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Trump's reported losses could explain some Trump Foundation antics

The massive losses Donald Trump appears to have reported on his tax returns could explain some of the unusual antics related to the financing of the Trump Foundation, tax experts said.

The tax deductions some Americans get for donating to charity would not have been available to Trump in years where he had a net operating losses, such as the massive loss he reported in 1995, according to portions of three Trump state tax returns published Saturday by the New York Times.

That loss of nearly $916 million is believed to have carried over for many years, likely wiping out his taxable income for a long period, perhaps up to 15 years.

The lack of a tax deduction during that time would have reduced Trump's financial incentive to make charitable gifts and may have made it more attractive to direct personal income or money owed to his companies to his personal foundation.

"If he really had net operating losses [NOL] every year, then the deduction would never be valuable to him," said Linda Sugin, a law professor at Fordham University.

Directing honoraria, appearance fees or other income to the Trump Foundation would have avoided including those fees in income that would have reduced the amount of Trump's losses available to be carried forward to another year.

"Anything that makes you use up your NOL is something you would try to avoid," Sugin said.

The Washington Post has reported that Trump engaged in several such transactions including a $400,000 payment the foundation received from Comedy Central for Trump's appearance at a celebrity roast in 2011 and about $1.9 million in reported donations from Richard Ebers, a New York ticket broker. There was also a $500,000 donation to the foundation in 2012 by NBC Universal, while it was airing the TV series that greatly boosted Trump's prominence, "The Apprentice."

Spokespeople for Trump have denied that he directed income to the foundation, but acknowledged he sometimes waived fees and urged that the money be given to charity. A Trump adviser also insisted that the Comedy Central payment was made to Trump Productions, recorded in its taxes and then turned over to the foundation, although if that's the case the foundation's tax return appears to be in error because it shows the funds coming directly from Comedy Central, a division of Viacom.

What's curious about the timing of Trump's direct, personal gifts to his foundation is that he appears to have been donating to his charity in some volume during the period his massive tax loss from the mid-1990s would still have been available to reduce or even wipe out his income, and the value of his tax deduction.

From 2001 to 2008, Trump gave about $2.8 million to his foundation, although the gifts tapered off toward the end of that period. From that time through 2014, he didn't donate directly to the foundation, according to tax filings.

It's unclear what benefits Trump would have received for donating in more recent years, or in most of the earlier ones, because he has declined to release his tax returns. It is possible Trump incurred fresh losses after 1995 that would still have been available to offset income through recent years. There are also techniques that seek to shift old losses into newer ones, extending the time to use them to cancel out other income.

"People talk about 'refreshing' your losses," Sugin said.

Timing your income and your donations to maximize tax benefits is not unusual for wealthy Americans. A private foundation can also be used to take a tax deduction in a high-income year and stretch out donations over a longer period, although there are rules that limit the deductions and discourage private foundations from hoarding their funds.

While the lack of access to most of Trump's tax returns leaves the public in the dark, the Fordham professor noted that the amount of Trump's gifts to charity in years when he would have gotten no tax benefit would provide insight into his generosity. In that sense, he'd be in the same boat with many less-wealthy Americans who get no tax benefit from charitable gifts because they don't make enough to pay federal income tax or they don't itemize their tax deductions.

"If you don't have the government subsidizing your charitable giving, then you are really doing it because you want to," Sugin said.