Q: Hi, I am curious about what a bankruptcy attorney thinks about Donald Trump’s bankruptcies. Is it really possible that Trump hasn’t paid the IRS taxes in 20 years because of it?
A: I hope you packed a lunch. This is going to take a while.
First, here’s how just one bankruptcy in 1995 (albeit for $916 million or $1,447,273,881.10 in 2016 when adjusted for inflation) got Donald Trump off the hook for federal income taxes for over 20 years. The loss shows up on his 1995 New York State Tax return, but it is not known which real estate business generated the loss or if it was for the 1994-1995 tax year or from a prior year. Real estate developers have a vast array of tax breaks, tax credits, and other deductions available to them. This includes depreciation on properties and net operating losses that even though they appreciate in value, they depreciate in wear and tear.
Mr. Trump admits – and brags about being the King of Debt – how using these strategies has amounted to a de facto tax shelter that has benefitted himself, his family, and his businesses. At the same time, the uncollected tax revenues have shortchanged the United States, and left a void that other taxpayers must fill. In short, Mr. Trump has used a socialized loss to privatize the profits of his $916 million dollar failure using tax code and accounting acumen unavailable at HR Block. It is legal on its face, but ethically and morally reprehensible.
I am an attorney who sees a lot of people who are in over their heads from a variety of factors. They are underwater on mortgages, facing foreclosure, buried in student debt, credit card debt, and medical bills. Most of them have arrived at their circumstances after long struggles, unwise decisions, lack of financial literacy, and some from being scammed. They struggle to provide for their families, pay their bills, run their businesses, and pay their taxes like responsible citizens. Many of them are so ashamed that they’ve struggled to avoid bankruptcy at all costs, terrified of losing everything. They come to bankruptcy as a last resort.
Even if what Donald Trump did was legal, it allowed him to “fail upwards” after decades of blowing through money from his father and lines of credit, multiple business failures, stiffing businesses, stiffing workers and contractors, getting more money from his father, and finally a loss of nearly a billion dollars that has allowed him to amass a fortune in the ensuing two decades. I sincerely hope that if Donald Trump has another bankruptcy that the loopholes that allowed to him rip off his fellow citizens will have been not only closed, but welded shut. Bankruptcy is not supposed to be a way to privatize profits at the expense of shareholders, workers, contractors, and tax payers. It’s supposed to be a fresh start, not a way to line your pockets and not something to brag about being able to use to your advantage.
If you are not Donald Trump, and if you think you are in over your head with expenses and debts, call me for a free consultation.
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