Podcast Center
Video Center
Webcasts
Resource Center
Events
October 23, 2016 at 01:00 AM
The New York Times recent posting of only three pages of Donald Trump’s 1995 state income tax returns (from New York, Connecticut and New Jersey) raised the following questions:
-
- Did Trump’s 1995 income tax return show a loss of nearly $1 billion?
- Was that entire loss sustained in 1995?
- Was the net operating loss (NOL) it created a “tax shelter,” because it eliminated all of Trump’s income tax for up to 18 years?
Unfortunately, the schedules attached to Trump’s unreleased 1995 federal Form 1040, which set forth the specific types and sources of income and deductions claimed on the return, are unavailable. The information on the schedules may have provided easy answers to these questions.
Related: Worried about the U.S. presidential election? You’re not alone
Fortunately, the first page of the New York State Resident Income Tax Return (Form IT-201) is a helpful resource because the line items of income and deduction set forth on that form, and the line items set forth on the first page of Trump’s 1995 Form 1040, are the same. Some insight may then be gained into Trump’s federal tax return by examining his state income tax return. Additionally, an analysis of the return provides interesting insight into the way Trump conducted business.
Netting the line items reported on Form IT-201 (wages, interest income, dividends, state income tax refunds, Schedule C income, capital losses, losses from the sale of business property and rental real estate losses) results in negative income, or a loss of $6,269,378. Finally, including the last line item entry on the form, a negative $909,459,915 of “other income,” there is an overall staggering loss in 1995 of $915,729,293.
Related: The 10 best & worst states to pay taxes
As discussed later in this article, whether the $909 million is an additional loss sustained in 1995 or was an NOL carried over from another year(s) depends on what the $909 million of “other income” is.
Continue reading for a more detailed analysis…
Protestors march in a downtown street holding a sign in support of Republican presidential candidate Donald Trump releasing his tax returns, outside of a campaign rally attended by Trump, Friday, Sept. 16, 2016, in Miami. (AP Photo/Lynne Sladky)
Detailed Analysis of Trump’s 1995 State Income Tax Return
Wages ($6,108): Such a trivial salary paid to the creator and CEO of the Trump businesses lacks credibility. Clearly, Trump’s reasonable salary could have been millions. If Trump intended to avoid payroll taxes on wages (Social security and Medicare), he failed because the $3,427,092 reported on Schedule C was subject to self-employment tax (the equivalent of payroll tax for sole proprietors).
Interest Income ($7,386,825): Interest was by far Trump’s greatest source of income. Unfortunately, the source of that income revealed on Schedule B is unavailable. Possible sources could have been interest paid on Trump loans to others and/or his corporate bond holdings. In any event, to generate that amount of interest income, assuming an interest rate of 8.83% (the prime rate in 1995), the total principal amount of loans and/or invested in corporate bonds could have been in excess of $83,600,000.
Dividend Income ($26,051): Compared to $7 million plus of interest income, this relatively small amount of dividend income indicates a very unbalanced investment portfolio In any event, it appears that Trump’s investment in the stock market (at least dividend paying stocks), or perhaps even in his own companies was relatively small.
Schedule C – Self-Employment Income ($3,427,092). Virtually no wage income as compared to significant self-employment income suggests that Trump was operating as a sole-proprietor/independent contractor. This means Trump may have performed services for the Trump empire as a 1099 independent contractor. In addition, all or part of the income could be attributable to speaking fees, consulting, etc. If Trump had different independent contractor gigs, that income may have been reported on several Schedules C.
