Trump may have dodged taxes for 18 years

US Republican presidential nominee Donald Trump gesturing following a rally at Spooky Nook Sports center in Manheim, Pennsylvania on Oct 1.
US Republican presidential nominee Donald Trump gesturing following a rally at Spooky Nook Sports center in Manheim, Pennsylvania on Oct 1.PHOTO: AFP

WASHINGTON • Mr Donald Trump declared a loss of US$916 million on his income tax returns for 1995, and - because of tax rules that favour 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 Mr Trump reported in 1995 - US$916 million - seemed to be a holdover from the early 1990s, when his real estate and casino empire tottered and almost fell.

By 1995, his businesses were 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, he might have been able to earn US$50 million a year for 18 years and still pay no federal income taxes - thanks to this one giant loss, and the resulting deductions.

Professor Howard Abrams, director of tax programmes 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 next 15 years. As a result, Mr Trump would have potentially paid no taxes for an 18-year period.

Prof Abrams said Mr 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 non-existent."

The documents obtained by the Times did not reveal his charitable giving for 1995.

After the Times report was published, the Trump campaign issued a statement that did not dispute the accuracy of the documents cited by the Times. In fact, it complained that the documents had been published without Mr Trump's permission: "The only news here is that the more than 20-year-old alleged tax document was illegally obtained," the statement said.

The statement went on to defend Mr 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," the statement said.

It went on to say: "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."

Mr 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.

Internal Revenue Service officials have said there is no reason a taxpayer cannot choose to make their returns public, even if they are undergoing an audit.

WASHINGTON POST

A version of this article appeared in the print edition of The Straits Times on October 03, 2016, with the headline 'Trump may have dodged taxes for 18 years'. Print Edition | Subscribe