NYT Debunks Three Media Conspiracy Theories With Trump’s Tax Returns
Audit
Trump has said for a while that he did not want to release his tax returns due to an audit by the IRS.
Did he lie? Nope. The NYT admitted that Trump is in “a decade-long audit battle with the Internal Revenue Service over the legitimacy of a $72.9 million tax refund that he claimed, and received, after declaring huge losses.”
Sure he could have released it. Trump said he could not, but it’s not against the law to release tax returns during an audit.
But the fact is Trump did not lie when he said the IRS was auditing him (emphasis mine):
Real Estate
Let’s look at the other aspect of this supposed jaw-dropping report.
Stop conflating cash income and taxable income!!
I spoke to a friend in finance and he also invests in real estate. From what he could tell in the story Trump more than likely took his salary or income and put it all back into his businesses.
Plus, you have to know how real estate investing works. You want the returns to show depreciation. Again, I am no expert, but my friend has experience.
Depreciation is a deduction for income tax purposes, but it is a non-cash item. You do not pay out of pocket. It is a non-cash expense. It’s designed to show the true value of the asset because it wears down, whether it’s real estate, machinery, etc.
Accountants have to account for the lower value. Real estate investors generally welcome that and it’s honestly not a big deal.
My friend gave me this example:
The IRS only lets you offset a certain amount each year. However, you are allowed to carry over the loss until it’s used up.
A few people have told me that they’ve seen people with millions in carryovers.
But this is another reason why releasing tax returns is stupid and dumb. The returns tell you nothing. It does not tell a story. It does offer in-depth details.
Audit
Trump has said for a while that he did not want to release his tax returns due to an audit by the IRS.
Did he lie? Nope. The NYT admitted that Trump is in “a decade-long audit battle with the Internal Revenue Service over the legitimacy of a $72.9 million tax refund that he claimed, and received, after declaring huge losses.”
Sure he could have released it. Trump said he could not, but it’s not against the law to release tax returns during an audit.
But the fact is Trump did not lie when he said the IRS was auditing him (emphasis mine):
And while the records do not lay out all the details of the audit, they match his lawyers’ statement during the 2016 campaign that audits of his returns for 2009 and subsequent years remained open, and involved “transactions or activities that were also reported on returns for 2008 and earlier.”
Real Estate
Let’s look at the other aspect of this supposed jaw-dropping report.
Stop conflating cash income and taxable income!!
I spoke to a friend in finance and he also invests in real estate. From what he could tell in the story Trump more than likely took his salary or income and put it all back into his businesses.
Plus, you have to know how real estate investing works. You want the returns to show depreciation. Again, I am no expert, but my friend has experience.
Depreciation is a deduction for income tax purposes, but it is a non-cash item. You do not pay out of pocket. It is a non-cash expense. It’s designed to show the true value of the asset because it wears down, whether it’s real estate, machinery, etc.
Accountants have to account for the lower value. Real estate investors generally welcome that and it’s honestly not a big deal.
My friend gave me this example:
The depreciation reduces your tax liability. The property lost money so it offsets your taxes.Let’s say you own a building and it takes in $1000 a year in rental income. This is just for simplicity. But over the year I as landlord have to pay property taxes, insurance, utilities. Those are the basics. I have to send a check for those. Let’s say the total of those is $800 a year. So I make $200 a year in profit after I pay all expenses.
So in my pocket I have $200 at the end of the year. So In April I give all this info to my accountant to do my personal taxes. He looks and sees I made the $200 but he has to account for the one year of depreciation in the value of the property.
Let’s say the property depreciated by $300 during the year. So recording everything the depreciation is added to take expenses of $800 for a total of $1100 which means for tax purposes the property lost $100.
I still have $200 in cash though but I reduced my tax liability.
Because I show that the property lost money which offsets my taxes
The IRS only lets you offset a certain amount each year. However, you are allowed to carry over the loss until it’s used up.
A few people have told me that they’ve seen people with millions in carryovers.
But this is another reason why releasing tax returns is stupid and dumb. The returns tell you nothing. It does not tell a story. It does offer in-depth details.