Sunday, October 30, 2016

Losing a Billion...

As the Super Tax Genius, I feel a need to dispel a myth about Trump "losing" a billion dollars. This should not be read as a defense of his policies, personality, or honesty.
In the tax world, you lose or gain money on a tax year basis. It doesn't mean the money is gone, just that you spent more in one year than you made. This is common and typical.
When you make an investment, you want to make a better return than you could have if you had just left the money in the bank. The higher the risk, the bigger return you want.
Big businesses spend a lot of money trying to make money, and the returns often take many years to come back.
Trump "lost" money in the tax parlance, but it is a better term to say he spent it. Until he makes the money he spent back, he has no "gain" to tax. Once he makes his billion back, he pays taxes on everything above it.
The same principle works with smaller numbers. You spend $1000 bucks in your business, and if you make $100, you pay no taxes. Make $1500, and you pay taxes on $500, not $1500. It could take a while to make that $1000 back, but, until you do, you haven't made any money.
On a separate note, all those articles about the pentagon "losing" 6 billion dollars are misleading. They can't account for what they spent it on, but they know it was spent and that the very large majority at least spent correctly by law. They just didn't do the paperwork right. Messed up, but the 6 billion dollars isn't just "gone" as some would have you believe.

No comments:

Post a Comment