donald trump would have been on the hook for taxes but he argued that he qualified for an exception because he issued stock to satisfy debt. | ap photo by katy o'donnell 11/01/16 05:22 pm edt donald trump<u+2019>s massive tax avoidance maneuver in the early 1990s wasn't unusual at the time for highly leveraged real estate developers <u+2014><u+2013> and wasn<u+2019>t clearly illegal, tax lawyers say. but like so much else when it comes to trump, he just went bigger, potentially saving hundreds of millions of dollars. story continued below <u+201c>people were taking very aggressive positions,<u+201d> said lee sheppard, an editor at tax notes. <u+201c>but is he the only one? oh, hell no. he was just the most visible one." new questions about trump<u+2019>s accounting erupted today after the new york times' disclosed new details on how he allegedly avoided paying personal income taxes as his atlantic city casinos tanked. opponent hillary clinton pounced on the <u+201c>blockbuster report,<u+201d> as she called it, in renewing her call for trump to release his 2015 tax returns. but tax lawyers say that while the gambit may have been risky <u+2014> it technically didn<u+2019>t even exist in the internal revenue code <u+2014> it wasn<u+2019>t clearly off limits. by sarah wheaton <u+201c>there was some risk to it because there was nothing that specifically said it was doable," said tax analyst robert willens, who said he worked on several such deals at the time. "on the other hand, there was nothing saying it wasn<u+2019>t doable. and in interpreting tax law if there<u+2019>s nothing that specifically forbids a technique, you can assume it<u+2019>s permissible.<u+201d> here<u+2019>s what happened: when the trump-owned taj mahal was going under, trump worked out a deal with lenders that essentially cancelled some of his debt by giving them stakes in the business that were worth less than he owed. normally, cancelled debt is taxed as income, so trump would have been on the hook for taxes. but trump argued that he qualified for an exception because he issued stock to satisfy debt. <u+201c>the magic here was that trump lost other people<u+2019>s money and flipped that into a big asset of his own<u+201d> that he could write off later, said tax law professor ed kleinbard, former chief of staff at the joint committee on taxation. the tactic was aggressive, to be sure. not only was there no law permitting the exception, there wasn<u+2019>t a clear precedent. trump sought a tax opinion letter, and in june 1991, his team of lawyers concluded <u+201c>substantial uncertainties exist with respect to many of the tax consequences of the plan<u+201d> and suggested the irs might reject them. <u+201c>i<u+2019>m a little surprised that the law firm gave such a weak opinion to him and his people back then,<u+201d> willens said. <u+201c>because at the time i think we were a little more confident that the technique worked.<u+201d> by nolan d. mccaskill still, as sheppard pointed out, <u+201c>it<u+2019>s a big deal to have an opinion from lawyers saying there<u+2019>s any basis for you to do it at all,<u+201d> since lawyer letters are only necessary in gray-area cases. sheppard said there<u+2019>s no sleight of hand involved. <u+201c>adults lent him that money, ok,<u+201d> sheppard said, dismissing the <u+201c>other people<u+2019>s money<u+201d> argument. <u+201c>and they lent other people money in the late 1980s because it was a boom. and that<u+2019>s what happens in a boom. and then it all blows up, we have a bunch of bankruptcies. and what we had in the early 1990s was bankruptcies and a bunch of tax questions and a lot of uncertainty in the law,<u+201d> sheppard added. congress eliminated the exception that trump used in 1993. <u+201c>i<u+2019>m confident actually that it was used relatively extensively in large transactions,<u+201d> willens said. <u+201c>other similarly situated people were also experiencing problems <u+2014> maybe his was on a little bit of a grander scale.<u+201d> by bill scher by thomas wright by joshua zeitz by jack shafer
trump tax maneuver was edgy, not unique - politico
katy o'donnell sarah wheaton nolan d. mccaskill jack shafer