TaxProf Blog

Editor: Paul L. Caron, Dean
Pepperdine University School of Law

Sunday, October 2, 2016

NY Times:  Trump Reported $916 Million Tax Loss In 1995, Perhaps Resulting In Zero Tax Liability For 18 Years Under NOL Rules

Trump Tax Return

New York Times, Trump Tax Records Obtained by The Times Reveal He Could Have Avoided Paying Taxes for Nearly Two Decades:

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.

Although Mr. Trump’s taxable income in subsequent years is as yet unknown, a $916 million loss in 1995 would have been large enough to wipe out more than $50 million a year in taxable income over 18 years. ...

Trump Campaign Statement:

"The only news here is that the more than 20-year-old alleged tax document was illegally obtained, a further demonstration that the New York Times, like establishment media in general, is an extension of the Clinton Campaign, the Democratic Party and their global special interests. What is happening now with the FBI and DOJ on Hillary Clinton's emails and illegal server, including her many lies and her lies to Congress are worse than what took place in the administration of Richard Nixon - and far more illegal.

"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. 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.

"The incredible skills Mr. Trump has shown in building his business are the skills we need to rebuild this country. Hillary Clinton is a corrupt public official who violated federal law, Donald Trump is an extraordinarily successful private businessman who followed the law and created tens of thousands of jobs for Americans."

https://taxprof.typepad.com/taxprof_blog/2016/10/ny-timestrump-reported-916-million-tax-loss-in-1995-perhaps-resulting-in-zero-tax-liability-for-18-y.html

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Comments

Is this any different from anyone else in the real estate business in the same period?

Posted by: mike livingston | Oct 2, 2016 9:12:29 AM

Mike: Is a ONE BILLION dollar loss really a typical real estate loss for that period???The real question is what is going on with our federal tax code that allows someone like Trump to write off a billion dollars as a loss on real estate and then carry if over for 18 years? Just wondering?

Posted by: gary minda | Oct 2, 2016 10:10:52 AM

Normies are such idiots. "Wut is NOL? REEEEEEEE!!!"

Posted by: Anon | Oct 2, 2016 10:13:25 AM

Mr. Livingston: The relevant question is "Is this any different from anyone else in the real estate business in the same period who is running for president of the U.S.?"

Posted by: Publius Novus | Oct 2, 2016 11:00:57 AM

It's ok not to like Trump, but it's not ok to suggest that deducting losses is improper. Even though we don't know whether he did take the deduction, the lawyer or accountant that does his taxes would be disbarred for not taking the deduction.

Posted by: Anon | Oct 2, 2016 2:36:06 PM

Not a suprise, given a guy like Trump.

I won't claim to know what the real question is, but an obvious one is: Who leaked confidential taxpayer information to the press?

I know of at least one party that stands to benefit in a close election. And that would be yet another violation of the U.S. Criminal Code, taxpayer confidentiality, that will probably go unprosecuted. Of course, that's been the standard practive in the Executive Branch for years...

Posted by: MM | Oct 2, 2016 2:57:37 PM

I gave the statutes a quick law. They do not seem to apply to a party who is not a state employee disclosing info on a state return, bearing in mind that criminal laws are strictly construed against the state. I did not look at state law and my reading was cursory.

Posted by: Bill Turnier | Oct 2, 2016 5:12:19 PM

It's interesting that although it's illegal for someone at the IRS to leak taxpayer information, it apparently is legal for someone else to use the information to the taxpayer's detriment. That's from the Pentagon Papers case, I suppose, but the twist is that the newspaper is using confidential information provided by a citizen, not a secret government report. Legal question: Suppose the NYTimes paid an IRS employee to get this information. Would that be a crime? (it is for the IRS employee, of course, but what about the Times?)

Posted by: Eric Rasmusen | Oct 2, 2016 5:58:15 PM

This is no bombshell, is it? Didn't we already know Trump lost a lot of money at one point, in which case he'd have the undoubted right to take NOL deductions? And it's not a controversial or sneaky deduction. Nobody's getting rich by losing millions of dollars in money to get 1/3 of it back later in the form of tax deductions.

Posted by: Eric Rasmusen | Oct 2, 2016 6:08:58 PM

My guess is that Trump leaked them himself. I still don't think he actually wants to be president...

Posted by: who leaked | Oct 2, 2016 7:10:44 PM

No great revelation here. Trump didn't have income that year. Ok. The income tax taxes income. In any event, I'm on the edge of my seat to see more info (only if obtained legally). Full disclosure: I'll be voting for Johnson or Stein.

Posted by: Jan | Oct 2, 2016 10:37:46 PM

"Suppose the NYTimes paid an IRS employee to get this information. Would that be a crime?"

Eric, I'm no lawyer, far from it, but I suspect this would fall under the U.S. Criminal Code governing bribery of public officials. A government employee receiving monetary inducement to divulge confidential information would lead to serious jail time for all involved:

https://www.law.cornell.edu/uscode/text/18/201

My understanding is that IRC 6103 also prohibits non-government individuals who have access to tax return information from disclosing anything without permission. In fact, IRC 7431 specifically says you can sue people who do that in civil court for monetary damages.

Posted by: MM | Oct 2, 2016 11:33:29 PM

Messrs. Rasmussen & M&Ms: Get your facts straight. The NYT received, from an anonymous source, the first pages of Trump’s NJ, NY, and CT state income tax returns. No federal returns. The federal criminal code is not implicated.

Mr. Rassmusen: The interesting thing is the NOL itself. The characteristics of an NOL, and the size of this NOL, infer that Trump is receiving his income by way of one or more pass-throughs. What kinds of entities comprise the Trump Organization?

Posted by: Publius Novus | Oct 3, 2016 6:27:33 AM

Anyone else smiling about the assertions of Trump's "genius" here? I would expect tax-savvy professionals to see leveraged-large depreciation deductions as anything but abnormal. The at-risk rules don't hamper him. He made bad investments in casinos.
NOLs are hardly ingenious. Size of the numbers involved, I'll grant, raise eyebrows.

Posted by: William J. Brown | Oct 3, 2016 9:13:12 AM

Thanks, MM. The "non-government individuals who have access to tax return information" who can't release it probably only covers authorized individuals such as consultants to the IRS. (By the way: Someone tell statute-writers to use the style "(e)(1)(D)(iii) DEFINITIONS", not "(iii) DEFINITIONS". It would make scrolling through a whole lot easier.)

It looks to me as if we need to worry about the following: Smith hacks into the IRS and copies 10,000 tax returns onto CD's. He mails them to his friend Jones, with no return address. Jones then publishes the tax returns on the web without fear of punishment.

Posted by: Eric Rasmusen | Oct 3, 2016 9:19:36 AM

You only pay tax if you have taxable income? Stop the presses!

Posted by: Skipp | Oct 3, 2016 9:55:16 AM

I don't see any federal returns, just NY state.

Posted by: Dale Spradling | Oct 3, 2016 10:11:38 AM

"Get your facts straight."

Point taken, but is Mr. Publius really saying that no felony has been committed by someone in the states of NY and CT?

Posted by: MM | Oct 3, 2016 7:25:17 PM

The NYT reporter who broke the story stated on CNN last evening that she received the state returns in a "Trump Tower" envelope.

Posted by: Publius Novus | Oct 4, 2016 6:26:18 AM


Via http://lawnewz.com/high-profile/trump-claims-the-new-york-times-illegally-published-his-taxes-we-investigate-if-thats-true/,

26 U.S. Code § 7213 - Unauthorized disclosure of information
"(3) Other persons
It shall be unlawful for any person to whom any return or return information (as defined in section 6103(b)) is disclosed in a manner unauthorized by this title thereafter willfully to print or publish in any manner not provided by law any such return or return information. Any violation of this paragraph shall be a felony punishable by a fine in any amount not exceeding $5,000, or imprisonment of not more than 5 years, or both, together with the costs of prosecution."

Whether there are similar statutes in state law I don't know.

Posted by: Eric Rasmusen | Oct 4, 2016 7:30:30 AM

"The NYT reporter who broke the story stated on CNN last evening that she received the state returns in a "Trump Tower" envelope."

Having lived through the 1990s, this has the Clinton Machine written all over it. As did Miss Universe, and a few other things that seemed to come out of nowhere recently...

Posted by: MM | Oct 4, 2016 1:35:40 PM

Mr. MM: You mean like whether HRC cheated on Bill?

Posted by: Publius Novus | Oct 4, 2016 2:21:52 PM

"You mean like whether HRC cheated on Bill?"

No, that's just stupid to trot out. And for the record, I'm willing to believe any allegation of dubious financial dealings by Mr. Trump. It's just who he is.

But is it really more compelling than, say, the Clinton Foundation accepting tens of millions of dollars in donations, while HRC was Secretary of State, from foreign governments and associated individuals in such countries as Algeria, Bahrain, the Democratic Republic of Congo, Ethiopia, Nigeria, Qatar, the Sudan, and Uzbekistan, all of whom where either accused of or investigated for rampant corruption, election fraud, terrorist financing, human rights abuses, or crimes against humanity? Not to mention the Clinton Foundation failing to collect foreign donation information for years, despite a promise to do so in the name of transparency, as well as failing to disclose over a thousand mostly foreign donations despite signing an agreement with the White House to do so?

Come one, Pubs, I'd love to see you spin all that into something positive. After all, aren't you proud of the way the Clintons have conducted their business affairs?

Posted by: MM | Oct 4, 2016 7:21:58 PM

Mr. MM: Was I “really saying that no felony has been committed by someone in the states of NY and CT?” No. I wasn’t addressing state law. The point was addressed to suggestions of violations of federal law.

As for the Clinton Foundation, I don’t recall mentioning it. Did I miss something while I was laughing about the National Review and House Oversight Committee press releases as sources of factual veracity?

Posted by: Publius Novus | Oct 5, 2016 9:02:32 AM

My guess is it was either Trump or Marla Maples. It wouldn't be illegal for Marla to release copies of HER joint filings with Donald.
The returns at issue are the first pages of the NY, CT and NJ returns. The losses are not from 1995; they are NOL carryforwards from an earlier year. Apparently the losses are not from the casinos, since the NJ return shows income, and no NOL. Since the losses are C/Fs, we have no idea of the year(s) of the losses or their size except that they are actually larger than 912 million since the losses would have wiped out any 1994 (and possibly earlier years) income.
I was really hoping for some real analysis of the returns from this site, but as far as I've seen, no other actual tax pros have analyzed them.

Posted by: Joan McHugh | Oct 5, 2016 7:48:39 PM

Pubs,

I congratulate you. Of all the regulars on this blog, you take the top prize for the most instances of avoiding answering direct questions, attacking factual sources you don't like, and general willful ignorance of the partisan variety.

I'll chock all that up to the fact that you're a Boomer...

Posted by: MM | Oct 5, 2016 8:03:13 PM