TRUMPWATCH: How Donald Trump avoided paying federal taxes for decades... Washington Post and New York Times investigations show how Trump paid less in federal income taxes than most of his disciples (even the poorest 'white working class' Trump fans)...
Donald Trump's record of federal income tax evasion and avoidance became more clear on October 2, 2016, when the New York Times exposed how he "lost" nearly a billion dollars in 1995 and thereby was able to avoid taxes for as long as 18 years after that. Only the tax code that favored the super rich could make such avoidances possible, while most of those still cheering for Trump paid more taxes than The Donald during the last quarter century.First it was draft evasion by the "best sex" guy. Now it's massive tax evasion. How many ways has Donald Trump been a traitor to the USA during his lengthy spoiled brat lifetime? Many of us who knew about the history of Donald Trump's con games realized early that his refusal to release his 2015 federal income tax returns had less to do with audits and more to do with Trump's massive tax evasion over not only a few years in the 21st Century, but many many years in the 20th Century as well. Once Trump's claim that he "couldn't" release his federal tax records while under what he calls a federal "audit" (that term may not be accurate by the way) was debunked by the Internal Revenue Service, then Trump's continued excuses for hiding his taxes became more and more a clue to a simple fact that may even cost him votes among his hard core of core supporters: Trump has probably paid less in federal income taxes the past several years than the poorest chump who cheers Trump on at Trump's racist Nuremburg-style rallies.
After Hillary Clinton trumped Trump on the income tax question during the September 26, 2016 presidential debate, Trump's propaganda staff bobbed and weaved around the questions of the Trump tax evasions. But finally on October 2, 2016, The New York Times in an deeply reported investigative story revealed that because of the way Trump took a nearly billion dollar "loss" in federal income taxes in 1995, Trump may have evaded all his federal income taxes during more than a decade after that.
The Times report was based on the first page of three state tax returns filed by Donald Trump and his then wife, Marla Trump, in 1995. In the report, the Times explained how the documents were provided to the Times anonymously and how they were verified.
When this story broke on the evening of October 1, 2016, we waited for our print edition of the Times (to which we subscribe), and I asked my sons to read the entire story so we could discuss it in light of what we had seen on the September 26 debate (which our entire family watched). Instead of summarizing what the Times reported, I am asking that our readers here at Substance take the same time to read the original Times article, either here (without the graphics) or on line.
THE NEW YORK TIMES INVESTIGATIVE STORY OF OCTOBER 2, 2016:
Trump Tax Records Obtained by The Times Reveal He Could Have Avoided Paying Taxes for Nearly Two Decades, By DAVID BARSTOW, SUSANNE CRAIG, RUSS BUETTNER and MEGAN TWOHEY, OCT. 1, 2016
Donald J. Trump declared a $916 million loss on his 1995 income tax returns, a tax deduction so substantial it could have allowed him to legally avoid paying any federal income taxes for up to 18 years, records obtained by The New York Times show.
The 1995 tax records, never before disclosed, reveal the extraordinary tax benefits that Mr. Trump, the Republican presidential nominee, derived from the financial wreckage he left behind in the early 1990s through mismanagement of three Atlantic City casinos, his ill-fated foray into the airline business and his ill-timed purchase of the Plaza Hotel in Manhattan.
Tax experts hired by The Times to analyze Mr. Trump’s 1995 records said that tax rules especially advantageous to wealthy filers would have allowed Mr. Trump to use his $916 million loss to cancel out an equivalent amount of taxable income over an 18-year period.
The $916 million loss certainly could have eliminated any federal income taxes Mr. Trump otherwise would have owed on the $50,000 to $100,000 he was paid for each episode of “The Apprentice,” or the roughly $45 million he was paid between 1995 and 2009 when he was chairman or chief executive of the publicly traded company he created to assume ownership of his troubled Atlantic City casinos. 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?”
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.”
The statement continued, “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.”
Separately, a lawyer for Mr. Trump, Marc E. Kasowitz, emailed a letter to The Times arguing that publication of the records is illegal because Mr. Trump has not authorized the disclosure of any of his tax returns. Mr. Kasowitz threatened “prompt initiation of appropriate legal action.”
Mr. Trump’s refusal to make his tax returns public — breaking with decades of tradition in presidential contests — has emerged as a central issue in the campaign, with a majority of voters saying he should release them. Mr. Trump has declined to do so, and has said he is being audited by theInternal Revenue Service.
At last Monday’s presidential debate, when Hillary Clinton suggested Mr. Trump was refusing to release his tax returns so voters would not know “he’s paid nothing in federal taxes,” and when she also pointed out that Mr. Trump had once revealed to casino regulators that he paid no federal income taxes in the late 1970s, Mr. Trump retorted, “That makes me smart.”
The tax experts consulted by The Times said nothing in the 1995 documents suggested any wrongdoing by Mr. Trump, even if the extraordinary size of the loss he declared would have probably attracted extra scrutiny from I.R.S. examiners. “The I.R.S., when they see a negative $916 million, that has to pop out,” Mr. Rosenfeld said.
The documents examined by The Times represent a small fraction of the voluminous tax returns Mr. Trump would have filed in 1995.
The documents consisted of three pages from what appeared to be Mr. Trump’s 1995 tax returns. The pages were mailed last month to Susanne Craig, a reporter at The Times who has written about Mr. Trump’s finances. The documents were the first page of a New York State resident income tax return, the first page of a New Jersey nonresident tax return and the first page of a Connecticut nonresident tax return. Each page bore the names and Social Security numbers of Mr. Trump and Marla Maples, his wife at the time. Only the New Jersey form had what appeared to be their signatures.
The three documents arrived by mail at The Times with a postmark indicating they had been sent from New York City. The return address claimed the envelope had been sent from Trump Tower.
On Wednesday, The Times presented the tax documents to Jack Mitnick, a lawyer and certified public accountant who handled Mr. Trump’s tax matters for more than 30 years, until 1996. Mr. Mitnick was listed as the preparer on the New Jersey tax form.
Mr. Mitnick, 80, now semiretired and living in Florida, said that while he no longer had access to Mr. Trump’s original returns, the documents appeared to be authentic copies of portions of Mr. Trump’s 1995 tax returns. Mr. Mitnick said the signature on the tax preparer line of the New Jersey tax form was his, and he readily explained an obvious anomaly in the way especially large numbers appeared on the New York tax document.
A flaw in the tax software program he used at the time prevented him from being able to print a nine-figure loss on Mr. Trump’s New York return, he said. So, for example, the loss of “-915,729,293” on Line 18 of the return printed out as “5,729,293.” As a result, Mr. Mitnick recalled, he had to use his typewriter to manually add the “-91,” thus explaining why the first two digits appeared to be in a different font and were slightly misaligned from the following seven digits.
“This is legit,” he said, stabbing a finger into the document.
Because the documents sent to The Times did not include any pages from Mr. Trump’s 1995 federal tax return, it is impossible to determine how much he may have donated to charity that year. The state documents do show, though, that Mr. Trump declined the opportunity to contribute to the New Jersey Vietnam Veterans’ Memorial Fund, the New Jersey Wildlife Conservation Fund or the Children’s Trust Fund. He also declined to contribute $1 toward public financing of New Jersey’s elections for governor.
The tax documents also do not shed any light on Mr. Trump’s claimed net worth of about $2 billion at that time. This is because the complex calculations of business deductions that produced a tax loss of $916 million are a separate matter from how Mr. Trump valued his assets, the tax experts said.
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.
But fragmentary as they are, the documents nonetheless provide new insight into Mr. Trump’s finances, a subject of intense scrutiny given Mr. Trump’s emphasis on his business record during the presidential campaign.
The documents show, for example, that while Mr. Trump reported $7.4 million in interest income in 1995, he made only $6,108 in wages, salaries and tips. They also suggest Mr. Trump took full advantage of generous tax loopholes specifically available to commercial real estate developers to claim a $15.8 million loss in 1995 on his real estate holdings and partnerships.
But the most important revelation from the 1995 tax documents is just how much 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.
Better still, if the losses are big enough, they can cancel out taxable income earned in other years. Under I.R.S. rules in 1995, net operating losses could be used to wipe out taxable income earned in the three years before and the 15 years after the loss. (The effect of net operating losses on state income taxes varies, depending on each state’s tax regime.)
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.
Politico, which previously reported that Mr. Trump most likely paid no income taxes in 1991 and 1993 based on the casino commission’s description of his net operating losses, asked Mr. Trump to comment. “Welcome to the real estate business,” he replied in an email.
Now, thanks to Mr. Trump’s 1995 tax records, the degree to which he spun all those years of red ink into tax write-off gold may finally be apparent.
Mr. Mitnick, the lawyer and accountant, was the person Mr. Trump leaned on most to do the spinning. Mr. Mitnick worked for a small Long Island accounting firm that specialized in handling tax issues for wealthy New York real estate families. He had long handled tax matters for Mr. Trump’s father, Fred C. Trump, and he said he began doing Donald Trump’s taxes after Mr. Trump turned 18.
In an interview on Wednesday, Mr. Mitnick said he could not divulge details of Mr. Trump’s finances without Mr. Trump’s consent. But he did talk about Mr. Trump’s approaches to taxes, and he contrasted Fred Trump’s attention to detail with what he described as Mr. Trump’s brash and undisciplined style. 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.
But if Mr. Trump lacked a sophisticated understanding of the tax code, and if he rarely showed any interest in the details behind various tax strategies, Mr. Mitnick said he clearly grasped the critical role taxes would play in helping him build wealth. “He knew we could use the tax code to protect him,” Mr. Mitnick said.
According to Mr. Mitnick, Mr. Trump’s use of net operating losses was no different from that of his other wealthy clients. “This may have had a couple extra digits compared to someone else’s operation, but they all benefited in the same way,” he said, pointing to the $916 million loss on Mr. Trump’s tax returns.
In “The Art of the Deal,” his 1987 best-selling book, Mr. Trump referred to Mr. Mitnick as “my accountant” — although he misspelled his name. Mr. Trump described consulting with Mr. Mitnick on the tax implications of deals he was contemplating and seeking his advice on how new federal tax regulations might affect real estate write-offs.
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.
“Here the guy was building incredible net worth and not paying tax on it,” he said.
THE WASHINGTON POST ALSO REPORTED ON THAT STORY...
Trump could have paid no fed taxes for 18 years... Newspaper obtains 1995 records that show $916M loss... By David A. Fahrenthold, Rosalind S. Helderman and
Jose A. DelReal, The Washington Post
Donald Trump declared a loss of $916 million on his income tax returns for 1995, and — because of tax rules that favor wealthy real estate investors — he could have used that loss to avoid paying any federal income taxes for up to 18 years, according to a report in The New York Times.
The Times' report said that the enormous loss Trump reported in 1995 — $916 million — seemed to be a holdover from the early 1990s, when his real estate and casino empire tottered and almost fell.
By 1995, Trump's businesses were actually in better shape. But he was able to use byzantine tax laws to use those prior losses to cancel out income taxes. By the Times' calculations, Trump might have been able to earn $50 million a year for 18 years and still pay no federal income taxes — thanks to this one giant loss and the resulting deductions.
Howard Abrams, the director of tax programs at the University of San Diego School of Law, confirmed that tax law allows losses of this size to be applied to returns three years prior to the loss and then for the next 15 years. As a result, Trump would have potentially paid no taxes for an 18-year period.
Abrams said Trump could likely have claimed losses so massive by taking advantage of tax loopholes available only to those in the real estate industry.
“The real estate industry has been very effective in lobbying Congress,” he said. “You can have a huge tax loss in a year when your actual loss is very little or nonexistent.”
After the report was published, the Trump campaign issued a statement that did not dispute the accuracy of the documents cited by the Times. It did complain that the documents were published without his permission.
“The only news here is that the more than 20-year-old alleged tax document was illegally obtained,” the statement said.
The Trump campaign went on to defend Trump's approach to taxes.
“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. 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, along with very substantial charitable contributions,” it said.
The information comes from three pages that appeared to be from tax returns Trump filed in New York, New Jersey and Connecticut. The pages had been sent anonymously by mail to reporter Susanne Craig, the paper said. Trump's accountant from that time, Jack Mitnick, had seen the documents and believed them to be authentic, the newspaper said.
Trump is the only major-party nominee in 40 years who has not released his federal income tax returns. His reasons for doing so have been varied, including assertions that the taxes are under audit. IRS officials have said there is no reason a taxpayer cannot choose to make their returns public, even if they are undergoing an audit.
During last Monday's presidential debate, Democrat Hillary Clinton asserted that Trump may have, in fact, paid no federal income taxes at all in recent years.
“That makes me smart,” Trump retorted at one point.
