Trump's tax returns

[Giordano]

As I understand it, there are at least two ways someone can benefit from deflating the value of an asset.

In some circumstances, the amount of tax payable on a (property) asset is dependent on the value of that asset. It is alleged that President Trump claimed that one of his Florida courses which was worth $50m was worth "no more than $5m" in order to pay lower local taxes. Permanently undervaluing the asset reduces the tax payable.

By deflating the value of an asset, you can create a "paper loss" which you can then offset against profits made elsewhere in the company reducing your tax liability towards, or even beyond, zero. When you come to dispose of the asset, you may make a capital gain for which taxes may be payable. Then again in some tax jurisdictions, the longer you hold onto an asset, the lower your capital gains liability so no capital gains tax may be due. In this case, the devaluing of an asset now reduces the current tax liability.

I am not an accountant (IANAA) but I did have to take some accountancy courses more than 30 years ago and am a director/part owner of a business. Our assets are largely things like IT equipment, furniture and so on and so we depreciate them at "standard" rates (over three or five years typically). For businesses with more volatile assets (like property companies, or companies with a lot of intangible assets) then there may be a lot more flexibility about how those assets are valued and hence how much can be written off against taxes. Done "correctly" this is legal tax avoidance.

However, if a business is deemed to be too aggressive about asset re-evaluation (for example writing off too much of an asset's value) then the tax authorities may deem it illegal tax evasion.

Ninja’d! Thanks for a much better understanding than I had!

 

[timhau]

538 gave Biden one more point in their prediction: from 77 to 78 chances in 100 of winning the election.

It's up to 80 now.

 

[JoeMorgue]

It's up to 80 now.

270towin has it at 80.3 for Biden, 19.0 for Trump, 0.7 for Electoral Tie/Other.

 

[Safe-Keeper]

It's up to 80 now.

The visual representation added another blue map, too .

I needed this injection of hope now. First the tax returns, then the surprising backlash even from Trumpkins over Trump being Trump at the debate, and now the payoff that it seems to have a measurable effect, whether or not it proves to be only temporary.

 

[timhau]

Do you think when Trump or anyone in that circumstance gets a $100,000,000 loan it is without independent (or the banks) appraisers determining the value of properties?

Depends on who is giving the loan. With Trump, it isn't a US bank, they haven't dealt with him in a long while. There could be circumstances where the lender might happily go along with overblown valuations.

Consider this: if you have a $10 million building as the collateral for a $100 million loan, it looks odd and might trigger suspicions of money laundering. But if the building is suddenly worth $100 million plus, the money is squeaky clean - it's just a regular collateralized loan.

 

[slyjoe]

Traditional wisdom also doesn't account for someone who would be more than willing to lose money to maintain the image and persona of rich, high end, wheeling and dealing businessman.

Losing money makes a lot of sense in ways that it never would otherwise if you factor that in

"Why would anyone lose that much money running a business?" can be the same question as "Why would anyone get a car loan at that high of a interest rate just to be seen with a Lambo in their driveway?" Because image is very, very important to some people.

Exactly right. When money comes out of your pocket based on value, the value is claimed to be low. When you inflate your ego at no cost, the value is high. Trump has a history of doing exactly that - an example is golf courses.

 

[JoeMorgue]

Yeah Trump isn't a good or a bad businessman really.

Because he's not a businessman, he's a businessman cosplayer. Business is like a Renaissance Faire to him.

 

[The Great Zaganza]

Since Trump often owns only parts of many properties, selling them might not be possible and if it is, not necessarily profitable.
Add to that the slump in rental property value as a result of Covid, and the value of Trump's assets has probably dropped quite a bit.
And then there is the problem of the Emoluments, which means he could be sued for the profits of any sale he makes to a foreign entity.

 

[Craig4]

270towin has it at 80.3 for Biden, 19.0 for Trump, 0.7 for Electoral Tie/Other.

I expect a Biden win followed by a whole lot of "other" going on.

 

[Craig4]

Since Trump often owns only parts of many properties, selling them might not be possible and if it is, not necessarily profitable.
Add to that the slump in rental property value as a result of Covid, and the value of Trump's assets has probably dropped quite a bit.
And then there is the problem of the Emoluments, which means he could be sued for the profits of any sale he makes to a foreign entity.

If the properties are struggling finding buyers might be a problem. The valuation is largely meaningless. Something is worth what someone else is willing to pay. You're not likely to get full the full valued price if you're buying a dumpster fire.

 

[eeyore1954]

As I understand it, there are at least two ways someone can benefit from deflating the value of an asset.


However, if a business is deemed to be too aggressive about asset re-evaluation (for example writing off too much of an asset's value) then the tax authorities may deem it illegal tax evasion.

In some circumstances, the amount of tax payable on a (property) asset is dependent on the value of that asset. It is alleged that President Trump claimed that one of his Florida courses which was worth $50m was worth "no more than $5m" in order to pay lower local taxes. Permanently undervaluing the asset reduces the tax payable.

But the property tax payer does not get to decide the assessed value. The government agency (usually tax assessor) decides the value and the taxpayer can contest or grieve it. So it doesn't matter if Trump says his golf courses are worth less. Although I am sure he (or his employees) try to contest a lot of valuations. I have done it too. In Long Island grieving your taxes is a big business.

By deflating the value of an asset, you can create a "paper loss" which you can then offset against profits made elsewhere in the company reducing your tax liability towards, or even beyond, zero. When you come to dispose of the asset, you may make a capital gain for which taxes may be payable. Then again in some tax jurisdictions, the longer you hold onto an asset, the lower your capital gains liability so no capital gains tax may be due. In this case, the devaluing of an asset now reduces the current tax liability.

For the most part you cannot claim unrealized losses in the US Federal tax system. So if a taxpayer owns a property that was purchased for 500 million and now its value is 300 million there is no loss for tax purposes. Until the property is sold for the lower price.
In the United States once you hold an asset for more than a year you are entitled to the capital gains rate. Which is 20% if the taxpayers net income is is around 450,000 or more. 15% for 40,000 to 450,000 and zero if less than 40,000.

 

[eeyore1954]

Depends on who is giving the loan. With Trump, it isn't a US bank, they haven't dealt with him in a long while. There could be circumstances where the lender might happily go along with overblown valuations.

Consider this: if you have a $10 million building as the collateral for a $100 million loan, it looks odd and might trigger suspicions of money laundering. But if the building is suddenly worth $100 million plus, the money is squeaky clean - it's just a regular collateralized loan.

I guess this could be true. No reason to think this is the case in loans we are aware of.

 

[Bob001]

.....
For the most part you cannot claim unrealized losses in the US Federal tax system. So if a taxpayer owns a property that was purchased for 500 million and now its value is 300 million there is no loss for tax purposes. Until the property is sold for the lower price.
In the United States once you hold an asset for more than a year you are entitled to the capital gains rate. Which is 20% if the taxpayers net income is is around 450,000 or more. 15% for 40,000 to 450,000 and zero if less than 40,000.

I'm certainly no tax expert, but a lot of tax breaks apply exclusively to the real estate industry. What is generally true may not be true for somebody like Trump.

FRANK CLEMENTE: The tax code is riddled with loopholes to benefit the real estate industry probably more than any other industry.

https://www.tpr.org/2020-09-28/in-real-estate-tax-credits-and-loopholes-are-common

New York (CNN Business)The $2 trillion coronavirus stimulus bill passed by the Senate provides aid for average consumers and small businesses -- but there's also a lucrative tax break for wealthy real estate developers.

That's because the stimulus bill removes limits on the amount of losses that wealthy investors can use to offset taxes, by writing down the gradual depreciation of assets like real estate. Those limits were put into place as part of President Trump's 2017 tax reform bill.

https://www.cnn.com/2020/03/27/investing/tax-bill-real-estate/index.html

 

[timhau]

I guess this could be true. No reason to think this is the case in loans we are aware of.

No. But we do know his businesses are going down the crapper. There's absolutely no other reason he would be personally guaranteeing company loans. That's is a small-business-owner move, done because there's no other choice. Personally guaranteed loans should also be the first ones to go when your business takes off.

 

[Giordano]

But the property tax payer does not get to decide the assessed value. The government agency (usually tax assessor) decides the value and the taxpayer can contest or grieve it. So it doesn't matter if Trump says his golf courses are worth less. Although I am sure he (or his employees) try to contest a lot of valuations. I have done it too. In Long Island grieving your taxes is a big business.


For the most part you cannot claim unrealized losses in the US Federal tax system. So if a taxpayer owns a property that was purchased for 500 million and now its value is 300 million there is no loss for tax purposes. Until the property is sold for the lower price.
In the United States once you hold an asset for more than a year you are entitled to the capital gains rate. Which is 20% if the taxpayers net income is is around 450,000 or more. 15% for 40,000 to 450,000 and zero if less than 40,000.

As mentioned the rules for real estate often have special tax breaks and have had these for a while.

But The NY Times article explains in detail just how Trump declared his losses and deductions. Other sites have done so too. I posted a link upthread but don’t have it handy. IIRC few, if any, involved him selling or walking away from a property. Should be easy to Google.

 

[Lurch]

Do you think when Trump or anyone in that circumstance gets a $100,000,000 loan it is without independent (or the banks) appraisers determining the value of properties?

I am wondering how deflating value of assets give tax losses aside from walking away from an investment and declaring it worthless. Or selling at a loss.

I do think I read somewhere there was an IRS dispute about an asset he had declared worthless.

I dont know when this commenced, but at some point no banks would touchTrump with a bargepole. Except one: Deutchebank, which has been fined for laundering money. Russian money. It would appear it came down to Trump havig to guarantee *personally* any more recent loans, and that implies other guarantors being involved. Russians, I'd bet.

 

[carlosy]

Does anyone remember when the NYT released Trump's tax returns?
It was... let me think, 4 days ago?

No one cares anymore. It lasted maybe 2 days at best.
Since the tax headlines we had
- The debate debacle
- The proud boys debacle
- The how-Trump-deals-with-his-statements debacle

The scandals fly be like we are living in fast forward combined with mass alzheimers.

 

[JoeMorgue]

Yes we're all aware of Trump's "crap the floor when you catch his hand in the cookie jar, then rape the dog when you tell at him for crapping on the floor" technique.

Does anyone have a way effectively combating it?

 

[carlosy]

I don't think it's just his technique (if it is one at all).

It's also a self-perpetuating media system.

 

[JoeMorgue]

Yes and (and no I will never stop beating this drum) we spent entire digital revolution creating the idea of a "troll" and the rule that the only way to deal with them was to ignore them so now we've got a long way to g before we have any effective method against them.