There are many ways a person can legally avoid paying taxes as long as they understand the tax code. Point in fact, the $50 million in taxes Donald J. Trump was able to avoid thanks to a massive loss he claimed in 1995.
$916 Million Loss
The New York Times discovered that Mr. Trump had declared a $916 million loss in 1995. This substantial loss allowed him to avoid paying federal income tax for a period of 18 years. In fact, with a loss of this size it would allow Mr. Trump to avoid paying more than $50 million in taxes.
No Wrong Doing
Under scrutiny, tax experts felt there was no wrong doing on Mr. Trump’s part with regard to the documents released by The Times. As well, the documents did not include the 1995 federal tax return. It would not be unusual for a person of his means to have donated substantial amounts to charity for example to help lessen the amount of taxes he would have to pay out.
Net Operating Loss
One of the saving graces for those in the highest of tax brackets is net operating loss (NOL), which provides many deductions as well as a long list of other tax considerations including:
- Business related expenses
- Depreciation of real estate
- Losses related to the sale of business assets
At the time the documents were filed, IRS rules allowed that net operating losses could apply to the three years before and 15 years after the loss. The $916 million loss was confirmed to be a net operating loss by the experts with whom The Times consulted, explaining in large part how Mr. Trump was able to avoid paying taxes.
Avoiding Tax Litigation
Although many Americans might suspect that Mr. Trump must be doing something that would lead to tax litigation, he was simply able to use the tax code to legally reap the benefits it provides to those in his position.
Tax litigation is a messy business and the Scammahorn Law Firm believes in protecting the rights of American citizens, and ensuring they only pay the taxes they are legally obligated to pay. If you are facing a tax litigation issue and do not know where to turn, we invite you to call us at (903) 595-1000 to discuss your situation.