Donald Trump declared a loss so substantial on his struggling businesses in 1995 that they may have ensured that he would be freed from paying income tax to the federal government for a full 18 years, The New York Times is reporting.

The newspaper threw a grenade in the race for president late on Saturday, publishing the Manhattan mogul’s tax return in full for that year. It showed his then stumbling business empire, principally of hotels and casinos, had reported a shocking loss of $916m (£705m) to the tax authorities.

“The 1995 tax records, never before disclosed, reveal the extraordinary tax benefits that Mr Trump, the Republican presidential nominee, derived from the financial wreckage he left behind in the early 1990s through mismanagement of three Atlantic City casinos, his ill-fated foray into the airline business and his ill-timed purchase of the Plaza Hotel in Manhattan,” a front-page article disclosed.

Though the newspaper apparently did not have subsequent annual filings, it said that it had been advised by tax experts that a loss of that scale “would have allowed Mr Trump to use his $916m loss to cancel out an equivalent amount of taxable income over an 18-year period”.

The disclosure presents a clear political risk to Mr Trump, who faced pressure from Hillary Clinton, the Democratic nominee, at last week’s debate when she demanded that he release his tax returns, following the tradition set by candidates for the White House in the modern era.

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At the debate, Ms Clinton suggested her rival was refusing to release the returns because they would show that he had managed to avoid paying federal taxes for years. His reply – that not paying taxes showed he was “smart” – was widely picked up as an ill-chosen defence that would offend voters.

Most galling for Mr Trump this weekend is that his determination to shield his tax returns from public scrutiny has now been partially sabotaged by The New York Times. It appears that the 1995 return had been sent to the newspaper unsolicited and by an anonymous source.

The latest drama in the election campaign unfolded as Mr Trump was turning up the heat of his criticism of his Democrat rival at a rally in Manheim, Pennsylvania, telling supporters that in his view Ms Clinton is mentally unstable, lacking in stamina, corrupt and should be in prison.

At earlier events, Mr Trump has responded to chants of “lock her up” from his supporters by asking them to help him defeat her. On Saturday, however, he abandoned caution and suggested that her handling of her emails while Secretary of State meant that “she should be in prison, let me tell you.”

If the analysis by The New York Times regarding his tax affairs is correct, Mr Trump could even have avoided paying taxes on the $50,000 to $100,000 he earned per episode as star of his reality TV show, The Apprentice.

Mr Trump will surely now come under renewed and even more intensive attack for his financial dealings by Ms Clinton at their second debate, which is set for 9 October. He is likely to argue that he did nothing wrong off-setting the earlier losses against subsequent earnings.

Such a defence is unlikely to sit well with many voters, at least those still undecided, who will see a candidate who brags about a personal fortune which appears to have been partially accumulated by avoiding writing cheques to the federal government.

Four years ago, Republican nominee Mitt Romney's campaign suffered severe damage when it emerged that he had paid taxes to the government at a rate of just over 13 per cent. That was a sin in the minds of many voters, but one that may now have been put into a different perspective.

The Trump campaign issued a swift statement responding to the story. Rather than denying the thrust of the newspaper’s contention that he had not paid federal taxes in years, it noted that he had paid a wide assortment of other taxes.

“Mr Trump is a highly skilled businessman who has a fiduciary responsibility to his business, his family and his employees to pay no more tax than legally required,” it said. “That being said, Mr Trump has paid hundreds of millions of dollars in property taxes, sales and excise taxes, real estate taxes, city taxes, state taxes, employee taxes and federal taxes.”

The statement continued: “Mr Trump knows the tax code far better than anyone who has ever run for president and he is the only one that knows how to fix it.”

At the same time, the newspaper received an open threat of legal action from a lawyer representing Mr Trump. Contending that it had broken the law by publishing the return without Mr Trump’s permission, Marc E Kasowitz threatened “prompt initiation of appropriate legal action,” in an emailed letter.

At the Pennsylvania rally, Mr Trump suggested that Ms Clinton was disloyal to her husband, the former president Bill Clinton.