WASHINGTON, U.S. - Republican presidential nominee Donald Trump's advisors had warned him against using a legal manoeuvre that enabled him to avoid paying hundreds of millions of dollars in ...
• Trump used a 'stock-for-debt swap'-like trick to avoid paying taxes
• Trump's lawyers warned him against this, saying IRS could rule against him
• Top Democrat questions if FBI probing Trump ex-manager's Russia ties
WASHINGTON, U.S. - Republican presidential nominee Donald Trump's advisors had warned him against using a legal manoeuvre that enabled him to avoid paying hundreds of millions of dollars in personal federal income taxes.
The loophole was so "legally dubious" it was later made illegal by Congress in 2004.
Hillary Clinton, then a New York senator, was among the lawmakers who voted to close the loophole.
Ironically, during the first presidential debate, Trump accused Clinton of failing to close such tax loopholes, when in fact that is exactly what she did.
This avoidance manoeuvre was a new twist on 'stock-for-debt swap', which is when a company trades debts it cannot repay in exchange for stocks to avoid paying taxes on forgiven debts, the New York Times reported.
Until the loophole in question was closed, doing this allowed such companies to avoid reporting their debts as taxable income and, as such, avoid paying taxes on it - even if the stock they gave creditors was worth far less than the debt they owed.
Trump, reportedly, went against the advice of his lawyers, who warned him that the Internal Revenue Service “would likely declare it improper if he were audited."
According to documents with NYT, in the 1990s, when some of Trump's businesses were facing serious financial trouble, Trump, used the tax-avoidance strategy.
The issue is related to how Trump was able to cancel millions of dollars in debt as his casino empire in Atlantic City went broke.
Canceled debt generally is treated as taxable income, meaning Trump would have owed the IRS significant money on debt that his creditors forgave.
Trump essentially traded the debt relief for nearly worthless "partnership equity" to avoid any tax liability, NYT stated.
In practice, the strategy was almost identical to a tax manoeuvre that was already outlawed, but differed in minor details.
The newspaper said the manoeuvre also may explain how Trump posted a one-year loss of more than $900 million a few years later, enabling him to avoid paying federal income taxes for perhaps 18 years.
Trump has, till now, not released any of his official tax returns, breaking from a decades-long tradition in presidential politics.
The Republican nominee has cited an ongoing audit as the reason for withholding his returns.
During the second presidential debate on October 9, Trump, however, admitted he went years without paying federal income taxes.
Meanwhile, the top Democrat on the House Oversight Committee - Rep. Elijah Cummings of Maryland - said in a statement that his party is seeking an investigation into former Trump campaign manager Paul Manafort, who has been linked to pro-Kremlin elements in Russia and Ukraine.
Cummings said FBI Director James Comey should tell Congress and the public whether his agency is investigating Donald Trump's former campaign manager.
Comey on Friday sent a letter to Congress on the revival of the investigation into Hillary Clinton's private email server. The timing of the letter, just days before the November 8 election, was criticised by Democrats.
Cummings says Comey's action could damage the FBI's credibility and its standing could be further damaged if the bureau investigated Manafort but kept that secret.
Earlier, there were reports that the FBI was "conducting a preliminary inquiry into Donald Trump's former campaign manager's foreign business connections."