The wonky world of tax law experts was buzzing this weekend after Saturday's revelation that Donald Trump may not have paid federal income taxes for as long as 18 years after reporting a $916 million loss in 1995.
The fraction of tax information from Trump's long career as a real-estate developer made public by the New York Times was a piece, however small, of a puzzle that has eluded voters for months. The Republican nominee has refused to disclose his returns because, he says, he is under audit by the Internal Revenue Service (though there is nothing legally preventing him from releasing the returns).
Tax experts are trying to make sense of three pages from state tax returns Trump filed in 1995 to answer a fundamental question: Did the businessman really avoid paying income taxes because the business losses he generated were big enough to offset his income afterward?
The Trump campaign has not disputed the accuracy of the tax information cited by the Times, so we just don't know if the implication is true that Trump did not pay federal income tax for almost two decades. His allies argued Sunday that Trump was a "genius" for legally applying the tax code.
What follows is a list of five questions and why they're crucial to learning just how much Trump has paid the IRS.
1. What part of his business empire lost that much money?
The enormous loss Trump reported 21 years ago appeared to come from debts he carried over from the early '90s, when his casino empire, airline and hotel business were failing.
Tax experts said they would need to see Trump's full tax filing from 1995 and all supporting documents to know which part of the Trump enterprise was to blame for the massive setback - and exactly when the debt was generated.
But Edward Kleinbard, a tax law expert at the University of Southern California's Gould School of Law, said real-estate losses are a likely culprit.
"The loss likely came from selling some of his investments for values much less than his costs," Kleinbard said.
2. Was Donald Trump out $916 million from his own pocket in 1995, or did he owe money to creditors he had borrowed from?
Tax experts said it is highly unlikely that Trump really lost $916 million of his own money, a huge sum by mid-'90s standards, even for a big real-estate developer.
Tax experts said it is highly unlikely that Trump really lost $916 million of his own money.
"Based on everything Trump has ever said about being the king of leverage, it would be unlikely there was no debt," said David Herzig, who teaches tax law at Valparaiso University Law School in Indiana.
It's more likely that Trump used bank financing to buy his casinos and other properties - and was later forced to sell those investments at a fraction of their purchase prices, several experts said.
That's where the complicated law governing real-estate investment comes in, with its many tax breaks and benefits that could help someone like Trump recover from huge business losses.
Say a developer like Trump wanted to buy a $1 billion building and reached a deal with a bank to put up $300,000, while the bank financed the rest. If the investment failed and the property was sold at a loss, the bank would absorb the majority of that loss.
But, as Kleinbard points out, the tax code allows the developer to write off that loss (called a net operating loss) for the year it took place, for the next 15 years and for two years before, for a total of 18 years. So in this case, Trump could have offset $50 million a year in taxable income for that long.
This provision of the tax code may come as a shock to many taxpayers who are not in business. But as Andy Grewal of the University of Iowa College of Law explains, "It's not a giveaway, but a core feature of the tax system."
3.What happened to the debt after Trump declared it to the IRS? Did he get rid of it? If so, did he still get to avoid paying taxes?
Tax experts said Trump's losses may have been forgiven or written off by bankruptcy judges or banks. In that case, Trump would have been required to count this so-called "debt forgiveness" as income. Or just before he went before a bankruptcy judge, he might have settled with his creditors for a sum less than what he owed.
But experts disagree on whether having the debts go away would have prevented Trump from writing off the losses he reported in 1995 later.
"As soon as any of your debt is forgiven, it is counted as assessible income," said John Hempton, an Australian hedge fund manager and author of a well-known finance blog, in an interview.
"I would expect Donald Trump to declare income from this debt forgiveness."
But the rules may be different in real estate, others say. Typically, if a business posted a loss and that debt was forgiven, the business would have to claim the value of the debt it got rid of as income.
But in 1993, two years before Trump declared his $916 million loss, Congress stepped in to change the rules for real-estate investments.
Lawmakers added an exception for some real-estate investments that allows investors to claim the write-off even if they are financially insolvent, Kleinbard said.
Others have raised another scenario entirely – that Trump's advisers may have created a new tax entity, possibly offshore, to which he continued to owe some or all of the $916 million. This strategy, which is illegal and is called "parking" debt, would have allowed him to claim to the IRS that he still was incurring losses to avoid declaring any debt he had erased as income.
The reality is that no one except Trump and his accountants know what happened to the debt. Only years of tax returns, including those from his business entities, would tell us.
4. If he didn't pay any income taxes for 18 years, was that legal?
Again, the only way to know if Trump's tax maneuvers were legal would be to review his full returns for every year in question. But writing off the entire debt, if he was given any kind of debt forgiveness by the courts or creditors, could mean he owed some taxable income. We just don't know how that debt was resolved.
The sprawling tax code has been changed hundreds of times since it was last overhauled in 1986. It is littered with loopholes and preferences that allow savvy taxpayers to avoid paying taxes at every turn.
In the case of losses, the tax code creates systems to encourage business owners not to fold when they go through a tough year.
"The simplest way to think about this is to consider a business that loses $50 in June and makes $100 in July," said Kyle Pomerleau, director of Federal Projects at the Tax Foundation. "Everyone agrees that the profit there is 50 dollars."
But if another business loses $50 in December and brings in $100 in January, - the next tax year - the code does not penalize the owner, who gets to "carry forward" the loss from the previous year.
5. If Trump is elected president on Nov. 8, will his tax plan change the feature of the tax law he apparently took advantage of?
Trump's tax plan would cut rates for high-income people like him, reducing the number of federal tax brackets to three from seven and setting rates at 12 percent, 25 percent and 33 percent, a boon to wealthy Americans. He has pledged to eliminate a loophole known as "carried interest" that benefits hedge fund managers, among other provisions.
"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," the campaign told the Times.
But his plan does not address the rule on net operating losses he may have taken advantage of with his tax filings. Neither Trump nor the campaign have said whether as president he would eliminate or change the rules on how the tax code treats losses, particularly real-estate losses.