The New York Times obtained new documents that show Republican presidential nominee Donald Trump avoided reporting hundreds of millions of dollars of taxable income in the 1990s.
After reviewing Trump's 1995 tax returns, the Times previously reported that Trump posted a nearly billion dollar loss which could have been used to avoid paying income taxes for next 20 years, but some experts questioned how he could do that because canceled debt must be reported to the IRS.
Now we know how he did it.
Investors and banks that financed Trump's failing Atlantic City casino business forgave the hundreds of millions of dollars of debt that Trump owed them, but Trump never reported the cancelled debt.
As that empire floundered in the early 1990s, Mr. Trump pressured his financial backers to forgive hundreds of millions of dollars in debt he could not repay. While the cancellation of so much debt gave new life to Mr. Trump’s casinos, it created a potentially crippling problem with the Internal Revenue Service. In the eyes of the I.R.S., a dollar of canceled debt is the same as a dollar of taxable income. This meant Mr. Trump faced the painful prospect of having to report the hundreds of millions of dollars of canceled debt as if it were hundreds of millions of dollars of taxable income. [...]
By avoiding reporting his canceled casino debt in the first place, however, Mr. Trump’s $916 million deduction would not have been reduced by hundreds of millions of dollars. He could have preserved the deduction and used it instead to avoid paying income taxes he might otherwise have owed on books, TV shows or branding deals. Under the rules in effect in 1995, the $916 million loss could have been used to wipe out more than $50 million a year in taxable income for 18 years.
Notably, Trump's own lawyers advised him not to do this according to the new documents reviewed by the New York Times but, obviously, he did it anyway and hasn't paid taxes since then. This is significant because Trump surrogates and other Republicans have downplayed Trump's tax avoidance by saying he was simply following the law, but this new information implicates him in an illegal tax avoidance scheme.
Trump would not have been able to use his massive loss of nearly a billion dollars to avoid paying taxes if he had reported the cancelled debt.
Speaking of debt, it's no mystery why no American banks will do business with Trump and why he now relies exclusively on foreign banks in Germany and Russia. Anyone who has ever bet on Trump's businesses has paid a high price for it.
The loophole that allowed Trump to avoid paying taxes for such a long time was actually closed by Congress. Hillary Clinton voted to close it as a senator.