Donald Trump’s Cradle to Grave Tax Exempt Strategy to Stave off Bankruptcy

On Sunday, the NY Times wrote what is being called a “bombshell” story on President Trump’s taxes, after obtaining 20 years of tax returns. Although a good read, it’s old news. The bigger story that the Times has finally alluded to is that Trump is indeed on a journey to bankruptcy. Let’s examine why.

As one who has reviewed complex tax returns and financial disclosures for leading journalists involving numerous public officials, companies, offshore entities, etc. I’d be glad to take a look at these returns for the Times or other publications and invariably identify other significant stories. Same holds for Biden’s returns.

All though Trump’s tax evasion is old news, where the Times finally got it right was coming close to a story identified almost four years ago. This is that Donald Trump ran for President to stave off bankruptcy, which I calculated would occur within 18 months in a review of Trump’s financials for Bloomberg.

Say what you want about Trump, yet the sheer audacity of his plan was brilliant. The result, the highest office in the land and a perfect credit score for Team Trump.

This conclusion that Trump ran for presidency in 2016 to stave off bankruptcy was seen as preposterous by leading journalists. Yet no one wanted to examine his major debts, an easy task. Debts that were having a crushing impact on his businesses. The largest being to Deutsche Bank.

Trump’s Most Valuable Inherited Asset – Loans He Never Had To Qualify For

What was also hard for journalists to understand in 2016 was that Trump’s most valued inherited asset was debt. This is because with debt came the underlying property. Today, most bankers consider death a default event, meaning the inheritor would have to re-qualify for the loans, something Donald Trump could never do.

It was his father Fred who qualified for the hundreds of millions in loans, and crafted loan agreements to make sure his son, Donald, would not have to re-qualify upon his death.

Trump’s Primary Operating Business – Highly Unprofitable Golf Courses

In 2016, Trump’s financial statement showed wildly inflated values for his golf courses, his primary operating business. This included Ferry Point, a course which he leases from the public in Brooklyn, i.e. public documents are available.

One need only ask Phil Knight how to profit from golf and he’ll readily say that Nike has never made golf profitable, even with its built in advantages. Not to mention the least profitable segment of the entire industry is the courses themselves. After all, there are only so many rounds on so many holes that can be played each day.

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Trump ran as the “successful businessman” and it was all a con. The only successful endeavor he had was on The Apprentice, reality TV.

This is why his 2005 return was leaked, to show his best year. Yet even then he paid significant interest and penalties, more than $150K, because he obviously didn’t have the cash to pay taxes until he was paid by NBC for the Apprentice. Surprisingly, whoever leaked this return for Trump was not adept enough to white out the interest and penalties section.

I originally outlined this bankruptcy story for Bloomberg in 2016, in conjunction with reviewing Trump’s financial records for Rich Rubin, and later for other major news outlets including the Times. Rich considered this a bold conclusion yet never printed it.

So this time let’s make a few observations and hopefully The Times will finally get the story right.

Ivanka Trump’s Consulting Fees Are A Bankruptcy Preparation Strategy to Remove Cash

Paying $750K in annual consulting compensation to Ivanka Trump to reduce taxes, as implied by the Times, is ridiculous. Put another way, Trump was not paying Ivanka to reduce his own tax bill. His losses are too great and therefore additional tax deductions are worthless since he has little taxable income. And even if he did, you don’t pay $750K to save a couple hundred thousand on taxes.

The payments to Ivanka are to remove valuable cash from the Trump organization because it is going bankrupt. Not enough cash removed to arouse its bankers yet a meaningful amount enough to make a difference.

Ivanka is also likely not paying much in tax since she has significant real estate based losses via investments in Kushner Companies. Kushner, however, unlike Trump does not seem to be sliding toward bankruptcy.

Trump Organization 401K Plan Is Revealing:

In 2018, the average participating employee received a matching contribution of approx. $780 from Trump, a pittance. Trump’s plan also allows for profit sharing yet none was provided.

Of course you can’t provide much profit sharing if all your businesses are losing money. So while Trump claims to be a great entrepreneur, claiming he’s worth $10 billion, he is not only short changing the IRS yet also his own employees.

Trump’s Tax Exempt Charity to Cover His Families Funeral Expenses

One of the more bizarre elements of Trump’s financial orbit is a tax exempt foundation set up to fund future funeral maintenance expenses at his private 10-plot burial site located on his Bedminster golf course. Most states require that an endowment be set up for cemeteries to ensure future maintenance when all plots are filled.

Sound ridiculous. Well, here is the annual 990 filing for the Trump private cemetery at his Bedminster golf course, where he will rest in peace some day.

Final Thought:

Most successful business owners will note that wages and taxes are the two most significant cash expenses. Trump has done a fine job of minimizing both via tax evasion schemes and short changing his companies’ workers.

What Trump has failed to realize, however, is that running a successful business long-term requires rewarding others for their efforts and inspiring trust in partners.

Trump’s primary goal is to simply be number one, with no regard to others. After all, who would locate their personal cemetary, funded by their own tax exempt foundation, on the first hole of a beautiful golf course?