estate taxes, city taxes, state taxes, employee taxes and federal taxes.”
His campaign also stated: “Mr. Trump knows the tax code far better than anyone who has ever run for President and he is the only one that knows how to fix it.” That is certainly good to know considering the situation with his foundation, because the exception to outright fraud in a criminal case where intent can be proven is the claim of ignorance of the law. The auditors at the IRS should be thrilled to have an official statement from Mr. Trump in which he brags about his expert knowledge in tax law, as that will satisfy one half of their case against him should the Trump Foundation case be pursued in criminal court.
Once again, his pathological need to be the best and brag about it may prove to bite him in the end.
It should also be noted that during this same period, Donald Trump claimed to be worth approximately $2 billion. How is that possible? Extremely wealthy families like the Trumps are able to take advantage of a crazy labyrinth of partnerships, S-Corporations, and limited liability companies that somewhat protect their money inside vast deductions, losses, business expenses, real estate depreciation, and even operating losses. However, although those losses can be used to offset their other income, like money earned from writing books or appearing on a reality television show, that other income is protected and cannot be used against them to pay back the investors or contractors that lose out when the businesses go bad.
Under current law and according to the PAN Faq, when the net losses from those businesses are larger than other income, the taxpayer is allowed to carry it back up to three years and forward up to fifteen, offsetting income for a total of eighteen years.
From The Times:
The tax experts consulted by The Times said the $916 million net operating loss declared by Mr. Trump in 1995 almost certainly included large net operating losses carried forward from the early 1990s, when most of Mr. Trump’s key holdings were hemorrhaging money. Indeed, by 1990, his entire business empire was on the verge of collapse. In a few short years, he had amassed $3.4 billion in debt — personally guaranteeing $832 million of it — to assemble a portfolio that included three casinos and a hotel in Atlantic City, the Plaza Hotel in Manhattan, an airline and a huge yacht.
Reports that year by New Jersey casino regulators gave glimpses of the balance sheet carnage. The Trump Taj Mahal casino reported a $25.5 million net loss during its first six months of 1990; the Trump’s Castle casino lost $43.5 million for the year. His airline, Trump Shuttle, lost $34.5 million during just the first six months of that year.
“Simply put, the organization is in dire financial straits,” the casino regulators concluded.
Reports by New Jersey’s casino regulators strongly suggested that Mr. Trump had claimed large net operating losses on his taxes in the early 1990s. Their reports, for example, revealed that Mr. Trump had carried forward net operating losses in both 1991 and 1993. What’s more, the reports said the losses he claimed were large enough to virtually cancel out any taxes he might owe on the millions of dollars of debt that was being forgiven by his creditors. (The I.R.S. considers forgiven debt to be taxable income.)
But crucially, the casino regulators redacted the precise size of the net operating losses in the public versions of their reports. Two former New Jersey officials, who were privy to the unredacted documents, could not recall the precise size of the numbers, but said they were substantial.
If this were the only issue with Trump’s taxes, he likely would go ahead and release them and state that he had followed the letter of the law. However, in conjunction with what has been learned about how he used the Foundation to illegally avoid paying taxes in tandem with this, it is highly probable, to speculate, there is even more going on that he is desperate to keep hidden from the public.
It is quite apparent Donald Trump took full advantage of the tax laws to amass a significant amount of wealth while screwing over a lot of little guys on his way to the top.