Trump Engaged in Suspect Tax Schemes as He Reaped Riches From His Father
THE SAFETY NET DEPLOYS
Bailouts, collateral, cash on hand — Fred Trump was prepared, and was not about to let bad bets sink his son.
As the 1980s ended, Donald Trump’s big bets began to go bust. Trump Shuttle was failing to make loan payments within 15 months. The Plaza, drowning in debt, was bankrupt in four years. His Atlantic City casinos, also drowning in debt, tumbled one by one into bankruptcy.
What didn’t fail was the Trump safety net. Just as Donald Trump’s finances were crumbling, family partnerships and companies dramatically increased distributions to him and his siblings. Between 1989 and 1992, tax records show, four entities created by Fred Trump to support his children paid Donald Trump today’s equivalent of $8.3 million.
Fred Trump’s generosity also provided a crucial backstop when his son pleaded with bankers in 1990 for an emergency line of credit. With so many of his projects losing money, Donald Trump had few viable assets of his own making to pledge as collateral. What has never been publicly known is that he used his stakes in the mini-empire and the high-rise for the elderly in East Orange as collateral to help secure a $65 million loan.
Tax records also reveal that at the peak of Mr. Trump’s financial distress, his father extracted extraordinary sums from his empire. In 1990, Fred Trump’s income exploded to $49,638,928 — several times what he paid himself in other years in that era.
Fred Trump, former employees say, detested taking unnecessary distributions from his companies because he would have to pay income taxes on them. So why would a penny-pinching, tax-hating 85-year-old in the twilight of his career abruptly pull so much money out of his cherished properties, incurring a tax bill of $12.2 million?
The Times found no evidence that Fred Trump made any significant debt payments or charitable donations. The frugality he brought to business carried over to the rest of his life. According to ledgers of his personal spending, he spent a grand total of $8,562 in 1991 and 1992 on travel and entertainment. His extravagances, such as they were, consisted of buying his wife the odd gift from Antonovich Furs or hosting family celebrations at the Peter Luger Steak House in Brooklyn. His home on Midland Parkway in Jamaica Estates, Queens, built with unfussy brick like so many of his apartment buildings, had little to distinguish it from neighboring houses beyond the white columns and crest framing the front door.
时报没有找到弗雷德·特朗普有任何大笔债务支付或慈善捐赠的证据。他一生在经营上恪行节俭。据他的个人支出账薄，在旅行和娱乐上，1991年和1992年他总共花了8562美元。他的奢侈消费（如果够得上奢侈的话）包括从安东诺维奇皮草行(Antonovich Furs)给妻子买的零星礼物，或在布鲁克林的彼得鲁格牛排屋(Peter Luger Steak House)举办的家庭庆祝活动。他位于皇后区牙买加庄园(Jamaica Estates)米德兰公园路(Midland Parkway)的家，与他盖的许多公寓楼一样，是用毫不讲究的砖砌成的，除了白色的立柱和大门框上的纹章外，与相邻的房子没有什么区别。
There are, however, indications that he wanted plenty of cash on hand to bail out his son if need be.
Such was the case with the rescue mission at his son’s Trump’s Castle casino. Donald Trump had wildly overspent on renovations, leaving the property dangerously low on operating cash. Sure enough, neither Trump’s Castle nor its owner had the necessary funds to make an $18.4 million bond payment due in December 1990.
On Dec. 17, 1990, Fred Trump dispatched Howard Snyder, a trusted bookkeeper, to Atlantic City with a $3.35 million check. Mr. Snyder bought $3.35 million worth of casino chips and left without placing a bet. Apparently, even this infusion wasn’t sufficient, because that same day Fred Trump wrote a second check to Trump’s Castle, for $150,000, bank records show.
With this ruse — it was an illegal $3.5 million loan under New Jersey gaming laws, resulting in a $65,000 civil penalty — Donald Trump narrowly avoided defaulting on his bonds.
BIRDS OF A FEATHER
Both the son and the father were masters of manipulating the value of their assets, making them appear worth a lot or a little depending on their needs.
As the chip episode demonstrated, father and son were of one mind about rules and regulations, viewing them as annoyances to be finessed or, when necessary, ignored. As described by family members and associates in interviews and sworn testimony, theirs was an intimate, endless confederacy sealed by blood, shared secrets and a Hobbesian view of what it took to dominate and win. They talked almost daily and saw each other most weekends. Donald Trump sat at his father’s right hand at family meals and participated in his father’s monthly strategy sessions with his closest advisers. Fred Trump was a silent, watchful presence at many of Donald Trump’s news conferences.
“I probably knew my father as well or better than anybody,” Donald Trump said in a 2000 deposition.
They were both fluent in the language of half-truths and lies, interviews and records show. They both delighted in transgressing without getting caught. They were both wizards at manipulating the value of their assets, making them appear worth a lot or a little depending on their needs.
Those talents came in handy when Fred Trump Jr. died, on Sept. 26, 1981, at age 42 from complications of alcoholism, leaving a son and a daughter. The executors of his estate were his father and his brother Donald.
Fred Trump Jr.’s largest asset was his stake in seven of the eight buildings his father had transferred to his children. The Trumps would claim that those properties were worth $90.4 million when they finished converting them to cooperatives within a few years of his death. At that value, his stake could have generated an estate tax bill of nearly $10 million.
But the tax return signed by Donald Trump and his father claimed that Fred Trump Jr.’s estate owed just $737,861. This result was achieved by lowballing all seven buildings. Instead of valuing them at $90.4 million, Fred and Donald Trump submitted appraisals putting them at $13.2 million.
Emblematic of their audacity was Park Briar, a 150-unit building in Queens. As it happened, 18 days before Fred Trump Jr.’s death, the Trump siblings had submitted Park Briar’s co-op conversion plan, stating under oath that the building was worth $17.1 million. Yet as Fred Trump Jr.’s executors, Donald Trump and his father claimed on the tax return that Park Briar was worth $2.9 million when Fred Trump Jr. died.
This fantastical claim — that Park Briar should be taxed as if its value had fallen 83 percent in 18 days — slid past the I.R.S. with barely a protest. An auditor insisted the value should be increased by $100,000, to $3 million.
During the 1980s, Donald Trump became notorious for leaking word that he was taking positions in stocks, hinting of a possible takeover, and then either selling on the run-up or trying to extract lucrative concessions from the target company to make him go away. It was a form of stock manipulation with an unsavory label: “greenmailing.” The Times unearthed evidence that Mr. Trump enlisted his father as his greenmailing wingman.
On Jan. 26, 1989, Fred Trump bought 8,600 shares of Time Inc. for $934,854, his tax returns show. Seven days later, Dan Dorfman, a financial columnist known to be chatty with Donald Trump, broke the news that the younger Trump had “taken a sizable stake” in Time. Sure enough, Time’s shares jumped, allowing Fred Trump to make a $41,614 profit in two weeks.
弗雷德·特朗普的报税表显示，1989年1月26日，他花934854美元购买了8600股时代公司(Time Inc.)的股票。七天后，众所周知与唐纳德·特朗普有私下往来的金融专栏作家丹·多尔夫曼(Dan Dorfman)透露，唐纳德·特朗普已“购买了相当份额的时代股票”。果然，时代的股价大幅上涨，弗雷德·特朗普得以在两周内获得了41614美元的利润。
Later that year, Fred Trump bought $5 million worth of American Airlines stock. Based on the share price — $81.74 — it appears he made the purchase shortly before Mr. Dorfman reported that Donald Trump was taking a stake in the company. Within weeks, the stock was over $100 a share. Had Fred Trump sold then, he would have made a quick $1.3 million. But he didn’t, and the stock sank amid skepticism about his son’s history of hyped takeover attempts that fizzled. Fred Trump sold his shares for a $1.7 million loss in January 1990. A week later, Mr. Dorfman reported that Donald Trump had sold, too.
With other family members, Fred Trump could be cantankerous and cruel, according to sworn testimony by his relatives. “This is the stupidest thing I ever heard of,” he’d snap when someone disappointed him. He was different with his son Donald. He might chide him — “Finish this job before you start that job,” he’d counsel — but more often, he looked for ways to forgive and accommodate.
By 1987, for example, Donald Trump’s loan debt to his father had grown to at least $11 million. Yet canceling the debt would have required Donald Trump to pay millions in taxes on the amount forgiven. Father and son found another solution, one never before disclosed, that appears to constitute both an unreported multimillion-dollar gift and a potentially illegal tax write-off.
In December 1987, records show, Fred Trump bought a 7.5 percent stake in Trump Palace, a 55-story condominium building his son was erecting on the Upper East Side of Manhattan. Most, if not all, of his investment, which totaled $15.5 million, was made by exchanging his son’s unpaid debts for Trump Palace shares, records show.
Four years later, in December 1991, Fred Trump sold his entire stake in Trump Palace for just $10,000, his tax returns and financial statements reveal. Those documents do not identify who bought his stake. But other records indicate that he sold it back to his son.
Under state law, developers must file “offering plans” that identify to any potential condo buyer the project’s sponsors — in other words, its owners. The Trump Palace offering plan, submitted in November 1989, identified two owners: Donald Trump and his father. But under the same law, if Fred Trump had sold his stake to a third party, Donald Trump would have been required to identify the new owner in an amended offering plan filed with the state attorney general’s office. He did not do that, records show.
He did, however, sign a sworn affidavit a month after his father sold his stake. In the affidavit, submitted in a lawsuit over a Trump Palace contractor’s unpaid bill, Donald Trump identified himself as “the” owner of Trump Palace.
Under I.R.S. rules, selling shares worth $15.5 million to your son for $10,000 is tantamount to giving him a $15.49 million taxable gift. Fred Trump reported no such gift.
According to tax experts, the only circumstance that would not have required Fred Trump to report a gift was if Trump Palace had been effectively bankrupt when he unloaded his shares.
Yet Trump Palace was far from bankrupt.
Property records show that condo sales there were brisk in 1991. Trump Palace sold 57 condos for $52.5 million — 94 percent of the total asking price for those units.
Donald Trump himself proclaimed Trump Palace “the most financially secure condominium on the market today” in advertisements he placed in 1991 to rebut criticism from buyers who complained that his business travails could drag down Trump Palace, too. In December, 17 days before his father sold his shares, he placed an ad vouching for the wisdom of investing in Trump Palace: “Smart money says there has never been a better time.”
By failing to tell the I.R.S. about his $15.49 million gift to his son, Fred Trump evaded the 55 percent tax on gifts, saving about $8 million. At the same time, he declared to the I.R.S. that Trump Palace was almost a complete loss — that he had walked away from a $15.5 million investment with just $10,000 to show for it.
Federal tax law prohibits deducting any loss from the sale of property between members of the same family, because of the potential for abuse. Yet Fred Trump appears to have done exactly that, dodging roughly $5 million more in income taxes.
The partnership between Fred and Donald Trump was not simply about the pursuit of riches. At its heart lay a more ambitious project, executed to perfection over decades — to create that origin story, the myth of Donald J. Trump, Self-Made Billionaire.
Donald Trump built the foundation for the myth in the 1970s by appropriating his father’s empire as his own. By the late 1980s, instead of appropriating the empire, he was diminishing it. “It wasn’t a great business, it was a good business,” he said, as if Fred Trump ran a chain of laundromats. Yes, he told interviewers, his father was a wonderful mentor, but given the limits of his business, the most he could manage was a $1 million loan, and even that had to be repaid with interest.
Through it all, Fred Trump played along. Never once did he publicly question his son’s claim about the $1 million loan. “Everything he touches seems to turn to gold,” he told The Times for that first profile in 1976. “He’s gone way beyond me, absolutely,” he said when The Times profiled his son again in 1983. But for all Fred Trump had done to build the myth of Donald Trump, Self-Made Billionaire, there was, it turned out, one line he would not allow his son to cross.