Home > Taxes > Sanders Aims to Close Tax Loopholes Used by Trump

Comments 0 Comments

Sen. Bernie Sanders (I-Vt.) recently announced that he plans to introduce a bill during the next session of Congress that he claims will close the loopholes Donald Trump reportedly could have used to avoid paying federal taxes for 18 years.

“Special tax breaks and loopholes in a corrupt tax code enable billionaires and powerful corporations to avoid paying their fair share of taxes while sticking the burden on the middle class,” Sanders said in a press release. “It’s time to create a tax system which is fair and which asks the wealthy and powerful to start paying their fair share of taxes.”

What Are the Loopholes?

According to the press release, there are four main “loopholes” Sen. Sanders is looking to close — exemption for real estate from passive loss rules (section 469), exemption for real estate from at-risk rules (section 465), like-kind exchanges (section 1031), and debt and depreciation — as these tax breaks are likely what “made it easier for [Trump] to claim losses of $916 million in the 1990s and avoid paying income taxes in subsequent years,” according to the release.

“Maybe he has a book about his plans for each, but it sounds like he’s just saying just get rid of these,” Jared R. Callister, an attorney at Fishman Larsen & Callister in Fresno, California, who focuses on real estate transactions and taxations, said. “I don’t see the benefit of that. Maybe he can modify the rules … to make it a middle ground.”

What Does This All Mean?

Callister broke down each of the items Sanders is hoping to change when Congress meets again in 2017, starting with the passive loss rule. He said this allows real estate developers to offset their losses with income they earn from other sources. In Trump’s case, that would mean he could balance out what he loses investing in real estate with the income he gets from non-real estate projects, like book royalties, TV appearances or endorsements.

“I think there is an argument to re-examine if we want professional real estate developers to benefit the way that they do,” Callister said.

In terms of real estate exemptions for at-risk rules, Callister said he thinks Sanders has “some good arguments there,” as this currently allows real estate investors to claim losses that are more than what they invested.

The like-kind exchanges law allows people to defer paying taxes on money made from property sales, assuming the person uses the money to purchase another property, Callister explained.

“The reason Congress put that in place is because they don’t want people to be hesitant to buy and sell property,” Callister said. “They think property changing hands is better than forcing someone to hold onto it because they don’t want to pay the taxes.”

He did note that if this law is changed, it could hurt farmers, as “you’d have farmers stuck holding land they don’t really want because they don’t want to pay the tax, but as long as they buy another real property, they get to defer the tax. It’s a delay and deferral of [paying a] tax, not avoidance of it.”

The debt and depreciation regulation is the item Callister said is baffling to him.

“I don’t know why [Sanders] would challenge that,” Callister said. “It doesn’t make any sense to me. If you borrow money and pay interest on the debt, I don’t know why you wouldn’t be able to deduct your interest.”

However, Callister said that the thing most notable about Sanders’ announcement is the “glaring omission” of the Net Operating Losses rule that predominately helped Trump get out of paying a large portion of taxes.

Representatives from Sen. Sander’s team did not immediately respond to Credit.com’s request for comment.

Paying Your Taxes

We are still several months away from Tax Day, but that doesn’t mean you shouldn’t be thinking about what you may have to pay. It is a good idea to have some money set aside just in case you do end up owing the IRS come April 15. Owing on your taxes doesn’t necessarily affect your credit, but how you choose to pay them might. For example, if you take out a personal loan or charge the bill to your credit card, these things will most likely be reported to the credit bureaus. You can see how your credit is being affected by these and other financial habits by viewing a snapshot of your credit report for free, updated every 14 days, on Credit.com.

Image: andykatz

Comments on articles and responses to those comments are not provided or commissioned by a bank advertiser. Responses have not been reviewed, approved or otherwise endorsed by a bank advertiser. It is not a bank advertiser's responsibility to ensure all posts and/or questions are answered.

Please note that our comments are moderated, so it may take a little time before you see them on the page. Thanks for your patience.

Credit.com receives compensation for the financial products and services advertised on this site if our users apply for and sign up for any of them.

Hello, Reader!

Thanks for checking out Credit.com. We hope you find the site and the journalism we produce useful. We wanted to take some time to tell you a bit about ourselves.

Our People

The Credit.com editorial team is staffed by a team of editors and reporters, each with many years of financial reporting experience. We’ve worked for places like the New York Times, American Banker, Frontline, TheStreet.com, Business Insider, ABC News, NBC News, CNBC and many others. We also employ a few freelancers and more than 50 contributors (these are typically subject matter experts from the worlds of finance, academia, politics, business and elsewhere).

Our Reporting

We take great pains to ensure that the articles, video and graphics you see on Credit.com are thoroughly reported and fact-checked. Each story is read by two separate editors, and we adhere to the highest editorial standards. We’re not perfect, however, and if you see something that you think is wrong, please email us at editorial team [at] credit [dot] com,

The Credit.com editorial team is committed to providing our readers and viewers with sound, well-reported and understandable information designed to inform and empower. We won’t tell you what to do. We will, however, do our best to explain the consequences of various actions, thereby arming you with the information you need to make decisions that are in your best interests. We also write about things relating to money and finance we think are interesting and want to share.

In addition to appearing on Credit.com, our articles are syndicated to dozens of other news sites. We have more than 100 partners, including MSN, ABC News, CBS News, Yahoo, Marketwatch, Scripps, Money Magazine and many others. This network operates similarly to the Associated Press or Reuters, except we focus almost exclusively on issues relating to personal finance. These are not advertorial or paid placements, rather we provide these articles to our partners in most cases for free. These relationships create more awareness of Credit.com in general and they result in more traffic to us as well.

Our Business Model

Credit.com’s journalism is largely supported by an e-commerce business model. Rather than rely on revenue from display ad impressions, Credit.com maintains a financial marketplace separate from its editorial pages. When someone navigates to those pages, and applies for a credit card, for example, Credit.com will get paid what is essentially a finder’s fee if that person ends up getting the card. That doesn’t mean, however, that our editorial decisions are informed by the products available in our marketplace. The editorial team chooses what to write about and how to write about it independently of the decisions and priorities of the business side of the company. In fact, we maintain a strict and important firewall between the editorial and business departments. Our mission as journalists is to serve the reader, not the advertiser. In that sense, we are no different from any other news organization that is supported by ad revenue.

Visitors to Credit.com are also able to register for a free Credit.com account, which gives them access to a tool called The Credit Report Card. This tool provides users with two free credit scores and a breakdown of the information in their Experian credit report, updated twice monthly. Again, this tool is entirely free, and we mention that frequently in our articles, because we think that it’s a good thing for users to have access to data like this. Separate from its educational value, there is also a business angle to the Credit Report Card. Registered users can be matched with products and services for which they are most likely to qualify. In other words, if you register and you find that your credit is less than stellar, Credit.com won’t recommend a high-end platinum credit card that requires an excellent credit score You’d likely get rejected, and that’s no good for you or Credit.com. You’d be no closer to getting a product you need, there’d be a wasted inquiry on your credit report, and Credit.com wouldn’t get paid. These are essentially what are commonly referred to as "targeted ads" in the world of the Internet. Despite all of this, however, even if you never apply for any product, the Credit Report Card will remain free, and none of this will impact how the editorial team reports on credit and credit scores.

Your Stories

Lastly, much of what we do is informed by our own experiences as well as the experiences of our readers. We want to tell your stories if you’re interested in sharing them. Please email us at story ideas [at] credit [dot] com with ideas or visit us on Facebook or Twitter.

Thanks for stopping by.

- The Credit.com Editorial Team