Much has been made in the press of late regarding the tax returns of the major Presidential candidates. This article is not focused on promoting either candidate, but an attempt to shed some light on these recent tax revelations.

Donald Trump’s New York and Connecticut returns for 1995 were leaked, in part, by the New York Times. It is significant to note that the Federal 1040 was not a part of what was made public. Additionally, the signature page of the New York state return was not leaked. He filed in Connecticut as a non-resident and paid some taxes. Much has been made of the $916,000,000 loss indicated on the return and that it would allow him to avoid income taxes for 18 years. We don’t know what is on Mr. Trump’s returns for other years, it is conceivable that he wouldn’t pay taxes for that period of time, but it is also likely that he could have used up that entire loss carryforward in the following year and paid taxes since then. These returns may or may not be legitimate, we have no way of knowing. Suspicions arise due to the partial nature of the disclosures.

Hillary Clinton has taken some heat for the $1,042,000 charitable contribution deduction on the joint return filed will Bill Clinton for 2015. $1,000,000 of that amount was paid to the Clinton Family Foundation, not to be confused with the Bill, Hillary, and Chelsea Clinton Foundation. The Bill, Hillary, and Chelsea Clinton Foundation is a legitimate 501(c)(3) IRS designated public foundation. The foundation raises millions of dollars that are used for charitable purposes. It is not our purpose here to discuss any irregularities. The point is, it is currently an IRS-approved public foundation. The contribution did not reduce their taxes by $1,000,000 as has been widely reported, but reduced their taxable income by that amount. The tax savings was less than $400,000.

The Clinton Family Foundation is an entirely different organization, an IRS-approved private foundation. Characteristic of a private foundation is that the bulk of the contribution received by the private foundation are received from a limited number of donors, usually its founders. Private foundations are legitimate, and common organizations under our current tax laws. The Bill and Melinda Gates Foundation and the Ford Foundation are two very well-known private foundations. The Clinton Family Foundation is the vehicle utilized by the Clinton Family for their personal charitable contributions.

Both public and private foundations must file a Form 990 or 990-PF with the IRS and are available to the public. These can frequently be found on the foundation’s website or at www.guidestar.org. Otherwise, a request for a copy can be made to the foundation itself. It should be noted that the public version of the tax return has the names and addresses of donors redacted.

The point of this is that everything I have discussed to this point is legal under our tax laws. Before you criticize either candidate, I would ask you a question. “If I could show you a completely legal way to avoid paying income tax, would you use that information?” I think most people would say “Yes.” Before you answer too quickly, consider Warren Buffett. Mr. Buffett has been a harsh critic of our tax system, claiming that his secretary pays a higher tax rate than he does. But does Warren Buffet pay more than the legally required tax? We don’t know as his returns have not been made public, but I doubt it.

Let’s go a step further. When you sign your 1040, you are attesting that “Under penalties of perjury, I declare that I have examined this return and accompanying schedules and statements, and to the best of my knowledge and belief, they are true, correct, and complete.” If I intentionally omit a deduction from my return is it a “true, correct, and complete” return? I would have to say not. If taxpayers pay too much tax, I don’t think the IRS is going to come after them, waving money in their faces because they overpaid, but the point is they have made an untrue statement in signing that declaration.

So don’t come down too hard on Trump, Clinton, or Buffett. They have only followed the tax laws, as far as we know.