Trump’s tax dodge skirted the edge of the law, report says

At a time when Donald Trump’s casinos were bleeding money and he was badly in debt, the Republican presidential nominee used a “legally dubious” accounting maneuver to avoid reporting hundreds of millions of dollars in income, according to a New York Times report Monday.

In the early 1990s, Trump convinced financial backers to forgive large debts he could not repay, the paper wrote. But he avoided having to report the canceled debts as income because he gave the backers equity in his partnerships that owned the casinos, effectively writing off the income.

Trump’s attorneys advised him at the time that if he were audited, the Internal Revenue Service would not look favorably upon the tactic, the paper reported. In 2004, Congress voted to outlaw the practice. Then-Sen. Hillary Clinton was among those who voted to close the loophole.

Trump declined to comment on the report, and his spokeswoman Hope Hicks dismissed it as “either a fundamental misunderstanding or an intentional misreading of the law.”

The Times wrote that it discovered the tax gambit while combing through casino bankruptcy filings. The newspaper posted on its website “tax opinion letters” Trump obtained from his attorneys about the maneuvers.

On the campaign trail, Trump has bragged about his ability to use tax loopholes and said his knowledge of the flaws in the tax structure made him the most capable to fix it.

But Trump’s claims about his taxes and income are not independently verifiable because he has refused to release his tax returns, bucking four decades of practice among presidential nominees.

Democrats have speculated that he has refused to release his returns because they would reveal that Trump isn’t as wealthy as he claims, didn’t give as much to charity as he says he did, or has controversial overseas ties.

The sole information that has come to light about his tax history came from another article in the New York Times, which said Trump reported a $916-million loss in 1995, a deduction he could have used to legally avoid taxes for nearly two decades afterward.

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seema.mehta@latimes.com

Twitter: @LATSeema

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