What David Cay Johnston figured out about Trump’s taxes from those three pages:
Normally, any part of a loan that is forgiven becomes taxable income, as millions of people who could not repay home mortgages or student loan debt have learned in recent years.
That’s where Section 108 comes in. Three years after Trump bested his bankers, Congress amended that section to let real-estate professionals avoid income taxes on debts that were canceled.
The technique is simple. The taxes due immediately because a debt is forgiven can be exchanged for relinquishing future real-estate tax deductions. Trump agreed to forgo his future right to take about $1 billion worth of depreciation on his casino hotels.
This exchange created a future problem for Trump. Real estate that cannot be depreciated is worth a lot less. Indeed, generous tax benefits drive real-estate investment. So while Trump escaped an immediate income-tax bill, the future tax benefits he gave up would mean that he would likely have to pay income taxes on his salary, fees for licensing his name, and other income.
To solve this problem, Trump sold stock for the first time in 1995. He founded Trump Hotels and Casino Resorts, which which then took ownership of his casino hotels.
That meant Trump got money for selling his casino hotels, while the investors got real estate with greatly diminished tax benefits.
Trump Hotels and Casino Resorts was a complete disaster. It lost money every year. During Trump’s 13 years as chairman, the company lost $1.1 billion. Trump stock fell from a high of $35 to just 17 cents, wiping out investors.
Trump did just fine, though. He was paid $82 million, Fortune magazine estimated. The publicly traded company even took out loans that were used to pay off some of Trump’s remaining obligations to the banks from when he owned his casinos outright.
One thought on “Art of the steal: Three pages”
Where the hell is the shareholders’ derivative action? The statute can’t have run because of fraud.
Comments are closed.