Loss Carried Forward is a long standing provision in the US (and other countries) tax code and is really quite easy to understand.
Let’s say you invest a hundred thousand dollars in a new business that you start on January 1. In the first 90 days or first quarter of business you lose 10 thousand dollars. New businesses often lose money at start up. So, in the second quarter you manage to break even. You have no loss but also no profit. For the 3rd and 4th you make 5 thousand dollars in each quarter. This would mean you finish the year with zero net profit or loss and your taxable income for your first year in business would be zero; simple right?
To understand Loss Carried Forward simply change the time frame in the above story from quarters to years. In the first year you lose 10 grand, in the second year you break even and in the third and fourth years you make 5 thousand dollars each. For the total four years you have been in business you have managed to break even. Yet, without the Loss Carried Forward provision in the tax code you would have a taxable income in years 3 and year 4 of five thousand dollars for each year.
The Loss Carried Forward provision of the tax code insures that a business pays income tax on the total profits of a business regardless of what year those profits were earned.
This provision of the tax code is available to businesses both large and small, including farms.
If the New York Times or the Clinton campaign would back up their outrage with a policy statement that the Loss Carried Forward provision in the tax code should be removed that would at least be intellectually and morally honest. But neither the New York Times nor the Clinton campaign are going to do that because they know that the outcry from the business community would be loud and clear.
I am not defending Mr. Trump or his application of tax law to his businesses. But to suggest that the use of a Loss Carried Forward in and of itself is exploiting the tax code or is somehow immoral is a blatant misrepresentation of the facts. The New York Times failed in their journalistic responsibility to put some context to this story, like listing all the other companies that have used this provision of the tax code. And the Clinton campaign is exploiting the public’s basic misunderstanding of tax policy and fairness in the tax code for a cheap political gain. It is this type of fundamental misunderstanding and misrepresentation of real world policy that makes me ashamed to say I am a Democrat.