The release of three pages from Donald Trump’s 1995 tax returns by the New York Times has created quite a stir, but what do these forms really tell us? As it turns out, not much. You see, the first page of any tax return is a lot like the first page of the newspaper. You can tell that the paper includes information about sports, the economy, local events, classified ads, etc. from the headlines on page one. However, you do not get any details until you turn to the actual section that provides you with the full story. It’s the same with a tax return – the details are in the schedules that follow after page one.
To cloud the matter further, only the first pages of three different state returns have been released. Depending upon the state and its tax laws, the income tax reporting may be handled differently. Typically, state tax returns either require the taxpayer to report only the income earned inside their borders, or they require the taxpayer to report all of their income from all sources and then allow the taxpayer to deduct any taxes paid to other states. Without having all of Mr. Trump’s details in hand, an accurate conclusion as to his financial well-being simply cannot be reached.
So, what can we learn from these released return forms?
- His return included a lot more zeros at the end of his numbers than many of us.
- He didn’t receive a large W-2 salary during the year. This is no surprise since he owned many businesses and reported income elsewhere on his return.
- He had substantial investments, based on the amount of interest and dividend income reported.
- He had a large amount of business income reported from Schedule C. This indicates he most-likely paid in the maximum amount of Social Security tax and a substantial amount of Medicare taxes on this income for the year shown.
- He had a capital loss carryforward of some nature. This simply means he had losses in excess of $3,000. This could be his “sell the losers and stick with your winners” mantra, but it was a paltry sum in light of his income level.
- He lost money on the sale of some of his business assets. This could be from a variety of business situations.
- He lost money from the overall operations and investments in other businesses. This could be due to large amounts of depreciation or actual losses from operations.
- He had a substantial loss from some source disclosed on “Statement 1” elsewhere in his return.
So, while we can glean a few generalities from the forms that have been released, we still have an incomplete puzzle and cannot see a full picture from these forms.