One of the great frustrations about US tax law for a lot of Americans is that everyday wage earners can often pay a higher tax rate than billionaire real estate investors. Here's what a tax law expert says. | Analysis by zbyronwolf
The publishing of data about more than a decade of President Donald Trump's tax returns in The New York Times confirms he often paid little or no federal income tax and suggests running for president and being elected did nothing to awaken a patriotic sense of tax-paying duty in Trump.
Someone with extensive real estate holdings likely has interests in businesses where the owners are taxed on the operations of the business and where the business does not pay taxes on a separate return. For example, LLCs generally are not taxed directly; instead, the income, losses and deductions of the LLC are assigned to the owners by agreement with the tax consequences following from there and reported on the owners' individual returns.
Tax law generally allows deductions for ordinary business expenses and for business losses, including abandonment of projects. The key is that the payment must be for bona fide business purposes. Payments to close family and friends by those in control of businesses are subject to scrutiny on audit because of the potential to inflate deductions and to avoid transfer taxes.
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