Unless you have been in a coma for the last month, you’ve heard that the New York Times published several pages from Donald Trump’s 1995 state income tax returns. The bombshell within those pages had nothing to do with how much Trump made, rather, it had everything to do with how much he lost. The scant few pages available include the first page of three income tax returns for New York, New Jersey, and Connecticut. The New York return indicates that in 1995, Trump earned wages of $6,108; interest income of $7,386,825; dividend income of $26,051; had business income of $3,427,092; and real estate and partnership losses of negative $15,818,562. Who cares? For a billionaire, these numbers are boring.

A little further down the page is a line that reads “other income,” which shows a negative $915,729,293, along with “SEE STATEMENT 1.”  This monster loss zero’d out Trump’s taxable income for the year…and presumably many more years. Trump could carry-over this negative near one-billion dollar loss to future years to negate an equal amount of taxable income. This loss was worth (very approximately) $366 million of cash in Trump’s pocket.

These net operating losses (NOLs) are not new – they have been utilized by millions of taxpayers for decades. For example, 1.2 million taxpayers reported NOLs on their federal returns in 2014.[1]  Granted Trump blew away the competition – the average NOL claimed in 1995 was a mere $97,627. A little more interesting history:  the total size of NOLs claimed on individual tax returns was $49.3 billion in 1995, when Trump reported his tax loss; it has blown-up to $196.2 billion in 2014.[2]

How in the good lord’s name did Trump obtain a near billion dollar loss in 1995? Unfortunately, we do not know - the few pages of tax returns produced do not include a breakdown or explanation. The Trump camp has not elaborated. Theories abound, the most popular of which indicates the simultaneous financial collapse of the Trump Taj Mahal, Castle casinos in Atlantic City, the Trump Shuttle airline, and the Trump Plaza hotel. These four ventures all claimed bankruptcy. As part of the 1990’s bankruptcy settlement, Trump gave an ownership interest in the ventures to the creditor banks in exchange for debt write-downs. Ordinarily, cancellation of debt results in taxable income, but not if the taxpayer is involved in bankruptcy proceedings, as Trump was.  This is complete speculation.

As a side-note, can Trump sue the NY Times for publishing portions of his tax returns?  Of course he can sue, but he may not win. Unauthorized disclosure of federal tax returns is prohibited by 26 U.S.C. § 7213(a)(3), punishable by a $5,000 fine and 5 years imprisonment. However in this case only state tax returns were disclosed, so no dice there. However states generally have a comparable civil and criminal laws prohibiting publication of tax returns. For example, New York punishes unauthorized disclosure of tax return information by terminating the party if he/she is a state employee (N.Y. Tax § 314). Disclosure can also amount to a criminal misdemeanor (N.Y. Tax § 1825), though details on prison sentencing were elusive. New York further provides civil damages of up to $1,000 or actual damages, plus punitive damages and court costs, for unauthorized disclosure of a state tax return (N.Y. Tax § 3038). If Trump loses the election, I wonder how he will calculate “actual damages” for purposes of the statute.

However, none of this will probably matter. In mid-September, New York Times executive editor Dean Baquet said he would publish Trump’s tax returns even if it risked jail time. Regardless, a lot of people would pay a lot of money to see “STATEMENT 1” of Mr. Trump’s 1995 tax return.


By Michael S. Cooper, Barnes Law

Michael Cooper is an associate attorney with Barnes Law, and is licensed to practice law in California.

The opinions expressed are those of the author and do not necessarily reflect the views of the firm, its clients, or any of its or their respective affiliates. This article is for general information purposes and is not intended to be and should not be taken as legal advice.



[2] Id.