As you know, "The Donald" invests heavily in real estate. One of the biggest deductions for real estate investors is depreciation. The way they maximize the deduction for depreciation is to:
1) Increase the depreciable basis of the asset; take the higher of either the tax role or an independent appraiser's evaluation.
2) Decrease the length of time the asset is depreciated, identify personal property assets. They can be depreciated over shorter lives.
Mr. Trump mostly likely has not paid taxes throughout the years by using a tax strategy known as the "Tax Deferred Exchange". This is a fantastic way to take all of one's profits from a sale of real estate and put it into a new property without having initially to pay taxes. When his property is transferred at death, the basis is adjusted to current market values, thus all or mostly all of the deferred capital gains tax liabilities can be eliminated.
How could you accomplish the same thing?
1) Funds from the sale should be held by a qualified intermediary or an accommodator until the exchange transaction is complete and the requirements have been met.
2) You have 45 days from the date escrow closes to identify an "up property" and 180 days to complete the exchange. The 180 days includes the 45-day identification period.
3) If you receive cash or reduction in the mortgages, it's considered "boot" and you have to pay capital gains taxes on it.
One of the advantages of doing a tax-free exchange is that you retain more of the funds for investment and defer taxes to a later date. Postponing the taxes is a good tax strategy because, when the taxes are finally paid, they're generally paid with inflationary dollars. The longer the payment is delayed, the lower the present value of the taxes and the larger the benefit of the deferment.
Donald Trump is proposing four tax brackets topping out at 25% No tax on individuals earning less than $ 25,000, couples earning less than $ 50,000. Replace the corporate rate with a maximum 15% tax. End tax break for business earnings overseas. Note how he would not eliminate the two major strategies for real estate investors.
Hillary Clinton wants to increase the capital gains rate. Bernie Sanders wants to tax capital gains and dividends taxed at the same rates as incomes for annual incomes over $ 250,000 at 52%. Ted Cruz wants a flat tax of 10% on capital gains and wants to abolish the Internal Revenue Service. Marco Rubio wants to eliminate capital gains taxes.
Trump's tax returns will show us many new strategies to reduce income taxes using real estate. The return, if it's forthcoming, will make interesting reading. It will point out the difference between taxable and nontaxable profits. You may even be able to verify his billionaire status and determine if he is a huge taxpayer, or uses legitimate rules to avoid huge levies.