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Trump tax return bumbling

Posted by John Reed on

I said releasing tax returns of a billionaire is probably a bad idea because the public can’t understand them and you opponent will spin them against you.

It’s worse than I thought. I said if he did not pay taxes for one or more year, it’s probably because of loss carry-forwards. It now seems that is the case.

But we are now talking about him “exploiting,” “taking advantage of,” and “fixing” that “loophole.”


If you lose more money than you took in in one tax year, you are allowed to deduct the excess loss the following year. Actually, I believe the law says something like you can deduct the excess from the prior three years taxable income by filing amended returns for those years, or you can carry them forward for up to 15 years.

That’s not a loophole. It’s common sense. To not allow that would be to treat all businesses like lottery winnings and losses: winning are taxable and losses are not deductible. Is that the “fix” Trump is promising? That would make all businesses far more loss averse meaning there would be far fewer jobs.

And people keep saying it was all right for him to choose to avail himself of that tax break.


Your tax accountant does not even ask you if you want to use your carried forward losses to lower this year’s income tax. It’s automatic. If Trump said, “No, go ahead and pay a bunch of taxes I don’t have to pay,” his family would rightly use that as evidence to have a guardian appointed for his financial affairs.

Trump has perhaps a world-record loss carryforward of almost a billion dollars. To paraphrase Trump, “That means he’s dumb.”

So Trump has not avoided taxes because of arcane, rich-people loopholes that mainly only exist in Democrat mythology. Rather, he is using an absolutely fair, sensible, and ancient clause that lets you apply legitimate deductions you cannot deduct this year to the last three or the next fifteen years.

As I predicted, Hillary is dishonestly spinning that as tax evasion, a crime, but Trump is incapable of explaining it the way I just did. Or even of telling his tax lawyer to explain it. That also means he’s dumb.

I wrote THE BOOK on being smart about taxes, at least in real estate investing which is what Trump does to an extent. Aggressive Tax Avoidance for Real Estate investors, 19th edition.

Aggressive Tax Avoidance for Real Estate investors, 19th edition bookDid Trump read that book? I do not know. I do know he asked me to contribute to a book he wrote title the best real estate advice I ever got from the 100 best real estate investors in America. I was one of whom he called the top 100. I sent in my contribution to the book then demanded it not be used when I found Robert Kiyosaki, author of Rich Dad Poor Dad was also in it. They removed me before publication.
But I expect that Donald “has people” who do his taxes, probably the top tax accounting or tax law firm firm in Manhattan. They may have read my book.
Being smart in taxes as Trump claims he is is specifically defined, at least in my book. It means knowing the tax law thoroughly so you take advantage of every Internal Revenue Code good clause that applies to you and it means handling what I call the judgmental areas as far in your favor as legally allowed. I say, and Donald would probably love this, “What you put on your tax return is your first offer in a possible negotiation with the IRS.”
An example of knowing the tax law thoroughly is the credit for prior year AMT. That got me an $8,000 refund one year. I told my subscribers to Real Estate Investor’s Monthly about that and one of them also got an $8,000 refund from it.
Real Estate Investor’s Monthly newsletterI got audited that year and the IRS auditor never heard of credit for prior year AMT. But she checked and her bosses said it was allowed. Many readers told me their accountant first denied it existed, then admitted it did.

An example of leaning in your own favor in a judgmental area would be choosing the correct improvement ratio on a business property. You can depreciate the building but not the land.Your purchase price includes both. So you want the percentage allocated to the building to be as high as possible. There are several ways to calculate it. Choose the one that gives the highest improvement ratio.
You should not go so far in judgmental areas that you trigger a penalty. But you should not fear a deficiency. That’s where you get audited and the IRS say you owe more taxes, perhaps because they think a higher improvement ratio is the correct one. In that case, you just pay the extra tax you should have paid originally, plus interest. What’s wrong with that? You, in effect, borrowed from the IRS, now you have to pay it back with interest. No harm no foul no punishment.Borrowing money and paying it back with interest is not a crime.

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