A major theme of mine in my posts at AB for a while now has been to try to highlight disclosures about Trump that have been overshadowed by others but that are important for more reasons than the most obvious one.
During Sunday’s debate Trump shocked me (and I’m sure, Clinton) when he claimed that billionaire Clinton supporters Warren Buffett and George Soros had used the same tax breaks as he had in carrying over massive business losses from one year to claim massive tax deductions for many years to come—and that Buffett’s and Soros’s losses and consequent deductions were much larger than his own.
Partly, I was stunned because I know that Trump’s ability to use the tax code in that way stems from a combination of depreciations allowed on real estate holdings—something that Trump mentioned at the debate by saying something like “A lot of it is depreciation. I love depreciation.”
But even more relevant to Trump’s carryover deduction of that one-year $916 million loss onto his federal income tax returns for two years prior and 15 years afterward is that Trump’s holdings apparently are mostly in LLCs, partnerships, and S corporations—the three business structures that under the tax code allow for “pass-throughs” for losses, from the businesses to the individual’s tax liability—or lack thereof by converting business losses into individual ones. Buffett’s personal portfolio surely is diversified, but his income from ongoing businesses still comes probably mainly from his holdings in Berkshire Hathaway, which is neither an LLC, nor a partnership, nor an S corporation.
But what made me gasp—literally—was that Trump was claiming to have seen Buffett’s and Soros’s individual tax returns.
On Monday Buffett set the record straight. The Washington Post’s Max Ehrehnfrend wrote Monday in a report titled “Donald Trump tried to call out Warren Buffett. He probably didn’t expect this response.”:
In any case, since Trump was able to claim that he was $916 million poorer, the Internal Revenue Service would not have forced him to pay taxes on any income for at least 15 years until he had made up that loss. A loss that is counted against future income is sometimes called a “carry forward.”
Trump said that such maneuvers were common, mentioning several wealthy donors supporting his Democratic rival.
“Many of her friends took bigger deductions,” the Republican nominee said. “Warren Buffett took a massive deduction.”
It was not clear what deduction of Buffett’s Trump meant, but Buffett’s statement Monday made clear he had never counted losses from past years against his personal income.
“I have paid federal income tax every year since 1944, when I was 13. (Though, being a slow starter, I owed only $7 in tax that year,)” Buffett wrote. “I have copies of all 72 of my returns and none uses a carryforward.” …
There are several reasons that Buffett might never have used a carry forward, although he did not provide any details in his statement. It is possible that Buffett, renowned for his acumen as an investor, simply has never lost enough money in one year.
Also, as a shareholder in his corporation, Berkshire Hathaway, Buffett would not be able to count any losses against his personal income because his assets are in a different legal category than Trump’s.
Trump and his allies have implied that there was nothing out of the ordinary about his $916 million loss. Yet the contrast with Buffett is a reminder that the benefits Trump claimed might well have been unavailable to most taxpayers — although, without more information from his returns, it is impossible to know which provisions of the tax code he exploited and how much money they saved him.
As a real estate developer, Trump probably owned his properties through legal entities that would have allowed him to claim losses against his personal income, rather than against corporate income.
Elsewhere I read that based upon the nature of Buffett’s businesses and of Soros’s, it’s extremely unlikely that either of them ever used the tax write-offs that Trump did in computing their individual tax liability.
I know that this isn’t sex tapes—Trump’s or erroneously-allegedly a former Miss Universe’s. But Trump completely fabricated specific allegations: that he had seen the individual tax returns of two individuals and that they had suffered larger business losses than Trump’s in 1995 and had used those to write off personal income that, even had those business losses occurred, would have been unavailable to them as individual federal income tax deductions.
And it also showed something else that Trump is lying about: that he actually knows the ins and outs of the federal income tax code. Obviously, he knows even less than I do about it. Which is saying that he actually knows next to nothing about it, beyond what’s directly relevant to his own income tax liability and that of his businesses’.
So I suggest that Clinton invite Warren Buffett as an honored guess at next week’s debate. A front-row seat for him would be nice.