Trump Paying $750 in Income Tax Shows Why He’s a Billionaire

[The_Waco_Kid]

Trump Paying $750 in Income Tax Shows Why He’s a Billionaire

https://finance.yahoo.com/news/trump...001249392.html

Caleb Melby, Tom Maloney and Devon PendletonTue, September 29, 2020, 10:43 AM CDT

(Bloomberg) -- A New York Times story based on Donald Trump’s long-sought-after tax data shows he avoided paying income taxes for most of the past two decades and paid only $750 the year he was elected president.

That doesn’t mean he isn’t a billionaire.


By pairing moneymaking businesses with spectacular money-losers, the Trump Organization has been able to shield profits generated by office properties and “The Apprentice” from tax collectors. It’s a souped-up version of the formula deployed by America’s landlord class for decades. But tax losses are different from operating losses, and the new data don’t necessarily show his business empire is heading into crisis, even if it’s carrying sizable debts.


“Your tax return at the end of the day shows income and whatever deductions are claimed against that income. That’s it,” said Thorne Perkin, president at Papamarkou Wellner Asset Management. “It doesn’t necessarily show net worth.”


The newspaper’s report described the extent of Trump’s tax-cutting strategies, such as taking deductions for consulting fees to his daughter and for hairstyling, which resulted in paying far less than poorer Americans. Although the report raises questions about the legality of some of the maneuvers, the new details don’t affect the Bloomberg Billionaires Index estimate of his wealth. His net worth is based chiefly on the value of his office and commercial property holdings, minus debts that were already known. The index estimated his net worth at $2.7 billion as of August, down $300 million from mid-2019, hurt by declining prices for certain types of real estate holdings.


Trump’s office properties include commercial spaces at Trump Tower, a leasehold on 40 Wall Street in downtown Manhattan and a 30% interest in two office towers co-owned with Vornado Realty Trust. Collectively, the assets are valued at about $1.9 billion, and Trump’s share of the debt that encumbers them is about $670 million -- meaning they constitute almost half of his net worth.


Financial records for his golf courses in Europe have long shown that, after including items such as depreciation, they run in the red. The tax data obtained by the Times reveal Trump’s American golf courses operate similarly.


Depreciation is crucial for real estate investors. Depending on the type of property at hand, they can write off a portion of its value over a useful lifetime pre-determined by the Internal Revenue Service. That allows investors to claim tax losses on the property even when they’re putting money in their pockets.


“You want to show as much losses as you possibly can for your deductions,” said Papamarkou’s Perkin. “That’s a big part of the advantages of real estate investing.”
The president’s son, Donald Trump Jr., disputed the Times’s reporting on Tuesday while acknowledging that Trump exploited depreciation, tax credits and other provisions of the tax code.


“He’s paying tens of millions in taxes -- now, he’s not going to pay more” than he needs to, the president’s son said in an interview on Fox Business Network. “And by the way, he’s following the tax code that people like Joe Biden, who has been in DC for 47 years, have written. He’s playing by their rules. Joe Biden is taking advantage of the same loopholes.”


The Times in a Monday story also revealed that when Trump did pay taxes it was because of cash from his role fronting “The Apprentice” and not as a real-estate developer. He earned $197 million from the show and $230 million from branding, speaking engagements and licensing deals off the back of the fame the series provided. As well as borrowing against Trump Tower and selling stocks and bonds, he plowed some of that money into the money-losing golf courses.


Carrying Loans


The tax documents described by the Times aren’t enough to draw conclusions about the profitability of Trump’s empire. But even if his golf courses are bleeding money, they contribute comparatively little to the tally of his fortune -- about $430 million before debt. Prices for golf resorts are down after years of decreasing interest in the sport. Younger generations simply aren’t taking it up as quickly as their elders are leaving it behind.


Trump has long been required to disclose a road map to his assets and liabilities. In 2015, then a contender for the Republican party’s nomination for president, he released a financial disclosure listing the lenders behind his loans, ranges for their outstanding balances, when they were issued and when they must be repaid.


That several are due in the next few years isn’t unusual in commercial real estate, where most loans run five to 10 years and are refinanced regularly. Unless there is a serious deterioration in the performance of his properties, it’s likely his portfolio can be refinanced before loans mature.


Though Trump has carried on this balancing act for years, his re-election could make obtaining new loans harder if potential lenders don’t want to face the prospect of foreclosing on a sitting U.S. president. Conversely, Trump is engaged in a variety of court fights that could accelerate once he leaves office and complicate refinancing. The Covid-19 pandemic also may take a lasting toll on the value of his holdings, making future loans more onerous.


His biggest financial vulnerabilities remain his hotel in Washington, where the pandemic has slowed business, and Doral, a sprawling golf resort in Florida. He has taken out nearly $300 million of personally-guaranteed loans from Deutsche Bank AG against these properties. The debts mature in 2023 and 2024, according to his personal financial disclosure.


Room to Borrow


But Trump, whose earlier career included a series of bankruptcies, also has a safety valve: the office properties.When he refinanced Trump Tower in 2012 with a $100 million loan, it was appraised at $480 million. A 2015 refinancing of 40 Wall Street fetched a $160 million loan on a $540 million appraisal.That left both properties relatively low-levered for Manhattan real estate, suggesting either a newly learned financial conservatism on Trump’s part or a squeamishness on the part of the lender, Ladder Capital. Ladder, which specializes in loans for commercial property, is Trump’s second-biggest lender after Deutsche Bank.An August appraisal of the buildings by the Bloomberg Billionaires Index, based on current net income and prevailing capitalization rates, was less sanguine, valuing them at $365 million and $375 million respectively. But so long as the pandemic doesn’t crater office values, the properties could carry far more debt, were Trump to need it.


(Updates with comments from Trump’s son in 10th paragraph.)


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[The_Waco_Kid]

interesting article. rather hard to single out Trump when many others use the same methods.

https://www.yahoo.com/finance/news/p...203242752.html



President Trump's tax returns show he has company: How rich Americans avoid taxes

Nathan Bomey, USA TODAY
Tue, September 29, 2020, 12:56 PM CDT


Like President Donald Trump, rich Americans often deploy sophisticated tax avoidance strategies to maximize their wealth.

Not to be confused with tax evasion, which is illegal, tax avoidance is entirely legal, even if many view it as unfair.


A sweeping New York Times report published Sunday revealed numerous tax reduction strategies used by Trump. He's not alone. Affluent taxpayers often have more avenues than ordinary Americans to avoid paying Uncle Sam.


Wealthy Americans are the largest source of underreported income, according to IRS data analyzed by researchers. The top 1% of American taxpayers account for about 34% of misreported income, according to a study published in the National Tax Journal.


Many wealthy Americans deploy complex, arcane but wholly legal strategies to minimize their tax obligations. Some use fairly straightforward strategies that allow them to minimize their taxes under the tax code.


Here are some of the most common tax avoidance strategies deployed by the wealthy:Growing wealth through investments

It's much harder to avoid taxes on your paycheck than on your investments.
In general, the federal government taxes regular wages at higher rates than investment income. The long-term capital gains tax rate maxes out at 20%, and the highest income tax rate is 37%.


In other words, the government keeps $370,000 of every $1 million in salary once you hit the highest tax bracket. If you make $1 million on stocks or similar investments, the government keeps $200,000.

Selling assets at strategic times

Taxes on assets such as stocks and real estate investments aren't owed until they are sold. That helps people such as Jeff Bezos, the Amazon CEO, founder and richest person in the world, grow their wealth rapidly while avoiding a huge tax bill. Then they can be strategic about when they sell.


By stockpiling assets without selling, rich investors can minimize their tax burden.
"Wealthy individuals can wait to sell until it makes the most sense for them, such as a year in which they will have large capital losses to offset the gain," according to the Center on Budget and Policy Priorities.


Unrealized capital gains accounted for more than one-third of the assets held by the richest 1% of Americans in 2013, according to a Federal Reserve analysis. By comparison, the bottom 90% of Americans have only 6% of their assets in unrealized capital gains.

Using business income loopholes to reduce personal tax liability

The 2017 tax bill passed signed into law by Trump allowed for a 20% deduction on certain business income that passes through partnerships, sole proprietorships and S-corporations.


This is income that individuals report on their personal IRS returns, but the tax break allows them to reduce the tax rate on that money by up to 7.4 points, according to the CBPP.


This setup is most likely to help the wealthy: 61% of the benefits go to the wealthiest 1% of Americans, according to the Joint Committee on Taxation.


Lisa De Simone, associate professor of accounting at the McCombs School of Business at the University of Texas-Austin, said many tax breaks available for business owners were put in place to stimulate risk-taking and innovation.


“There’s a notion that there are lots of tips and tricks that only the wealthy can take advantage of,” De Simone said. “The provisions weren’t written to try to help the wealthy get away with things.”


Instead, she said, new businesses can benefit when they’re able to deduct early losses from income.


“You don’t have to be super-rich in order to claim a business loss," she said.

Taking advantage of death tax policies to enrich their heirs

The tax code allows Americans to build wealth through deferred capital gains, then pass those assets tax-free along to their heirs upon death.


Called the "stepped-up basis" tax break, this loophole "encourages wealthy people to turn as much of their income into capital gains as possible and hold on to assets until death, when a lifetime of gain becomes permanently exempt from tax," according to the CBPP.


The inheritor could be subject to paying the estate tax if the total value of the estate exceeds a certain threshold, but that threshold has been substantially increased.


The 2017 tax law doubled the amount of a deceased person's wealth that's shielded from the estate tax from about $5.5 million to more than $11 million. The limit is poised to reset to its original amount in 2025 unless Congress takes action.


Contributing: Susan Tompor of the Detroit Free Press

Follow USA TODAY reporter Nathan Bomey on Twitter @NathanBomey.

This article originally appeared on USA TODAY: Trump tax returns: How rich Americans avoid taxes

[oeb11]

TWK - thank you
almost none of the DPST's - those who are not nomenklatura as Bernie and Kerry - will ever find it necessary to become familiar with the tax law you presented.

[Tiny]

Trump is probably more solvent than I thought he was. Here's a breakdown of Bloomberg's estimate. They base values of buildings on rental rates, square footage, comparable sales and the like.

Vornado Partnership $685 million
Golf Courses and Resort Properties $430 million
40 Wall Street $375 million
725 Fifth Avenue $365 million
6 East 57th Street $360 million
Cash & Other Assets $340 million
Other Properties $315 Million
Old Post Office Hotel $160 million
502 Park Avenue $130 million
Aircraft $30 million
Misc. Liabilities $-540 million
Total: $2.65 billion

[LexusLover]

The sad part of all this hoopla is ....

.... more than likely 99% of the posters in this forum ..... "paid $750 a year in income taxes" for at least one, if not all, of the past four years....2016-2020.

It might take an English major to interpret that statement as it is written as opposed to speculating ....

.... Chris Wallace is challenged with it. "The apple doesn't fall far from the tree!"

Here's a slight hint:

If one paid $800 in a year that person paid $750! And if one paid $10 million in a year then that person paid $750 that year!

[Grace Preston]

Yep. Shows why he's a "billionaire".


His accountants.



Because his history shows that when he just does what he wants, bankruptcy comes calling.

[LexusLover]

Originally Posted by Tiny

Vornado Partnership $685 million
Golf Courses and Resort Properties $430 million
40 Wall Street $375 million
725 Fifth Avenue $365 million
6 East 57th Street $360 million
Cash & Other Assets $340 million
Other Properties $315 Million
Old Post Office Hotel $160 million
502 Park Avenue $130 million
Aircraft $30 million
Misc. Liabilities $-540 million
Total: $2.65 billion

Munchie has him beat by a mile, I'm sure!