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Monday, October 3, 2016

Let's Talk About Mr. Trump's Tax Returns

Over the weekend, the New York Times obtained and published Mr. Trump's 1995 New York tax return - or, more accurately, 3 pages from it, his Connecticut, and his New Jersey non-resident returns.  The breathless headlines talked about Mr. Trump being able to avoid taxes for 18 years.

Let's analyze this a little:

(Disclosure:  I despise Mr. Trump.  I find him to be a disgusting pig of a human being, a poor businessman, a xenophobe, a racist, a misogynist, and just an all around sad sack of poop who has the potential to launch nuclear missles at 3 in the morning because he is pissed off at someone)

By the way:  I assume that Mr. Trump is designated as a "Real Estate Professional" - this designation allows a person to deduct real estate losses, which are ordinarily considered to be passive losses that are only deductable against passive income, down to a net of zero, and then carry the rest forward to net against future passive income (as always, there are a few exceptions, but they wouldn't affect Mr. Trump's return).

Ok - in 1995, Mr. Trump's NY tax return showed a $909 MILLION net operating loss carry-forward, as well as current passive losses of almost $16 million, and other/capital losses of $1.36 million. Wage income, interest income, dividend income, and business income was a positive (almost) $11 million - he had over $41 million in New York deductions, for a New York adjusted gross income of $<913,765,884> - to make this clear, that is NEGATIVE $913 million.

Now, it is important to understand a couple of things:

First, Mr. Trump wasn't able to lose all that money in 1995 - the majority of the losses came from his uncanny ability to bankrupt gambling casinos in 1992 and 1994 (someone please fact check me on those dates).

Second, if one is such a colossally poor businessman that one can manage to lose almost a billion dollars, tax law dictates that one can either go back and recover previously paid income taxes, or carry the losses forward as a credit against future income - THERE IS ABSOLUTELY NOTHING WRONG WITH THIS.

Third, apparently Mr. Trump uses a lot of "pass-through entities", which means that the income or losses flow through to the individual shareholder's tax returns (I don't know how many partners Mr. Trump had in these various passthroughs, but he did have partners to some extent).  So, the losses would have actually been greater than those shown on Mr. Trump's 1995 New York return.  The beauty (it seems to me) is that Mr. Trump can ruin businesses, (and therefore peoples lives), and yet take the tax benefit of his (apparent) hugely poor business decisions on his personal tax return.

Again - there is nothing wrong with utilizing net operating loss carryforwards, truly there isn't.  He hasn't avoided paying taxes in subsequent years simply because he had these massive losses that were available to him.

Here is what bothers me:  This man, who brags about his business acumen, lost almost a BILLION DOLLARS in the '90's - for comparison, the stock market had an average ROI (return on investment) of 18.17%:

Mr. Trump is a fraud.