A for­tune built on fraud; a ‘self-made’ man of his own myth

Houston Chronicle Sunday - - MONEY - michael@ michael the smart money.com twit­ter.com/michael_­tay­lor

Wed­nes­day’s in­ves­ti­ga­tion by the New York Times dis­closed pre­vi­ously un­known in­for­ma­tion about the pres­i­dent’s past through a re­view of the busi­ness and fi­nan­cial records of his fa­ther, Fred Trump. I am in awe of the year­long in­ves­ti­ga­tion for what it re­veals about two things: Don­ald Trump’s in­her­i­tance and Trump fam­ily tax fraud.

Read­ers of this col­umn al­ready know that taxes and in­her­i­tance are both ex­tremely my jam.

Based on more than 100,000 doc­u­ments and in­ter­views with peo­ple who worked with and for Fred Trump’s busi­ness, the in­ves­ti­ga­tion re­veals trans­fers and sham busi­nesses cre­ated to fun­nel money to Fred’s chil­dren and to avoid gift and es­tate taxes.

High­lights of the in­ves­ti­ga­tion in­clude:

• An es­ti­mated $1 bil­lion in wealth trans­ferred to Fred Trump’s chil­dren, which would have cre­ated a $550 mil­lion tax li­a­bil­ity, on which the Trump heirs only paid $52.2 mil­lion. That’s nearly $500 mil­lion in es­tate tax avoid­ance. The Times quotes tax ex­perts who found “a pat­tern of de­cep­tion and ob­fus­ca­tion” in the meth­ods used.

• A sham com­pany called “All County Build­ing Sup­ply & Main­te­nance,” owned by Trump and his sib­lings, pur­chased MICHAEL sup­plies for TAY­LOR Fred Trump’s con­struc­tion busi­ness and marked them up by 20 to 50 per­cent, for the ben­e­fit of chil­dren, as a way of trans­fer­ring the fa­ther’s wealth to his chil­dren and avoid­ing gift taxes. This is il­le­gal gift tax avoid­ance.

• A low­ball val­u­a­tion of $41.4 mil­lion for Fred Trump’s real es­tate hold­ings, on his death, on prop­er­ties sold by his heirs within the decade for ap­prox­i­mately $662 mil­lion in or­der to avoid es­tate taxes. This is il­le­gal es­tate tax avoid­ance.

• 295 dif­fer­ent in­come streams from Fred Trump’s busi­nesses to Don­ald Trump over five decades, from land­lord­ing to man­age­ment in­come to mort­gage in­come toAll County Build­ing & Sup­ply Main­te­nance. Con­trary to Trump’s claims, his fa­ther con­tin­u­ously shov­eled money at him for five decades. This un­der­cuts Trump’s ver­sion of him­self as a self-made busi­ness­man who “only re­ceived a mil­lion-dol­lar loan” from his fa­ther.

Does it mat­ter if Don­ald Trump is mostly a trust fund scion of a real es­tate fam­ily, bailed out by his fa­ther’s vast for­tune in the early 1990s and again in the 2000s, de­spite his pre­ferred nar­ra­tive?

Not re­ally. Fi­nan­cial priv­i­lege is an un­der­ap­pre­ci­ated as­pect of Amer­i­can po­lit­i­cal life, but it’s not go­ing to change most cit­i­zens’ views of Don­ald Trump’s fit­ness for high of­fice. I have no par­tic­u­lar prob­lem with a trust fund kid be­com­ing pres­i­dent, even if he in­cor­rectly be­lieves he “did it the hard way.”

Does it mat­ter if Trump and his fam­ily com­mit­ted mas­sive tax fraud through sham com­pa­nies and il­le­gally un­der­valu­ing real es­tate hold­ings? Yes. Well, it should. One of the on­go­ing mys­ter­ies of Trump as a can­di­date was why he broke with 45 years of tra­di­tion and re­fused to re­lease his tax re­turns. The Times in­ves­ti­ga­tion does not com­pletely ex­plain that mys­tery, but it does il­lus­trate the ad­van­tage of dis­clo­sure. What else would see the light of day if we had his per­sonal and busi­ness tax re­turns for the past 20 years?

Trump sup­port­ers have their po­lit­i­cal or per­sonal rea­sons for sup­port­ing the pres­i­dent, and that’s fine. On the other side of the aisle, op­po­nents of the pres­i­dent have long wor­ried about a wide range of dis­qual­i­fy­ing be­hav­iors.

From a po­lit­i­cal per­spec­tive, I don’t ex­pect an in­ves­ti­ga­tion by the New York Times to sway vot­ers. Vot­ers al­ready be­lieve what they be­lieve.

On the other hand, I’m old enough to re­mem­ber when de­fraud­ing the IRS was dis­qual­i­fy­ing for hold­ing an im­por­tant govern­ment job, no mat­ter what your po­lit­i­cal lean­ings. En­forc­ing this past tax fraud would de­pend on the po­lit­i­cal lead­ers in Congress, cur­rently mostly al­lied with Trump, as well as the com­pli­cat­ing fac­tor that the IRS cur­rently re­ports to Trump. It’s not clear if it will hap­pen. If Al Capone him­self had been ap­pointed di­rec­tor of the Bu­reau of To­bacco, Al­co­hol, Firearms and Ex­plo­sives, it would not be as ironic or prob­lem­atic as the fact that the IRS ul­ti­mately re­ports to Trump.

I can al­ready an­tic­i­pate some read­ers’ re­sponse to ex­cuse Trump’s ac­tions be­cause of a be­lief that busi­ness own­ers gen­er­ally, or maybe real es­tate de­vel­op­ers specif­i­cally, game the tax sys­tem on val­u­a­tions and joint ven­tures. But not this brazenly. Not at this scale. Not so clearly flout­ing IRS rules on gift and es­tate taxes. All I can say is, if that’s your view you need to read the in­ves­ti­ga­tion in full.

Pres­i­dent Richard Nixon set the prece­dent for dis­clos­ing a pres­i­dent’s tax re­turn in 1973, fa­mously say­ing, “Peo­ple have got to know whether or not their pres­i­dent is a crook.”

Fol­low­ing publi­ca­tion of Wed­nes­day’s New York Times in­ves­ti­ga­tion, we have the an­swer about Trump.

Newspapers in English

Newspapers from USA

© PressReader. All rights reserved.