2020-09-28_NY_Times_Article_on_Trump_Tax

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00:00:30.240 | - Welcome to Radical Personal Finance,

00:00:33.280 | a show dedicated to providing you with the knowledge,

00:00:35.080 | skills, insight, and encouragement you need

00:00:37.240 | to live a rich and meaningful life now

00:00:39.600 | while building a plan for financial freedom

00:00:40.960 | in 10 years or less.

00:00:42.240 | My name is Joshua, I am your host,

00:00:43.480 | and today on Radical Personal Finance,

00:00:45.720 | we're going to discuss the recent New York Times study,

00:00:49.080 | the president's taxes long concealed records

00:00:51.840 | show Trump's chronic losses and years of tax avoidance.

00:00:56.840 | I'm gonna go through this story with you

00:00:58.280 | in an extremely detailed way.

00:01:00.640 | I'm gonna give you an overview,

00:01:01.940 | tell you what's in the article, what's not in the article,

00:01:04.480 | and then we'll go through it in an extremely detailed way

00:01:07.440 | so that you can get an idea of some lessons

00:01:11.920 | that you can learn and apply to your own life.

00:01:14.840 | And I'll talk to you about what's behind the scenes

00:01:18.040 | so that you can feel much more competent

00:01:20.440 | when discussing this or really any other kind of article.

00:01:25.240 | This article in the New York Times

00:01:27.040 | is going to read, I guess I should say,

00:01:29.440 | obviously it's gonna read differently

00:01:30.960 | depending on the political background that you come from,

00:01:33.320 | but it's gonna be read very differently

00:01:35.360 | based upon whether you have any knowledge

00:01:37.640 | or familiarity with the tax code in general,

00:01:39.840 | how taxes work in the United States,

00:01:42.280 | how business works, et cetera, or if you don't.

00:01:45.260 | And for that reason, it's really fascinating

00:01:48.880 | to look at people's responses to this article

00:01:51.560 | because the responses vary dramatically

00:01:54.160 | depending on, well, I guess somebody's exposure to it.

00:01:59.040 | So first, let me give you Joshua's summary of the article.

00:02:02.920 | We begin with the lead.

00:02:03.740 | The New York Times obtained Donald Trump's tax information

00:02:06.080 | extending over more than two decades,

00:02:07.980 | revealing struggling properties, vast write-offs,

00:02:10.840 | an audit battle, and hundreds of millions in debt

00:02:13.720 | coming due.

00:02:15.000 | In short, the New York Times obtained, evidently,

00:02:18.120 | all of Trump's tax returns over the last 15 years or so,

00:02:20.640 | including returns from the business organizations

00:02:23.880 | that he is involved in.

00:02:25.280 | They've evidently analyzed those returns,

00:02:27.680 | and they basically wanted to make a few basic statements.

00:02:31.560 | Number one, there was no evidence of malfeasance uncovered

00:02:35.440 | with regard to Russia or other kinds of basic

00:02:38.600 | allegations that have been being made.

00:02:42.920 | The basic arguments that they tried to advance

00:02:45.440 | in this article are, number one,

00:02:47.080 | that President Trump has lost lots and lots of money

00:02:50.400 | over the years.

00:02:51.240 | And I think that's probably

00:02:52.920 | when the authors were writing it,

00:02:54.480 | trying to say, "What do we talk about?"

00:02:56.200 | They were basically trying to say,

00:02:57.380 | "Well, let's prove that President Trump

00:02:59.080 | "is not a very good businessman

00:03:00.580 | "because he's lost lots of money."

00:03:01.900 | That would be number one.

00:03:03.240 | With regard to potential areas of misdeeds,

00:03:06.360 | they talk extensively about a few basic things.

00:03:09.120 | Number one is the use of business losses

00:03:12.600 | across the organization,

00:03:13.880 | including a 70-something million dollar tax deduction

00:03:17.740 | that had been claimed for and filed for

00:03:20.040 | from an event a number of years ago.

00:03:23.040 | We'll talk into that number in a little bit.

00:03:25.100 | Consulting fees and also deductions,

00:03:27.180 | whether the deductions are valid or not.

00:03:31.180 | Now, I think for the anti-Trump crowd,

00:03:34.040 | unfortunately, there's no smoking gun in the taxes.

00:03:37.320 | And this is hard, it's hard to overstate

00:03:39.220 | how important this story is in political terms.

00:03:42.560 | There have been many political consultants

00:03:44.360 | who for many years have been saying,

00:03:45.400 | "Well, if we could just get ahold of the tax returns,

00:03:47.460 | "then we could prove all of these things

00:03:49.140 | "about President Trump's crookedness

00:03:51.360 | "and all the things that he's done wrong,

00:03:52.760 | "and then we'll be able to make that case

00:03:54.900 | "as a slam dunk case."

00:03:56.280 | That does not seem to be the case,

00:03:57.800 | or at least if that is the case,

00:03:59.460 | the New York Times did not choose to profile anything

00:04:03.060 | in this initial story.

00:04:05.120 | As a financial planner, I read the story and I said,

00:04:07.380 | "Yep, okay, that makes sense.

00:04:09.420 | "Yep, that makes sense.

00:04:10.840 | "No surprise there.

00:04:12.180 | "Yep, that makes sense.

00:04:13.220 | "That makes sense, that makes sense."

00:04:14.580 | And I'll explain all the details of how that is,

00:04:17.800 | but I don't see, this is not a bombshell story

00:04:21.080 | for a financial planner.

00:04:22.700 | And so I think that's one thing that's worth pointing out.

00:04:26.260 | Most of the techniques and things discussed here

00:04:29.540 | is exactly what I would understand.

00:04:30.920 | In fact, much of it is what I teach

00:04:32.840 | on Radical Personal Finance when I teach tax planning.

00:04:35.380 | The techniques are just simply a little bit grander

00:04:38.040 | in scale than what a lot of people do,

00:04:40.140 | but there's not really any fundamental difference

00:04:42.200 | that I can see from what President Trump

00:04:45.340 | has been doing over the years

00:04:46.380 | versus what I teach people to do to save on their taxes.

00:04:50.180 | So let's begin, and I'm gonna give you a detailed analysis.

00:04:52.940 | And I'm doing this just so you can think about my brain

00:04:57.140 | as far as how I read articles like this.

00:04:59.340 | I don't have a political horse in the race.

00:05:02.780 | I'm not trying to make it go one way or the other,

00:05:04.940 | but it is really interesting to read an article like this

00:05:07.380 | and think about the challenge of writing it.

00:05:10.920 | I'm not an anti-New York Times guy.

00:05:14.300 | I'm not a pro-New York Times guy.

00:05:15.660 | I probably read and respect newspapers

00:05:17.900 | much more than I do many other forms of news.

00:05:21.940 | And I think that the authors of this story,

00:05:25.740 | Russ Buechner, Suzanne Craig, and Mike McIntyre,

00:05:28.680 | it's the story of their lives, right?

00:05:29.940 | They've been working hard to get it just right,

00:05:31.820 | and you see that carefulness in the writing.

00:05:33.700 | But we'll still analyze a little bit of the details

00:05:38.700 | along the way through as well.

00:05:39.980 | So begin with the lead.

00:05:41.440 | Donald J. Trump paid $750 in federal income taxes

00:05:45.760 | the year he won the presidency.

00:05:47.840 | In his first year in the White House, he paid another $750.

00:05:51.880 | He had paid no income taxes at all

00:05:54.680 | in 10 of the previous 15 years,

00:05:57.600 | largely because he reported losing

00:05:59.560 | much more money than he made.

00:06:02.160 | As the president wages a re-election campaign

00:06:03.900 | that polls say he is in danger of losing,

00:06:06.160 | his finances are under stress, beset by losses,

00:06:09.040 | and hundreds of millions of dollars in debt

00:06:11.160 | are coming due that he has personally guaranteed.

00:06:13.840 | Also hanging over him is a decade-long audit battle

00:06:16.620 | with the Internal Revenue Service

00:06:17.960 | over the legitimacy of the $72.9 million tax refund

00:06:21.360 | that he claimed and received after declaring huge losses.

00:06:25.120 | An adverse ruling could cost him more than $100 million.

00:06:28.760 | Now, in that lead, we see these themes that I talked about.

00:06:34.000 | And I'll just first give you my reactions

00:06:36.000 | to what it says here.

00:06:37.840 | Most of this is designed to have a good news hook,

00:06:41.200 | which is true.

00:06:42.280 | And that's what a newspaper should do.

00:06:43.960 | It's pretty amazing that somebody who is renowned

00:06:46.920 | and purported to be a billionaire

00:06:49.120 | would only pay $750 in income taxes.

00:06:51.920 | And to the average person who doesn't understand taxes,

00:06:55.800 | that will sound like a shocking reality, a shocking number.

00:07:00.800 | From my perspective, it's not particularly shocking

00:07:03.680 | due to the nature of President Trump's businesses,

00:07:06.200 | primarily involving real estate.

00:07:08.600 | And real estate is one of those things

00:07:10.000 | where it's relatively, I won't say easy,

00:07:13.440 | it's relatively, I should say easy,

00:07:15.100 | it's relatively easy and fairly normal

00:07:17.680 | that you could invest in real estate,

00:07:19.800 | use that real estate to generate

00:07:21.560 | a very significant income for yourself,

00:07:24.000 | and then defer massively the tax bill,

00:07:27.840 | and in some cases, completely avoid the tax bill.

00:07:30.040 | Let me give you a very practical example

00:07:31.480 | about how you, perhaps not yet a billionaire,

00:07:34.280 | can do the same thing in your own real estate investing.

00:07:38.480 | Let's pretend that you go out

00:07:39.820 | and you're walking around your neighborhood,

00:07:41.500 | and you notice that in your neighborhood,

00:07:44.840 | there is a rundown building that is for sale,

00:07:48.640 | and a rundown house.

00:07:49.820 | And so you go and you buy that house,

00:07:51.800 | and you negotiate the purchase of that house for $150,000.

00:07:56.000 | And you borrow $150,000 from your dad

00:07:58.840 | in order for you to go and be able to buy the house.

00:08:01.440 | Well, when you buy that house, you buy it for a purpose,

00:08:05.160 | for a purpose of being able to improve it.

00:08:07.280 | So you take the money, you buy the house,

00:08:09.960 | you put a little bit more money into it, and you fix it up.

00:08:11.920 | And let's say that you fix it up,

00:08:13.360 | so whereas now it's valuable on the marketplace,

00:08:15.980 | now it wants to be rented,

00:08:18.040 | where people will want to actually live in it.

00:08:19.560 | So you go and you take the house, and you rent it out.

00:08:22.800 | And you rent it out for $1,500 a month.

00:08:26.960 | So now you've got an extra $1,500 a month

00:08:28.960 | of rental income coming in.

00:08:30.560 | The first thing is that in that situation,

00:08:32.600 | if your mortgage payment is lower than your rental income,

00:08:35.200 | you'll probably have cashflow

00:08:36.660 | that'll be available to you in your pockets.

00:08:39.120 | Maybe you will, maybe you won't,

00:08:40.920 | but let's assume that you do.

00:08:42.380 | In that situation, because of the ability

00:08:45.120 | for you to take depreciation expenses against the house,

00:08:48.400 | which is unique to real estate,

00:08:49.800 | you probably won't pay any money on the cash.

00:08:52.880 | But what you will have done

00:08:53.820 | is you will have increased the value of the house.

00:08:55.600 | So let's pretend that you put $50,000 into the house,

00:08:58.380 | you renovated it, and now it's worth $300,000.

00:09:01.320 | You can now go to the bank,

00:09:02.520 | and you can refinance it for $300,000 with a bank mortgage.

00:09:06.460 | You take $150,000, you pay off your debt,

00:09:08.820 | and you put $150,000 in your pocket.

00:09:11.480 | What you've just done is you've just put $150,000

00:09:14.740 | in your pocket of real money,

00:09:17.300 | but because the money was accessed in the form of debt,

00:09:20.420 | you will not pay taxes on it.

00:09:23.540 | So you just earned $150,000 tax-free.

00:09:27.660 | Now, in the fullness of time,

00:09:29.620 | you will owe taxes if you sell the house.

00:09:32.500 | But you can refinance the house,

00:09:34.260 | and you can take the money out in the form of debt

00:09:36.100 | and not pay any taxes on it.

00:09:37.800 | Now, assuming that you keep the property rented,

00:09:39.700 | and let me change the facts just a little bit.

00:09:41.260 | Let's just say that your tenant pays just enough

00:09:44.100 | for you to pay the mortgage payment

00:09:45.980 | and the expenses of the property,

00:09:47.220 | the insurance, the mortgage payment, et cetera.

00:09:49.340 | You will have no taxable income in that example,

00:09:52.540 | but you have $150,000 of spendable money in your pocket

00:09:55.660 | because you took it out in the form of a loan.

00:09:58.420 | Now, fast forward.

00:09:59.260 | Let's say that three or four years from now,

00:10:01.440 | you sell that house for $300,000,

00:10:04.900 | but you do a 1031 exchange into another house,

00:10:07.320 | which is a like-kind exchange.

00:10:08.740 | And so now you buy a bigger house,

00:10:10.780 | and you repeat the same thing.

00:10:11.940 | You fix it up, then you go ahead and refinance it.

00:10:14.040 | You take a mortgage out on it.

00:10:15.740 | You take the mortgage to put money in your pocket.

00:10:17.820 | You can do this again and again throughout your lifetime.

00:10:20.300 | By doing like-kind exchanges,

00:10:22.100 | you can defer the taxes indefinitely.

00:10:24.740 | In theory, you could actually get the money out tax-free

00:10:27.380 | in a couple of ways.

00:10:28.500 | Way number one would be in the United States,

00:10:30.380 | if it were a house that you wanted to move into,

00:10:32.500 | you could move into the house,

00:10:33.960 | transform it into your personal residence,

00:10:35.980 | and then be able to take advantage of some of the increase

00:10:39.220 | due to the tax exclusion on personal residence.

00:10:42.180 | That's one, some tricky rules with it, but that's one way.

00:10:44.960 | A second way is you could just simply leave it

00:10:47.080 | to your children in your will at the date of your death.

00:10:50.180 | And if you left them that house in your will,

00:10:53.540 | maybe you started with $150,000 of seed capital,

00:10:56.100 | but at your death,

00:10:57.140 | you have a million dollars worth of real estate.

00:10:59.180 | You leave that million dollars of real estate

00:11:00.980 | to your children,

00:11:02.220 | assuming you're not subject to estate taxes,

00:11:04.880 | which a billionaire would be,

00:11:05.900 | but you would not with a million dollars of property.

00:11:08.420 | In that situation, you can now receive

00:11:10.700 | what's called a step-up in tax basis at your death.

00:11:12.880 | Your children will receive the million dollars,

00:11:15.020 | and the entire gain from $150,000 to a million dollars

00:11:18.920 | would have been untaxed in the tax code.

00:11:21.660 | Meanwhile, you access that money

00:11:23.580 | in the form of mortgage loans,

00:11:24.860 | you put cash in your pocket,

00:11:26.420 | and that allowed you to spend money.

00:11:28.780 | Now, that's not even getting into a deep discussion

00:11:31.180 | of depreciation expense,

00:11:32.500 | which is very significant

00:11:34.060 | when you are dealing with a property portfolio

00:11:36.820 | like President Trump supervises.

00:11:40.360 | That's just a simple, ordinary example

00:11:42.420 | to show how real estate, because of its very nature,

00:11:45.040 | lends itself to a tremendous level of tax efficiency.

00:11:48.980 | It's very, very useful from a tax efficiency perspective.

00:11:52.460 | The other thing that I immediately wonder is,

00:11:54.420 | okay, he paid no income taxes at all

00:11:56.940 | in 10 of the previous 15 years.

00:11:59.380 | My question is immediately,

00:12:00.300 | well, what did he pay in the five of the 15?

00:12:02.340 | And this has to do with the lumpiness of income.

00:12:04.440 | We'll talk about this in a moment

00:12:05.540 | when we get into the details,

00:12:06.500 | but when you're doing tax planning,

00:12:08.180 | what you generally often want to do

00:12:10.100 | is you want to lump your income

00:12:11.500 | and you wanna lump your deductions

00:12:12.900 | and your expenses together.

00:12:14.460 | And so, a simple example.

00:12:16.900 | You can, charitable deductions,

00:12:18.940 | in the United States,

00:12:19.780 | if you're gonna take itemized deductions on your taxes,

00:12:22.260 | and I understand I'm not starting at beginner level,

00:12:24.220 | I'm assuming you understand the difference

00:12:25.380 | between a standard deduction and an itemized deduction.

00:12:27.740 | But most people don't have enough itemized deductions

00:12:30.700 | for it to be worth it for them to itemize their deductions,

00:12:34.120 | but there are a lot of things that you can do.

00:12:35.700 | So what you do if you're trying to maximize

00:12:38.100 | your tax savings is one year you take the standard deduction

00:12:42.660 | and then the next year you itemize deductions

00:12:44.820 | and you lump your charitable deductions together

00:12:47.100 | in that second year so you get bigger deductions.

00:12:50.140 | And so that's a simple kind of layman's example

00:12:53.140 | of why lumpy income and lumpy deductions are useful.

00:12:56.740 | You do the same thing in business when possible.

00:12:59.460 | If you can compress your income together,

00:13:01.340 | you try to adjust the timing of your income

00:13:04.100 | to match the time when you have

00:13:05.340 | significant deductions available.

00:13:07.240 | So a lead like this is a good journalistic lead,

00:13:11.400 | it's factually true,

00:13:13.020 | but it's one of those things where you have big questions

00:13:15.880 | and you wanna know immediately as a financial advisor,

00:13:18.580 | what happened in those five years?

00:13:20.760 | One of the most interesting things that's mentioned here,

00:13:24.600 | which I'll talk about in detail,

00:13:25.900 | is this comment they made,

00:13:26.820 | also hanging over him as a decade long audit battle

00:13:29.740 | with the Internal Revenue Service

00:13:31.060 | over the legitimacy of a $72.9 million tax refund.

00:13:34.540 | And I immediately wanna know, why so long?

00:13:36.540 | Why do you have a decade long audit battle?

00:13:39.300 | That's a really long audit battle.

00:13:41.120 | So that tells me a couple of things right off the bat,

00:13:44.460 | even if we don't get to the details.

00:13:46.340 | That tells me, number one,

00:13:48.020 | if this is a decade long audit battle,

00:13:50.720 | this is not a clear cut win or loss either way.

00:13:54.900 | This is not a clear cut thing where,

00:13:57.060 | oh, the IRS was in the wrong

00:13:59.040 | and the taxpayer just said, yeah,

00:14:01.340 | well, the IRS was in the wrong,

00:14:02.280 | the IRS admitted it and the taxpayer got it their way.

00:14:04.820 | On the other hand, it wasn't a clear cut thing

00:14:06.620 | where the IRS could move against them and say,

00:14:08.780 | look, you're clearly wrong in this situation.

00:14:11.280 | Now, we find out later in the article

00:14:13.180 | that there's some more texture to this,

00:14:14.580 | probably due to President Trump's political status,

00:14:17.420 | but a decade long audit battle means

00:14:19.620 | that this is not a smoking gun in some way.

00:14:23.340 | Now, obviously I can't read the whole article to you

00:14:27.260 | 'cause of the New York Times copyright restrictions,

00:14:31.240 | but I will read just some important points to you.

00:14:34.260 | The New York Times has obtained tax return data

00:14:36.380 | extending over more than two decades for Mr. Trump

00:14:38.660 | and the hundreds of companies

00:14:39.780 | that make up his business organization,

00:14:41.780 | including detailed information

00:14:43.340 | from his first two years in office.

00:14:45.340 | It does not include his personal returns

00:14:46.900 | for 2018 or 2019.

00:14:49.900 | This is certainly one of those ethical gray issues.

00:14:52.560 | You clearly have a leaker, somebody in very well-connected,

00:14:57.480 | I don't know, I'm not competent enough to say

00:14:59.780 | where is this person probably from,

00:15:02.100 | but clearly you had someone who had access to this data

00:15:04.740 | who chose to share it with the New York Times.

00:15:07.020 | That's probably some form of crime.

00:15:11.060 | I don't know the details on it,

00:15:12.220 | but that's probably some form of crime.

00:15:14.500 | Now, is it a matter of public interest

00:15:16.020 | for the New York Times to publish it?

00:15:17.800 | I would say probably so.

00:15:19.660 | And should there be a law requiring

00:15:22.020 | the disclosure of this data?

00:15:23.540 | Maybe there should be, but there's not a law right now.

00:15:25.640 | So although that's been the custom,

00:15:27.140 | there's not a law right now.

00:15:29.640 | It is important to note, and quote,

00:15:31.100 | "They report the data reports that Mr. Trump

00:15:33.780 | "owns hundreds of millions of dollars in valuable assets,

00:15:36.100 | "but they do not reveal his true wealth,"

00:15:38.020 | as is the nature with any kind of tax return.

00:15:42.420 | Taxes do not indicate wealth.

00:15:44.580 | Taxes and tax returns indicate merely your income.

00:15:49.580 | That's what's included in a tax return.

00:15:53.980 | Now, where you can get a better idea

00:15:55.900 | of a politician's wealth is by looking

00:15:57.740 | at their financial disclosure reports,

00:15:59.220 | where they report ranges of assets, ranges of debts.

00:16:01.760 | For example, we know how much money

00:16:03.060 | President Trump is liable for.

00:16:04.300 | We know all the people that he owes money to.

00:16:06.540 | But tax returns do not indicate wealth,

00:16:08.880 | which will be a common theme that, as I explained to you,

00:16:11.420 | the concepts that I can grasp from this article

00:16:14.140 | and how you can use this to lower your tax bill,

00:16:16.880 | you have to always recognize

00:16:18.100 | that income is not necessarily wealth.

00:16:21.220 | In response to a letter summarizing

00:16:29.140 | the Times findings, Alan Garten,

00:16:30.540 | a lawyer for the Trump Organization,

00:16:31.940 | said that most, if not all, of the facts

00:16:33.860 | appear to be inaccurate and requested

00:16:35.220 | the documents on which they were based.

00:16:36.620 | After the Times declined to provide the records

00:16:38.500 | in order to protect its sources,

00:16:39.940 | Mr. Garten took issue only with the amount

00:16:42.220 | of taxes Mr. Trump had paid.

00:16:44.220 | Over the past decade, President Trump has paid

00:16:45.980 | tens of millions of dollars in personal taxes

00:16:47.940 | to the federal government,

00:16:49.020 | including paying millions in personal taxes

00:16:50.900 | since announcing his candidacy in 2015.

00:16:54.220 | With the term personal taxes, however,

00:16:56.040 | Mr. Garten appears to be conflating income taxes

00:16:58.400 | with other federal taxes Mr. Trump has paid,

00:17:01.140 | Social Security, Medicare,

00:17:02.340 | and taxes for his household employee.

00:17:04.780 | I wanna talk for a moment about taxes

00:17:06.660 | because when we use the term,

00:17:07.980 | it's a very general term,

00:17:09.280 | but it's important that you think about

00:17:11.260 | and that you recognize and pay attention

00:17:13.380 | to the fact that you understand how taxes work

00:17:18.380 | because if you understand how taxes work

00:17:21.900 | and how income is taxed,

00:17:23.500 | then all of this stuff will make a lot more sense.

00:17:25.840 | First of all, what's being discussed here

00:17:28.060 | in this article is federal income taxes,

00:17:32.020 | federal income taxes exclusively.

00:17:34.500 | That ignores a whole lot of money

00:17:36.660 | that flows to the federal government

00:17:38.580 | that's not being discussed in this article.

00:17:40.460 | So the New York Times here identifies it.

00:17:42.660 | Other federal taxes, including Social Security,

00:17:45.460 | Medicare, and taxes for his household employees.

00:17:47.600 | I would say if far in addition to that,

00:17:50.020 | you have significant numbers of taxes

00:17:51.940 | that are paid even for employees.

00:17:54.040 | So for example, let's say that I own

00:17:56.660 | the Sheets organization, not the Trump organization,

00:17:58.860 | I own the Sheets organization.

00:18:00.420 | And the Sheets organization has a million dollars of revenue

00:18:04.180 | and we have 100 employees.

00:18:07.020 | Well, that organization in and of itself

00:18:10.220 | is responsible for paying massive amounts of taxes,

00:18:14.120 | massive amounts of federal taxes.

00:18:16.620 | Also, the employees are all paying federal taxes

00:18:20.260 | based upon the productivity of the organization.

00:18:23.460 | So while at the end of the day,

00:18:24.940 | I might have a $0 tax bill,

00:18:27.060 | that's not to say that the Sheets organization

00:18:29.660 | is in and of itself a net consumer

00:18:34.420 | of things like federal money.

00:18:35.940 | If you look at the tax impact of a company,

00:18:37.660 | for example, famously Amazon is often touted as,

00:18:40.980 | Amazon doesn't pay any taxes.

00:18:42.420 | Is it true?

00:18:43.640 | Depends on how you look at it, right?

00:18:45.220 | On one hand, yeah, it is true.

00:18:46.840 | On the other hand, the tax impact of a company

00:18:49.680 | is very, very significant.

00:18:51.220 | And most of the stuff that is discussed here

00:18:53.540 | in a story like this is in some ways

00:18:59.460 | a sleight of hand because everything that's discussed

00:19:02.700 | is simply the basic nature of the tax code.

00:19:05.980 | The tax code is designed to incentivize investment.

00:19:10.140 | The tax code is designed to protect businesses

00:19:12.620 | from losses of income.

00:19:14.640 | It's designed to make it palatable for businessmen

00:19:17.820 | to invest money and grow businesses

00:19:20.460 | because of what's considered to be the good,

00:19:22.520 | the net positive good, the net effect of an organization

00:19:25.380 | that's productive in that way.

00:19:27.380 | Now, before we get to more of the details,

00:19:30.700 | I wanna make one basic point.

00:19:32.320 | The first argument that this article is making

00:19:35.940 | is primarily this idea that President Trump's

00:19:39.580 | business success is a mirage.

00:19:42.480 | That's what the editors or the writers are trying to say.

00:19:44.660 | They're trying to say that his business success is a mirage.

00:19:48.080 | I think there are ways that you can fairly

00:19:51.700 | make that argument.

00:19:53.180 | There'll be people who say, well, he just inherited

00:19:55.420 | all kinds of money from his parents and his father.

00:19:58.220 | He would've done better if he put in an index fund.

00:20:00.660 | I'm not sure.

00:20:01.700 | But what I wanna point out is actually,

00:20:03.740 | from a business guy's perspective,

00:20:05.420 | what I see is I don't see a mirage.

00:20:09.220 | I see, forgive me, a touch of genius in the sense that

00:20:14.220 | the exact things that you see, the New York Times article,

00:20:17.720 | within the article, the exact things that you see

00:20:20.180 | the article talk about how these are wrong things,

00:20:23.620 | it actually has paid off in spades for Trump

00:20:26.120 | in the creation of his image.

00:20:28.300 | So let me read the article, what the editors say here,

00:20:30.960 | and then we'll discuss this lesson.

00:20:32.740 | Together with related financial documents

00:20:35.580 | and legal filings, the records offer the most detailed

00:20:38.140 | look yet inside the president's business empire.

00:20:41.140 | They reveal the hollowness, but also the wizardry

00:20:44.040 | behind the self-made billionaire image,

00:20:46.260 | honed through his star turn on The Apprentice,

00:20:49.540 | that helped propel him to the White House

00:20:51.380 | and that still undergirds the loyalty of many in his base.

00:20:54.980 | Ultimately, Mr. Trump has been more successful

00:20:57.780 | playing a business mogul than being one in real life.

00:21:01.680 | Listen very carefully to that sentence.

00:21:03.660 | Ultimately, Mr. Trump has been more successful

00:21:05.900 | playing a business mogul than being one in real life.

00:21:10.060 | Now listen to the very next sentence.

00:21:12.460 | The Apprentice, along with the licensing

00:21:15.180 | and endorsement deals that flowed

00:21:17.100 | from his expanding celebrity, brought Mr. Trump

00:21:20.260 | a total of $427.4 million,

00:21:24.940 | the Times analysis of the records found.

00:21:27.880 | When I read that, and I'll give you some other evidence

00:21:29.740 | and quotes throughout the article, I thought to myself,

00:21:31.860 | how can you write that he's been more successful

00:21:34.860 | in playing a business mogul than being one in real life,

00:21:37.680 | when in the very next sentence you say

00:21:39.900 | that he made $427.4 million from his work on The Apprentice?

00:21:44.900 | Now The Apprentice is an interesting part

00:21:46.740 | of President Trump's business structure,

00:21:49.740 | because it's the part at which he's been

00:21:51.660 | the most heavily taxed, due to it not being real estate.

00:21:55.260 | And that's an important point when we get

00:21:56.740 | to the actual numbers of the taxes he's paid.

00:21:58.320 | You have to understand that The Apprentice,

00:22:00.180 | while I think was a fabulously successful endeavor for him,

00:22:05.180 | he made a lot of money, he built a massive reputation,

00:22:08.320 | he was able to cultivate an image of himself

00:22:11.020 | as being this super hot shot businessman from it,

00:22:14.360 | it was extremely highly taxed,

00:22:16.460 | due to it not being real estate.

00:22:18.860 | But I'm a bit cynical, and I just thought to myself,

00:22:23.420 | the editors of this article, the writers here,

00:22:25.540 | the three writers of this article

00:22:26.740 | and the teams of people supporting them,

00:22:28.780 | I don't know, 'cause I don't know anything about them,

00:22:31.300 | but I would guess that they probably make,

00:22:34.220 | you would think probably an average income

00:22:36.420 | would be somewhere in the, $150,000-ish.

00:22:39.600 | It wouldn't surprise me if that was a standard income.

00:22:42.780 | Maybe if these are very senior reporters

00:22:44.620 | with The New York Times, maybe they're making $250,000.

00:22:47.980 | Somewhere in that range of $150,000-$300,000

00:22:50.900 | would be my guess of what a writer at The New York Times

00:22:54.800 | would probably make in this kind of context.

00:22:58.860 | Which means that the total lifetime earnings of that someone,

00:23:01.300 | depending on how old they are and how senior they are,

00:23:03.980 | total lifetime earnings of somebody in that situation

00:23:06.940 | would be, I would guess, $3-6 million,

00:23:10.140 | if you were sitting down and calculating

00:23:12.420 | all of their lifetime earnings

00:23:13.580 | from getting a journalism degree

00:23:15.560 | and then winding up going on to working through

00:23:18.380 | maybe a normal retirement age at age 65.

00:23:20.380 | It'd probably be $3-6 million, something in that range.

00:23:23.820 | It's quite interesting to have somebody

00:23:26.020 | with a lifetime income of, say, $3-6 million write,

00:23:29.860 | "Ultimately, Mr. Trump has been more successful

00:23:32.020 | "playing a business mogul than being one in real life.

00:23:34.860 | "The Apprentice, along with the licensing

00:23:36.460 | "and endorsement deals that flowed

00:23:37.700 | "from his expanding celebrity,

00:23:39.120 | "brought Mr. Trump a total of $427.4 million."

00:23:43.820 | I would very much like to earn $427.4 million

00:23:47.500 | in five to 10 years.

00:23:49.720 | I would very much like to earn $427.4 million

00:23:52.920 | in my lifetime.

00:23:54.660 | When you recognize that that is a small component

00:23:57.960 | of the taxpayer in question and his overall financial life,

00:24:01.960 | it's very hard to make that argument in it

00:24:04.020 | with a straight face.

00:24:05.600 | I think one of the most valuable things

00:24:07.120 | about what I have learned from Mr. Trump's business life

00:24:13.120 | is just the truth of the old saying

00:24:15.720 | that perception is reality.

00:24:17.520 | Years ago, I worked with a guy

00:24:19.560 | who hammered this into my head.

00:24:20.960 | And the guy was, he wasn't a fraud,

00:24:23.720 | but he was a boss of mine that lived by the phrase

00:24:26.000 | that perception is reality.

00:24:27.720 | And that's always been hard for me

00:24:29.100 | because I've always been a reality matters guy.

00:24:32.240 | I've never been a smoke and mirrors guy

00:24:34.200 | and a perception guy.

00:24:35.400 | I've always been a reality matters guy.

00:24:37.320 | But one of the things that you see with President Trump,

00:24:40.920 | he is shameless, absolutely shameless in saying,

00:24:45.920 | this is the image that I'm going to project.

00:24:49.280 | And as I project this image, people will now believe it.

00:24:52.720 | People are going to believe it again and again and again.

00:24:55.440 | And I'll show you throughout this article

00:24:56.880 | as we go through it linearly,

00:24:59.160 | I'll show you how this comes out to be true.

00:25:01.520 | But one of the things that Mr. Trump is a master of

00:25:04.320 | is saying, I'm gonna see something,

00:25:06.520 | I'm gonna create this vision of something,

00:25:09.360 | and then I'm gonna speak this vision so clearly

00:25:11.880 | that he personally seems to believe it at its heart.

00:25:15.480 | And then it brings people along with it, along with him.

00:25:19.000 | And so when Trump says, Trump is a luxury brand

00:25:22.120 | and we're gonna be the luxury brand,

00:25:24.280 | he essentially willed it into existence.

00:25:27.280 | And he did the same thing with The Apprentice.

00:25:29.080 | He basically had this idea that I'm gonna play

00:25:32.000 | this hotshot business guy role.

00:25:34.280 | And he willed this reality into existence

00:25:37.240 | and made a whole lot of money along the way.

00:25:39.480 | Now what I see immediately,

00:25:40.520 | let me read the whole paragraph to you.

00:25:42.200 | The Apprentice, along with the licensing

00:25:43.760 | and endorsement deals that flowed

00:25:45.160 | from his expanding celebrity,

00:25:46.840 | brought Mr. Trump a total of $427.4 million,

00:25:50.720 | the Times analysis of the records found.

00:25:52.880 | He invested much of that in a collection of businesses,

00:25:56.040 | mostly golf courses, that in the years since

00:25:58.720 | have steadily devoured cash,

00:26:00.600 | much as the money he secretly received from his father

00:26:02.680 | financed a spree of quixotic overspending

00:26:06.120 | that led to his collapse in the early 1990s.

00:26:08.720 | Now, as a financial planner,

00:26:10.040 | I wrote in my marking up of this article,

00:26:13.800 | when it says he invested much of that

00:26:16.840 | in a collection of businesses, mostly golf courses,

00:26:19.960 | that in the years since have steadily devoured cash

00:26:23.280 | and created tax deductions, much as the money received.

00:26:27.920 | The whole point, when any person creates

00:26:30.080 | a lot of earned income,

00:26:31.520 | what you immediately have to do is you have to figure out

00:26:34.200 | how can I shelter that income?

00:26:36.480 | And that's one of the perspectives that I would bring

00:26:38.520 | to this kind of analysis of financial planner

00:26:40.720 | that would be different from the New York Times writers,

00:26:43.360 | is that when you create income,

00:26:45.120 | you immediately need to look and say,

00:26:46.600 | how can I shelter this?

00:26:48.080 | What can I do?

00:26:48.920 | Because the single biggest expense that you're going to face

00:26:51.560 | is when you create income is the tax man.

00:26:54.200 | The tax rates on earned income are stunningly horrific,

00:26:58.360 | approaching and exceeding 50%,

00:27:00.240 | depending on where you are in the United States,

00:27:02.640 | depending on your federal tax rates,

00:27:04.240 | depending on your state tax rates, et cetera.

00:27:06.040 | And so it's very, very problematic.

00:27:08.560 | And in a situation like the apprentice,

00:27:10.280 | although he could still try to massage the earnings

00:27:13.560 | and say, well, I need to figure out

00:27:17.000 | how to protect some of this,

00:27:19.160 | and maybe it's not all gonna be classified

00:27:21.000 | as earned income, it's hard.

00:27:22.440 | Because that kind of money is very, very heavily taxed,

00:27:25.280 | and you don't have a lot of good deductions

00:27:27.040 | associated with it.

00:27:28.400 | And so what somebody who's trying to save on tax will do

00:27:31.520 | is immediately go and look for businesses

00:27:34.000 | that will generate growth that's not tax,

00:27:36.960 | which is primarily gonna be capital gains growth

00:27:38.800 | rather than current income,

00:27:41.160 | and that are gonna create lifestyle opportunities,

00:27:44.440 | and that are gonna enhance the brand.

00:27:46.200 | And so to me, this sounds totally normal.

00:27:50.320 | It's the same advice

00:27:51.160 | that your accountant would give you, right?

00:27:53.600 | Let's say that you run a small business,

00:27:56.040 | maybe you make $200,000 a year.

00:27:58.640 | And at the end of the year,

00:27:59.680 | you're going and you're meeting with your accountant

00:28:01.120 | on December 1st, and the accountant is saying to you,

00:28:04.040 | all right, listen, buddy, you made 200 grand this year,

00:28:06.320 | you're gonna pay 50 grand or 70 grand or something of taxes,

00:28:11.240 | can you spend some money?

00:28:12.320 | Is there something that you can spend money on?

00:28:14.320 | The first thing that you look for in that situation is,

00:28:16.840 | can I spend money profitably?

00:28:19.240 | And so you look for something like buying equipment,

00:28:22.720 | maybe your business could use an expansion,

00:28:25.120 | and if you expanded something beyond where you are now,

00:28:28.520 | you could make more money in the future,

00:28:29.840 | but that would wipe out 50 grand of profit.

00:28:32.720 | So you look, can I invest money profitably?

00:28:34.920 | You look at, can I invest money early?

00:28:37.160 | Can I move expenses forward into something

00:28:39.760 | that I would do later, but I don't know.

00:28:41.920 | And so the classic is marketing expenses.

00:28:44.140 | You look and say, well, our marketing budget

00:28:46.320 | for the next fiscal year is going to be $50,000,

00:28:49.920 | but can I just prepay that right at the end of the year

00:28:52.560 | and go ahead and prepay those marketing expenses

00:28:54.760 | so I save on the taxes?

00:28:56.480 | You might look and say,

00:28:57.360 | can I invest this money into Goodwill?

00:28:59.280 | Can I give a small bonus to my employees?

00:29:02.120 | Or can I hire another employee?

00:29:03.840 | Once you reach a certain point in the tax rate,

00:29:05.980 | you basically start hiring employees

00:29:08.000 | simply to enhance your lifestyle.

00:29:09.680 | You look at it and you say,

00:29:10.500 | the government's gonna steal half of this anyway,

00:29:12.480 | so why don't I just go ahead and hire an employee

00:29:14.720 | who makes my life easier?

00:29:16.200 | Someone who, even if they do relatively unproductive things,

00:29:20.760 | just gives you a better lifestyle.

00:29:22.080 | I'm gonna hire a personal assistant

00:29:23.880 | whose job is to fix me drinks

00:29:26.720 | and bring me lunch in the office.

00:29:28.720 | I'm using a bit of a hyperbolic example,

00:29:31.400 | but you reach a point where you say,

00:29:33.060 | I'm just gonna invest it into something

00:29:34.400 | that may not truly be necessary

00:29:36.100 | because the tax cut is so steep.

00:29:38.720 | Or you look and say,

00:29:40.240 | is there a way that I can enhance my lifestyle

00:29:42.040 | with a big purchase?

00:29:43.040 | And so the common kind of relatively small

00:29:46.320 | business approach to this is,

00:29:47.800 | well, we had $200,000, so I went ahead and bought a car,

00:29:51.060 | or I went ahead and bought a new truck for the business.

00:29:52.720 | I didn't need one.

00:29:54.000 | I could have made the old one go,

00:29:55.640 | but I was gonna spend all this money at the taxman anyway,

00:29:58.120 | so I went ahead and bought a nicer truck.

00:29:59.880 | Well, that's the small business approach

00:30:02.120 | to this kind of planning.

00:30:03.840 | I would bet you that the billionaire business

00:30:05.640 | approach to this, if you were inside Donald Trump's brain,

00:30:09.560 | that you would just say,

00:30:11.040 | I'm gonna buy another golf course, right?

00:30:12.920 | Because what do you do?

00:30:13.760 | What benefit do you get when you buy a golf course?

00:30:16.960 | Well, first of all, you're enhancing your global brand,

00:30:19.920 | right, you're building this brand of being a luxury,

00:30:23.240 | a purveyor of luxury goods, luxury lifestyles.

00:30:26.380 | When you're investing in a golf course,

00:30:28.280 | you're buying a massive quantity of hard assets.

00:30:32.320 | You're buying a massive quantity of land.

00:30:35.220 | Oftentimes it's land that is extraordinarily valuable

00:30:38.160 | in a valuable location sometimes,

00:30:40.760 | but that land only has, usually,

00:30:43.800 | a relatively small number of buildings on it, right?

00:30:47.780 | You've got a clubhouse, you might have some condos

00:30:49.960 | or something associated with that,

00:30:51.460 | but it's nothing like buying a skyscraper.

00:30:53.760 | So you're buying a bunch of land,

00:30:55.200 | you're buying a clubhouse,

00:30:57.880 | you have a relatively small staff

00:30:59.800 | compared to the overall investment,

00:31:01.760 | but you have a probably,

00:31:03.120 | and I don't know anything about the golf business,

00:31:04.780 | I'm just analyzing it,

00:31:05.720 | I've never even been part of a golf club,

00:31:07.200 | I'm just looking at it from the outside and saying,

00:31:09.120 | you have probably relatively low expenses

00:31:12.100 | compared to the potential.

00:31:13.840 | I used to drive past in West Palm Beach,

00:31:15.800 | the Trump Golf, whatever it's called,

00:31:19.280 | in West Palm Beach, the big golf resort that he has there.

00:31:22.400 | I mean, the membership fees on a business like that

00:31:24.840 | are obscene, it's, I think,

00:31:26.440 | probably about $300,000 to join the club,

00:31:29.080 | plus you have all the other fees,

00:31:30.680 | but yet to service that is relatively simple.

00:31:33.200 | You have a staff of groundskeepers,

00:31:34.760 | you have a basic maintenance staff for the buildings,

00:31:37.080 | you have a hospitality staff.

00:31:39.480 | It's not a very complex business,

00:31:41.360 | but it can be very profitable if you have that image,

00:31:44.600 | if you have a nice place, et cetera.

00:31:47.240 | But from a tax perspective,

00:31:48.280 | this is a really good use of business

00:31:51.940 | because you're acquiring a hard asset like land

00:31:55.360 | that doesn't have a lot of maintenance costs

00:31:57.340 | associated with it that generates income,

00:32:00.640 | and then you can hold that land for a long time,

00:32:03.200 | plus it gives you a great lifestyle.

00:32:04.400 | You always have to say to your buddies,

00:32:05.500 | hey, listen, we'll go to my club,

00:32:06.600 | and you get to hobnob with it,

00:32:08.380 | and it creates this incredible network for you,

00:32:10.240 | build a network for yourself.

00:32:11.740 | In a minute, I'll tell you the story

00:32:13.220 | of when President Trump started Mar-a-Lago in Palm Beach

00:32:17.760 | and kind of the gossip about it on Palm Beach at the time.

00:32:21.400 | But to me, that just sounds to me

00:32:23.500 | like a lifestyle tax deduction.

00:32:25.360 | So I compare it to say,

00:32:27.480 | is it true that he is losing money on it?

00:32:29.660 | Sure, right?

00:32:30.620 | There's no reason to say that,

00:32:32.040 | but not all losses are equal in the same way

00:32:35.180 | that if at the end of the year,

00:32:36.580 | you go out and you decide to put money into your business

00:32:39.480 | and buy a nicer car,

00:32:40.860 | that might turn one of your businesses

00:32:42.440 | into a loss for the year,

00:32:44.220 | but in your mind, you're still happy to drive the car.

00:32:46.580 | We'll talk more about multiple businesses in a moment.

00:32:49.980 | So goes on, talks about the legal battles,

00:32:52.820 | and the New York Times says this.

00:32:54.100 | In fact, those public filings,

00:32:55.780 | referring to the public disclosure requirements,

00:32:58.340 | those public filings offer a distorted picture

00:33:01.180 | of his financial state,

00:33:02.540 | since they simply report revenue, not profit.

00:33:05.440 | In 2018, for example,

00:33:06.900 | Mr. Trump announced in his disclosure

00:33:08.540 | that he had made at least $434.9 million.

00:33:12.080 | The tax records deliver a very different portrait

00:33:14.280 | of his bottom line, $47.4 million in losses.

00:33:18.740 | Now, the lesson here that you always need to remember

00:33:20.460 | is first of all,

00:33:21.420 | you need to always remember

00:33:23.540 | there's a difference between revenue and profit,

00:33:26.700 | but there are two kinds of profit, right?

00:33:28.800 | There's paper profit, and there's real profit, right?

00:33:32.620 | In the same way that there's losses and there's paper losses.

00:33:35.620 | And what I tried to explain with the example of the car

00:33:38.460 | is that you might very well have a business

00:33:41.140 | that loses money, and it's not a lie.

00:33:43.940 | It genuinely loses money.

00:33:46.980 | You genuinely spent more money than the business brought in,

00:33:50.280 | but you may do that purposely for any number of reasons.

00:33:55.580 | And an article like this doesn't tell us.

00:33:57.380 | Now, I'm not trying in this analysis to defend

00:34:00.540 | and say, well, actually,

00:34:02.060 | the New York Times is totally wrong.

00:34:03.540 | And actually what's happening

00:34:05.540 | is that President Trump is making $8.7 billion,

00:34:08.700 | and he's just got the world's best tax attorney.

00:34:10.340 | I'm not making that claim at all.

00:34:12.180 | What I'm saying is that articles like this,

00:34:14.600 | they're not very persuasive one way or the other,

00:34:16.940 | which is why what you see in the political sphere

00:34:18.860 | is you see each camp is basically saying,

00:34:20.660 | hey, this is what I believe, this is what I believe,

00:34:22.340 | and people go in different ways.

00:34:24.260 | And so I wanna explain the concepts,

00:34:25.860 | the financial concepts to you so you can consider.

00:34:28.260 | When the New York Times writes here,

00:34:31.540 | "The tax records deliver a very different portrait

00:34:33.580 | "of his bottom line, $47.4 million of losses."

00:34:36.700 | What we don't know is are those losses on paper,

00:34:41.260 | meaning they are accounting for depreciation expense?

00:34:45.100 | Are they accounting for financing expense?

00:34:47.940 | Or are those losses real losses

00:34:51.680 | that are actually sucking cash out of your pocket,

00:34:53.820 | and it's actually a real loss?

00:34:56.140 | And let me illustrate this with an example.

00:34:58.740 | Back to my real estate example.

00:34:59.980 | You bought the house for $150,000.

00:35:02.520 | You improved the value of the house

00:35:06.620 | with some renovation money.

00:35:07.700 | Then you refinanced the house for $300,000.

00:35:10.420 | You thus, because you refinanced it,

00:35:12.380 | you put $150,000 of tax-free money in your pocket.

00:35:17.140 | But that $150,000 of tax-free money is not income, it's debt.

00:35:21.300 | So now you have $300,000 of debt on your $300,000 property.

00:35:25.660 | And then a hurricane blows in,

00:35:27.940 | or a coronavirus pandemic hits,

00:35:30.060 | and now your tenant doesn't pay you any money

00:35:31.980 | for an entire year.

00:35:33.580 | Well, now you're going to have significant losses

00:35:37.180 | to report on that property.

00:35:39.180 | You're going to have $1,500 a month of a mortgage payment

00:35:42.980 | that you're paying.

00:35:43.980 | So there's $18,000 of loss right there.

00:35:48.040 | Plus you're gonna have other expenses.

00:35:50.540 | You're gonna have property expenses.

00:35:51.700 | You might've had to fix up the property

00:35:53.140 | or do some repairs along the way

00:35:54.580 | while that tenant was living in there.

00:35:56.220 | You might have some legal expenses for that property.

00:35:59.520 | Plus you'll have some depreciation expenses.

00:36:01.500 | And then you might have some accounting expenses

00:36:03.140 | and some other things related to the property.

00:36:05.660 | So it's very conceivable that in that simple example,

00:36:09.620 | you lost $25,000 in 2020

00:36:14.420 | based upon that $150,000 property that you bought.

00:36:17.020 | But your bank account can tell a very different story

00:36:20.420 | because your bank account,

00:36:21.940 | while you may have lost $25,000 on your tax returns,

00:36:25.320 | your bank account has an extra $125,000 in it

00:36:28.740 | at the end of the year

00:36:29.900 | that it didn't have at the beginning of the year

00:36:32.420 | because you took out that $125,000 in the form of debt.

00:36:36.260 | And that's one of the things

00:36:37.140 | that makes a real estate empire so difficult

00:36:39.180 | to poke your way through from a tax perspective

00:36:41.740 | is the use of debt.

00:36:42.900 | Because real estate is so leverageable,

00:36:45.700 | you'll have most real estate investors

00:36:47.380 | constantly moving their debt around.

00:36:49.300 | And they'll take the mortgages,

00:36:50.500 | they'll move them over here,

00:36:51.340 | they'll refinance there, refinance there.

00:36:53.020 | And if you have good properties

00:36:54.460 | that are increasing in value,

00:36:55.460 | you can do that throughout an entire lifetime.

00:36:57.760 | And I'm not exaggerating,

00:36:58.660 | you can do that for an entire lifetime.

00:37:00.380 | But that would just be a simple example to say

00:37:02.360 | that the tax records saying that in 2018,

00:37:05.540 | he made $434.9 million

00:37:08.700 | and he had $47.4 million in losses

00:37:11.340 | actually tells us nothing

00:37:13.120 | about the real profitability of his business.

00:37:16.620 | Now, let me enhance my house example

00:37:18.920 | to illustrate this point still further.

00:37:21.140 | You bought the house for $150,000,

00:37:23.020 | you improved it,

00:37:23.980 | you brought the appraisal value up to $300,000,

00:37:26.340 | you refinanced it for $300,000.

00:37:28.780 | But then in that year

00:37:30.660 | when your tenant didn't pay you anything

00:37:32.340 | and yet you had to pay those mortgage payments

00:37:34.520 | every single year,

00:37:35.360 | thus you're losing in my example, $30,000.

00:37:38.520 | In that year,

00:37:39.760 | a developer moved in next door

00:37:43.940 | and bought out all of the other houses

00:37:46.020 | and started this new big, beautiful gulf development.

00:37:49.760 | And now that's increased the value

00:37:52.540 | of your property even more.

00:37:54.820 | I know we're getting some good increases here,

00:37:56.740 | but it serves to illustrate the accounting point

00:37:59.020 | that I need you to understand.

00:38:00.540 | You've increased the value of your property now

00:38:02.740 | and it's actually $500,000.

00:38:05.060 | So not only do you have an extra $125,000 in your pocket,

00:38:10.060 | but on your balance sheet,

00:38:12.060 | you can fairly reflect

00:38:14.020 | that that property is now worth $500,000.

00:38:17.140 | So you have cash to spend from the mortgage

00:38:20.900 | and you have unrealized appreciation

00:38:23.380 | in the value of your portfolio.

00:38:25.260 | And that unrealized appreciation

00:38:27.140 | is the most valuable tool in an investor's portfolio

00:38:30.100 | for avoiding tax.

00:38:31.580 | Because that unrealized appreciation

00:38:33.820 | is actually spendable money,

00:38:35.460 | especially if you get it out with a mortgage,

00:38:37.600 | and you can defer that tax

00:38:39.180 | through a like-kind exchange with real property.

00:38:41.940 | So you can now take that property that's worth $500,000,

00:38:46.160 | you've already taken $125,000 of money in your pocket

00:38:50.660 | because you refinanced it at 300.

00:38:52.900 | Now you can sell it to the developer for $500,000.

00:38:56.900 | You can go and you can buy another property

00:38:58.900 | somewhere else for $500,000.

00:39:01.460 | And on that one, you can put a $500,000 mortgage on it.

00:39:05.500 | And now you have 200 and what did I do?

00:39:07.460 | $325,000 in your pocket over and above what you've done.

00:39:11.780 | And not a penny of it has ever been taxed

00:39:14.560 | because you have unrealized appreciation.

00:39:16.980 | And then again, you can defer that appreciation

00:39:19.060 | for a very long time because you control when you sell.

00:39:22.780 | So this also comes into the lumping of income.

00:39:25.540 | What does an investor do?

00:39:26.460 | An investor looks at when they create income.

00:39:28.940 | And what you wanna do is you want to bring your losses

00:39:32.020 | and you wanna realize your losses on your assets

00:39:34.820 | when you can pay, when you have income

00:39:37.880 | that you can't otherwise avoid or otherwise offset.

00:39:41.220 | So let's continue on.

00:39:42.260 | Tax records do not have the specificity

00:39:46.260 | to evaluate the legitimacy of every business expense

00:39:48.300 | Mr. Trump claims to reduce his taxable income.

00:39:51.460 | For instance, without any explanation in his returns,

00:39:53.780 | general and administrative expenses, blah, blah, blah.

00:39:56.420 | But the returns by his own account

00:39:57.820 | undercut his claims of financial acumen,

00:39:59.940 | showing that he is simply pouring more money

00:40:01.940 | into many businesses than he is taking out.

00:40:05.260 | Now, what I would say is that this is one

00:40:09.440 | of those statements that is one of those things

00:40:13.140 | that's very true, but you can't actually know

00:40:16.000 | even from the tax returns because of what I just tried

00:40:18.180 | to discuss about the unrealized appreciation.

00:40:21.300 | If Mr. Trump were realizing income, then he would owe tax.

00:40:26.300 | But it's the fact that he's not realizing income,

00:40:32.340 | that's why he doesn't owe tax.

00:40:33.620 | That's why his, allegedly, his tax return,

00:40:37.500 | his debt, his total tax due was $750

00:40:41.500 | because he's not realizing income.

00:40:44.880 | Now, if President Trump had simply taken his $400,000 salary

00:40:50.320 | and instead of donating it to charity,

00:40:53.240 | which is getting him now $400,000 of additional deductions

00:40:57.040 | that he can use, if instead of taking that,

00:40:59.440 | he simply took it and put it in the bank,

00:41:01.240 | now he would owe income tax on the $400,000

00:41:03.800 | and being a resident of, I assume he's taxed

00:41:05.960 | as a resident of Washington, D.C.,

00:41:07.140 | although his official residency, I think, is in Florida,

00:41:09.340 | but he would owe, what, $170,000, say,

00:41:12.200 | on that $400,000 of tax, $140,000 to $170,000,

00:41:15.760 | something in there.

00:41:17.280 | So now, of course, everything would change immediately,

00:41:19.340 | but he's not doing that.

00:41:20.320 | And here's the next thing that you need to understand.

00:41:23.280 | Once you are wealthy, you can live very, very well,

00:41:27.100 | and you can increase your wealth without paying tax,

00:41:30.040 | especially if you've invested into businesses

00:41:33.160 | that are providing you with lifestyle benefits

00:41:36.280 | associated with them.

00:41:37.640 | Now, there are many aspects of this

00:41:39.880 | that are clear in the IRS tax laws.

00:41:41.760 | There are many components of this that are genuinely clear.

00:41:44.800 | You know, for example, you can't say,

00:41:47.200 | this is my business and I've got to get

00:41:49.400 | all these personal benefits out of it.

00:41:51.160 | But if you think about a business

00:41:52.940 | like Mr. Trump is involved in,

00:41:55.480 | as far as his businesses, hotels and golf courses, et cetera,

00:41:59.440 | virtually everything that he does

00:42:02.040 | in terms of all of his personal expenses

00:42:05.000 | are legitimately ordinary and necessary business expenses.

00:42:09.640 | If you have a hotel and you spend a night in the hotel,

00:42:15.760 | you don't have to count that night in the hotel

00:42:18.520 | as far as saying, well, look,

00:42:19.720 | this night in the hotel is a personal expense

00:42:21.480 | because I don't normally do that.

00:42:23.080 | That is very defensible as simply saying,

00:42:25.720 | it's a quality control mechanism.

00:42:27.640 | I own a hotel business.

00:42:29.520 | There's a reason why corporations have corporate suites

00:42:32.360 | all around the world, or corporate apartments,

00:42:35.240 | where when our employees are in that city,

00:42:37.720 | we go and stay in that corporate apartment.

00:42:39.680 | And so when you recognize the fact that I own a private club,

00:42:44.880 | that I also have private rooms at, I own hotels,

00:42:48.280 | I have an airplane to manage my affairs,

00:42:51.080 | I do business on the airplane,

00:42:52.520 | virtually everything that someone like President Trump does,

00:42:56.360 | virtually everything like that

00:42:58.520 | is either a genuine part of the business,

00:43:03.520 | is a genuine business expense,

00:43:05.720 | or it's simply a de minimis fringe benefit.

00:43:10.000 | If you go and you take a meal at your hotel

00:43:13.440 | and that meal has a value of $50,

00:43:16.240 | but you technically didn't perform business at that meal,

00:43:19.720 | you technically sat there by yourself and you ate it,

00:43:22.480 | well, technically speaking, that's one of those things

00:43:25.240 | where is that a personal expense

00:43:26.560 | or is that a business expense?

00:43:28.200 | Well, in a situation like this,

00:43:29.720 | when you have a life that has that many people

00:43:31.800 | involved in it, every meal you take

00:43:33.880 | is gonna have somebody with you

00:43:36.680 | doing some kind of business deal, researching something,

00:43:39.640 | and a $50 meal or a bottle of champagne

00:43:42.000 | that you order up from your hotel,

00:43:44.000 | that's just de minimis stuff that disappears.

00:43:45.960 | In the same way that the local landscaping guy,

00:43:50.200 | when he drives his landscaping truck

00:43:52.040 | to the grocery store to get groceries,

00:43:54.000 | technically he's responsible now to the IRS

00:43:56.560 | for three miles of personal use of the vehicle,

00:44:00.560 | and he should account for that,

00:44:01.600 | and at the end of the year, he should just deduct

00:44:03.320 | that $1.65 of personal use of the vehicle

00:44:09.960 | because he was using a business vehicle

00:44:11.320 | for a personal vehicle.

00:44:13.120 | Come on, right?

00:44:14.040 | It's impossible to prove that stuff.

00:44:15.560 | That stuff disappears in the wash,

00:44:17.280 | even though the law is clear

00:44:18.880 | on what is personal use of a vehicle and what's not.

00:44:21.840 | So in this situation, these arguments,

00:44:26.120 | while I believe that probably the New York Times is right,

00:44:28.480 | 'cause I think that how I'd guess this worked

00:44:31.320 | if I were a reporter, I would take it,

00:44:33.200 | then I would hire a bunch of tax attorneys,

00:44:35.600 | accountants, et cetera, and I would say,

00:44:37.240 | help me digest this stuff and help explain it to me

00:44:39.760 | so I can write a fair report.

00:44:41.320 | It's true, but it doesn't mean

00:44:43.520 | that he's a terrible businessman

00:44:48.240 | because the businesses are taking money out currently.

00:44:51.120 | The two other points I need to make on this before we go on.

00:44:53.640 | Once you have a lot of wealth,

00:44:55.120 | you can live on your accumulated wealth and not pay tax.

00:44:59.520 | So imagine that you have $10 million

00:45:02.120 | and you have a million dollars of cash in the bank.

00:45:04.880 | You have businesses,

00:45:06.280 | you have $9 million of investment assets,

00:45:08.400 | and those investment assets

00:45:09.720 | are not cashflow generating assets.

00:45:11.960 | Maybe you're, what's the guy who started CNN

00:45:16.960 | who bought all the ranches,

00:45:20.800 | blanking on his name,

00:45:24.720 | but the guy who famously bought all the ranches

00:45:27.040 | and one of the biggest private landowners

00:45:28.560 | in the United States

00:45:29.400 | has all this basically unproductive land.

00:45:32.200 | In a situation like that, you've bought all this land,

00:45:34.840 | you have $9 million worth of land.

00:45:36.360 | Now that land may be appreciating, it may not be,

00:45:38.880 | but the land is just sitting out there.

00:45:40.520 | But meanwhile, you have a business over on the side

00:45:42.720 | and that business is a good lifestyle oriented business,

00:45:45.640 | Ted Turner, that's who it was.

00:45:47.000 | Thank you from the live chat here, Ted Turner,

00:45:49.880 | Montana Ted, the grills.

00:45:53.040 | So you have this lifestyle business

00:45:54.520 | that provides you with a way to shelter

00:45:57.760 | most of your lifestyle expenses,

00:45:59.320 | your travel, your movements,

00:46:02.680 | some of your dining expenses,

00:46:06.080 | you have a hotel here, a restaurant there,

00:46:08.080 | a couple of glamor businesses

00:46:10.720 | that you enjoy being involved in

00:46:12.160 | that give you something interesting to do,

00:46:13.600 | but you still have $30,000 of annual just personal expenses.

00:46:18.360 | Well, you can easily have $9 million of investment assets

00:46:22.360 | sitting there, growing without any tax

00:46:24.680 | because they're capital gains assets.

00:46:26.560 | You can easily have businesses

00:46:28.240 | that are providing you with a lifestyle of $250,000 a year

00:46:32.400 | through genuine, legitimate, ordinary business expenses

00:46:35.220 | in those businesses.

00:46:36.880 | While meanwhile, you just simply take $30,000 a year

00:46:40.020 | from your million dollars of savings

00:46:41.440 | and use that to spend on personal expenses.

00:46:43.680 | So someone in that situation could go for 30 years,

00:46:46.960 | never make a profit on any of their businesses,

00:46:49.840 | never make a profit and live like a multimillionaire,

00:46:54.440 | genuinely legitimately having a great lifestyle

00:46:57.280 | and not owe a dime of income tax in that situation.

00:47:01.040 | So these taxes are not a tell-all is the basic point.

00:47:05.460 | Taxes don't, the tax returns are not what you need.

00:47:10.460 | What you need is the income statement.

00:47:15.280 | What you need is the balance sheet.

00:47:16.820 | And so when you see how the balance sheet

00:47:18.100 | and the income statement are working together,

00:47:19.500 | that tells you the story,

00:47:20.620 | but the tax returns do not tell you that accounting story.

00:47:23.860 | They don't give you the details that you need

00:47:25.620 | to actually understand what's going on.

00:47:27.820 | So when the New York Times quote says this,

00:47:30.140 | the picture that perhaps emerges most starkly

00:47:32.240 | from the mountain of figures and tax schedules

00:47:34.520 | prepared by Mr. Trump's accountants

00:47:36.400 | is of a businessman president

00:47:37.920 | in a tightening financial vice.

00:47:39.580 | Is the New York Times right?

00:47:42.040 | I would say probably, right, possibly,

00:47:44.880 | although I'll show why I don't think that's the case.

00:47:48.000 | Any president that leaves office

00:47:49.760 | is destined for unlimited amounts of wealth

00:47:52.520 | due to the way that politics works in the United States,

00:47:55.880 | is destined for unlimited amounts of wealth.

00:47:57.860 | And so if President Trump leaves office today,

00:48:00.240 | his stint as the President of the United States

00:48:03.040 | will have been one of the best, most profitable uses

00:48:05.720 | of his four years in terms of his financial situation.

00:48:08.640 | He will never have problems

00:48:10.400 | with dealing with these details ever again.

00:48:12.520 | And I'm not alleging corruption.

00:48:13.720 | I'm not alleging backdoor deals or anything like that.

00:48:16.040 | That's just the way the presidency works, right?

00:48:17.900 | You go and you give $400,000 speeches.

00:48:21.080 | You go and you're invited into all,

00:48:23.360 | it's just, that's the way the modern presidency works.

00:48:27.000 | So you can't learn this though from tax returns.

00:48:30.060 | You need the full picture to actually understand this.

00:48:33.260 | Now, let's go on to talk about

00:48:36.980 | one of the things that I think is very interesting here

00:48:41.620 | due to the discussion of Mar-a-Lago.

00:48:44.940 | The New York Times talks about an audit

00:48:48.900 | on his apprentice income.

00:48:50.380 | Most of Mr. Trump's core enterprises

00:48:52.740 | from his constellation of golf courses

00:48:54.220 | to his conservative magnet hotel in Washington

00:48:56.220 | report losing millions, if not tens of millions of dollars

00:48:58.640 | year after year.

00:48:59.920 | His revenue from the apprentice

00:49:01.240 | and from licensing deals is drying up.

00:49:03.160 | And several years ago, he sold nearly all the stocks

00:49:05.620 | that now might have helped him plug holes

00:49:07.380 | in his struggling properties.

00:49:08.900 | The tax audit looms.

00:49:10.460 | And within the next four years,

00:49:11.620 | more than $300 million in loan obligations

00:49:13.900 | for which he is personally responsible will come due.

00:49:17.300 | One of the things that you see in this article

00:49:19.240 | from a financial planner's perspective

00:49:21.540 | is an abundance of numbers

00:49:23.860 | that don't actually tell you anything that you need to know.

00:49:26.860 | And that's what's frustrating about this.

00:49:28.900 | Because the New York Times

00:49:31.140 | is certainly engaging in journalism, right?

00:49:32.780 | They're certainly working to make their journalistic point

00:49:37.780 | and to clearly say, here's what you need to know.

00:49:43.060 | But without the context of the balance sheet

00:49:45.540 | and the income statement, you can't know.

00:49:47.740 | Is $300 million in loans coming due a lot or a little?

00:49:51.940 | Well, the answer depends on the value of the properties

00:49:56.020 | and the cashflow of those properties

00:49:57.980 | and his overall willingness to fund them.

00:50:00.860 | You don't know that.

00:50:01.700 | $300 million on a property portfolio worth $100 million,

00:50:06.040 | that could be a problem.

00:50:07.060 | $300 million on a property portfolio worth $900 million

00:50:11.100 | is not a problem, even if the cashflow is low.

00:50:21.860 | Excuse me.

00:50:22.700 | One of the things that's fascinating to me

00:50:25.740 | is the conversation and discussion

00:50:27.340 | about just the nature of Mr. Trump's businesses.

00:50:31.860 | They go through and they talk about

00:50:33.420 | how none of the scandalous things

00:50:36.180 | are actually listed in the tax returns.

00:50:38.320 | So we don't know is the point that they make.

00:50:40.380 | For example, did President Trump

00:50:42.500 | write off the hush money payment to Stormy Daniels?

00:50:45.340 | It's not listed.

00:50:46.780 | We don't know any of that information.

00:50:50.380 | But the most important section to me

00:50:54.540 | from a business perspective is this.

00:50:56.720 | To delve into the records is to see,

00:50:59.260 | quoting from the story,

00:51:00.220 | "To delve into the records is to see up close

00:51:02.300 | "the complex structure of the president's business interests

00:51:05.380 | "and the depths of his entanglements.

00:51:07.840 | "What is popularly known as the Trump Organization

00:51:10.260 | "is in fact a collection of more than 500 entities,

00:51:13.580 | "virtually all of them wholly owned by Mr. Trump,

00:51:16.380 | "many carrying his name.

00:51:18.240 | "For example, 105 of them are a variation

00:51:20.800 | "of the name Trump Marks,

00:51:22.040 | "which he uses for licensing deals.

00:51:23.980 | "Fragments of Mr. Trump's tax returns

00:51:27.220 | "have leaked out before.

00:51:28.060 | "Transcripts of his main federal tax form,

00:51:29.900 | "the 1040 from 1985 to 1994,

00:51:32.580 | "were obtained by the Times in 2019.

00:51:34.860 | "They showed that in many years,

00:51:36.240 | "Mr. Trump lost more money

00:51:37.940 | "than nearly any other individual American taxpayer."

00:51:41.380 | And I would point out to you that the reason,

00:51:44.100 | if you understand these basic lessons that I have said,

00:51:46.300 | from a tax planning perspective,

00:51:47.780 | Trump is doing everything that you're supposed to do

00:51:50.020 | to save on taxes.

00:51:51.540 | And the reason that he owes no taxes,

00:51:54.720 | basically, in terms of the way

00:51:56.460 | that they've arranged it so far,

00:51:57.580 | although it's not technically true

00:51:58.660 | when we go back to some of those five out of the 10 years,

00:52:01.680 | is simply that he has lost,

00:52:04.440 | that he's lost money on the businesses.

00:52:07.320 | But if you understand the nature

00:52:09.580 | of why do you have 500 businesses,

00:52:11.860 | you have 500 businesses so that you can spread

00:52:15.540 | your income across those businesses in the best way,

00:52:18.460 | and also so that you can spread your expenses

00:52:20.560 | across those businesses in the most efficient way.

00:52:22.780 | And it's exactly the same reason why,

00:52:25.000 | if you're a private client of mine

00:52:26.500 | and you're a newly minted multimillionaire,

00:52:28.780 | the first thing that you do,

00:52:29.780 | and you say, "I wanna save on taxes,"

00:52:31.240 | we look at your current business,

00:52:32.940 | we look and say,

00:52:33.760 | "How can you get the maximum legal benefits

00:52:35.520 | "from that business?"

00:52:36.740 | And then we look at the rest of your lifestyle,

00:52:38.100 | and we say, "How can we start additional businesses

00:52:41.460 | "that are going to defray the tax obligations

00:52:44.000 | "that you have from these over here?"

00:52:46.760 | Now, the New York Times talked a little bit here

00:52:49.260 | about the overseas taxes that he has paid.

00:52:54.260 | Now, certainly this is one of those things

00:52:57.820 | that sounds very scandalous from the basic perspective

00:53:00.980 | of you have the US president who's paying, allegedly,

00:53:05.980 | more money in overseas tax payments

00:53:09.900 | for his businesses abroad than he is in the United States.

00:53:14.500 | And I can't find that in the article here.

00:53:18.540 | That's interesting, but it actually is entirely

00:53:23.480 | to be expected with the nature

00:53:26.400 | of overseas engagements as well.

00:53:28.720 | So let me skip past that point.

00:53:30.480 | We go now to the section here of loser and winner.

00:53:34.860 | And here's the headline of this section.

00:53:36.480 | Losses reported by businesses Mr. Trump

00:53:39.600 | Mr. Trump owns and runs helped wipe out tax bills

00:53:42.520 | on hundreds of millions of dollars in celebrity income.

00:53:45.560 | My notes, my marginalia on this article says, "Duh."

00:53:49.200 | Right? "Duh."

00:53:50.680 | That is the entire point.

00:53:52.320 | When you generate large amounts of income

00:53:54.960 | that's not otherwise shelterable,

00:53:57.560 | because taxes are such a ridiculous,

00:53:59.920 | brutal expense for business, you have to shelter that.

00:54:03.920 | And so you immediately need to create losses

00:54:06.620 | to offset against that income.

00:54:08.380 | That's tax planning 101.

00:54:10.320 | What do we say at a normal level?

00:54:12.960 | You have a client, client comes in and says,

00:54:16.160 | "I'm a lawyer and I'm trying to,

00:54:21.160 | "I'm a lawyer and I'm gonna have a big settlement.

00:54:25.600 | "I'm gonna have $10 million of income

00:54:27.020 | "from this big settlement this year."

00:54:29.200 | Well, if that lawyer is sitting in my office,

00:54:31.840 | then I say, "Buddy, you got a problem.

00:54:33.200 | "You can't show $10 million of income.

00:54:35.360 | "The IRS is gonna wipe out four of that 10 million."

00:54:38.420 | And so what are you gonna do?

00:54:39.660 | You immediately need to figure out

00:54:40.980 | where can you create losses.

00:54:42.620 | So can you buy some investments?

00:54:45.060 | That's one choice.

00:54:46.280 | Can you buy a business, a building

00:54:49.060 | that's gonna need renovation expenses or repairs?

00:54:52.060 | Can we find a business that's gonna have tons of repairs

00:54:54.900 | associated with it, where we can fix it up,

00:54:57.260 | but it not cross the line into actual improvement

00:55:00.660 | so that we can deduct in the current year

00:55:02.180 | all those repairs and generate losses from that?

00:55:04.840 | Can you take your race car hobby

00:55:06.780 | and can we turn that into a business?

00:55:08.440 | Because maybe you're gonna start

00:55:09.740 | a race car business in the future.

00:55:11.820 | So can we go ahead and move that now

00:55:13.780 | and then use those startup expenses for that business

00:55:16.540 | to offset this $10 million tax bill this year?

00:55:19.700 | That's what you do as a tax planner.

00:55:24.640 | The other thing that you see Trump doing

00:55:31.500 | is you see him managing his personal brand

00:55:33.780 | in a comprehensive way.

00:55:35.520 | And this is, to me, what is fascinating.

00:55:38.460 | I'm gonna read to you three and a half related paragraphs,

00:55:41.780 | and I want you to watch how this pays off.

00:55:43.700 | Remember that the earlier allegation in the story

00:55:46.400 | was that the New York Times reporters said

00:55:48.400 | that Mr. Trump's image is primarily flash

00:55:51.200 | rather than substance, but then later they write this.

00:55:53.540 | Mr. Trump's net income from his fame,

00:55:55.240 | his 50% share of The Apprentice,

00:55:57.420 | together with the riches showered upon him

00:55:59.380 | by the scores of suitors paying to use his name,

00:56:02.160 | totaled $427.4 million through 2018.

00:56:07.160 | A further $176.5 million in profit came to him

00:56:11.620 | through his investment

00:56:12.540 | in two highly successful office buildings.

00:56:14.860 | Now you can make the argument that,

00:56:17.380 | well, Trump was given a lot of money by his father

00:56:19.700 | and he could have invested it better in some other way.

00:56:21.940 | It's fine to make that argument, I think.

00:56:23.980 | But what I would point out is that Trump leveraged

00:56:27.260 | his high profile, his buildings, his image,

00:56:30.380 | to move himself into an obscenely profitable business deal,

00:56:34.560 | The Apprentice, that made him a lot of money.

00:56:36.600 | For most people, making $400 million,

00:56:39.820 | or in this case, $600 million with these two named things,

00:56:44.120 | that's the win of a lifetime.

00:56:45.300 | Most people, if they made $400 million,

00:56:46.980 | would immediately stop and not engage in anything else.

00:56:49.800 | Now, continuing on, quoting,

00:56:51.180 | "So how did he escape nearly all taxes on that fortune?"

00:56:53.720 | There's your lesson for you.

00:56:55.020 | "Even the effective tax rate paid by the wealthiest 1%

00:56:58.080 | "of Americans could have caused him

00:56:59.360 | "to pay more than $100 million."

00:57:01.720 | The answer rests in a third category

00:57:03.760 | of Mr. Trump's endeavors,

00:57:05.220 | businesses that he owns and runs himself.

00:57:08.160 | Duh, I've been teaching you this

00:57:08.980 | on Radical Personal Finance for years.

00:57:10.800 | "The collective and persistent losses he reported from them

00:57:13.880 | "largely absolved him from paying federal income taxes

00:57:16.960 | "on the $600 million from The Apprentice

00:57:19.240 | "branding deals and investments."

00:57:21.180 | Again, it's what I've been teaching you for years.

00:57:23.200 | If you have income and you can't avoid it,

00:57:25.920 | what you need is losses to offset that income.

00:57:28.260 | So you do that with assets

00:57:30.080 | where you can grow your value and capital gains,

00:57:32.320 | which is not currently taxable,

00:57:34.140 | rather than generating current income.

00:57:36.960 | That equate, continuing, quote,

00:57:38.160 | "That equation is a key element

00:57:39.580 | "of the alchemy of Mr. Trump's finances.

00:57:42.200 | "Use the proceeds of his celebrity

00:57:44.480 | "to purchase and prop up risky businesses,

00:57:47.320 | "then wielding their losses to avoid taxes."

00:57:50.480 | What I would point out to you

00:57:51.760 | is that that goes right back to the previous paragraphs.

00:57:54.320 | What do you do?

00:57:55.160 | You build a brand with buildings,

00:57:58.460 | with renovating Central Park and Trump Tower in downtown.

00:58:01.860 | Go back to his story in the '80s and the '90s.

00:58:03.540 | You build a brand.

00:58:04.740 | Then what he did is he's taken that brand

00:58:06.820 | and expanded that brand into many things,

00:58:08.820 | some things that succeeded, some things that didn't succeed,

00:58:11.500 | Trump Stakes and Trump University and all these failures.

00:58:14.480 | You isolate, as I teach you,

00:58:15.820 | you isolate all of your business dealings

00:58:18.260 | so that when something fails,

00:58:19.420 | like Trump University or Trump Stakes or whatever,

00:58:21.840 | you cut it off, those businesses go into bankruptcy,

00:58:24.820 | you segregate the losses on those businesses,

00:58:29.780 | but then all of this enhances your personal image.

00:58:32.500 | And so in this case, then he takes his personal image,

00:58:34.660 | he leverages it into The Apprentice,

00:58:36.900 | which was a cash cow for him.

00:58:38.980 | Then you take that fame, and in this case,

00:58:40.660 | he leveraged that fame eventually to the presidency,

00:58:43.300 | going into politics,

00:58:44.520 | but you take that and you leverage it back in.

00:58:46.180 | "Look, I have all these luxury golf courses.

00:58:47.980 | "I have all this other luxury stuff."

00:58:49.820 | And you build the brand.

00:58:51.060 | He is obsessed with the brand,

00:58:53.520 | the gold-plated brand all the way across,

00:58:55.780 | continuing from the New York Times story.

00:58:58.120 | That equation is a key element of the alchemy

00:59:00.120 | of Mr. Trump's finances,

00:59:01.180 | using the proceeds of his celebrity

00:59:02.640 | to purchase and prop up risky businesses,

00:59:05.200 | then wielding their losses to avoid taxes.

00:59:08.480 | Throughout his career, Mr. Trump's business losses

00:59:10.880 | have often accumulated in sums larger

00:59:13.360 | than could be used to reduce taxes

00:59:15.060 | on other income in a single year,

00:59:17.060 | but the tax code offers a workaround.

00:59:18.980 | With some restrictions, business owners can carry forward

00:59:21.780 | leftover losses to reduce taxes in future years.

00:59:24.900 | My comment, exactly.

00:59:27.680 | This is why you want lumpy income and lumpy deductions,

00:59:30.280 | and this is why you take risks on things,

00:59:32.500 | because if you have other income that you can offset,

00:59:34.920 | if something doesn't work out, you take the risk on it,

00:59:37.600 | and then you can bring it over,

00:59:38.960 | and you lump those deductions against your other income.

00:59:41.760 | The tax code incentivizes risk-taking,

00:59:47.640 | and you need to understand that.

00:59:49.080 | The tax code incentivizes risk-taking.

00:59:51.480 | As I have, in the years that I've taught tax planning to you,

00:59:54.760 | here on Radical Personal Finance,

00:59:55.840 | what I've tried to emphasize is that

00:59:57.940 | there are not two tax codes,

00:59:59.920 | one for the poor and one for the rich.

01:00:02.000 | There's not a special tax code for the poor

01:00:03.680 | and a special tax code for the rich.

01:00:05.480 | There are two tax codes in this way.

01:00:07.700 | There's one for employees,

01:00:09.320 | and there's one for business owners,

01:00:11.560 | and the employee tax code has basically nothing good in it.

01:00:15.440 | Basically, if you are an employee,

01:00:16.980 | you get screwed by the tax code every single time.

01:00:21.240 | You get screwed every single way.

01:00:23.680 | You pay through the nose.

01:00:25.800 | You lose more than half your income in some states.

01:00:28.720 | Just think about that, how obscene that is.

01:00:30.680 | You lose more than half your income

01:00:32.440 | if you're living in certain states

01:00:34.520 | and combining state income taxes and federal taxes

01:00:37.000 | and employment taxes.

01:00:38.000 | It's utterly obscene.

01:00:39.880 | Employees get skinned every which way by the tax code.

01:00:44.360 | Why?

01:00:45.360 | Because employees bring very little value to the economy.

01:00:49.600 | Employees don't generally create something that grows.

01:00:53.520 | Employees don't employ people.

01:00:54.920 | All employees do is serve as one individual body,

01:00:58.760 | and that's why they get skinned

01:01:00.200 | by the tax code every single time.

01:01:02.600 | So there are two tax codes,

01:01:04.240 | but it's not a tax code for the poor

01:01:05.960 | and a tax code for the rich.

01:01:07.300 | It's a tax code for employees

01:01:08.880 | and a tax code for business owners

01:01:11.080 | and investors incumbent in that, business owners.

01:01:13.920 | And that tax code is where all the good stuff is.

01:01:16.840 | And so why do I say that everybody needs a business?

01:01:19.480 | Because that tax code is where all the good stuff is.

01:01:21.880 | And you have every right to use that tax code

01:01:26.160 | whether you're totally broke

01:01:28.240 | or whether you're a multi-billionaire.

01:01:29.600 | It's exactly the same.

01:01:30.760 | The same rules that apply to President Trump

01:01:32.640 | apply to you and to me.

01:01:34.620 | But it takes risk for us to go out

01:01:36.920 | and get involved in business.

01:01:38.440 | It's hard.

01:01:39.280 | It takes a lot of hours.

01:01:40.160 | It takes a lot of work,

01:01:41.240 | but it's available to you exactly the same way.

01:01:44.200 | So continuing on here.

01:01:45.960 | The newer tax returns show that Mr. Trump

01:01:48.760 | burned through the last of the tax-reducing power

01:01:51.080 | of that $1 billion, which was a previous loss,

01:01:53.440 | a $1 billion in 2005,

01:01:55.320 | just as a torrent of entertainment riches

01:01:57.160 | began coming his way

01:01:58.200 | following the debut of "The Apprentice" the year before.

01:02:00.640 | Now, listen to the next two paragraphs

01:02:02.400 | in light of what I've said.

01:02:03.300 | If you generate income, you need deductions.

01:02:06.280 | For 2005 through 2007, cash from licensing deals

01:02:09.520 | and endorsements filled Mr. Trump's bank accounts

01:02:12.080 | with $120 million in pure profit,

01:02:15.080 | i.e. taxable profit, Joshua's comment.

01:02:17.600 | With no prior year losses left to reduce his taxable income,

01:02:20.920 | he paid substantial federal income taxes

01:02:23.120 | for the first time in his life, a total of $70.1 million.

01:02:27.200 | As his celebrity income swelled,

01:02:30.600 | Mr. Trump went on a buying spree,

01:02:32.760 | unlike any he had had since the 1980s

01:02:35.400 | when eager banks and his father's wealth

01:02:37.200 | allowed him to buy or build the casinos,

01:02:39.400 | airplanes, yacht, and old hotel that would soon lay him low.

01:02:43.280 | Now, in the light of tax planning,

01:02:44.580 | are you surprised that when someone generates

01:02:46.680 | a whole bunch of taxable income, they go on a buying spree?

01:02:49.880 | When "The Apprentice" premiered,

01:02:52.920 | Mr. Trump had opened only two golf courses

01:02:55.040 | and was renovating two more.

01:02:56.320 | By the end of 2015, he had 15 courses

01:02:59.520 | and was transforming the old post office building

01:03:01.440 | in Washington into a Trump International Hotel.

01:03:04.000 | But rather than making him wealthier,

01:03:05.360 | the tax records reveal, as never before,

01:03:07.560 | each new acquisition only fed the downward draft

01:03:09.960 | on his bottom line.

01:03:11.440 | I wanna point out is that might be true,

01:03:13.240 | but we don't know that it's true

01:03:14.400 | because you cannot pull that out of a tax record.

01:03:16.880 | You don't know what has happened to the capital,

01:03:19.720 | the value of the asset.

01:03:21.600 | It may very well be that that asset has become very valuable,

01:03:24.920 | but you don't know.

01:03:25.960 | You also don't know where you are

01:03:27.640 | in the trajectory of a business.

01:03:29.400 | Most businesses lose money in the beginning.

01:03:32.400 | Now, that, ideally, there are some business structures

01:03:35.100 | that naturally lend themselves well to not doing that,

01:03:37.920 | but most businesses, especially businesses

01:03:39.840 | that require tremendous capital expense,

01:03:41.840 | like buildings and equipment

01:03:43.640 | and thousands of mattresses

01:03:45.120 | and thousands of plates and all that stuff,

01:03:48.280 | like hotels and real estate,

01:03:50.040 | they lose money in the beginning.

01:03:51.640 | So you have to look and say,

01:03:52.480 | where is this business in its life cycle?

01:03:54.720 | So pretend, let me give you an example.

01:03:56.800 | Pretend that you decide to start a gym.

01:03:59.520 | That can be a very expensive proposition.

01:04:04.120 | And here I'm thinking not of a CrossFit style gym

01:04:06.560 | with minimal equipment.

01:04:07.440 | I'm thinking of a gym with hundreds of thousands of dollars

01:04:10.560 | of expensive machines and infrastructure and et cetera.

01:04:14.040 | You start the gym.

01:04:15.400 | Well, at what point in time does your gym become profitable?

01:04:18.760 | I don't know, but many businesses like that,

01:04:20.520 | it'd be three years, four years, five years.

01:04:23.160 | And so where are you in that life cycle?

01:04:25.240 | So what we don't know here is it's 2020.

01:04:28.480 | And what we know is that in 2007,

01:04:30.900 | President Trump, from 2005 to 2007, he made a lot of cash.

01:04:35.840 | Then he went on a buying spree,

01:04:37.660 | evidently sometime between 2007 and 2015.

01:04:41.760 | By the end of 2015, he had 15 courses

01:04:43.920 | and was transforming the old post office building

01:04:45.720 | into a hotel.

01:04:46.900 | But where are we in the business cycle of the business?

01:04:50.300 | Once you have a golf course,

01:04:52.360 | and if it's in demand, it can be very profitable.

01:04:54.580 | But if you have to renovate it, it can be expensive.

01:04:56.740 | So I feel like I'm giving too many disclaimers.

01:05:00.220 | My point is not to say that President Trump

01:05:01.700 | is a brilliant businessman.

01:05:04.020 | I don't know if he is or isn't.

01:05:05.200 | I haven't seen his balance sheet.

01:05:06.340 | I haven't seen his income statement.

01:05:07.500 | It hasn't been done in the fullness of time.

01:05:09.420 | I would say my instinct is that he has a killer,

01:05:12.180 | my opinion is that he has a killer instinct

01:05:15.540 | for how to leverage a brand

01:05:16.980 | into increasingly profitable things,

01:05:19.100 | which is what I think he'll do after the presidency,

01:05:21.420 | whether the presidency for him ends in 2020 or 2024,

01:05:24.620 | he will continue to leverage that brand

01:05:26.340 | and he'll build it again and again.

01:05:27.960 | I don't expect him to have financial trouble ever again

01:05:30.040 | in the rest of his life.

01:05:31.340 | But the tax, so my point is not to make a comment

01:05:33.660 | on his business acumen.

01:05:34.500 | My point is to make a comment that this article,

01:05:38.020 | unless they have the income statements

01:05:39.940 | and the balance sheets,

01:05:41.220 | you can't know this purely from tax returns, in my opinion,

01:05:46.160 | because the tax returns do not reflect

01:05:48.660 | unrealized depreciation, unrealized capital gains.

01:05:52.300 | You may very well suck up cash.

01:05:55.100 | And these numbers, for example,

01:05:57.620 | the story is full of numbers.

01:05:59.180 | Consider the results of his latest golf resort,

01:06:01.540 | Trump National Doral near Miami.

01:06:03.520 | Mr. Trump bought the resort for $150 million in 2012.

01:06:07.580 | Through 2018, his losses have totaled $162.3 million.

01:06:11.900 | He's pumped $213 million of fresh cash into Doral,

01:06:15.260 | tax records show, and has a $125 million mortgage balance

01:06:18.660 | coming due in three years.

01:06:20.260 | Question is how much income?

01:06:21.800 | We don't know, because we can't know that.

01:06:25.940 | The fact that he has losses don't tell us

01:06:28.020 | that he's a bad businessman.

01:06:29.380 | It just tells us that he has losses,

01:06:30.980 | or at least tax losses.

01:06:33.180 | Quote, "Even so, the rules do hold,"

01:06:37.540 | talking about depreciation,

01:06:38.920 | "Depreciation, though, is not a magic wand.

01:06:40.940 | "It involves real money spent or borrowed

01:06:42.620 | "to buy buildings or other assets

01:06:43.880 | "that are expected to last years.

01:06:45.540 | "Those costs must be spread out as expenses

01:06:47.540 | "and deducted over to the useful life of the asset.

01:06:49.680 | "Even so, the rules do hold particular advantages

01:06:52.020 | "for real estate developers like Mr. Trump,

01:06:54.200 | "who are allowed to use their real estate losses

01:06:56.280 | "to reduce their taxable income from other activities."

01:06:59.180 | And that is the key tax planning tip.

01:07:02.820 | As a full-time real estate businessman,

01:07:06.300 | Trump can use his losses from real estate

01:07:09.200 | to offset his other income,

01:07:10.660 | because he's a full-time,

01:07:12.180 | he's in the business of real estate.

01:07:14.160 | And that has been one of his powerful tools.

01:07:18.320 | That's one of the reasons why real estate

01:07:20.040 | is always such a powerful tool

01:07:22.540 | in a tax planner's arsenal.

01:07:28.660 | Many years ago, in the tax code,

01:07:30.620 | there were many other useful tools.

01:07:33.360 | But over the last 30 years,

01:07:35.640 | the tax code has been tightened up so much

01:07:38.260 | that the vast majority of loopholes

01:07:40.120 | that were previously available are now gone.

01:07:42.780 | I have looked for years as a tax planner,

01:07:47.420 | trying to find where are all the good loopholes, right?

01:07:49.300 | Where are the loopholes for the rich?

01:07:51.140 | The vast majority of them are gone.

01:07:54.300 | And things like this with real estate,

01:07:56.720 | they're not a loophole.

01:07:58.720 | They're just simply a feature

01:08:01.280 | that you can do with a scale of $100,000 properties,

01:08:04.360 | or you can do with a scale of $300 million properties.

01:08:07.440 | Let's talk about some of the other controversies in it.

01:08:11.300 | I wanna read three quotes here.

01:08:13.640 | There's some stupid New York Times commentary.

01:08:15.960 | Again, I'm not a basher of newspapers,

01:08:19.300 | but it's interesting that the New York Times,

01:08:22.080 | and most modern newspapers, right?

01:08:23.960 | There's really not any, they can't help.

01:08:26.000 | Their perspective, their bias is so,

01:08:29.720 | their bias is so

01:08:33.040 | endemic that they can't help it.

01:08:37.600 | They can't help but see through it.

01:08:38.840 | And so the article is full of all kinds of little quips

01:08:41.960 | and whatnot that are clearly negative.

01:08:44.080 | I think the authors did a good job

01:08:45.400 | of trying to report the facts.

01:08:46.560 | I mean, they know that this article

01:08:47.760 | is gonna be the most viewed of all time,

01:08:53.060 | but it's still full of it.

01:08:56.340 | But let me, I don't wanna get into the politics.

01:08:58.240 | Quote, "Once again, his businesses losses

01:09:00.180 | "mostly absolved his tax responsibilities.

01:09:02.140 | "He paid no federal income taxes for 2014."

01:09:05.100 | One of the points I wanna make that's important

01:09:06.740 | is that just because somebody

01:09:08.060 | does not have any current tax due

01:09:11.100 | does not mean that they won't pay tax.

01:09:13.900 | So let's go back to my example,

01:09:16.500 | where you bought the house for $150,000,

01:09:18.980 | you fixed it up, and you have $300,000,

01:09:22.180 | and then you flipped it to the developer for $500,000.

01:09:25.180 | Maybe you were just the world's greatest real estate picker,

01:09:28.380 | and you picked that house that you bought for 500,

01:09:31.540 | and now it's worth $2.5 million.

01:09:33.700 | Now, the question is this.

01:09:35.960 | You have reported $0, let's assume it's land

01:09:40.620 | and not even creating rents.

01:09:41.660 | You've reported $0 of income from that property,

01:09:46.420 | but you have $2.5 million asset.

01:09:49.700 | Is that asset owned by you tax-free?

01:09:52.000 | The answer is so far, yes, but not forever.

01:09:58.540 | And that's one of the other key things

01:10:01.060 | about anything related here to the New York Times article.

01:10:05.580 | Taxes and tax returns give you a snapshot in time,

01:10:09.060 | but they don't give you the full understanding

01:10:11.900 | of whether somebody is a net tax contributor or not.

01:10:15.540 | So if we were trying to really do this

01:10:17.920 | from a tax perspective, and you would say,

01:10:19.980 | well, is President Trump, what is the total lifetime value

01:10:23.900 | of President Trump's business activities

01:10:26.540 | to the coffers of the US Treasury?

01:10:28.840 | That would be a fair and interesting question.

01:10:31.220 | But the answer is we don't know yet.

01:10:35.620 | Now, we will know in the fullness of time,

01:10:38.280 | but that fullness of time has to be

01:10:40.300 | that President Trump is dead,

01:10:42.140 | because that's the point in time

01:10:44.780 | at which the US government will stop taxing him.

01:10:47.420 | And until President Trump is dead,

01:10:50.420 | we won't understand what his total lifetime contributions are

01:10:54.740 | to the coffers of the US Treasury.

01:10:56.460 | Will he be a net negative on the tax code?

01:11:01.460 | Not in any way, which is why earlier I mentioned

01:11:04.400 | about the productivity of the businesses,

01:11:05.980 | the salaries that are paid,

01:11:07.000 | the employment taxes, et cetera.

01:11:08.420 | Not in any way will he be a net negative.

01:11:10.760 | His contribution, even with everything

01:11:13.220 | in the New York Times article,

01:11:14.200 | his contribution to the tax rolls of the United States

01:11:16.820 | will be far bigger than the average professional

01:11:20.100 | in the United States.

01:11:21.140 | Excuse me.

01:11:28.020 | His contributions will be far bigger

01:11:29.460 | than the average professional in the United States.

01:11:31.660 | There'll be many, many multiples of that

01:11:33.580 | because of him being a businessman.

01:11:36.620 | But what we don't know is we don't know

01:11:39.300 | what the total cost is,

01:11:40.420 | because everything has to be marked to market,

01:11:43.620 | either at the sale of the properties,

01:11:45.900 | at the transfer of the properties,

01:11:47.700 | or at his death when the estate taxes are due.

01:11:51.260 | Because in the United States,

01:11:52.340 | you cannot go forever without paying taxes.

01:11:56.220 | You simply can't.

01:11:57.460 | Now, you can go for a very long time

01:12:00.100 | in a very few circumstances.

01:12:02.360 | For example, it is possible that somebody could put

01:12:06.380 | some property into a trust,

01:12:10.060 | into some kind of dynasty trust, right?

01:12:11.780 | Maybe a trust in Florida,

01:12:12.820 | the dynasty trust in Florida for 360 years.

01:12:15.660 | And you can transfer this property into the trust

01:12:17.860 | and the property generates no income,

01:12:20.060 | no income whatsoever.

01:12:23.860 | It could be whatever kind of asset that has no income.

01:12:26.860 | And it sits in the trust for 300 years.

01:12:30.400 | Well, it's generating no income.

01:12:32.380 | Thus, the trust is not paying any taxes on the money.

01:12:35.800 | But at some point in time, 300 years from now,

01:12:38.940 | when that property is sold, the taxes are gonna be due.

01:12:42.460 | And it'll be taxed 300 years from now.

01:12:44.060 | That's about as far as you can possibly go,

01:12:46.660 | is that kind of dynasty trust in the US tax system.

01:12:49.700 | But you have to have no income in the property

01:12:52.020 | for it to not be taxed for that long period of time.

01:12:54.460 | Now, could that be a massive tax savings?

01:12:57.740 | Yeah, for 300 years, the newspapers could write about

01:13:01.340 | how there's $100 million of property

01:13:03.500 | sitting here in this trust, and it's paying $0 of tax.

01:13:06.460 | Why?

01:13:07.380 | Because it's not taxing income.

01:13:09.660 | There's no tax on wealth at the moment

01:13:12.040 | in the United States of America.

01:13:13.660 | There's only a tax on income.

01:13:15.380 | So in the same way, President Trump's property

01:13:17.580 | can sit here for year after year after year.

01:13:20.060 | They may or may not be appreciating.

01:13:21.940 | He'll owe taxes on the current profits due,

01:13:26.040 | but if there are losses, he won't owe taxes.

01:13:28.060 | But he will eventually.

01:13:29.660 | So if President Trump owns Trump Tower,

01:13:32.820 | whichever, or Trump Hotel, whichever one you want,

01:13:35.020 | or Trump Golf Course, if he owns it,

01:13:37.060 | and he decides in the year 2030

01:13:39.060 | that he wants to sell that property,

01:13:41.020 | when that property is sold, he will now owe tax.

01:13:44.300 | And so it's conceivable that he could lose

01:13:46.260 | $20 million per year on a property for 20 years,

01:13:49.460 | and then sell the property in the 20th year

01:13:52.060 | for a $500 million profit,

01:13:54.620 | and have a massive tax bill in that 20th year

01:13:57.220 | because of the nature of real estate.

01:13:59.340 | So once again, tax returns don't tell us much.

01:14:02.700 | All they tell us is that he doesn't currently owe taxes

01:14:05.660 | because he currently doesn't have taxable income

01:14:07.820 | from his business affairs.

01:14:09.740 | And so you need to keep that in mind,

01:14:11.580 | that he will eventually pay the tax.

01:14:15.260 | Now, what can you do as an individual to eliminate tax?

01:14:18.940 | As long as you don't get into the world of estate taxes,

01:14:22.060 | then you can actually own property totally tax-free.

01:14:25.540 | I gave you this earlier, but I wanna repeat it now.

01:14:27.700 | You buy a property,

01:14:28.580 | you buy a million dollars worth of property.

01:14:30.180 | You own the property personally,

01:14:31.780 | you have some income from the property.

01:14:33.940 | Maybe you don't.

01:14:34.780 | Maybe you go and buy one of Ted Turner's ranches,

01:14:36.860 | and it's totally unproductive from a financial perspective,

01:14:39.420 | but you love it because it gives you a place

01:14:41.100 | to ride your horses and see the buffalo.

01:14:43.500 | You own that property, you own it for 50 years,

01:14:45.740 | and it goes in value from $1 million

01:14:47.860 | to $10 million 50 years from now,

01:14:49.860 | and you just leave it outright to your children.

01:14:51.820 | Well, your children can inherit the property

01:14:53.580 | for $10 million, and they'll inherit it free and clear

01:14:56.060 | as long as your estate doesn't owe taxes.

01:14:58.020 | Now, if you start to get into a place

01:14:59.740 | where you have an estate that has a taxable value

01:15:01.940 | beyond the 20-something million-ish dollars

01:15:03.820 | right now in the United States,

01:15:05.220 | then now all of a sudden, when you died,

01:15:06.860 | your estate would owe taxes.

01:15:08.460 | But the most you can do is do this

01:15:10.620 | with 10-ish million dollars for you,

01:15:12.620 | 10-ish million dollars for your spouse,

01:15:15.020 | up to about $20 million for the family

01:15:17.260 | before you start to have to do estate tax planning.

01:15:19.740 | And so the point is that just because taxes

01:15:21.500 | are not paid currently doesn't mean that taxes are not paid.

01:15:25.420 | So always keep that in mind.

01:15:26.820 | This is clearly a politically inflammatory piece,

01:15:30.140 | and nobody in the United States understands taxes.

01:15:32.460 | I've been studying it for years,

01:15:33.540 | and I am scared to do a show like this

01:15:35.340 | because I'm sure I'll get something wrong.

01:15:37.460 | But the argument is basically,

01:15:41.380 | well, President Trump doesn't pay taxes.

01:15:42.820 | My answer would be he isn't currently owing taxes

01:15:46.300 | because his businesses are not currently generating income,

01:15:48.620 | but that doesn't mean he won't owe taxes.

01:15:50.620 | Next.

01:15:53.340 | I'm belaboring some of these points too much.

01:15:57.980 | I just wanted you to know

01:15:58.860 | that taxes cannot be avoided forever.

01:16:00.780 | That's the argument for estate taxes.

01:16:02.260 | I don't like estate taxes,

01:16:04.100 | but that's the argument for estate taxes

01:16:05.780 | is that eventually the taxes need to be paid

01:16:08.220 | because rich people can simply live

01:16:10.300 | on their money in the bank.

01:16:11.780 | They don't have to incur taxes.

01:16:13.420 | And so if there's not estate taxes there

01:16:14.900 | to eventually force the taxation of property,

01:16:17.500 | then we've got a problem.

01:16:19.180 | That's the argument for estate taxes,

01:16:20.580 | but you need to understand that.

01:16:21.860 | All right, let's talk about the $72.9 million maneuver.

01:16:24.860 | Quote, "The apprentice created

01:16:27.220 | what was probably the biggest income tax bite

01:16:29.460 | of Mr. Trump's life.

01:16:30.700 | During the Great Recession bailout,

01:16:32.140 | he asked for the money back."

01:16:34.300 | Now, by now you should hear, as I hear,

01:16:36.980 | hey, the apprentice created a big income tax bite.

01:16:39.940 | Why?

01:16:40.980 | Because it wasn't real estate.

01:16:42.500 | It was just pure taxable income.

01:16:44.820 | It was pure profits on the business of the apprentice.

01:16:47.260 | And so he couldn't successfully offset it legally.

01:16:50.500 | He couldn't generate enough deductions to offset it

01:16:53.100 | with other investment in order for him to cover all of it.

01:16:58.100 | So he had to pay tens of millions of dollars in tax,

01:17:02.180 | on income tax, on the profits.

01:17:04.140 | Then in 2010, he claimed and received an income tax refund

01:17:09.140 | totaling $72.9 million,

01:17:11.860 | all the federal income tax he had paid

01:17:13.660 | for 2005 through 2008 plus interest.

01:17:17.940 | The records, so there's an ongoing audit,

01:17:20.620 | and the story basically affirms that on this particular

01:17:23.500 | piece, evidently President Trump has been truthful,

01:17:26.180 | to all of our surprise, right?

01:17:29.700 | "The records at the Times Reviewed square with the way

01:17:31.820 | Mr. Trump has repeatedly cited without explanation

01:17:34.100 | an ongoing audit as grounds for refusing

01:17:36.260 | to release his tax returns.

01:17:37.860 | He alluded to it as recently as July on Fox News

01:17:40.820 | when he told Sean Hannity,

01:17:41.660 | "They treat me horribly, the IRS horribly."

01:17:43.820 | And while the records do not lay out all the details

01:17:45.660 | of the audit, they match his lawyer's statement

01:17:47.500 | during the 2016 campaign that audits of his returns

01:17:51.220 | for 2009 and subsequent years remained open

01:17:53.740 | and involved transactions or activities

01:17:55.260 | that were also reported on returns for 2008 or earlier.

01:17:57.780 | So basically this worked like this,

01:17:59.660 | that as part of the bailout package in 2009,

01:18:03.460 | the US government removed the two-year look-back rule

01:18:07.420 | for deducting business losses.

01:18:09.260 | And so under that part of the legislation at that time,

01:18:14.260 | then Trump was able to go back and use those losses

01:18:19.780 | to offset his previous income.

01:18:21.660 | And so Mr. Trump had paid no income taxes in 2008,

01:18:24.820 | but the change meant that when he filed his taxes for 2009,

01:18:27.460 | he could seek a refund of not just the $13.3 million

01:18:30.980 | he had paid in 2007, but also the combined $56.9 million

01:18:35.980 | paid in 2005 and 2006, when the apprentice created

01:18:41.740 | what was likely the biggest income tax bite of his life.

01:18:45.380 | And so he applied for the refund under the legislation,

01:18:48.220 | under the bailout legislation,

01:18:49.540 | and that started the rounds of auditing.

01:18:52.780 | Now what the story explained was that these kinds of refunds

01:18:56.500 | require the approval of IRS auditors

01:18:58.340 | and an opinion of the Congressional Joint Committee

01:19:00.540 | on Taxation, a bipartisan panel better known

01:19:03.460 | for reviewing the impact of tax legislation.

01:19:05.820 | Tax law requires the committee to weigh in on all refunds

01:19:09.100 | larger than $2 million to individuals.

01:19:11.780 | So that was interesting.

01:19:12.620 | I didn't know that that existed.

01:19:13.580 | I didn't know about that rule.

01:19:15.380 | But in short, for the last 10 years,

01:19:18.220 | Trump filed for the refund, but because it was so large,

01:19:22.020 | everything had to be reviewed,

01:19:23.380 | and it's basically been stuck in the committee

01:19:26.820 | for the last 10 years.

01:19:28.420 | Now, evidently there was a resolution expected

01:19:32.380 | in about 2014 of this audit process,

01:19:35.800 | but then when Mr. Trump started to become

01:19:38.560 | politically prominent during the 2016

01:19:41.460 | Republican nomination process,

01:19:45.460 | then everything got kicked back to committee.

01:19:47.540 | And so according to the New York Times,

01:19:49.460 | it's not clear why the case has stalled,

01:19:52.420 | but according to the New York Times,

01:19:54.340 | quote, "Experts say it suggests that the gap

01:19:56.140 | "between the sides remains wide.

01:19:57.500 | "If negotiations were to deadlock,

01:19:59.060 | "the case would move to federal court

01:20:00.220 | "or it would become a matter of public record."

01:20:02.660 | Who knows?

01:20:03.700 | And so this is the most interesting part of it,

01:20:06.620 | where basically they are,

01:20:08.660 | the IRS and the Trump Organization

01:20:11.900 | have come to loggerheads, and it's basically sitting,

01:20:15.100 | probably because of its political sensitivity,

01:20:17.060 | which would be my guess.

01:20:18.660 | Now, people are saying, was this fraudulent?

01:20:21.020 | I don't see any evidence from this New York Times article

01:20:24.860 | that it's fraudulent.

01:20:26.580 | Let's talk about what it means to file for something.

01:20:29.100 | First of all, there's never a reason for you as an individual

01:20:33.420 | not to be aggressive in your tax reporting to the IRS.

01:20:37.940 | There is no downside to being aggressive.

01:20:40.480 | You cannot be fraudulent.

01:20:42.360 | If you try to do something that is outright fraud,

01:20:45.060 | that's extremely dangerous to,

01:20:48.860 | that's extremely dangerous to your,

01:20:51.000 | well, to your freedom, right?

01:20:53.060 | They can lock you up for that.

01:20:54.620 | But in the situation where you put yourself in,

01:20:58.260 | in a situation where you wanna be aggressive

01:21:01.840 | with something and file for it, there's no reason not to,

01:21:03.820 | because the only thing that the IRS will say is no,

01:21:06.620 | and the deduction will be disallowed,

01:21:08.280 | or in this case, the refund request would be disallowed.

01:21:12.580 | So think about it from the Trump Organization perspective.

01:21:15.160 | Trump paid, we'll call it $70 million of taxes.

01:21:17.760 | Then Congress passed this bailout bill,

01:21:19.700 | which allowed you to carry back your,

01:21:21.700 | go back more than two years to your losses

01:21:23.980 | and deduct them against your previous tax bills paid.

01:21:26.740 | So now that puts you in a situation

01:21:28.300 | where you're not in any way committing fraud

01:21:31.180 | by applying for it.

01:21:32.700 | You go ahead and apply for it,

01:21:34.100 | and now you get a $70 million refund,

01:21:36.380 | or you make the request to the IRS

01:21:38.780 | of the $70 million refund.

01:21:40.780 | The worst that the IRS can say is no, right?

01:21:43.740 | That's the worst that they can say.

01:21:45.220 | If they say no, you're not in any worse place

01:21:47.940 | than you were previously.

01:21:49.540 | If they say yes, you're $70 million richer.

01:21:52.660 | If they say, well, we're not sure,

01:21:54.180 | we're gonna fight about it,

01:21:55.540 | depending on who has the money,

01:21:56.860 | and it's not clear to me from the article

01:21:58.340 | who has the money currently,

01:21:59.420 | whether the IRS has the $70 million,

01:22:01.620 | or Mr. Trump has it.

01:22:02.860 | Actually, I think that Trump has it,

01:22:05.060 | because the article says that if he loses the dispute,

01:22:07.760 | then he'll owe the IRS $100 million,

01:22:09.780 | which is $70 million plus penalties and fees.

01:22:12.380 | So in that situation, as a businessman,

01:22:14.900 | you have use of the $70 million

01:22:16.740 | while you're fighting the audit with the IRS.

01:22:19.380 | You have the use of the $70 million.

01:22:21.100 | You can use it however you want.

01:22:22.700 | And then eventually, if you lose your audit fight,

01:22:25.160 | then you'll have to pay it back,

01:22:26.400 | which is, of course, potentially a cashflow problem.

01:22:28.960 | But in this scale, it should be handleable

01:22:31.540 | if you're wise and prudent with the money.

01:22:33.680 | So that's, I think, the most interesting part

01:22:36.300 | of what's aware of it.

01:22:39.620 | But I think to say that it's clearly fraudulent

01:22:42.380 | would be far too far.

01:22:45.140 | To say that it's not,

01:22:46.420 | I wouldn't say that it's fraudulent.

01:22:49.220 | If it were fraudulent, it would have been thrown out,

01:22:51.100 | is my opinion,

01:22:52.180 | as that anything that would be genuinely fraudulent,

01:22:54.620 | the tax, the judge would have ruled on it,

01:22:56.700 | the IRS would have ruled on it,

01:22:57.660 | the committee would have ruled,

01:22:58.740 | and everything would have been settled.

01:23:00.700 | According to what Trump said in public,

01:23:02.980 | evidently he had reached some kind of agreement with them,

01:23:05.780 | which means that it was probably a questionable case

01:23:07.940 | where it could go either way,

01:23:08.860 | and they'd reach some kind of settlement between them.

01:23:11.460 | And then he became politically prominent,

01:23:14.060 | and then everybody backed off of that.

01:23:16.500 | Now we go to the 20%, which is the consultant's fees.

01:23:19.260 | And let me explain to you the basic argument,

01:23:21.740 | and then we'll talk about how you can use this for yourself.

01:23:24.500 | The New York Times headline,

01:23:25.340 | "The 20% Solution,

01:23:26.500 | Helping to Reduce Mr. Trump's Tax Bills

01:23:28.780 | Are Unidentified Consultant's Fees,

01:23:30.860 | Some of Which Can Be Matched to Payments

01:23:32.620 | Received by Ivanka Trump."

01:23:34.660 | Examining the Trump Organization's tax records,

01:23:37.500 | a curious pattern emerges.

01:23:38.740 | Between 2010 and 2018,

01:23:40.500 | Mr. Trump wrote off some $26 million

01:23:42.860 | in unexplained consulting fees

01:23:44.820 | as a business expense across nearly all of his projects.

01:23:48.220 | They explain a little bit about where they are,

01:23:50.940 | but there is no evidence that Mr. Trump,

01:23:52.460 | who mostly licenses his name,

01:23:54.860 | mysterious big payments,

01:23:55.860 | talk about foreign business deals,

01:23:57.300 | mysterious big payments and business deals

01:23:59.020 | can raise red flags,

01:24:00.060 | particularly in places where bribes

01:24:01.380 | or kickbacks to middlemen are routine.

01:24:03.100 | But there is no evidence that Mr. Trump,

01:24:04.500 | who mostly licenses his name to other people's projects

01:24:06.780 | and is not involved in securing government approvals,

01:24:08.700 | has engaged in such practices.

01:24:09.980 | We'll talk about the Foreign Practices Act in a moment,

01:24:12.140 | but this is one of those areas

01:24:13.060 | where the New York Times just can't help themselves, right?

01:24:15.140 | You raise a suspicion,

01:24:16.740 | and then you say, "Well, there's no evidence of it."

01:24:18.220 | It's like if I say,

01:24:19.220 | people who,

01:24:21.060 | I have children, right?

01:24:23.460 | And you say, you come,

01:24:24.300 | and you're writing a newspaper article about Joshua.

01:24:26.540 | And you say, "Joshua has children,

01:24:29.140 | and people who have children

01:24:31.180 | have been known to abuse their children."

01:24:32.980 | There's no evidence that Joshua is abusing his children,

01:24:35.860 | right?

01:24:36.700 | But people who have children

01:24:37.540 | have been known to abuse their children.

01:24:38.380 | That's what this is.

01:24:39.220 | It's this stupid stuff that raises the suspicion.

01:24:43.540 | And then you go on to say,

01:24:44.380 | "Well, there's no evidence of this."

01:24:45.220 | But now you've planted the seeds of doubt

01:24:47.220 | that people who have children abuse children,

01:24:49.380 | which is certainly technically true,

01:24:51.260 | that there are some people who have children

01:24:52.940 | who abuse children.

01:24:54.100 | Well, it's also true

01:24:55.260 | that the overwhelming majority of people who have children

01:24:58.020 | fight tooth and nail to protect their children

01:25:00.740 | from every harm that could possibly accrue to them.

01:25:03.460 | And so that kind of stuff annoys me,

01:25:05.700 | but we'll move on.

01:25:07.260 | Quote, "Rather, there appears

01:25:08.660 | to be a closer-to-home explanation

01:25:10.220 | for at least some of the fees.

01:25:11.820 | Mr. Trump reduced his taxable income

01:25:13.780 | by treating a family member as a consultant

01:25:15.820 | and then deducting the fee as a cost of doing business."

01:25:19.780 | Now, this particular scenario is raised as,

01:25:23.460 | "Is this questionable?"

01:25:24.940 | But from my perspective,

01:25:27.620 | I see no way that you can say that this is questionable.

01:25:30.180 | This is standard practice.

01:25:32.220 | Let me bring this back from the billionaire perspective

01:25:34.660 | to talk about you and me.

01:25:36.380 | Let's pretend that I run an accounting office.

01:25:38.420 | I have an accounting office,

01:25:40.220 | and I look around and I say,

01:25:42.180 | "You know what?

01:25:43.020 | I need someone to clean my office."

01:25:44.060 | And I could hire a commercial cleaning company

01:25:46.260 | to come and do it and pay them $1,000 a month

01:25:48.300 | for the privilege,

01:25:49.380 | but I could also hire my 15-year-old son

01:25:52.260 | to come and pay him $1,000 a month for the privilege.

01:25:54.940 | I talked to my son and I say,

01:25:55.900 | "Would you like to come and clean my office for $1,000?"

01:25:58.420 | And he says, "I'll do it."

01:25:59.260 | "Yeah, absolutely."

01:26:00.540 | So what I have just done

01:26:01.620 | is I've done what's called income shifting.

01:26:03.660 | It's one of the three basic techniques

01:26:05.300 | of income tax planning.

01:26:06.500 | It's an income shifting strategy.

01:26:08.380 | Where you're trying to shift income

01:26:10.140 | from a higher bracket taxpayer to a lower bracket taxpayer.

01:26:13.620 | You're trying to shift income from one party

01:26:16.700 | to another party within a family bound.

01:26:19.340 | And there's nothing illegal about it.

01:26:21.060 | It's entirely legal for you to hire your son

01:26:23.820 | $1,000 a month to clean your office.

01:26:25.980 | Now, you want to make sure

01:26:27.180 | to properly account for that deduction.

01:26:29.060 | You wanna make sure that

01:26:30.780 | there is a method of keeping track on him,

01:26:32.660 | that he's got a checklist of what he's supposed to do.

01:26:35.220 | You wanna make sure that there's some kind of

01:26:36.740 | way to prove his attendance,

01:26:38.060 | that he's actually cleaning the office, et cetera.

01:26:40.260 | But if he's coming in and cleaning the office

01:26:42.020 | and a commercial cleaner would charge you $1,000,

01:26:44.460 | you can pay him $1,000 as well.

01:26:46.900 | So let's talk about the tax effect of this.

01:26:49.020 | Did the taxes disappear?

01:26:51.700 | No, and yes, in a way.

01:26:54.540 | So the first thing is they didn't disappear.

01:26:56.020 | What you did was you took income,

01:26:58.420 | what would have been $12,000 for the year

01:27:01.180 | from your business, and you've shifted it to your son.

01:27:04.660 | Now he has $12,000 of income.

01:27:06.940 | And in this situation, evidently,

01:27:09.100 | that's what President Trump has done

01:27:11.620 | by shifting the income from the Trump Organization

01:27:14.500 | to his daughter, Ivanka Trump,

01:27:16.220 | in the form of consulting fees.

01:27:17.780 | And so it's some tens of millions of dollars

01:27:19.980 | over a period of time, the numbers are unclear,

01:27:22.420 | but the money that was gonna be taxable income

01:27:24.860 | to the Trump Organization

01:27:26.020 | is now taxable income to Ivanka Trump.

01:27:29.060 | So when I say that, did the taxes disappear?

01:27:32.220 | The answer is no, they didn't.

01:27:33.540 | They've just changed parties.

01:27:35.420 | So now Ivanka Trump has paid in taxes,

01:27:38.180 | and there's no allegations

01:27:39.380 | that she's not reported the income.

01:27:41.300 | Evidently, she's reported it, she's paid taxes on it.

01:27:43.780 | It's just simply been that Ivanka Trump

01:27:45.580 | has paid the taxes on the income

01:27:46.980 | rather than the Trump Organization,

01:27:48.340 | rather than President Trump himself.

01:27:50.040 | Just like if you, in your accounting business,

01:27:53.280 | pay your son $12,000, he will pay the tax on $12,000,

01:27:59.540 | and you will not.

01:28:01.020 | Now that's advantageous at the smaller level

01:28:03.140 | because you might very well be making $400,000

01:28:06.100 | as an accountant running a large accounting firm,

01:28:08.980 | and your tax rate may be approaching 50%, maybe it's 40%.

01:28:13.820 | So therefore, you, with that $12,000,

01:28:16.740 | would perhaps lose, I'm gonna use 50% for clear math,

01:28:19.300 | you would lose $6,000 in taxes.

01:28:21.400 | Whereas your son, if he has no other income,

01:28:24.140 | your son would wind up not owing any money on the $12,000

01:28:28.380 | because it's below the taxable threshold in that situation.

01:28:31.540 | And so you've sheltered $12,000 from taxes

01:28:34.060 | by shifting it within the family.

01:28:36.260 | As long as he's doing the work,

01:28:37.700 | and as long as there's a record there to prove it,

01:28:39.500 | it's entirely legal.

01:28:40.660 | And so the same thing is the case

01:28:42.100 | with Ivanka's business expenses.

01:28:44.840 | To me, I see nothing questionable about this

01:28:49.840 | from a perspective.

01:28:51.780 | Let me quote from the article.

01:28:56.260 | There is no quote, "There is no indication

01:28:57.780 | "that the IRS has questioned Mr. Trump's practice

01:28:59.720 | "of deducting millions of dollars in consulting fees.

01:29:02.900 | "If the payments to his daughter were compensation for work,

01:29:05.020 | "it is not clear why Mr. Trump would do it in this form

01:29:07.180 | "other than to reduce his own tax liability."

01:29:10.000 | Now, there is a IRS doctrine that says

01:29:14.300 | that you cannot do something

01:29:16.220 | for the sole purposes of reducing taxes.

01:29:18.740 | Forget the name of the doctrine at the moment,

01:29:19.980 | but you can't just do something

01:29:21.060 | for the sole purposes of reducing taxes.

01:29:23.280 | But these are areas where there's a broad leeway,

01:29:26.260 | where something can have the side benefit

01:29:28.400 | of reducing taxes.

01:29:29.760 | And to say that I'm gonna pay consulting fees to Ivanka

01:29:33.080 | on a number of, you know, on a hotel in Azerbaijan

01:29:35.660 | or a hotel in Turkey or whatever,

01:29:37.880 | you could probably justify that in many ways.

01:29:40.600 | So I don't buy the IRS saying

01:29:42.920 | that it's not clear why Mr. Trump would do it in this form

01:29:46.920 | other than to reduce his own tax liability.

01:29:48.760 | Why not?

01:29:49.600 | Why not do that?

01:29:52.400 | Another more legally perilous possibility

01:29:54.000 | is that the fees were a way to transfer assets

01:29:55.800 | to his children without incurring a gift tax.

01:29:58.200 | A Times investigation in 2018 found

01:30:00.240 | that Mr. Trump's late father, Fred Trump,

01:30:01.800 | employed a number of legally dubious schemes decades ago

01:30:04.960 | to evade gift taxes on millions of dollars

01:30:06.940 | he transferred to his children.

01:30:08.760 | Now, I struggle with that word dubious.

01:30:10.760 | What does dubious mean, right?

01:30:12.920 | Dubious means questionable or uncertain or,

01:30:17.400 | you know, it could go right or could go wrong.

01:30:22.480 | Well, that's certainly an emotionally loaded word,

01:30:25.440 | but everything, many, many things in the tax code

01:30:29.760 | are dubious.

01:30:30.960 | There are many times where you look at something and say,

01:30:32.880 | "I could go two ways on this."

01:30:34.400 | And so by that case, it's dubious.

01:30:36.520 | And there are clear ways of resolving it.

01:30:39.400 | There is an audit process.

01:30:40.680 | And so if you are audited,

01:30:42.680 | then the issue will come before the tax court.

01:30:45.240 | The judge and the court will consider previous precedent.

01:30:48.080 | They'll consider what you've done.

01:30:49.460 | If you've done something fraudulent,

01:30:50.940 | they will charge you for doing something fraudulent,

01:30:53.060 | even up to the point of criminal penalties

01:30:55.800 | in a very egregious case,

01:30:58.040 | but they'll charge you with something.

01:31:00.100 | They'll take the money,

01:31:00.940 | and then they'll take your property to pay for it.

01:31:02.560 | So that word dubious is a very loaded word,

01:31:07.080 | but it doesn't exist.

01:31:08.280 | Now, is he transferring money to his children

01:31:10.320 | without a gift tax?

01:31:11.420 | You could make that argument very clearly

01:31:14.920 | if his children were not engaged in the business.

01:31:17.480 | And this is why it's so advantageous

01:31:18.800 | to have a family business

01:31:19.800 | where your children are engaged in the business.

01:31:21.800 | Is the net effect that Mr. Trump

01:31:23.500 | is transferring wealth to his children

01:31:25.820 | without paying gift taxes?

01:31:27.300 | Yes, but he's transferring wealth to his children

01:31:30.600 | at the price of income taxes.

01:31:33.260 | Ivanka is receiving consulting fees,

01:31:35.220 | and she's paying taxes on those consulting fees.

01:31:37.500 | So the money is still being taxed.

01:31:39.300 | It's not a tax fee transfer.

01:31:40.940 | That's the first point.

01:31:42.060 | Second point, that in a situation like this,

01:31:43.940 | I don't think you could make an argument

01:31:45.660 | that this is not an appropriate payment

01:31:48.280 | because Ivanka is clearly very involved

01:31:50.580 | in the business organization.

01:31:52.060 | She's involved in the White House currently.

01:31:53.620 | She was involved in "The Apprentice."

01:31:54.940 | She's involved in the hotel organization.

01:31:57.220 | Now, if your daughter was sitting at home

01:31:59.520 | and never came into the office

01:32:01.460 | and was receiving millions of dollars a year

01:32:03.860 | of consulting fees,

01:32:05.740 | but she never came into the office,

01:32:06.980 | then certainly that would be fraudulent,

01:32:08.460 | and that would be denied.

01:32:09.620 | The deduction would be denied.

01:32:10.920 | The income would be charged to the Trump organization,

01:32:14.600 | and there would probably be some kind of penalties.

01:32:16.580 | But in a situation where Ivanka is clearly involved,

01:32:19.820 | she's clearly earning the millions of dollars

01:32:21.900 | in consulting fees.

01:32:23.100 | The fact that it might be a little bit generous,

01:32:24.880 | these are the areas where there's a huge degree

01:32:27.540 | of subjectivity.

01:32:28.980 | And so it's one thing for you to say,

01:32:31.260 | my 15-year-old boy, I'm gonna get a $1,000 estimate

01:32:34.820 | from a cleaning company and use that.

01:32:36.460 | It's another thing when you're running

01:32:37.500 | a multi-hundred-million-dollar

01:32:39.620 | or billion-dollar organization,

01:32:41.420 | and you're paying million-dollar consulting fees.

01:32:45.140 | Now, I wanna talk for just a moment

01:32:47.940 | about the Foreign Corrupt Practices Act

01:32:49.620 | because this actually really impresses me.

01:32:52.300 | Quoting from the article,

01:32:53.300 | "On the failed hotel deal in Azerbaijan,

01:32:55.540 | "which was plagued by suspicions of corruption,"

01:32:57.620 | again, kind of that underground argument of,

01:32:59.580 | okay, suspicions of corruption,

01:33:00.740 | it has an effect in the reader's mind.

01:33:03.540 | It's probably factually, totally factually true,

01:33:06.040 | but it has the net effect

01:33:08.860 | that The New York Times is hoping for.

01:33:10.220 | "On the failed hotel deal in Azerbaijan,

01:33:12.180 | "which was plagued by suspicions of corruption,

01:33:14.220 | "a Trump organization lawyer told The New Yorker

01:33:16.260 | "the company was blameless because it was merely a licensure

01:33:19.060 | "and had no substantive role, adding,

01:33:21.240 | "We did not pay any money to anyone.

01:33:23.060 | "Yet the tax records for the three Trump LLCs

01:33:25.020 | "involved in that project

01:33:26.200 | "show deductions for consulting fees

01:33:27.940 | "totaling $1.1 million that were paid to someone."

01:33:32.020 | The thing that's interesting to me about this

01:33:33.580 | is that I think the Trump organization

01:33:35.820 | has probably worked very, very hard

01:33:37.460 | to keep their hands clean around the world.

01:33:40.060 | I'm not a Trumpist nor an anti-Trumper.

01:33:42.100 | I've got, as with most times, complex opinions

01:33:45.200 | that many of which are in some ways contradictory,

01:33:48.500 | but it doesn't really matter, right?

01:33:49.660 | 'Cause I'm not him, I'm not in any position of authority.

01:33:52.260 | But one of the things that's the most difficult

01:33:55.860 | for US Americans is years ago,

01:33:57.700 | the US Foreign Corrupt Practices Act was passed.

01:34:00.580 | And the US Foreign Corrupt Practices Act

01:34:02.980 | bans the use of briberies or kickbacks

01:34:06.260 | to foreign officials in business deals.

01:34:08.060 | And it comes with very, very severe penalties.

01:34:10.780 | And this has made American companies

01:34:13.600 | extremely uncompetitive around the world

01:34:16.700 | in the past decade, since it was passed,

01:34:20.620 | because the penalties on this are very, very substantial.

01:34:25.620 | If you as a US company are caught

01:34:29.400 | paying a bribe to a foreign official,

01:34:31.860 | that can be really, really damaging

01:34:34.340 | and personally, legally, very problematic.

01:34:37.260 | And so it's interesting that Trump's strategy

01:34:39.720 | of just simply licensing his name

01:34:41.860 | is a really impressive strategy

01:34:43.580 | where it allows him to make money from these deals,

01:34:46.180 | but it allows his local partners

01:34:47.980 | to do whatever needs to be done

01:34:49.900 | in order to make the deal happen.

01:34:52.180 | Now, I don't care much for the subject of paying bribes.

01:34:56.440 | I think that accepting bribes is immoral and offensive.

01:35:03.040 | And I think that paying bribes is very unwise,

01:35:06.840 | bordering on immoral in many circumstances,

01:35:09.620 | but certainly unwise.

01:35:11.700 | Unfortunately, there's a very big difference

01:35:15.060 | between countries and between cultures

01:35:18.740 | in the way that many places work.

01:35:20.740 | And so it's very easy to sit in the United States and say,

01:35:23.220 | "Wow, I can't believe that so-and-so paid a bribe

01:35:25.460 | for such and such."

01:35:26.900 | Once you've spent some time traveling

01:35:28.660 | and doing business around the world,

01:35:29.940 | you learn that if some extra money doesn't change hands,

01:35:34.940 | then often you never get what you need done.

01:35:39.180 | There's just simply no way to run a business

01:35:40.720 | in many countries unless money changes hands.

01:35:43.620 | And this happens in the United States as well,

01:35:46.980 | but it happens in a different system.

01:35:48.460 | In the United States, it happens primarily

01:35:49.740 | in the form of political contributions.

01:35:52.580 | The United States is a deeply corrupt country,

01:35:54.620 | but the corruption happens in a different way

01:35:57.280 | than it does in some other places.

01:35:58.980 | But I thought it was an interesting point here

01:36:04.480 | of how Trump has elegantly sidestepped

01:36:06.780 | those potential legal problems with his use of licensing.

01:36:11.500 | And it points out the power of building a brand

01:36:14.180 | because he's sunk so much money and attention and effort

01:36:17.980 | into building his gold-plated brand

01:36:20.700 | that then he could sell that brand around the world.

01:36:23.140 | And it has a genuine value to local property developers.

01:36:26.480 | The next thing that, in the next section of the Times article

01:36:29.940 | is talking about write-offs.

01:36:30.980 | And this is the least interesting to me

01:36:33.160 | because it's all of what we know about.

01:36:35.800 | The allegation is that President Trump

01:36:39.620 | is taking excessive numbers of write-offs.

01:36:42.240 | Is it true?

01:36:44.540 | I would say certainly not, because if it were true,

01:36:48.860 | the IRS audit would have taken care of this,

01:36:53.680 | would have found this.

01:36:54.600 | And this is fairly clear.

01:36:56.340 | When you're dealing with the companies,

01:36:57.860 | you're not dealing with President Trump personally.

01:36:59.700 | He doesn't prepare a tax return.

01:37:01.340 | The lawyers do it.

01:37:02.500 | The lawyers and the accountants are following the rules

01:37:05.200 | and they are taking the write-offs

01:37:08.260 | that are appropriately allowed by law.

01:37:10.880 | I just don't buy for an instant

01:37:13.340 | that President Trump's buying extra table linens

01:37:18.140 | is somehow a big thing for him.

01:37:20.220 | Now, they talk about this in the New York Times article.

01:37:22.380 | Take, for example, Mar-a-Lago,

01:37:23.580 | now the president's permanent residence

01:37:25.060 | as well as a private club and stage

01:37:27.020 | set on which Trump luxury plays out.

01:37:29.040 | As a business, it is also the source

01:37:30.500 | of millions of dollars in expenses

01:37:31.900 | deducted from taxable income.

01:37:33.900 | Among them, $109,433 for linens and silver

01:37:38.420 | and $197,829 for landscaping in 2017.

01:37:43.020 | Also deducted as a business expense

01:37:44.540 | was the $210,000 paid to a Florida photographer

01:37:47.140 | over the years for shooting numerous events at the club,

01:37:49.660 | including a 2016 New Year's Eve party hosted by Mr. Trump.

01:37:53.340 | These are stupid details without any relevance whatsoever.

01:37:57.580 | If you wanted to understand how $109,433 for linens,

01:38:02.940 | whether that matters or not, what would you do?

01:38:05.180 | Well, you would say, let's pool the finances

01:38:09.060 | and let's go down the street to the Breakers Hotel

01:38:11.660 | or let's go to the Everglades Club

01:38:13.420 | or to the Bath and Tennis Club,

01:38:15.300 | also private clubs here on Palm Beach,

01:38:17.260 | and let's ask them how much they pay in linens.

01:38:20.140 | And there's somehow, the article is trying

01:38:22.980 | to give this impression that somehow President Trump

01:38:26.460 | is enriching himself because he's overpaying on linens,

01:38:29.280 | which is just silly.

01:38:30.920 | At the small level, then certainly at the smaller level,

01:38:34.900 | there are plenty of business owners who do this, right?

01:38:37.160 | You can imagine the guy who has a few thousand dollars

01:38:41.660 | of revenue and he takes and bills a couple extra $100

01:38:45.060 | in linens or cost of business,

01:38:46.940 | and he sells them out the back of his store

01:38:49.260 | and doesn't report the income, sure.

01:38:50.900 | But the idea that Mar-a-Lago is overspending

01:38:53.620 | because they spent $109,000 for linens is silly.

01:38:56.260 | I don't know anything about what they spend or don't spend.

01:39:00.780 | You would have to compare it again to Everglades Club

01:39:03.160 | or go to the breakers and see how does this compare.

01:39:08.160 | $197,829 for landscaping, to me, sounds about right, right?

01:39:13.180 | I've worked with clients that had a private house

01:39:15.360 | and they have a full-time gardener

01:39:17.360 | with two part-time assistants.

01:39:19.000 | Well, right there, they've got $100,000

01:39:20.680 | of annual landscaping bills for their estate in Palm Beach,

01:39:23.520 | and it's not an estate, it's a private club.

01:39:25.160 | So you have to have context for all of these things.

01:39:28.080 | What to me is the most interesting

01:39:29.480 | from a lifestyle perspective is what I want you to learn

01:39:31.500 | from the next paragraph.

01:39:32.900 | Quote, "Mr. Trump has written off his business expense costs,

01:39:36.080 | "including fuel and meals associated with his aircraft

01:39:39.500 | "used to shuttle him among his various homes and properties.

01:39:42.440 | "Likewise, the cost of haircuts,

01:39:44.000 | "including the more than $70,000 paid

01:39:46.200 | "to style his hair during 'The Apprentice.'

01:39:48.480 | "Together, nine Trump entities have written off

01:39:50.560 | "at least $95,464 paid to a favorite hair

01:39:54.340 | "and makeup artist of Ivanka Trump."

01:39:56.740 | So there are multiple ways to look at that.

01:39:59.460 | First of all, if you are a financially productive person,

01:40:03.040 | you can use your business as a form of influence,

01:40:06.320 | which is what people do.

01:40:07.180 | So if Mar-a-Lago has paid $200,000 to a photographer,

01:40:11.360 | right, that's a useful thing.

01:40:12.840 | You choose a photographer that you like,

01:40:14.400 | you choose a photographer that's kind to you,

01:40:16.000 | that's nice to you, that treats you well.

01:40:17.720 | You may choose a photographer that's politically connected.

01:40:19.800 | You may choose a photographer that's the mayor's son,

01:40:21.820 | or something like that.

01:40:23.920 | But the brilliance of the Trump organization

01:40:26.800 | is that he's built a lifestyle business

01:40:28.980 | that allows him to live his life

01:40:31.200 | and to genuinely live a high-status,

01:40:36.200 | high-consumption lifestyle in a very tax-efficient way.

01:40:41.840 | That's the power of it.

01:40:43.240 | And that's what's open to you and to me,

01:40:45.480 | which is why I've continually encouraged you

01:40:47.880 | that everybody should have a business

01:40:49.360 | and that businesses should not have a sole goal

01:40:52.760 | of producing profit.

01:40:54.040 | It should have and must,

01:40:55.400 | in order to be a legitimate business,

01:40:57.000 | have a goal of producing profit,

01:40:58.800 | but it should also provide for you a pleasant lifestyle,

01:41:01.780 | a lifestyle that you enjoy.

01:41:03.680 | You can do this with your own company, right?

01:41:05.980 | You can do this with your own multinational company.

01:41:08.260 | If you have a multinational company

01:41:09.700 | that has business affairs in London and Australia

01:41:13.060 | and the Bahamas and New York City,

01:41:16.260 | well, now your business has every right

01:41:18.580 | for it to send you to those places

01:41:20.900 | and to pay for your expenses

01:41:22.340 | and to give you an entertainment budget

01:41:23.900 | and a dining budget and an appropriate budget

01:41:26.460 | for the things that you need.

01:41:28.180 | Now, you can't deduct personal clothing, right?

01:41:30.740 | That would be an example of what you can't deduct.

01:41:32.420 | You can't buy custom bespoke suits

01:41:35.620 | just for you as a normal businessman

01:41:37.460 | and deduct it as personal clothing,

01:41:39.860 | unless that personal clothing relates some way

01:41:42.340 | to your actual brand, for example, like The Apprentice.

01:41:46.580 | And the rules on some of this stuff get a little bit fuzzy,

01:41:48.720 | but if you're a TV personality,

01:41:50.360 | the cost of your makeup is certainly part of doing business.

01:41:55.280 | You don't expect, I don't even know who's on TV anymore.

01:41:57.740 | Is Katie Couric still on TV?

01:41:59.500 | You don't expect your morning news anchor to come to the,

01:42:03.640 | you don't have a problem with your morning news anchor

01:42:05.940 | on your TV show having a makeup person on staff

01:42:08.960 | that prepares their makeup.

01:42:10.180 | And so if you build a business,

01:42:12.340 | like perhaps the Trumps have built,

01:42:14.020 | then you can do the same thing.

01:42:15.060 | And so there's an art to this,

01:42:17.080 | where you look at your lifestyle and you say,

01:42:19.360 | what kind of lifestyle do I want?

01:42:21.720 | And then how can I build this lifestyle

01:42:23.540 | in a tax-efficient way?

01:42:25.220 | And so that's what Trump has done with his club,

01:42:27.500 | even along the way.

01:42:28.340 | And to me, let me tell a story about the Trump club.

01:42:32.120 | I don't know if this is true or not.

01:42:35.740 | This is just simply gossip that I heard.

01:42:38.940 | So a number of years ago,

01:42:39.820 | I was out at the Everglades Club with a friend of mine.

01:42:41.460 | And so if you've never been to Palm Beach,

01:42:42.900 | Palm Beach is a very exclusive society,

01:42:45.820 | very hoity-toity, it always has been.

01:42:47.980 | And it's my hometown.

01:42:50.300 | And so I spent a lot of time on Palm Beach.

01:42:53.140 | I went to school right in downtown West Palm Beach.

01:42:55.140 | I would walk to the beach in Palm Beach

01:42:57.420 | when I was in college.

01:42:59.540 | And so it's my hometown.

01:43:02.260 | Worth Avenue is where I would go to walk.

01:43:04.700 | It's where my friends went to ride skateboards.

01:43:06.900 | And so down the street.

01:43:08.900 | So a number of years ago, I was at the Everglades Club,

01:43:11.540 | which is a private exclusive club.

01:43:13.060 | It's like a country club, but a little bit,

01:43:14.940 | it is a country club, but it's a glorified country club.

01:43:17.220 | And it's one of the places where during season,

01:43:19.460 | Palm Beach is a very seasonal town during the winter season,

01:43:21.940 | where that's where people go to hang out.

01:43:23.980 | And it's really nice.

01:43:24.820 | It's a lovely experience to go to any of these clubs.

01:43:27.780 | But the story that was told was that Donald Trump

01:43:31.100 | wanted to join the Everglades Club.

01:43:32.980 | And again, I am not saying,

01:43:34.980 | I don't know if this is true,

01:43:35.820 | it's gossip that was told to me of the stories.

01:43:37.740 | Donald Trump wanted to join the Everglades Club.

01:43:40.380 | And unfortunately, nobody wanted him in the club

01:43:44.100 | because he was too vulgar, right?

01:43:46.380 | The Palm Beach society scene is very,

01:43:49.780 | very much about not being vulgar.

01:43:52.340 | And he was so vulgar and brash and he was new money.

01:43:54.740 | He wasn't old money.

01:43:55.980 | And he's very, very vulgar and he's everywhere in the press

01:43:58.420 | and he's a playboy and all over the place.

01:44:00.100 | And so he wanted to join the Everglades Club,

01:44:01.540 | but he couldn't get people to sponsor him

01:44:02.980 | and they wouldn't approve him for membership.

01:44:04.740 | And allegedly he tried multiple different clubs.

01:44:07.100 | And so he said, "Fine, you're not gonna have me.

01:44:10.060 | "I'm gonna start my own club."

01:44:11.020 | So he bought the, was it the Estee Lauder Estate,

01:44:13.860 | I think it was Mar-a-Lago.

01:44:15.100 | So he bought the house that is now Mar-a-Lago,

01:44:17.220 | the estate that is now Mar-a-Lago,

01:44:18.420 | and he started his own club.

01:44:19.820 | But he was so stupid with his choice,

01:44:21.580 | again, the gossip of Palm Beach.

01:44:22.740 | He was so dumb with his choice

01:44:24.220 | that he didn't realize that the flight path

01:44:26.500 | for Palm Beach International Airport

01:44:28.060 | flies right over Mar-a-Lago.

01:44:29.900 | So he bought this big expensive house

01:44:32.040 | that is right in the path of the flight path

01:44:35.380 | of the airplanes.

01:44:36.220 | So all day long, there's airplanes coming in

01:44:37.580 | from the Atlantic Ocean, right over the top of Mar-a-Lago

01:44:40.220 | to land at Palm Beach International Airport.

01:44:42.420 | And so he went and he tried to get the laws changed

01:44:45.100 | and everything to protect his club.

01:44:47.820 | Now, at the end of the day, nobody wanted to join his club.

01:44:51.220 | So then he started to bring people down to join his club,

01:44:52.960 | et cetera, et cetera.

01:44:54.060 | But it has turned out to be a good investment for him.

01:44:56.780 | So that's the gossip about the Palm Beachers

01:44:58.900 | who don't like President Trump

01:45:00.140 | and have never liked him because he's vulgar.

01:45:02.240 | But along the way, if you think about the value

01:45:04.940 | of starting a private club,

01:45:06.260 | there's incredible value to that

01:45:07.900 | from a lifestyle perspective.

01:45:10.020 | If you start a private club,

01:45:11.620 | you could have all of the benefits

01:45:13.180 | that President Trump has from his private club.

01:45:15.620 | Instead of having to pay fees to the Everglades Club,

01:45:18.620 | which in today's world, in today's tax code

01:45:20.900 | are basically not deductible, right?

01:45:22.700 | There was a time when you could deduct

01:45:23.900 | more country club dues than now,

01:45:26.340 | but that's a very hard one to get past.

01:45:27.740 | So instead of paying your multi-six figure

01:45:30.580 | initiation fees to the club

01:45:32.140 | and your tens of thousands of dollars a year

01:45:33.620 | membership fees, Trump doesn't have that.

01:45:35.620 | He started his own club.

01:45:37.060 | And so instead of it being an expense source for him,

01:45:39.740 | it's a revenue source.

01:45:40.860 | And it gives him the ability to own real property,

01:45:42.980 | a very beautiful estate,

01:45:44.500 | right in a very valuable section of Palm Beach,

01:45:47.300 | and to do it in a very efficient way.

01:45:49.020 | So don't hate him for these deductions.

01:45:52.260 | If the deductions are improper,

01:45:54.020 | the IRS will deal with that.

01:45:56.300 | Copy him from this perspective.

01:45:58.860 | And if there's a high consumption lifestyle

01:46:00.940 | thing that you wanna do,

01:46:02.340 | think about if you can just simply

01:46:05.020 | bring that into your life in some way.

01:46:06.460 | I've talked about, you know,

01:46:08.180 | at some point I might start a,

01:46:11.100 | not a coworking space, but a maker space.

01:46:15.300 | Why?

01:46:16.140 | Well, I'd love my children to have a fully equipped workshop,

01:46:20.900 | but I'd rather have my children have a fully equipped

01:46:23.100 | workshop that they can work at,

01:46:25.020 | not only physically do the work,

01:46:27.340 | but also physically put yourself in a place

01:46:30.260 | where they can manage it.

01:46:32.540 | So I'd rather, if I'm gonna buy a bunch of expensive

01:46:34.780 | equipment for my children to learn, you know,

01:46:36.900 | woodworking equipment and metalworking equipment

01:46:38.580 | and computers and graphic design, et cetera,

01:46:41.300 | I'd rather do that in the form of business.

01:46:43.060 | And I'll capitalize the business,

01:46:45.300 | but I'll have my children involved in picking it out

01:46:48.020 | and running it and helping manage it, et cetera.

01:46:51.340 | So now not only do they of course have the ability

01:46:53.700 | to use the equipment,

01:46:55.300 | but now it can be a source of revenue for the family

01:46:58.340 | and a source of business training,

01:47:00.180 | rather than just me buying $100,000 worth of equipment

01:47:03.020 | to put in a shed out behind my back,

01:47:05.100 | behind my house for my children to use.

01:47:08.140 | And so you can do this on many levels.

01:47:10.300 | If you wanna start a maker space,

01:47:11.740 | because you wanna buy a 3D printer,

01:47:13.600 | there's no requirement that your business

01:47:15.300 | has to have 30,000 square feet.

01:47:17.460 | You can do that right there.

01:47:18.860 | You can just simply start a business

01:47:20.740 | and have that business buy a 3D printer

01:47:22.940 | and have the plan be to start a private club

01:47:24.900 | where you're gonna rent out time on that 3D printer

01:47:27.340 | for your children's friends.

01:47:28.500 | And now you have the exact same thing

01:47:30.460 | that President Trump has with starting his own private club.

01:47:33.460 | There is a significant section on ethics in this article.

01:47:40.700 | The ethical quandaries, quote,

01:47:41.860 | "The ethical quandaries created by Mr. Trump's decision

01:47:44.660 | to keep his business while in the White House

01:47:46.420 | have been documented,

01:47:47.900 | but the full financial measure

01:47:49.340 | of his extraordinary confluence of interests,

01:47:52.220 | a president with a wealth of business entanglements at home

01:47:54.940 | and a myriad geopolitical hotspots has remained elusive.

01:47:59.260 | The tax records for Mr. Trump and his hundreds of companies

01:48:02.220 | show precisely how much money he has received over the years

01:48:04.500 | and how heavily he has come to rely on leveraging his brand

01:48:07.660 | in ways that pose potential or direct conflicts of interest

01:48:10.260 | while he is president."

01:48:12.140 | This is an area that is very, very concerning,

01:48:15.060 | is the ethical discussions.

01:48:17.060 | And I do not have a high opinion

01:48:20.860 | of President Trump's sense of ethics and morality.

01:48:24.860 | It's hard for me to believe that any honest person

01:48:28.820 | would look to him as a paragon of human virtue,

01:48:31.620 | as somebody who always plays it straight

01:48:33.560 | and who always does the right thing no matter what.

01:48:36.160 | What's bothersome to me

01:48:41.700 | is that these ethical problems

01:48:44.180 | are major risks going forward for every single person,

01:48:48.620 | not only who inhabits the White House,

01:48:51.980 | but who inhabits any part of the governmental system.

01:48:55.780 | And I expect this to continue getting worse.

01:48:59.780 | I'll tell you why.

01:49:01.260 | If you have a society where the government is rather small

01:49:06.260 | and where the government is not involved

01:49:08.740 | in every form of society,

01:49:11.140 | the government might have a few basic functions.

01:49:14.060 | And if then that society,

01:49:15.780 | the local government officials

01:49:18.820 | have very modest power over people's lives,

01:49:21.940 | then I think you have far fewer ethical problems.

01:49:24.420 | Imagine, for example, that you live in a county

01:49:29.180 | that's just a small rural county

01:49:30.860 | and you have a county commission of four or five people

01:49:33.200 | and everyone pays the same tax rate, et cetera.

01:49:36.740 | There's not a lot of incentive

01:49:38.180 | for every normal individual citizen

01:49:40.780 | to go and to try to bribe or corrupt

01:49:43.660 | the county commissioners.

01:49:45.100 | Now, there is a big incentive

01:49:46.660 | for a mega real estate developer

01:49:48.780 | who wants to come in and open a casino in your county

01:49:51.300 | to try to bribe the county commission.

01:49:53.640 | But there's not a lot of incentive for the normal person.

01:49:55.980 | Why?

01:49:56.820 | Well, because the county commission

01:49:57.860 | doesn't have that much power.

01:49:59.100 | They're just there.

01:50:00.740 | They're just part of the government

01:50:01.780 | and they're a functionary

01:50:02.820 | and they don't have a lot of power over the average person.

01:50:05.340 | And so when you have a small government,

01:50:06.780 | you have a very small risk of ethical,

01:50:11.020 | of people trying to buy influence because it's not worth it.

01:50:14.180 | But when you have a very large government,

01:50:16.500 | now all of a sudden it becomes much more important

01:50:19.300 | to get the government on your side.

01:50:21.340 | And so as the US government has grown

01:50:24.500 | and has taken over more and more of the economy,

01:50:26.700 | and as we've transitioned from a small government,

01:50:29.380 | more of a libertarian oriented society,

01:50:32.420 | to the modern government, which is huge,

01:50:35.340 | where everybody's involved over the last century,

01:50:38.220 | this particular change means that the ethics problems

01:50:42.140 | are much, much more substantial.

01:50:45.860 | And I expect that to continue to grow.

01:50:47.600 | As the government continues to grow in power and in scope,

01:50:50.900 | there's more incentive for normal people

01:50:53.100 | to influence the government and to try to buy influence.

01:50:57.140 | Most of the time this happens in political contributions.

01:51:00.020 | President Trump famously giving money to everybody, right?

01:51:02.660 | That's normal for many business people

01:51:04.300 | to give money to the people who are involved.

01:51:06.860 | And then it happens in terms of employment opportunities.

01:51:09.400 | You see the revolving door

01:51:10.900 | between the government and Wall Street.

01:51:14.620 | You see the revolving door

01:51:15.740 | between lobbyist firms and government.

01:51:18.180 | And if you can succeed in getting into government

01:51:20.220 | at a high level, you basically can write your ticket

01:51:23.420 | to a very profitable life.

01:51:25.300 | If you get elected to Congress for a few years,

01:51:28.500 | you can parlay that, if you're politically savvy,

01:51:31.060 | you can parlay that into becoming a lobbyist.

01:51:35.060 | At the moment, there's no real laws against that.

01:51:37.780 | And the role of a lobbyist,

01:51:39.460 | it's hard to think of a cushier job, right?

01:51:41.220 | If I said, I'll pay you $850,000 a year,

01:51:45.540 | and you need to live in a comfortable house

01:51:47.580 | in a great metropolitan area,

01:51:49.260 | Washington, DC is just a lovely place to live

01:51:51.380 | from a cultural perspective.

01:51:53.020 | And your job is to talk to people.

01:51:55.820 | You're gonna have an entertainment and expense budget

01:51:58.420 | of $100,000 a year.

01:52:01.020 | You can use that going to all the finest restaurants,

01:52:03.140 | taking people around.

01:52:04.820 | I mean, to me, that's a dream job, right?

01:52:06.580 | That's the kind of thing that would be so fun.

01:52:08.300 | And so if you don't have moral reservations

01:52:12.140 | about what you're doing, it's a really fun job.

01:52:14.540 | I've thought many times about, well, is there a cause

01:52:18.340 | that I could just get behind so much

01:52:19.820 | that I'd be willing to go and do it?

01:52:20.900 | It's a cushy job.

01:52:22.020 | And so that's an example of how legally

01:52:23.660 | you can leverage political power and exposure

01:52:26.940 | into a lifetime employment

01:52:30.340 | in a very fun and cushy type of work.

01:52:33.420 | And so that temptation is there for all politicians now.

01:52:38.020 | You have to be really, either really straight,

01:52:42.500 | you have to be like a Ron Paul or a Thomas Massey

01:52:45.220 | or somebody really abrasive like that

01:52:47.100 | who has these really hardcore opinions,

01:52:49.500 | not to leverage that.

01:52:50.460 | And even in those situations,

01:52:51.560 | you'll still leverage your name, right?

01:52:52.780 | Ron Paul has a successful TV organization

01:52:56.640 | where he opines on subjects that are important to him.

01:52:59.420 | And so you can leverage political businesses,

01:53:01.940 | political, excuse me, Freudian slip there.

01:53:04.500 | You can leverage political engagement

01:53:06.340 | and government service into a fortune.

01:53:08.940 | I did a show on that a year or so ago

01:53:10.540 | where I talked about how you can do that

01:53:12.100 | and even for your children.

01:53:12.940 | Now you're connected, your children are connected.

01:53:15.100 | It's one of the, it's a really good investment.

01:53:17.380 | If you invest a few years of your life

01:53:19.060 | into getting that low salary of a congressman,

01:53:22.500 | you can then leverage that into a lifetime of ease

01:53:24.980 | and riches for yourself down the road.

01:53:27.500 | And from a presidential perspective,

01:53:29.860 | this is even more true, more powerful.

01:53:33.640 | I think you could see this very clearly

01:53:35.680 | in President Bill Clinton.

01:53:37.500 | When he and Hillary Clinton left office,

01:53:41.640 | they said we're broke, right?

01:53:44.320 | We're totally broke.

01:53:45.280 | But then just a very short time later,

01:53:48.040 | they were once again doing very well financially,

01:53:51.280 | multi, multi, multi millionaires.

01:53:53.200 | And so you see this with expensive speeches.

01:53:57.180 | You see this with all of the stuff.

01:53:58.980 | And it's almost impossible not to believe

01:54:01.580 | that the politicians who leave that

01:54:03.460 | don't continue to exercise their leverage.

01:54:06.240 | They just certainly do.

01:54:07.380 | And so there are enough ways for you to whitewash the money

01:54:10.820 | through handsome speaking fees, et cetera,

01:54:14.120 | book engagements, et cetera,

01:54:15.860 | that basically the ticket when you're a president,

01:54:18.420 | the presidency is a ticket to lifetime of wealth

01:54:21.900 | for anybody.

01:54:22.980 | Even somebody without a business,

01:54:25.380 | a former business scenario,

01:54:27.620 | somebody like President Clinton or President Obama,

01:54:30.300 | it's a lifetime ticket to massive wealth forever.

01:54:34.560 | Now, when you take someone like President Trump

01:54:36.180 | who has all these business interests,

01:54:37.820 | I don't see how he,

01:54:39.680 | regardless of whether he wins or loses in the next election,

01:54:42.820 | I don't see how he doesn't transform this

01:54:45.140 | into untold wealth.

01:54:49.140 | Whether that's in,

01:54:50.060 | it's rumored that he's gonna take over

01:54:51.620 | the news network or a TV network

01:54:54.860 | and have the Trump TV network,

01:54:55.980 | something like the One America News Network,

01:54:57.860 | maybe so, it'd be a smart move for him

01:55:00.400 | to do that financially.

01:55:01.940 | I don't know how he'll leverage it,

01:55:03.260 | but somebody like him who everything is built on brand

01:55:06.060 | will certainly leverage it.

01:55:07.660 | And so I think the ethics concerns are without question,

01:55:11.440 | without question troubling

01:55:17.980 | because it's just a very, very big pot of money

01:55:21.940 | for anybody to have to walk away from.

01:55:23.900 | But there's no evidence in the story

01:55:27.780 | that President Trump has crossed

01:55:30.860 | any of the legal ethic lines, ethics lines.

01:55:34.680 | There's no evidence of it.

01:55:35.520 | Wouldn't surprise me if there were,

01:55:37.020 | but I think it's notable that there's not.

01:55:38.740 | In all this story, after years of people saying,

01:55:41.140 | if we could just get access to his tax records,

01:55:42.700 | that'll show how dirty he is.

01:55:46.620 | In my opinion, he's cleaner than I expected.

01:55:49.060 | Let's wrap it up with the final section of the article

01:55:51.140 | called "The Gathering Storm,"

01:55:52.700 | the headline from the New York Times.

01:55:53.740 | Threats are converging, mounting business losses,

01:55:56.540 | the looming IRS audit,

01:55:58.220 | and personally guaranteed debts coming due.

01:56:00.520 | I think that case is unproven would be at best.

01:56:07.700 | I think that's more of a point of wishing.

01:56:11.420 | I think it's unproven.

01:56:12.860 | And I would say that it's just gonna depend, right?

01:56:15.240 | There's not enough context here.

01:56:16.540 | We don't know enough, yes, okay,

01:56:18.420 | he's gonna have loans coming due.

01:56:19.660 | We don't know what the revenue is of those businesses.

01:56:21.260 | We don't know what the worth of those businesses are.

01:56:24.780 | And so the idea here of the New York Times writers

01:56:28.100 | is Mr. Trump is likely to wield his influence unethically

01:56:32.360 | because he's in financial trouble, maybe so.

01:56:34.620 | I wouldn't say that's impossible,

01:56:38.320 | but I think that it's unproven.

01:56:41.740 | And if you understand the basic ideas of business,

01:56:46.740 | I think that this will be evidence.

01:56:48.520 | Let me show you how I would analyze this

01:56:50.160 | through a business lens.

01:56:51.320 | Now his tax records, quote,

01:56:54.140 | "Now his tax records make clear

01:56:55.340 | "that he is facing a battery of threats to his business

01:56:57.480 | "and his own financial wellbeing.

01:56:59.280 | "Over the past decade,

01:57:01.920 | "he appears to have filled the cashflow gaps

01:57:03.740 | "with a series of one-shots

01:57:05.060 | "that may not be available again.

01:57:06.960 | "In 2012, he took out a $100 million mortgage

01:57:09.940 | "on the commercial space in Trump Tower."

01:57:12.660 | Now the idea of the New York Times writer here

01:57:16.540 | is that this is a sign of financial distress,

01:57:19.000 | but we don't know if it's a sign of financial distress.

01:57:20.880 | It may be very well that he needed some cash,

01:57:23.120 | and so he took out the $100 million mortgage,

01:57:25.380 | and that's what you do when you wanna spend money

01:57:28.160 | from a real estate portfolio in a tax-efficient way,

01:57:30.220 | you use debt.

01:57:31.540 | Money that you get from borrowing is not taxable income.

01:57:34.640 | But who knows?

01:57:36.680 | Then they go on, quote,

01:57:38.820 | "He took nearly the entire amount as a payout,

01:57:40.520 | "his tax records show.

01:57:41.700 | "His company has paid more than $15 million in interest

01:57:44.040 | "on the loan, but nothing on the principal.

01:57:45.800 | "The full $100 million comes due in 2022."

01:57:49.920 | So an example like this is supposed to say

01:57:53.840 | he's in financial trouble.

01:57:54.880 | I look at it and I say, he wanted to spend money,

01:57:57.640 | he needed money, and so you take a loan out,

01:57:59.720 | that's tax-free income.

01:58:01.220 | The $15 million in interest is a deductible expense

01:58:05.540 | 'cause he's in the business of real estate.

01:58:07.680 | So with his wealth, that's a 50% discount.

01:58:11.280 | There's a good chance that the building has grown in value

01:58:19.040 | or is continuing to grow in value,

01:58:21.180 | so he can easily justify the interest expense

01:58:24.320 | on his balance sheet.

01:58:25.800 | And the fact that the $100 million loan comes due in 2022

01:58:29.080 | tells us nothing because we don't know what it's worth,

01:58:31.360 | we don't know what his lender is saying.

01:58:32.960 | If the lender is dealing with Donald Trump,

01:58:34.680 | who has a reputation for companies in bankruptcy,

01:58:36.960 | who's famously a billion dollars in debt in the 1990s,

01:58:40.040 | you would think that they would properly

01:58:41.280 | collateralize their loan.

01:58:42.520 | But at the end of the day,

01:58:43.440 | that's their choice of what they do.

01:58:45.840 | And even if he was foreclosed on one property,

01:58:48.920 | as is abundantly clear from his past business dealings,

01:58:51.320 | he understands the benefit of having your risk segregated.

01:58:55.000 | And so if he couldn't pay the loan, what do you do?

01:58:57.800 | If you're a billionaire

01:58:58.640 | and you can't pay a $100 million loan,

01:59:00.440 | well, you let the bank take the property

01:59:02.560 | and foreclose on the property.

01:59:03.560 | And if you're personally liable,

01:59:04.920 | you sell something else to pay the loan.

01:59:07.120 | It's not the same as an average person

01:59:10.160 | who's earning $50,000 at a job

01:59:13.200 | and has $100,000 of debt,

01:59:16.240 | of student loan debt or something like that.

01:59:18.160 | So they go on and talk about his sales, but it's unclear.

01:59:21.600 | So why he is selling, it's unproven.

01:59:25.520 | So at the very best case, it's unproven.

01:59:27.560 | And I think that it's valuable to show

01:59:30.800 | that even in what the New York Times is talking about.

01:59:35.560 | So they're saying that, quote,

01:59:38.280 | "What's more, the tax records show that Mr. Trump

01:59:40.640 | "has once again done what he says he regrets,

01:59:42.360 | "looking back on his early 1990s meltdown,

01:59:44.720 | "personally guaranteed hundreds of millions of dollars

01:59:46.600 | "in loans, a decision that led his lenders

01:59:48.620 | "to threaten to force him into personal bankruptcy.

01:59:50.720 | "This time around, he is personally responsible

01:59:52.600 | "for loans and other debts totaling $421 million,

01:59:55.980 | "with most of it coming due within four years.

01:59:58.480 | "Should he win re-election,

01:59:59.600 | "his lenders could be placed in the unprecedented position

02:00:02.020 | "of weighing whether to foreclose on a sitting president.

02:00:04.560 | "There is, however, a tax benefit for Mr. Trump.

02:00:06.800 | "While business owners can use losses to avoid taxes,

02:00:09.780 | "they can do so only up to the amount

02:00:11.540 | "invested in the business.

02:00:12.660 | "But by taking personal responsibility

02:00:14.360 | "for that $421 million in debt,

02:00:16.800 | "Mr. Trump would be able to declare that amount in losses

02:00:19.840 | "in future years."

02:00:21.800 | So at the very end of the article,

02:00:25.400 | we see that there are very good reasons

02:00:28.160 | to understand why he might have a $750 tax bill.

02:00:31.540 | This article was a 32-page article

02:00:36.400 | in my PDF version of it from the website.

02:00:38.800 | I don't know what it was in the print edition.

02:00:41.320 | But what I would point here,

02:00:43.400 | I would point out to you here,

02:00:45.200 | is that let's assume that you have one set of facts.

02:00:50.200 | Right, you have one set of tax returns.

02:00:54.200 | And let's assume that the IRS has the genuine tax returns.

02:00:58.420 | I don't know that President Trump is a great businessman.

02:01:02.320 | I'm not convinced he is.

02:01:05.080 | If I were making a list of the top 10 businessmen

02:01:09.420 | of all time, I don't think I would put him on that list.

02:01:12.100 | I think that his brand is a whole lot of flash

02:01:16.780 | and a whole lot of show.

02:01:18.020 | And I really wonder about the substance behind it.

02:01:23.100 | But sometimes I look at all kinds of businesses

02:01:26.020 | and I think, how on earth did this happen?

02:01:28.820 | And you wonder, right, you wonder.

02:01:32.540 | What I'm personally convinced is that

02:01:36.900 | President Trump has phenomenal instincts.

02:01:40.380 | And

02:01:41.220 | he has the ability to wheel and deal

02:01:50.140 | in the midst of circumstances that would crush me

02:01:53.300 | and to trust his instincts in a way

02:01:55.020 | that to me is very inspiring.

02:01:56.660 | I watched, I guess a couple months ago,

02:02:01.660 | I watched an interview, a long interview,

02:02:03.100 | I think it was PBS had done this long interview

02:02:05.020 | with Steve Bannon.

02:02:06.380 | And they released the entire uncut interview

02:02:10.020 | with Steve Bannon on YouTube.

02:02:11.740 | And it was two hours, two and a half hours

02:02:13.560 | of just uncut Steve Bannon talking very openly

02:02:16.520 | about his experiences with President Trump.

02:02:18.820 | And it opened my eyes in a really remarkable way

02:02:21.700 | to some of the inside stuff that was happening

02:02:23.300 | during the 2016 presidential campaign.

02:02:26.100 | And the thing that I, just convinced me of

02:02:29.540 | is that President Trump was a fighter

02:02:31.060 | and that he just has these instincts.

02:02:32.900 | And he doesn't, he seemingly has no shame.

02:02:35.980 | He's not controlled by the sense of propriety or dignity

02:02:40.980 | or the sense of reputation

02:02:43.900 | that I'm controlled by personally.

02:02:47.060 | And he seems to have been able just throughout his life

02:02:49.700 | to live this incredible, incredibly wealthy life

02:02:54.700 | without, and weathered things that would sink me.

02:03:01.260 | I mean, three marriages and bankruptcies here

02:03:04.020 | and business deals there,

02:03:05.180 | and the sheer amount of political abuse he gets

02:03:07.060 | is just stunning to me.

02:03:08.660 | And so I think that in this article,

02:03:12.800 | you can view, assume everything is true in this article.

02:03:16.220 | You can view this article in either way.

02:03:18.740 | I don't think this is gonna convince anybody

02:03:21.180 | one way or the other.

02:03:22.020 | I don't think that this article

02:03:23.020 | is gonna convince any lefties

02:03:25.380 | that somehow President Trump is this brilliant businessman

02:03:27.860 | because Joshua explained all these tax details

02:03:29.700 | that show that actually,

02:03:31.380 | actually he's just really smart.

02:03:33.980 | I think a lefty will read this and be convinced

02:03:35.940 | that he's in moral danger,

02:03:39.320 | that he's gonna commit all kinds of ethical breaches.

02:03:42.300 | I think a lefty says, well, look,

02:03:43.620 | he's lied constantly about his wealth.

02:03:46.140 | He's not as rich as he was.

02:03:47.580 | And there was all these shady deals

02:03:49.060 | and he's gonna have to pay the IRS $100 million.

02:03:51.780 | And I think a lefty will see that.

02:03:53.380 | I think a righty will look at this and say,

02:03:56.160 | it's cleaner than I thought.

02:03:58.580 | This is cleaner than I expected.

02:04:00.180 | This is cleaner than I expected personally.

02:04:03.580 | So I think a righty will probably look at it and say,

02:04:05.660 | that's cleaner than I thought.

02:04:06.540 | Look, he's not doing anything illegal.

02:04:07.800 | Look, the audit is not, it's just like he said.

02:04:10.140 | Plus we knew that all these other things about him.

02:04:14.300 | So I don't know that this will convince anything

02:04:16.380 | or move the political needle, who knows.

02:04:18.460 | The New York Times has promised

02:04:19.700 | that there are more articles coming,

02:04:21.100 | but I can't imagine that there's gonna be anything

02:04:22.900 | more explosive along the way.

02:04:25.020 | Just more details that probably won't help at all.

02:04:27.740 | So my hope as I finish is that you will learn

02:04:30.820 | from this example.

02:04:33.580 | Because regardless of whether you admire somebody

02:04:36.620 | or despise somebody, we can all learn from people.

02:04:39.620 | And I think an intelligent, mature way to approach people

02:04:42.260 | that you have disagreements with

02:04:45.580 | is to look at what they're doing

02:04:47.660 | and learn from what they're doing.

02:04:49.340 | And say, what can I take that I admire

02:04:51.780 | and what can I take from why someone is successful?

02:04:55.300 | And so what I would point out to you

02:04:56.620 | is there's a lot of tax lessons here.

02:04:59.060 | Number one, you see the value of real estate.

02:05:01.380 | Real estate, because of its ability to grow over time,

02:05:06.380 | to take significant depreciation expenses

02:05:10.020 | and to generate modest amounts of income,

02:05:13.260 | it can be a very tax-efficient thing to do.

02:05:15.620 | For someone like a real estate developer,

02:05:17.620 | you can put together this dream life, right?

02:05:20.260 | Where you're at all the finest clubs 'cause you own them.

02:05:24.340 | You eat at all the finest hotels 'cause you own them, right?

02:05:27.020 | And everything is related.

02:05:28.660 | And you can do that with any number of businesses

02:05:30.580 | to build a very tax-efficient life.

02:05:32.260 | And I hope that you will take that

02:05:34.700 | and you'll think about how you can apply that.

02:05:37.100 | I don't personally have any ambitions

02:05:38.900 | of being a billionaire real estate developer.

02:05:42.020 | But I do like to live a very tax-efficient life.

02:05:44.900 | And I'm proud of my low tax returns.

02:05:47.880 | One of the things that bothers me is on this subject,

02:05:51.940 | there is hypocrisy on all sides.

02:05:53.820 | Nobody believes in paying taxes, even if they say they do.

02:05:57.780 | I have never had somebody prove to me,

02:06:02.340 | the most virulent, we need to increase tax people,

02:06:04.900 | I have never had somebody prove to me

02:06:07.020 | that they believed in paying taxes enough

02:06:08.800 | to send extra money to the government.

02:06:10.340 | Nobody does it.

02:06:11.460 | Everybody pays the bare minimum.

02:06:13.420 | And so on this issue, everyone's a hypocrite,

02:06:17.420 | even the most loud mouth people that are public, right?

02:06:20.100 | You see someone like, what was the big debate

02:06:22.940 | five years ago?

02:06:23.780 | Warren Buffett says, we need to have a wealth tax.

02:06:26.020 | We need to have millionaires pay their fair share.

02:06:28.180 | And after all, I, Warren Buffett,

02:06:29.500 | pay less money than my secretary does.

02:06:32.760 | And of course, that was a sleight of hand

02:06:35.500 | because what he meant was a lower rate on wealth

02:06:38.660 | because of dividends and capital gains

02:06:40.380 | versus earned income.

02:06:42.780 | But even in a situation like that, what does Buffett do?

02:06:44.820 | Does Buffett say, well, I believe in paying taxes so much

02:06:47.960 | that I'm gonna stroke a check for an extra,

02:06:50.620 | $50 million a year to the US government?

02:06:52.620 | No, he doesn't.

02:06:54.100 | Does Buffett believe in taxes so much that he says,

02:06:56.660 | well, what I'm gonna do is when I die,

02:06:58.620 | I'm gonna give the money to my children

02:07:00.420 | and then I'll go ahead and allow the US government

02:07:03.280 | to get a few extra billion dollars in estate taxes?

02:07:05.640 | Not a chance.

02:07:06.500 | What does Buffett do?

02:07:07.340 | Buffett says, I'm gonna give all my money

02:07:08.800 | to my buddy Bill Gates Foundation.

02:07:11.220 | And so in that situation, you have the most outspoken people

02:07:15.420 | and I'm using him as a public example,

02:07:17.460 | the most outspoken spoken people saying

02:07:18.860 | we need to re-improve taxes,

02:07:20.180 | but they never even take the first step of paying extra,

02:07:25.180 | which any of us can do, right?

02:07:27.540 | The IRS publishes its voluntary contribution.

02:07:29.580 | You can designate your money to pay down the national debt.

02:07:32.260 | But we all know that it's a waste of time,

02:07:34.740 | that taxes are a rotten use of money.

02:07:37.220 | And so we all pay the least possible.

02:07:40.440 | So I believe you should pay your taxes.

02:07:42.920 | I believe it's too big of a risk not to.

02:07:44.920 | And so if you don't wanna pay taxes and you're an American,

02:07:48.660 | I would encourage you to not become an American.

02:07:50.640 | That's a process that I have been,

02:07:53.300 | that's a process that I have been preparing for myself

02:07:56.640 | because I think it's absolutely insane

02:07:59.600 | that somebody would be an effective businessman

02:08:01.520 | and run a high profit business that,

02:08:04.520 | and then have 40% of the profits sucked up

02:08:06.860 | by a government organization.

02:08:09.380 | And so you can't do it as American,

02:08:11.700 | but you can do it as a non-American.

02:08:14.340 | And so I think that's worth considering.

02:08:16.340 | But at the end of the day, you should follow these strategies

02:08:19.040 | and you should build a life

02:08:20.460 | that gives you the appropriate lifestyle, right?

02:08:22.340 | That provides you with everything

02:08:24.460 | that you and your family want,

02:08:25.700 | and that does it in a very efficient way.

02:08:27.900 | And I hope that some of the details

02:08:30.660 | on some of the stuff that's in this article helps you.

02:08:33.420 | Very long show, but it was a 32 page article

02:08:35.880 | and I wanted to use it as an example.

02:08:37.100 | So thank you for listening to Radical Personal Finance.

02:08:38.760 | As I close, I would remind you that if you've enjoyed this,

02:08:42.440 | you may enjoy some of my other educational programs.

02:08:45.320 | Let me point out, let me highlight for you two.

02:08:49.280 | I'd highlight number one is that I teach a course

02:08:51.240 | called How to Borrow Money Safely

02:08:52.880 | and Never Pay Interest Using Credit Cards.

02:08:55.080 | And you'll notice the importance of debt

02:08:59.280 | in what we've talked about.

02:09:00.300 | You'll notice that I've said several times

02:09:01.920 | that debt is not taxable income.

02:09:04.800 | And so if you understand that,

02:09:07.160 | then you can use that knowledge to structure your life

02:09:11.040 | in a way that provides you

02:09:13.680 | with a very tax efficient lifestyle.

02:09:16.520 | So in the example I gave of the real estate investor,

02:09:19.700 | how would that real estate investor

02:09:21.120 | who buys that property for $150,000 and wants to fix it up,

02:09:24.120 | how would they live in the time that they're fixing it up?

02:09:26.240 | Well, if they go get a job,

02:09:27.080 | they're gonna pay a lot of money in tax.

02:09:28.800 | But if they use credit cards

02:09:31.240 | for their personal living expenses, that's not income.

02:09:33.640 | And then if they fix their property up,

02:09:35.440 | then they can, and then they refinance it with a mortgage,

02:09:39.180 | they can pay off the credit card debt.

02:09:40.800 | Now, this kind of game can be very risky.

02:09:43.120 | And there are a lot of people

02:09:44.000 | who have lost their shirt doing it.

02:09:45.600 | And so I don't wanna gloss over the importance

02:09:50.200 | of being very careful and thoughtful

02:09:52.000 | in how you do things like this.

02:09:53.880 | But it is absolutely doable.

02:09:55.600 | And so debt that you take out is never income.

02:09:58.560 | And debt can be a way of providing for yourself

02:10:01.600 | while you're waiting for your deductions

02:10:03.080 | to become available.

02:10:04.160 | And so debt has a very valuable place

02:10:06.440 | in a good financial planner's arsenal.

02:10:10.340 | And so there have been times

02:10:12.660 | that I have used these strategies

02:10:14.080 | to help bridge the tax gap.

02:10:15.440 | So I've consulted with clients

02:10:16.840 | and they wanted to retire early

02:10:18.280 | and they were gonna take money out of a retirement account,

02:10:20.040 | but they needed to bridge the gap with extra expenses.

02:10:22.320 | And so something like this, using credit cards can be,

02:10:24.880 | if you understand the game

02:10:26.040 | and understand how to moderate the risk,

02:10:28.340 | can be a way of doing that in a very tax efficient way.

02:10:31.760 | So recognize that mortgages and credit cards, et cetera,

02:10:34.640 | are part of that.

02:10:35.480 | And so I would encourage, if you're interested in that course

02:10:36.840 | or any of the other courses that I share,

02:10:38.400 | that I have to share,

02:10:39.400 | go to radicalpersonalfinance.com/store.

02:10:41.960 | Go to radicalpersonalfinance.com/store

02:10:44.280 | and you'll find all those resources.

02:10:45.840 | Thank you for listening

02:10:46.660 | and I'll be back with you very soon.

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2020-09-28_NY_Times_Article_on_Trump_Tax_Returns