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Trump used dubious tax avoidance scheme in 1990s

02 November 2016
Trump used dubious tax avoidance scheme in 1990s

One is that, as has been previously reported, Trump may well have avoided paying taxes for many years through creative use of loopholes (it's impossible to say for certain, as he hasn't made his tax returns available).

Donald Trump avoided paying potentially hundreds of millions of dollars in taxes in a way even his own lawyers considered questionable, The New York Times reported Monday.

The Times report added: "Clever tax lawyers found a way around this inconvenience".

In the early 1990s, Trump convinced financial organizations that loaned him money to build a casino empire in Atlantic City to forgive debt he nearly certainly could not repay. Wouldn't that force the partnerships to report hundreds of millions of dollars of taxable income in the form of canceled debt?

Using the maneuver, Trump might have escaped paying tens of millions of dollars in personal income taxes, the report said, but there's no way to know for sure since he has refused to release his tax returns.

Tax experts reviewed the documents obtained by the newspaper and concluded that Trump's tax evasion strategy, based on ambiguous provisions from courts, clearly reached the edge of what the law allowed at that time.

"Whatever loophole existed was not "exploited" here, but stretched beyond any recognition", Steven M. Rosenthal, a senior fellow at the nonpartisan Tax Policy Center, told the Times.

John L Buckley, who served as the chief of staff for Congress's Joint Committee on Taxation in 1993 and 1994, told the newspaper Mr Trump was trampling over one of the fundamental principles of United States tax law by using his investors' losses to avoid paying his own taxes years later. After the New York Times published a portion of his 1995 taxes in early October, showing he claimed a $916 million loss, surrogates like Rudy Giuliani and Chris Christie immediately proclaimed him a "genius".

On the campaign trail, Trump has repeatedly defended his tax practices, blaming Congress and particularly his opponent, Hillary Clinton, for failing to close the loopholes that he exploited.

While much of the debt he incurred to build those casinos was forgiven, it would still have counted as taxable income under Internal Revenue Service policy.

Congress acted to ban the maneuver of swapping equity for debt in 2004, according to the Times.

Trump and Clinton's tax plans have many differences. Fred T. Goldberg, who was the IRS commissioner under President George Bush, recalled in an interview that the IRS frowned on partnership equity-for-debt swaps for the same reason it objected to corporate stock-for-debt swaps.

Trump spokeswoman Hope Hicks suggested the New York Times either misunderstood or misread U.S. tax law. The newspaper posted on its website "tax opinion letters" Trump obtained from his attorneys about the maneuvers.

Regardless of whether the I.R.S. objected, Mr. Trump's tax avoidance in this case violated a central principle of American tax law, said Mr. Buckley, the former chief of staff for Congress's Joint Committee on Taxation, who later served as chief tax counsel for Democrats on the House Ways and Means Committee. She said that the tax experts cited by the NYT were involved in "pure speculation".