Donald Trump avoided paying potentially hundreds of millions of dollars in taxes in a way even his own lawyers considered questionable, according to a report.
The New York Times said the manoeuvre may also explain how the Republican presidential candidate posted a one-year loss of more than $900m a few years later, enabling him to avoid paying federal income taxes for perhaps 18 years.
At issue is how billionaire property tycoon Mr Trump was able to cancel hundreds of millions of debt as his casino empire in Atlantic City went broke in the early 1990s.
Cancelled debt is generally treated as taxable income, meaning Mr Trump would have owed the Internal Revenue Service significant money on debt that his creditors forgave.
The newspaper said it obtained documents from 25 years ago showing Mr Trump essentially traded the debt relief for nearly worthless “partnership equity” to avoid any tax liability.
In practice, the strategy was almost identical to a tax move that was already outlawed, but differed in minor details. Mr Trump’s own lawyers advised him the IRS would be likely to find it improper if he were audited, the paper said, and Congress explicitly outlawed the manoeuvre in 2004.
So it was legal before 2004 then?