The news was released Wednesday in which Donald Trump paid $0 of income tax in 2020, which rekindled an old-fashioned belief that the former President isn’t really a billionaire.
The theory is erroneous. Trump’s assets total around $4.3 billion, which makes its net worth $3.2 billion once you account for $1.1 billion in debt. Trump has real estate–mansions, golf course offices, and mansions that are worth actual cash, even if his tax returns may suggest that he is not. The tax system is rigged to allow for gambling. Been a source of satisfaction for Trump, who boasted the fact that tax evasion “makes me smarter” during a presidential debate.
How can someone earn so many dollars yet claim such a small amount of earnings? This is a question Forbes asked two years ago following The New York Times’ revelation that Trump paid taxes of $750 in 2017. Trump’s financial situation has been a bit different since then, but the answer has remained the same.
This scandal, described in this report in September 2020, isn’t only the fact that Trump has paid such a low amount of taxes. That he was able to do it while remaining extremely rich.
“Is Donald Trump really a billionaire?” everyone seemed to be asking on Sunday night, following The New York Times dropping an explosive report on Trump’s tax burden that huge detailed losses in certain years and a weak income in others. The answer is yes, indeed, he is.
In reality, Trump is a multi-billionaire with a value of $2.5 billion, according to our calculations. His portfolio, which includes commercial properties, golf properties, branding companies, and branding businesses, is valued at $3.66 billion prior to debt. The President is able to leverage a decent amount of leverage–increased to approximately $1.13 billion, but not enough to bring his net worth to less than one billion dollars.
To comprehend the way Donald Trump could be so wealthy and yet look so poor, it’s important to understand the distinction between (a) tax-deductible earnings and (b) operating revenue. Taxable income is what individuals tell their Internal Revenue Service they earned after subtracting a slew of other things, including depreciation, interest loss, and in the case of Trump, questionable business expenses. Operating income is the sum of money businesses earn from their regular business operations without a lot of accounting tricks and financial techniques.
Many of Donald Trump’s businesses produce a large amount of operating revenue, even when his IRS reports show small amounts of tax-deductible income. It’s crucial because operating income, not tax-deductible income, is an important element in determining the worth of real estate assets. Buyers are interested in knowing the value of a property in annual earnings. What happens following that when filing a personal tax return – the amount of financial savvy sellers can employ to make their operating profits appear as a loss and thus avoid taxation–isn’t important for a prospective buyer.
“There’s the tax world as well as the actual world,” claims Eric Anton, a commercial real estate broker in New York City. “They’re completely different.”
Trump’s income from operations is authentic and documented, and it’s been documented in the form of the paperwork provided by local tax officials as well as The Securities and Exchange Commission and the President’s business associates. Beware: The report isn’t about whether Trump is in financial trouble (the Times story notes that tax returns don’t show the net worth of a person). The story, rather, can be described as the fact that Donald Trump seems to have not paid taxes despite the huge profits he made operating on specific properties. In this way, he has figured out how to share small portions of his wealth with the nation he is now leading.
Calculating the net worth of Donald Trump is a simple math equation: multiply the value of assets, then subtract the liabilities’ value. Of course, determining the value of an asset isn’t easy. In the case of a commercial real estate structure, one must look at the area, the size of the building, the multiples, as well as the income — the net operating income, which is.
Take forty Wall Street, a skyscraper located in New York City that Donald Trump owns. Documents submitted to the Securities and Exchange Commission show that Trump’s net operating earnings of $18.1 million in the year 2019. There are 1.2 million square feet of space in the structure, according to an additional document submitted to the SEC.
In interviews that were conducted in the last few months, 8 New York City real estate experts suggested multiples that could be applied to those square footage and income figures. On average, they believed that the net operating profit should be around 5.4 percent of the value. This suggests that the property had a value of $336 million. However, the same experts also suggested that they value the property at 400 dollars per square foot. This amounts to a total that is $466 million. The exact value isn’t easy, but using the average of the two methods as $401 million appears to be a reasonable method.
Perform the same exercise over Trump’s entire portfolio, and the assets will add up to approximately $3.7 billion. The most crucial factor in nearly every calculation is the net operating income. It could be wiped out before Trump’s accountants are done filing his taxes; however, it’s clear that it’s present at the beginning and is documented in a variety of other documents.
The President’s partner in 555 California Street, a publicly traded real estate company, named Vornado, has disclosed in its public filings that a 70 percent portion of the building took off $60 million in net operating earnings in 2019. That’s a total of Trump’s stake in the building generated $26 million. A document relating to a loan secured against 1290 Avenue of the Americas, another structure in which Trump has a 30% stake, reports $96 million in 2019’s net operating profits, which indicates that Trump’s share was around $29.9 million. In addition to $18.1 million in 2019 operating profits from 40 Wall Street, SEC filings include $13.3 million for Trump Tower, $1.7 million at Trump Plaza, and $600,000 at Trump International Hotel & Tower. The city of New York estimates operating income for commercial space in Trump World Tower ($1 million), Trump Parc ($600,000), Trump Parc East ($900,000), and Trump Park Avenue (roughly $2.4 million). The Trump Organization representative told Forbes in September that the store of the President, located at 6 East 57th Street, hauled in $10.7 million in profit per year. In total, Trump’s stakes in the properties, which include apartments in a few of them, are worth around $2.3 billion prior to subtracting the debt.
Trump’s portfolio of golf clubs is much more complex. He has 10 classic U.S. golf clubs, which brought in $108 million of revenues in 2019, as per an examination of his annual financial report on disclosure. It’s not easy to figure out the operating margins of these properties, but the past performances can provide a hint. A 2014 income report for the Trump club located in Westchester County, New York, has a revenue of $1.1 million from $5.6 million in revenue, which implies a margin of 20 percent. Documents related to the Trump Club in Jupiter, Florida, show margins of 19 percent in 2013, 13 percent in 2014, and 13% in 2015. Following the revelations, seven golfers believed that pre-Covid margins were 21% on average, which would indicate that the club was earning totals of $23 million in the year prior. If the properties were actually producing such a large amount, they would be worth as much as $200 million in the present. Even if the properties are losing money, they’ll remain worth at minimum $100 million.
The Times report doesn’t include the revenue from any of Trump’s golf courses. However, it does provide specifics about his golf courses, which were already well-known to be in financial trouble. European regulatory filings show the same losses year after year for Trump’s three overseas properties. The resort of Trump National Doral, the Trump National Doral, resort of the President located in Miami. The net operating earnings fell by $13.8 million in 2015, up to $12.4 million in 2016, and $4.3 million in 2017, as per the documents obtained by local authorities. A representative from Trump Organization told Forbes that the profit climbed to $9.7 million in the year 2018. The Times reports that Trump purchased Doral in the amount of $150 million and later paid an additional $213 million to the company, resulting in an overall amount investment of that was $ 363 million. Forbes estimates that it’s worth 153 million. Based on that calculation, it means that the President is $210 million deep in the hole.
In the middle of September, Forbes reported that Doral and the Trump International Hotel in Washington, D.C. The hotel appeared to be in financial trouble. The Times story confirms that–and includes more details. This D.C. hotel opened in 2016, and by the end of the year, Trump had already declared tax losses of $55.5 million, according to Times. The hotel could be worth something. One investor made an offer of $175 million before the coronavirus destroyed hotels. The Trumps rejected the offer. Forbes has now estimated that the hotel’s value is around $168 million. It appears certain that it is still leaking cash.
There are a lot of businesses that generate revenue for Trump’s portfolio. These include the 50% stake in a hotel-condo portfolio located in Las Vegas, a licensing business, and Mar-aLago. Each of these earns substantial sums. There are also toys, but they aren’t: airplanes, helicopters, homes, and airplanes located in New York, Florida, and St. Martin. Even if they’re not making a lot of money, however, they’re still worth a lot.
Take all of Trump’s assets — the ones that generate huge cash, those that are a loss for the company, as well as those which don’t operate as companies–, and you’ll get the $3.7 billion number. Real assets that are worth money. But that’s not what Trump’s net worth is. To calculate that figure, it is necessary to take into account the liabilities.
Trump has been known to declare himself to be the “king of the debts,” a nickname that was appropriate at the beginning of his career when he was teetering towards bankruptcy. More recently, he has been teetering towards bankruptcy as President; Trump has accrued massive federal budget deficits. As a businessman, Trump has been playing more cautiously lately. Sure, Trump’s estimated $1.1 billion of debt is an enormous level of leverage. If you take into account Trump’s $3.7 billion of assets, the majority of his bankers should be able to sleep at night.
A significant portion of his liabilities is concentrated around the 1290 Avenue of the Americas in New York City and 555 California Street in San Francisco, Two skyscrapers that which he shares with Vornado. In the most recent quarter-end reports, Vornado disclosed $950 million of debt for its New York property and $543 million in the San Francisco one. It’s $1.5 billion of total debt. Trump’s 30 percent share comes up to $448 million.
The President is owed hundreds of millions of dollars more on other Manhattan structures, as documented in SEC documents and property documents. In Trump Tower, he has 100 million in loans. On forty Wall Street, he owes $139 million. For Trump Plaza, $13 million. The Trump International Hotel & Tower, $6.5 million. For Trump Park Avenue, an estimated $10 million. It’s a total of $268 million which brings the total to $716 million.
The President refinanced $125 million via two mortgages that were recorded publicly at Doral. The company negotiated an agreement to loan $170 million from Doral’s D.C. hotel. The Times story lists an amount on the loan that is $160 million. It’s possible Trump has paid a portion of it off. The Financial disclosure report of the President shows that he has liabilities to his Chicago tower of over $75 million. Add on another $360 million to create $1.1 billion.
Trump has an 11 million mortgage on the mansion located in Palm Beach, plus another loan for the palace situated in Bedford, New York. He took on a mortgage at his golf club in D.C. and two mortgages on some of the New Jersey golf courses. If you add those up, the total of still rounds comes to $1.1 billion.
Being in debt means paying interest and reduces the earnings Trump must disclose on his tax return. However, the President appears to be using different methods to lower his tax burden.
Donald Trump has long prided himself on his ability to cheat taxes. “Makes me smarter,” he famously declared during a debate with the 2016 presidential candidate. It could also render him more vulnerable to being investigated by investigators looking over his financial information.
There’s a lot to take into consideration. For instance, Trump appears to have employed his daughter Ivanka be a “consultant” to his property company while she was an employee for the company. Donald Trump wrote off $26 million in “unexplained” consulting fees between 2010 and 2018, According to Times. “If the payments made to his daughter were compensation for her work, there’s no reason to believe that Donald Trump did it in this way,” the Times says, “other than to reduce the tax liability of his own. A different and more legally risky possibility is that these payments could have been a means of transferring the assets of his kids without incurring taxes on gifts.”
The Times also details extravagant expenses, including more than $70,000 in hairstyling fees–that were written off as business expenses. Trump Corp. Trump Corp., a company owned 100% by Donald Trump, wrote off the costs that were paid by Alan Futerfas, an attorney who was representing Donald Trump Jr. in the Russia investigation, according to the paper. Another questionable decision was Trump identified his house located in Bedford, New York, as an investment property, opening the way to write off $2.2 million of property tax, as per the Times.
These maneuvers–and the many others detailed in the report–were that they were successful. In 2016 and in 2017, as reported by the Times, Trump paid just $750 in federal income taxes. The issue isn’t just that he’s broke, and he’s paying such a small amount. It’s that he’s still quite wealthy.
