market-ticker.org / by Karl Denninger / 2016-10-02
Oh my, the breathless NYT reports, after aiding and abetting breaking the law by releasing part of a NY state tax return that was stolen (if it’s a true copy) from Trump.
The return showed a roughly $900 million net loss one year.
This, the Times reports, means that Trump may not have paid any federal (or state) taxes for many years.
To which I say: So what?
Let me remind you that the way you generate a net operating loss (NOL) is by losing money. In this case (if the return is factual) Trump lost a lot of money. The tax code allows you to reduce your tax liability when you lose money until your operating income reaches zero (and I remind you, the last 10 to 30 grand of it has already reached a zero payment liability, so you in fact “throw away” that amount worth of tax “benefit” right up front) but you cannot get a refund on previous taxes paid as you accumulated that capital when you take a loss. This is similar but not identical to capital loss treatment.
What happens with a capital loss is that the loss is rolled forward and you may take up to $3,000 a year against future income until it is exhausted, and you may also offset it dollar-for-dollar against future profits (capital gains.) A NOL also can used to “look back” for up to 3 years; which way you wish to go with that will depend on both the tax rates involved and your expected future plans (if the business is shut down then the choice is obvious, but if not it’s quite a bit more complex.)
There’s nothing wrong with this. You lost actual money to generate the NOL in the first place.