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Trump pursued 'legally dubious' debt-for-equity swap to avoid taxes, NYT reports

Donald Trump used a tax avoidance maneuver so "legally dubious" that his own lawyers advised him the Internal Revenue Service would consider it improper, the New York Times (NYT) reports.

The NYT said it had newly obtained documents related to the Republican presidential candidate's tax affairs from the 1990s—a time at which Trump was attempting to stave off financial ruin as several of his casinos went bust—that shows he potentially swapped canceled debt held by the bankrupt gaming houses for "partnership equity."

The newspaper previously reported that Trump declared a $916 million loss on his tax returns in 1995, which would have allowed him to cancel out an equivalent amount of taxable income over the next 18 years.

It said such a debt-for-equity swap was likely vital to allowing Trump to keep the tax benefit of that huge loss. Although the NYT's main report implies strongly but does not specifically say that Trump undertook the tax avoidance maneuver, an accompanying interactive graphic alleges that he did.

Donald Trump holds a campaign rally at Macomb Community College South Campus, Oct. 31, 2016, in Warren, Michigan.
Getty Images
Donald Trump holds a campaign rally at Macomb Community College South Campus, Oct. 31, 2016, in Warren, Michigan.

The law that allowed such a swap was banned by Congress in 2004, with Democratic nominee Hillary Clinton among the congress members who voted to do so

To read the full NYT report, click here.

To see the interactive graphic explaining Trump's finances, click here.

Hope Hicks, a spokeswoman for Trump, told the NYT that the newspaper had either made a "a fundamental misunderstanding or an intentional misreading of the law," in its interpretation of Trump's actions. She said that the tax experts cited by the NYT were involved in "pure speculation."

The Trump campaign did not immediately respond to CNBC's request for comment, sent outside U.S. business hours.

Trump is the first presidential candidate in recent history to fail to reveal his tax records, but has repeatedly boasted of paying as little tax as possible, calling attempts to avoid federal income tax "smart." He has also taunted rival Clinton over Congress's failure to close the loopholes he said he had exploited.

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