Donald Trump Avoided Paying Taxes Using Other People’s Money
Donald Trump Avoided Paying
Taxes Using Other People’s Money
OCT. 31, 2016
The story of how Mr. Trump sidestepped a potentially ruinous tax bill emerged from documents recently discovered by The Times during a search of casino bankruptcy filings.
Mr. Trump structured his companies to allow him to have lucrative personal tax advantages, while limiting his personal liability should business go bad.
For each of his Atlantic City casinos, Mr. Trump formed a partnership between himself and a corporation that he wholly owned and created for this specific purpose.
At the time, many businesses, particularly real estate ventures, were structured similarly, with the goal of protecting owners from losing personal money should their businesses go bust. But Mr. Trump was playing on a vastly different scale than most; his leverage was the stuff of legend.
“There’s nothing like doing things with other people’s money, because it takes the risk,” Mr. Trump said at a campaign rally in September.
With the partnerships in place, Mr. Trump went looking for financing.
O.P.M.
To finance the Trump Taj Mahal, Mr. Trump issued $675 million in bonds at a 14% interest rate. This is one of many ways Mr. Trump leveraged other people's money, known in investing as O.P.M.
To purchase and finish construction on the Trump Taj Mahal, for instance, Mr. Trump’s company sold over a half-billion dollars in bonds – essentially i.o.u.s with interest – to individuals, companies and banks.
Within the first year, Mr. Trump began missing interest payments, a bad sign for investors. The Taj, though, was far from the only Trump business that was hemorrhaging money.
PILING ON
Many of Mr. Trump’s other businesses also suffered losses that flowed onto his personal tax returns.
In the late 1980s and early 1990s, several of his casinos and other properties suffered significant losses, the majority of which ultimately ended up on Mr. Trump’s personal taxes.
Mr. Trump managed to turn these business losses to his personal gain — in the form of something called a net operating loss (N.O.L.).
TRUMP'S N.O.L.
Mr. Trump amassed nearly $1 billion in net operating losses that he could use to offset personal income taxes for almost two decades.
But there was a threat to Mr. Trump’s N.O.L.: the debt forgiven by many of his creditors who were trying to salvage what was left of their investments.
TAXABLE INCOME
When a debt is forgiven, it is seen as income by the government and subject to taxes.
Mr. Trump’s forgiven debt – which included the renegotiated bonds used to finance the Trump Taj Mahal – was viewed by the government as taxable income, and as such could be deducted from Mr. Trump’s personal N.O.L.
Mr. Trump needed a way to protect his advantage. He found a valuable one.
NEW BONDS
Mr. Trump issued new bonds to replace the old bonds. The new bonds have a lower return, essentially forgiving millions in debt, which could potentially decrease Mr. Trump’s N.O.L.
THE SWAP
To avoid taxes on the forgiven debt and protect the N.O.L., Mr. Trump used a partnership equity for debt swap that was subsequently closed by Congress.
In a tax avoidance maneuver his own lawyers told him was legally dubious, Mr. Trump managed to avoid paying taxes on the forgiven debt by swapping partnership equity for debt. It didn’t matter if the actual market value of the equity was less than the forgiven debt. (Equity in an insolvent partnership could easily be next to worthless). This type of swap was made illegal for partnerships in 2004.
Mr. Trump also was part of a determined and successful lobbying campaign in 1991 to change several tax rules, including one that would allow him use his N.O.L. to offset all personal income, and not just real estate income. This cleared the way for him to avoid paying federal income taxes on ventures including “The Apprentice” (and “The Celebrity Apprentice” ), for which Mr. Trump claims he was paid over $200 million.
http://www.nytimes.com/interactive/2016/us/politics/trump-taxes-loophole.html
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THIS IS HOW THE SCHEISTER MAKES HIS MONEY....
Only one question. At the time that he took advantage of these tax avoidance schemes, were they illegal?
That speaks to Ethics, all his "Investors" were sold Junk Bonds and then he declared Bankruptcy...Congress changed the Rules after...The Man is a Scheister...
Do you remember Michael Milken went to Prison for selling Junk Bonds???
Michael Milken and the History of Junk Bonds
Junk bonds have survived a dramatic rise and fall in popularity, as well as heated controversy. Before the 1980s , few companies issued junk bonds. The only ones available were from established companies that had fallen on hard times. That changed in the late 1970s when young companies with no credit began issuing bonds that started out as "junk" in order to get off the ground. Junk bonds became a common investment tool by the early 1980s, setting the stage for the ambitious trader Michael Milken, who later became known as the "Junk Bond King."
READ MORE:
My question did not require a paragraph to answer. It was a simple question requiring a yes or no answer.
Find me a moral politician and I'll faint.
Congress closed the procedure he used in 2004, long after what this seed is about happened. The NOL is still a legal deduction.
XXJefferson: I can't believe you could be so utterly clueless...
People call Hillary Clinton a crook, even though she has never been indicted for a crime, let alone convicted.
Trump is a crook, even though his actions are borderline legal. "Crook" is a value judgement.
People call Hillary Clinton a crook, even though she has never been indicted for a crime, let alone convicted.
Trump is a crook, even though his actions are borderline legal. "Crook" is a value judgement.
Your rationale for calling Trump a crook is exactly why people call Hillary a crook.
Someone can be a crook without being a criminal. Crook means you are crooked, not on the up and up. Trump has been crooked his entire adult life.
"Crook means you are crooked, not on the up and up."
How the hell do you think you can exempt the scandal queen from this statement? Do we need to dig all that old shit up again to remind you? Damn near every one of your posts this election cycle have been pure Hypocrisy.
Someone can be a crook without being a criminal. Crook means you are crooked, not on the up and up. Trump has been crooked his entire adult life.
You're just proving why people see Hillary as crooked. Hillary has been crooked her entire adult life and has been involved in more scandals than all other presidential candidates combined.
You think Clinton may have had people killed. Your opinion on her "scandals" is unreliable to say the least.
You think Clinton may have had people killed. Your opinion on her "scandals" is unreliable to say the least.
I never said that Hillary had anybody killed and, even if I did, that doesn't have any bearing on her history of scandals.
"My question did not require a paragraph to answer. It was a simple question requiring a yes or no answer."
Well she obviously didn't want to give you the NO answer. Funny that when you talk about Hillary with her supporters concerning questionable activities they say she has not been convicted, but when you talk about the same suspicious business on anyone else all of a sudden "morality" is the main talking point.
In a word, Buzz? No.
He's running a business not a philanthropy. His goal in business is to maximize his profits and that's what he did. All this article tells me is that he's smart at lining his own pocket which, again, is the point of having a business. If the IRS didn't see a problem with what he did, then neither do I. Dont like the tax rules? Then change them but, until they're changed, he can use them to his advantage just like everyone else.
"Dont like the tax rules? Then change them but, until they're changed, he can use them to his advantage just like everyone else. "
Good point. Why hasn't Hillary done a single thing about these laws she thinks are so unfair but that she also takes advantage of herself?
I didn't expect you to even attempt to honestly answer that one. How predictable.
The issue here is not what one senator out of 100 did or did not do about the tax laws, the issue is that Trump is basically a crooked and corrupt individual and you all hide your head in the sand about it.
The issue here is not what one senator out of 100 did or did not do about the tax laws, the issue is that Trump is basically a crooked and corrupt individual and you all hide your head in the sand about it.
I think the question is precisely what Hillary did about it as a senator. If she did nothing, then she should be complaining about herself not those who followed the law as she left it. And Hillary can't throw stones at others for being crooked and corrupt without herself in the head.
Why is someone a criminal if they obeyed the laws and took advantage of laws that said it was okay to do that? More jealousy than anything there.
Good point. Why hasn't Hillary done a single thing about these laws she thinks are so unfair but that she also takes advantage of herself?
Because she's full of shit. These laws benefit her donors just like they benefit Trump and her donors contribute to her campaign and her foundation. If she wants the money, and she does, then she kisses the ring (or asses) of her donors.
Well, Unethical people sees nothing wrong with an unethical business practice as long as it makes money...Usually, those are MOB Connected...
You mean like Hillary's diatribes against the excesses of Wall Street.....after she was the recipient of some of those excesses? Got it. I understand where you are coming from.