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Donald Trump Used Legally Dubious Method to Avoid Paying Taxes
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Donald J. Trump in Atlantic City in 1990, seeking approval for his Trump Taj Mahal casino. Credit Associated Press
Donald J. Trump proudly acknowledges he did not pay a dime in federal income taxes for years on end. He
insists he merely exploited tax loopholes legally available to any billionaire — loopholes he says Hillary
Clinton failed to close during her years in the United States Senate. “Why didn’t she ever try to change
those laws so I couldn’t use them?” Mr. Trump asked during a campaign rally last month.
But newly obtained documents show that in the early 1990s, as he scrambled to stave off financial ruin,
Mr. Trump avoided reporting hundreds of millions of dollars in taxable income by using a tax avoidance
maneuver so legally dubious his own lawyers advised him that the Internal Revenue Service would most
likely declare it improper if he were audited.
Thanks to this one maneuver, which was later outlawed by Congress, Mr. Trump potentially escaped
paying tens of millions of dollars in federal personal income taxes. It is impossible to know for sure
because Mr. Trump has declined to release his tax returns, or even a summary of his returns, breaking a
practice followed by every Republican and Democratic presidential candidate for more than four decades.
Tax experts who reviewed the newly obtained documents for The New York Times said Mr. Trump’s tax
avoidance maneuver, conjured from ambiguous provisions of highly technical tax court rulings, clearly
pushed the edge of the envelope of what tax laws permitted at the time. “Whatever loophole existed was
not ‘exploited’ here, but stretched beyond any recognition,” said Steven M. Rosenthal, a senior fellow at
the nonpartisan Tax Policy Center who helped draft tax legislation in the early 1990s.
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Mr. Trump managed to save millions in
personal taxes by borrowing – then losing
– other people’s money.
Moreover, the tax experts said the maneuver trampled a core tenet of
American tax policy by conferring enormous tax benefits on Mr. Trump
for losing vast amounts of other people’s money — in this case, money
investors and banks
had entrusted to him to build a casino empire in
Atlantic City.
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