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Trump Math

Date: July 27, 2021

How in the world can someone make just shy of $15Million/year in income and pay only $750 in tax? With legal tax avoidance and proper planning.

We all heard of the uproar when Trump’s 2017 tax return was released showing only $750 in income taxes on $14.8Million in income ($373k in salary, $6.8Million in Interest, $105k in pensions, annuities, and dividends, and $7.6Million in capital gains). Apart from the disparity and the illusion of ‘fairness’ in the US tax code, the math adds up – now whether or not the deductions are truly legitimate is still a matter of confusion, but let’s take the math for a spin.

(Come on, this sounds super exciting, right? Who wouldn’t love to do some FUN MATH? lol)

So, even with $15Million in income – Trump’s business showed losses of $15.3Million, in addition to that, he had Net Operating Loss Carryforwards (NOL) in the amount of $12.3Million which brought his ‘effective income’ down to -$12.8Million (yes, that is a negative).

Just looking at the surface we can see that Trump’s team of experts nailed the maximizing deductions strategy (again, whether or not the deductions are actually legal – we have no idea), but the 15.3Million in losses brought him to ‘break even’. In addition to that, he is receiving benefits from losses in prior years that exceeded his income. The IRS allows you (legally) to carry those unused losses FORWARD for 20 years, or BACKWARD by only 2 years for immediate refunds of taxes paid. Here’s the golden goose egg… The intention of this tax minimization strategy is to tax businesses on their AVERAGE profitability, making the tax code more neutral and providing an offset for the typical ebbs and flows of business. The tax code incentivizes small business owners to invest in their companies, even if it creates a net loss – by providing the benefit of being able to carry those losses forward to more profitable years as an offset.

So, those losses that brought Trumps income into the negative to the tune of nearly $13Million, could have been from all the way back in the year 1998 :O

Did you own a business that generated a net loss within the last 20 years? Did you incur a net loss in ’18, ’19, or ’20? If you answered yes to either of these questions and you HAVEN’T carried those losses forward or backward depending on which strategy employs the biggest savings – then give us a call. We’d be happy to help you get your excess tax payments back 🙂 Happy hunting taxpayers!