President Donald Trump has long claimed he is a self-made man.
“I built what I built myself,” he has repeatedly boasted.
He claims he started off with a small loan of “$1 million” from his father but it was his skills that turned that money into a gigantic business empire worth billions.
An investigative New York Times report found that “loan” was actually closer to $413 million and most of it was never repaid to Fred Trump. The money, at least most of it, was transferred using clever tax-evasion techniques, including some that would be considered “outright fraud.”
All in all, the Trump children received almost $1 billion from their parents and they would only end up paying a mere 5 percent of the money in taxes — the tax rates on gifts and inheritances at the time when the money was transferred was 55 percent. The Trumps would have been liable to pay almost $550 million in taxes but got away with only $52.2 million.
The sources of Trump’s wealth have long been questioned but the commander-in-chief has always claimed he had no one’s back but his own to reach where he did with his business.
When Trump tells his story, it is of a man who decided not to be another one of the inheritors of his father’s wealth, who then embarked on a successful business journey that would land him hotels, casinos and gold courses all over the world.
But that story is more fiction than truth.
According to the report, Trump was earning $200,000 a year, in today’s dollars, when he was three. He was a millionaire by the time he was eight— all thanks to his father’s empire.
Despite what he claims, Trump never really broke free from Fred Trump, who constantly came to his rescue whenever a new business venture would fail — and many did.
In late 1980s, many of Trump’s businesses started to crumble. As the POTUS weathered the storm, his family partnerships and companies cushioned him with increased payouts.
Fred Trump created four bodies that, from 1989 to 1992, paid Trump today’s equivalent of $8.3 million, as the president went to banks for a loan to help his businesses get back on track.
It was also indicated in the findings of the report that when Trump was at the height of his financial turmoil, in 1990, his father took out a gigantic sum of $50 million from his empire, to presumably help his son with cash on hand, if the need arises.
So how did the Trumps avoid paying taxes when there was a direct cash flow from father to son?
According to the report, Trump already owed Fred Trump at least $11 million by 1987, if the POTUS’ father would forego the debt, Trump would have been liable to pay millions in taxes.
So, they found a new solution: According to records, in December 1987, Fred Trump bought 7.5 percent stake in Trump Palace, his son’s condo tower in Manhattan, for $15.5 million. After four years, he sold the same stake back to his son for a mere $10,000.
According to tax experts cited by the Times, under IRS rules, selling the stake back to Trump for a comparatively negligible amount of money would be considered a multimillion-dollar gift but no such entry was made in Fred Trump’s tax returns. But what was in the tax return was a huge tax write-off citing the very same transaction. Federal law does not allow any such deduction when the sale or exchange of property is between family members. From this transaction only, Fred Trump approximately saved $8 million in gift taxes and $5 million in income taxes.
But Trump and his father worked together to build his “self-made” image.
If Fred Trump was the financier, Trump was the face who would sell of those ideas. While his father worked in the shadows, providing monetary backbone to his often failing projects, Trump presented this image of a successful businessman that landed him national popularity with TV shows like “The Apprentice” and then, eventually, a seat at the Oval Office.
According to the Times, in late 1990s, Trump sent his father a document asking for significant changes in his will.
This angered Fred Trump, who grew worried his son would use his long-build empire as collateral to save his own business ventures. It also shed light on another troubling aspect for the Trumps: Fred Trump was ailing and if a new plan was not hatched soon, he would soon leave an empire, worth tens of millions of dollars, up for the 55 percent inheritance tax.
So the Trumps, with the POTUS in central role, came up with another tax evasion strategy that would be considered fraudulent in some cases.
The Trump family reportedly created a company called All County Building Supply & Maintenance, which on paper purchased everything from boilers to cleaning supplies for Fred Trump’s buildings but in reality it never did. What it did was siphon cash from Trump’s father’s empire by marking up the price of the purchases already made by the employees. Those mark-ups would then go on to Trump, his siblings and a cousin.
Lee-Ford Tritt, a leading expert in gift and estate tax law at the University in Florida, said The Trumps’ use of the sham company looked like a “disguised gift.”
Now that the company was set up, the largest shares were transferred to Trump and his siblings, using a special kind of trust called a grantor-retained annuity trust, or GRAT.
GRAT is used to transfer inherited wealth while evading the 55 percent estate tax. But gift taxes still had to be paid and they were determined based on the market value of Fred Trump’s empire. Records show Trump’s parents yet again evaded millions in taxes after they presented undervalued figures of their assets in tax returns.
In 1995, Fred Trump’s gift tax return summed up the value of his properties at $41.4 million; however, in 2004, banks put them around the value of $900 million.
When Fred Trump died in 1999, his family’s tax-evasion strategies seemed to have worked. There was no prominent chunk of wealth to be taxed upon. The largest single item in his estate tax return was an I.O.U. (a signed informal notice of an unpaid debt) from Trump, worth $10.3 million.
For whatever was left of Fred Trump’s empire, on paper, was again grossly undervalued.
What Fred Trump has feared though, proved true, when Trump sold his empire in 2003, in midst of another financial turmoil. He made $177.3 million, $236.2 million in today’s dollars, from the sale. But apparently the sale could have been worth hundreds of millions more. It seems after years of saving money through taxes. Trump, in his last payout from his father, had made a bad deal.
In the light of the report, Trump’s lawyer, Charles J. Harder, in a statement, refuted all claims of tax fraud.
“There was no fraud or tax evasion by anyone. The facts upon which The Times bases its false allegations are extremely inaccurate,” he said. “President Trump had virtually no involvement whatsoever with these matters,” he continued, saying the president had delegated those tasks to relatives and tax professionals. “The affairs were handled by other Trump family members who were not experts themselves and therefore relied entirely upon the aforementioned licensed professionals to ensure full compliance with the law.”
Trump himself has not yet publicly addressed the article, despite several requests from the NYT.
The New York state tax department told The Associated Press that it is “vigorously pursuing all appropriate avenues of investigation.” Although, experts say there is a slim chance, if any, that Trump will be persecuted if the report’s findings are corroborated, because of statute of limitations.
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