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Trump Tax Thread, part 2. The big stuff.
I& #39;ll come back to @JesseDrucker& #39;s great work below in a minute.
Trump lost a lot of money, mostly other people& #39;s money, but claimed some of those losses as his own for tax purposes. 1/x https://www.nytimes.com/2020/04/24/business/tax-breaks-wealthy-virus.html?smid=tw-share">https://www.nytimes.com/2020/04/2...
I& #39;ll come back to @JesseDrucker& #39;s great work below in a minute.
Trump lost a lot of money, mostly other people& #39;s money, but claimed some of those losses as his own for tax purposes. 1/x https://www.nytimes.com/2020/04/24/business/tax-breaks-wealthy-virus.html?smid=tw-share">https://www.nytimes.com/2020/04/2...
This gets confusing, so at the risk of oversimplifying I& #39;ll try to keep it somewhat general. Also, to be honest, a lot of the details are still unclear. 2/x
Trump borrowed a lot of money and sank it into casinos. When those casinos crashed and were restructured, creditors lost money. 3/x
Trump had already taken tax losses (for depreciation, operating losses etc). (As general partner of a partnership, he& #39;s theoretically on the hook, and so he initially gets the tax losses.) 4/x
and so when Trump stiffs the creditors in bankruptcy/restructuring, he should have recognized income. 5/x
This is called cancellation of indebtedness income. If you borrow money, that& #39;s not income, because we assume you& #39;ll pay it back. If you don& #39;t, then you have to recognize the income. 6/x
Remember, a lot of these losses happened with other people& #39;s money. It& #39;s their economic loss. And it& #39;s their tax loss. Without COD income, you& #39;d have two taxpayer (Trump and the bank) taking two tax losses for a single economic loss. 7/x
Recognizing that cancellation of indebtedness income would have substantially reduced the amount of tax losses that Trump has taken over the years. He& #39;d still have some losses from the bad investments using his own money (e.g. golf courses, it seems). 8/x
(Today& #39;s NYT story indicates he used a variation of the usual gimmicks to avoid COD income in 2009 and claim a refund in 2010 that& #39;s still on audit.) 9/x
So back in April, when Congress passed the CARES Act, it gave $135 billion to partnerships (incl real estate partnerships) by relaxing restrictions on these loss limitations. More than 80% of the benefit goes to those who make more than $1 million. 10/x
Trump, it appears, directly benefits from this provision in the CARES Act. As do Kushner and the kids. No one seems willing to say who decided to stick this in the bill. The real estate roundtable denies involvement, I think. Senate Rs are quiet. Did the White House weigh in? 11x
We spent $135 billion on this provision, a pure giveaway to (non)taxpayers like Trump. Compare that to the relatively paltry $1200 checks to normal people (only $292 billion in total!). I think we deserve to know how this provision came about. 12/x
Big picture. While we often focus on the tax rate on income and capital gains, Trump& #39;s returns show that there& #39;s real money in tax losses too, and Congress has been giving away the store. 13/x
One more point. Under the Trump Administration the audit rate for partnerships is approaching zero. The IRS needs more resources to fight these complicated fights. 14/x
It& #39;s late. Apologies in advance for any mistakes. I welcome your comments/corrections. Congrats to the NYT team for an important story. 15/end