Before we get back to Donnie's 1995 tax return, I'd like to ask about the alleged audit that supposedly prevents Trump from releasing his taxes. As you know, Trump refuses to present any proof that he is, in fact, being audited, though there is no legal impediment which prevents him from doing so.
What I'd like to know is this: What kind of audit takes so long?
The average audit lasts three months. I can understand why an audit of someone like Donald Trump might last longer. But he announced his candidacy on June 16, 2015, which means that he (supposedly) has been under audit for at least 15 and a half months. Is that likely?
While researching the matter, I uncovered an interesting fact: No IRS audit can last more than 28 months. As the folks at NOLO
IRS auditors are instructed to close audits within 28 months of the date you filed your tax return or the date it was due (April 15), whichever is later. For example, if you filed your 2009 return on April 15, 2010, the IRS wants the audit completed by August 15, 2012.
Twenty-eight months ago brings us to July of 2014. Let us presume that Trump filed his tax returns for 2013 on April 15.
Is it not the case that Trump's tax returns for 2013 and all previous years are NOT UNDER AUDIT?
Or am I missing something here?
Back to 1995:
David Cay Johnston, a Trump biographer who also happens to have an expert knowledge of tax law, explains here
how Trump managed to game the system. I can follow much of what Johnston says, but I still have questions.
The biggest poser: Why 1995?
Trump's wild spending spree, and the Poppy Bush economic downturn, caught up with him about four years earlier. In 1995, the country was experiencing the Clinton economic boom, and Trump himself was bragging about his regained prosperity. This WP story
asks the central question:
So how could he be thriving and avoiding taxes at the same time?
That’s the central mystery behind the state tax documents filed in New York by Trump for 1995 and disclosed this weekend by the New York Times.
In August 1990, unable to pay interest on his loans, Trump persuaded his bankers and bondholders to extend the terms of his loans and agree not to hold him personally responsible until 1995. Still, his three casinos, Trump’s Castle, Plaza and Taj Mahal, as well as his Plaza Hotel in New York, sought bankruptcy protection in 1991 and 1992.
In each of the casino bankruptcies, Trump gave up 50 percent of his equity to lenders, a stake that could have been worth more than $1 billion, according to a Washington Post review of the Leventhal accounting and regulatory documents.
But in “The Art of the Comeback,” Trump also said that 1995 was a banner year for his business. He had reduced his debts in the wake of his bankruptcies and was back on a path to success, including sealing a deal for his landmark tower at 40 Wall Street.
By 1993, Trump wrote in the book, “my personal debt of $975 million had been reduced to $115 million, and I had two years to finish cleaning it up. There was no way to deny that things were going really great.”
Abe Wallach, the former head of acquisitions for the Trump Organization, said Trump by 1995 had stanched his major losses and was back making money.
“If these forms were dated 1990, I could see where he had $916 million in debt,” Wallach said. “Things were going well by the mid-’90s. He had gotten rid of some of the debts on some of the properties and had income coming in.”
So what, precisely, caused that debt?
The bulk of his 1995 losses, or roughly $909 million, was listed only as “other income.” A note, written on the return next to the loss, refers to a statement that could provide more explanation, but it was not included in the pages sent to the Times.
We still have one hell of a mystery.
As we have seen a couple of posts down, Marty Rudoy
believes that the major culprit was the Plaza Hotel in Manhattan. Trump bought the thing in 1988 for $400 million -- all borrowed money. He then took out loans against the hotel to fund the Taj Mahal casino (which tanked) and Trump Shuttle (which also tanked). According to Rudoy, mysterious investors from Saudi Arabia and Asia bought the hotel in 1995 for $325 million. They also picked up the bill for the debt...
Indeed, the 1995 purchasers of The Plaza seem to have assumed as much as $440 million in debt along with their purchase at $325 million, making the total purchase price closer to a $765 million value.
Not only that: The original lenders renegotiated the original terms of the loan, forgiving much of the debt. The banks probably did not perform that service for you when you tried to keep your house. But they did it for Trump.
As I understand it, debt forgiveness counts as income. Not a loss.
Now, high finance ain't my thing. Trump and I operate in very different worlds. I'm the kind of guy who will walk a mile just to pay twenty cents less for a can of tomatoes. My brother once told a friend that I would drive to Tijuana to save forty bucks -- a statement which he meant as an insult, but which I took as a compliment.
Bottom line, it is very possible that I'm missing something obvious. Nevertheless, at the risk of sounding foolish, I'll ask the question that has bugged me for more than a day: Where's the $916 million loss?
If Rudoy is right, those mysterious Saudi and Asian investors paid for the hotel. They also paid for the Trump Shuttle and Taj Mahal misadventures.
I just don't see a $916 million loss.
It has been argued that this 1995 return must have been audited. That makes sense. But I still don't comprehend how a loss of $916 million came about.