Trump & Taxes: A Question From Someone Who Is Not Super Tax Savvy

[TheBlackAdder]

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I've been reading and watching clips s to how Donald Trump fleeced suppliers and contractors.

Now, I know I am not the swiftest, when it comes to the matters of Tax Code, and I would like to ask the following:


If a person contracts for something/anything, and they end up welching out on payment, is that considered a gain?

Just as contractors take a loss, would Trump have to declare the gains from said practices?


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[BSdetect]

1. Guessing he claimed as if he had paid them

Just a hunch

I would work for the IRS for free if I could just check drumph's returns.

[aidbo]

2. Welching is an inappropriate term.

It derives from the name for the Welsh people.

'Reneging' is a perfectly appropriate term.

[unblock]

3. it's usually not a gain directly, just a smaller expense.

if i contract to pay $100,000 but eventually settle for only $70,000, i would just call that a $70,000 expense.

my taxable profit on my business overall would by $30,000 higher than if i had paid in full, but the $30,000 doesn't really enter into the calculations because it never happened.

now, it may be possible to actually *book* the $100,000 expected expense in one tax year. if you then settle for only $70,000 in the following tax year, you would either have to amend your earlier return or declare the $30,000 difference as a gain in the new tax year.


my understanding; not a tax lawyer.

[ColemanMaskell]

4. Probably Trump's COMPANIES (with Trump in charge) stiffed the contractors

The point of a limited liability corporation is to limit the liability of the owners.
It's a safe bet Trump uses limited companies. (Most big companies are set up in that way.)
It works like this:

1.) Someone, call him DT, files papers to start a limited liability company, and he owns all the stock -- or he can keep a majority of it and sell the rest to people who don't know him well. He calls it Trumped Up, inc.

2.) DT goes to a bank that doesn't know him well and gets a loan for Trumped Up company. The company contracts with unwitting suppliers to build something.

3.) Using the borrowed money from the bank, the company pays DT a very large salary for his administrative work as CEO -- This should be illegal by now but it isn't. Bill Clinton proposed to put a legal cap on maximum executive salaries, but he never got it into law. So DT pockets multiple millions as his salary (which actually is HUU-UGE). Meanwhile he forgets to pay his contractors.

4.) Oops, the company runs out of money, still having failed to pay the workers.

5.) The company files for bankruptcy. All of the assets of the company -- whatever the contractors built, and any remaining money in company accounts, if there is any -- are liquidated (sold off) by a court-appointed guy who oversees the process and dispenses the remaining assets to the creditors. Secured creditors (the bank) get first dibs on the money. If money is left over after they are paid off (right), then the contractors and other unsecured creditors get a share of whatever's left. The amount each creditor gets is either zero or much less than they were owed. This is due to the large executive salaries and operating expenses that were paid by the company.

6.) The executives keep the salaries they collected. The bank gets back part of its money. Working stiffs get stiffed.

Any part I left out? Oh, yeah. DT then starts a brand new limited corporation, call it Trump the Chumps, and repeats the process.

[ColemanMaskell]

5. +1 on what unblock said

If it is a person and not a company doing the stiffing, then it seems to work as unblock described (though I'm not a tax attorney either). The crook (not a Welshman) is making increased profits over what he otherwise would have. He should owe taxes on the total profits after deducting for operating expenses (including salaries).