After watching the presidential debate Monday, I was taken aback by a comment made by one of our two nominees.
It was when Donald Trump called himself a “smart” businessman for not paying any federal taxes.
Ethically, I have a problem with anyone saying he is “smart” for not paying any federal taxes on his returns the past few years.
I wouldn’t go around bragging that I’m not paying my taxes — especially if I were running for President. It’s just not right. But there are numerous reasons why he hasn’t paid federal taxes — and those reasons are probably all legit and legal.
Back in the late 1970s, his returns show that he had business losses on his tax returns from 1978 and 1979 that lowered his taxable income to “0,” essentially paying no income tax on his earnings those years.
Trump did not write the rules of taking losses on your business, nor did he do anything wrong by not paying taxes on his earnings.
He just followed the rules — rules that were made by politicians and lawmakers to take advantage of certain loopholes.
It’s not that he refused to pay taxes. It’s that real estate developers have several common techniques built into tax law to minimize or eliminate taxes, including depreciation deductions and the ability to defer capital gains when they transfer properties.
For instance, there are like-kind exchanges or section 1031 exchanges, which defer paying taxes on capital gains for a period of time until the property is sold again or transferred.
Actually, the real question is: If elected, would Trump insist that Congress and the IRS fix these tax loopholes so that everyone would pay their fair share of taxes?
Vincent Cervone is an enrolled agent and owner of Vincent R. Cervone & Associates, a New York-based accounting and tax preparation firm.