Trump Profits through Tax Tweak

Donald J. Trump, the Republican presidential candidate and real estate billionaire, took advantage of an old code in the federal tax laws to flee a sinking business. This code also helped him to avoid the payment of taxes for many years post the event. The provision is in itself simple: any business, whatever its size, can escape taxation in case it lost money the previous year. Trump seized upon this provision in the 1990s.

Trump tax avoidance

Documents published by The New York Times on October 1 shows that Trump in 1995 claimed nearly a billion dollars which he told the government was operating losses. He used the law to side step federal income taxation in the future. The Trump figure was so huge that it amounted to nearly two percent of all the net operating losses which were claimed by all the American taxpayers in 1995. This action has saved 18 years of income taxes. The consequent money saved him 18 years of income taxes. It thus indirectly assisted the billionaire to leverage his fame and name to a number of products. Consequently, there were Trump branded residential structures, steaks, men’s wear and golf courses. The widely popular reality television series followed soon after.

Trump, while campaigning in Colorado, asked his audience to vote for him as he claimed to know how to tweak US tax laws. In his subsequent self-praise, he proudly said that the way he survived could be accomplished by only a few. The real estate scion also broke a number of US political traditions by flat out refusing to release any of his income tax returns. Similar to the 2012 Mitt Romney admission that the presidential candidate of that period has paid income taxes on the effective rate of only about 14 percent while making a fortune of $250 million, Democrats have capitalized on such tax avoidance rules which favor the wealthier section of the population.

Advantage tax evaders

The Internal Revenue Service has confirmed that Donald Trump was not the only person to have avoided tax in this manner. It said that about 5000,000 individual taxpayers have taken advantage of this rule in 1995. This is where, however, the comparison stops. The median loss payed by those individuals was only $97,600. Trump’s in comparison, was a massive: a loss of about $916 million.

Trump shelters behind a rule dating back to 1918. It was crafted to stop the penalization of businesses by the due to calendar year taxation. In case a company makes a loss of $100,000 in one year and makes a profit of $100,000 in subsequent year, there is no requirement for the company to pay taxes, as it has simply broke even.

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