Debt Parking

Unless you've been asleep - by now you know all about the New York Times publication of Donald Trump's 1995 state income tax returns and the application of loss carry-forwards to offset future income.  All of which is perfectly legal.  I've done it myself - although not on the scale reported in the news last evening.  What might be illegal is leaking heretofore private information.  It is the job of law enforcement to identify the leaker(s) and take appropriate enforcement action.  It is not illegal for the press to publish information furnished to them.  Checking your mail and reporting it is perfect legal.  But while we're musing about all of this I found an interesting piece while surfing the web after breakfast today. 

I'm not one for conspiracy theories and I am not suggesting that this blogger is proposing one.  Rather, I think the author has advanced an even-handed analysis of several scenarios of the Trump tax return brouhaha including the one above - net operating losses carried forward to negate income or gains realized in subsequent years.  And the alternate of debt forgiveness - which has the opposite effect of triggering phantom income which is taxable.  Both of these outcomes are legal with one obviously more desirable than the other.

Nevertheless, a third scenario is suggested which involves off-shoring the debt by means of a dummy party.  The dummy party might be a spouse, children, a corporation or likely some murky offshore trust where the debt is parked and not forgiven.  The debt embarks upon a indefinite hiatus allowing the debtor to reduce taxable income/gains by means of the the losses.

Has Trump parked the debt to avoid taxation of debt forgiveness and utilize the operating loss carry-forwards?  Who knows?

Like the author suggests - I hope the press investigates this.  

And check-in with the Bronte Capital blog as the comments begin to roll-in.