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- Welcome to Radical Personal Finance, a show dedicated to providing you with the knowledge, skills, insight, and encouragement you need to live a rich and meaningful life now while building a plan for financial freedom in 10 years or less. My name is Joshua, I am your host, and today on Radical Personal Finance, we're going to discuss the recent New York Times study, the president's taxes long concealed records show Trump's chronic losses and years of tax avoidance.

I'm gonna go through this story with you in an extremely detailed way. I'm gonna give you an overview, tell you what's in the article, what's not in the article, and then we'll go through it in an extremely detailed way so that you can get an idea of some lessons that you can learn and apply to your own life.

And I'll talk to you about what's behind the scenes so that you can feel much more competent when discussing this or really any other kind of article. This article in the New York Times is going to read, I guess I should say, obviously it's gonna read differently depending on the political background that you come from, but it's gonna be read very differently based upon whether you have any knowledge or familiarity with the tax code in general, how taxes work in the United States, how business works, et cetera, or if you don't.

And for that reason, it's really fascinating to look at people's responses to this article because the responses vary dramatically depending on, well, I guess somebody's exposure to it. So first, let me give you Joshua's summary of the article. We begin with the lead. The New York Times obtained Donald Trump's tax information extending over more than two decades, revealing struggling properties, vast write-offs, an audit battle, and hundreds of millions in debt coming due.

In short, the New York Times obtained, evidently, all of Trump's tax returns over the last 15 years or so, including returns from the business organizations that he is involved in. They've evidently analyzed those returns, and they basically wanted to make a few basic statements. Number one, there was no evidence of malfeasance uncovered with regard to Russia or other kinds of basic allegations that have been being made.

The basic arguments that they tried to advance in this article are, number one, that President Trump has lost lots and lots of money over the years. And I think that's probably when the authors were writing it, trying to say, "What do we talk about?" They were basically trying to say, "Well, let's prove that President Trump "is not a very good businessman "because he's lost lots of money." That would be number one.

With regard to potential areas of misdeeds, they talk extensively about a few basic things. Number one is the use of business losses across the organization, including a 70-something million dollar tax deduction that had been claimed for and filed for from an event a number of years ago. We'll talk into that number in a little bit.

Consulting fees and also deductions, whether the deductions are valid or not. Now, I think for the anti-Trump crowd, unfortunately, there's no smoking gun in the taxes. And this is hard, it's hard to overstate how important this story is in political terms. There have been many political consultants who for many years have been saying, "Well, if we could just get ahold of the tax returns, "then we could prove all of these things "about President Trump's crookedness "and all the things that he's done wrong, "and then we'll be able to make that case "as a slam dunk case." That does not seem to be the case, or at least if that is the case, the New York Times did not choose to profile anything in this initial story.

As a financial planner, I read the story and I said, "Yep, okay, that makes sense. "Yep, that makes sense. "No surprise there. "Yep, that makes sense. "That makes sense, that makes sense." And I'll explain all the details of how that is, but I don't see, this is not a bombshell story for a financial planner.

And so I think that's one thing that's worth pointing out. Most of the techniques and things discussed here is exactly what I would understand. In fact, much of it is what I teach on Radical Personal Finance when I teach tax planning. The techniques are just simply a little bit grander in scale than what a lot of people do, but there's not really any fundamental difference that I can see from what President Trump has been doing over the years versus what I teach people to do to save on their taxes.

So let's begin, and I'm gonna give you a detailed analysis. And I'm doing this just so you can think about my brain as far as how I read articles like this. I don't have a political horse in the race. I'm not trying to make it go one way or the other, but it is really interesting to read an article like this and think about the challenge of writing it.

I'm not an anti-New York Times guy. I'm not a pro-New York Times guy. I probably read and respect newspapers much more than I do many other forms of news. And I think that the authors of this story, Russ Buechner, Suzanne Craig, and Mike McIntyre, it's the story of their lives, right?

They've been working hard to get it just right, and you see that carefulness in the writing. But we'll still analyze a little bit of the details along the way through as well. So begin with the lead. Donald J. Trump paid $750 in federal income taxes the year he won the presidency.

In his first year in the White House, he paid another $750. He had paid no income taxes at all in 10 of the previous 15 years, largely because he reported losing much more money than he made. As the president wages a re-election campaign that polls say he is in danger of losing, his finances are under stress, beset by losses, and hundreds of millions of dollars in debt are coming due that he has personally guaranteed.

Also hanging over him is a decade-long audit battle with the Internal Revenue Service over the legitimacy of the $72.9 million tax refund that he claimed and received after declaring huge losses. An adverse ruling could cost him more than $100 million. Now, in that lead, we see these themes that I talked about.

And I'll just first give you my reactions to what it says here. Most of this is designed to have a good news hook, which is true. And that's what a newspaper should do. It's pretty amazing that somebody who is renowned and purported to be a billionaire would only pay $750 in income taxes.

And to the average person who doesn't understand taxes, that will sound like a shocking reality, a shocking number. From my perspective, it's not particularly shocking due to the nature of President Trump's businesses, primarily involving real estate. And real estate is one of those things where it's relatively, I won't say easy, it's relatively, I should say easy, it's relatively easy and fairly normal that you could invest in real estate, use that real estate to generate a very significant income for yourself, and then defer massively the tax bill, and in some cases, completely avoid the tax bill.

Let me give you a very practical example about how you, perhaps not yet a billionaire, can do the same thing in your own real estate investing. Let's pretend that you go out and you're walking around your neighborhood, and you notice that in your neighborhood, there is a rundown building that is for sale, and a rundown house.

And so you go and you buy that house, and you negotiate the purchase of that house for $150,000. And you borrow $150,000 from your dad in order for you to go and be able to buy the house. Well, when you buy that house, you buy it for a purpose, for a purpose of being able to improve it.

So you take the money, you buy the house, you put a little bit more money into it, and you fix it up. And let's say that you fix it up, so whereas now it's valuable on the marketplace, now it wants to be rented, where people will want to actually live in it.

So you go and you take the house, and you rent it out. And you rent it out for $1,500 a month. So now you've got an extra $1,500 a month of rental income coming in. The first thing is that in that situation, if your mortgage payment is lower than your rental income, you'll probably have cashflow that'll be available to you in your pockets.

Maybe you will, maybe you won't, but let's assume that you do. In that situation, because of the ability for you to take depreciation expenses against the house, which is unique to real estate, you probably won't pay any money on the cash. But what you will have done is you will have increased the value of the house.

So let's pretend that you put $50,000 into the house, you renovated it, and now it's worth $300,000. You can now go to the bank, and you can refinance it for $300,000 with a bank mortgage. You take $150,000, you pay off your debt, and you put $150,000 in your pocket.

What you've just done is you've just put $150,000 in your pocket of real money, but because the money was accessed in the form of debt, you will not pay taxes on it. So you just earned $150,000 tax-free. Now, in the fullness of time, you will owe taxes if you sell the house.

But you can refinance the house, and you can take the money out in the form of debt and not pay any taxes on it. Now, assuming that you keep the property rented, and let me change the facts just a little bit. Let's just say that your tenant pays just enough for you to pay the mortgage payment and the expenses of the property, the insurance, the mortgage payment, et cetera.

You will have no taxable income in that example, but you have $150,000 of spendable money in your pocket because you took it out in the form of a loan. Now, fast forward. Let's say that three or four years from now, you sell that house for $300,000, but you do a 1031 exchange into another house, which is a like-kind exchange.

And so now you buy a bigger house, and you repeat the same thing. You fix it up, then you go ahead and refinance it. You take a mortgage out on it. You take the mortgage to put money in your pocket. You can do this again and again throughout your lifetime.

By doing like-kind exchanges, you can defer the taxes indefinitely. In theory, you could actually get the money out tax-free in a couple of ways. Way number one would be in the United States, if it were a house that you wanted to move into, you could move into the house, transform it into your personal residence, and then be able to take advantage of some of the increase due to the tax exclusion on personal residence.

That's one, some tricky rules with it, but that's one way. A second way is you could just simply leave it to your children in your will at the date of your death. And if you left them that house in your will, maybe you started with $150,000 of seed capital, but at your death, you have a million dollars worth of real estate.

You leave that million dollars of real estate to your children, assuming you're not subject to estate taxes, which a billionaire would be, but you would not with a million dollars of property. In that situation, you can now receive what's called a step-up in tax basis at your death. Your children will receive the million dollars, and the entire gain from $150,000 to a million dollars would have been untaxed in the tax code.

Meanwhile, you access that money in the form of mortgage loans, you put cash in your pocket, and that allowed you to spend money. Now, that's not even getting into a deep discussion of depreciation expense, which is very significant when you are dealing with a property portfolio like President Trump supervises.

That's just a simple, ordinary example to show how real estate, because of its very nature, lends itself to a tremendous level of tax efficiency. It's very, very useful from a tax efficiency perspective. The other thing that I immediately wonder is, okay, he paid no income taxes at all in 10 of the previous 15 years.

My question is immediately, well, what did he pay in the five of the 15? And this has to do with the lumpiness of income. We'll talk about this in a moment when we get into the details, but when you're doing tax planning, what you generally often want to do is you want to lump your income and you wanna lump your deductions and your expenses together.

And so, a simple example. You can, charitable deductions, in the United States, if you're gonna take itemized deductions on your taxes, and I understand I'm not starting at beginner level, I'm assuming you understand the difference between a standard deduction and an itemized deduction. But most people don't have enough itemized deductions for it to be worth it for them to itemize their deductions, but there are a lot of things that you can do.

So what you do if you're trying to maximize your tax savings is one year you take the standard deduction and then the next year you itemize deductions and you lump your charitable deductions together in that second year so you get bigger deductions. And so that's a simple kind of layman's example of why lumpy income and lumpy deductions are useful.

You do the same thing in business when possible. If you can compress your income together, you try to adjust the timing of your income to match the time when you have significant deductions available. So a lead like this is a good journalistic lead, it's factually true, but it's one of those things where you have big questions and you wanna know immediately as a financial advisor, what happened in those five years?

One of the most interesting things that's mentioned here, which I'll talk about in detail, is this comment they made, also hanging over him as a decade long audit battle with the Internal Revenue Service over the legitimacy of a $72.9 million tax refund. And I immediately wanna know, why so long?

Why do you have a decade long audit battle? That's a really long audit battle. So that tells me a couple of things right off the bat, even if we don't get to the details. That tells me, number one, if this is a decade long audit battle, this is not a clear cut win or loss either way.

This is not a clear cut thing where, oh, the IRS was in the wrong and the taxpayer just said, yeah, well, the IRS was in the wrong, the IRS admitted it and the taxpayer got it their way. On the other hand, it wasn't a clear cut thing where the IRS could move against them and say, look, you're clearly wrong in this situation.

Now, we find out later in the article that there's some more texture to this, probably due to President Trump's political status, but a decade long audit battle means that this is not a smoking gun in some way. Now, obviously I can't read the whole article to you 'cause of the New York Times copyright restrictions, but I will read just some important points to you.

The New York Times has obtained tax return data extending over more than two decades for Mr. Trump and the hundreds of companies that make up his business organization, including detailed information from his first two years in office. It does not include his personal returns for 2018 or 2019. This is certainly one of those ethical gray issues.

You clearly have a leaker, somebody in very well-connected, I don't know, I'm not competent enough to say where is this person probably from, but clearly you had someone who had access to this data who chose to share it with the New York Times. That's probably some form of crime.

I don't know the details on it, but that's probably some form of crime. Now, is it a matter of public interest for the New York Times to publish it? I would say probably so. And should there be a law requiring the disclosure of this data? Maybe there should be, but there's not a law right now.

So although that's been the custom, there's not a law right now. It is important to note, and quote, "They report the data reports that Mr. Trump "owns hundreds of millions of dollars in valuable assets, "but they do not reveal his true wealth," as is the nature with any kind of tax return.

Taxes do not indicate wealth. Taxes and tax returns indicate merely your income. That's what's included in a tax return. Now, where you can get a better idea of a politician's wealth is by looking at their financial disclosure reports, where they report ranges of assets, ranges of debts. For example, we know how much money President Trump is liable for.

We know all the people that he owes money to. But tax returns do not indicate wealth, which will be a common theme that, as I explained to you, the concepts that I can grasp from this article and how you can use this to lower your tax bill, you have to always recognize that income is not necessarily wealth.

In response to a letter summarizing the Times findings, Alan Garten, a lawyer for the Trump Organization, said that most, if not all, of the facts appear to be inaccurate and requested the documents on which they were based. After the Times declined to provide the records in order to protect its sources, Mr.

Garten took issue only with the amount of taxes Mr. Trump had paid. Over the past decade, President Trump has paid tens of millions of dollars in personal taxes to the federal government, including paying millions in personal taxes since announcing his candidacy in 2015. With the term personal taxes, however, Mr.

Garten appears to be conflating income taxes with other federal taxes Mr. Trump has paid, Social Security, Medicare, and taxes for his household employee. I wanna talk for a moment about taxes because when we use the term, it's a very general term, but it's important that you think about and that you recognize and pay attention to the fact that you understand how taxes work because if you understand how taxes work and how income is taxed, then all of this stuff will make a lot more sense.

First of all, what's being discussed here in this article is federal income taxes, federal income taxes exclusively. That ignores a whole lot of money that flows to the federal government that's not being discussed in this article. So the New York Times here identifies it. Other federal taxes, including Social Security, Medicare, and taxes for his household employees.

I would say if far in addition to that, you have significant numbers of taxes that are paid even for employees. So for example, let's say that I own the Sheets organization, not the Trump organization, I own the Sheets organization. And the Sheets organization has a million dollars of revenue and we have 100 employees.

Well, that organization in and of itself is responsible for paying massive amounts of taxes, massive amounts of federal taxes. Also, the employees are all paying federal taxes based upon the productivity of the organization. So while at the end of the day, I might have a $0 tax bill, that's not to say that the Sheets organization is in and of itself a net consumer of things like federal money.

If you look at the tax impact of a company, for example, famously Amazon is often touted as, Amazon doesn't pay any taxes. Is it true? Depends on how you look at it, right? On one hand, yeah, it is true. On the other hand, the tax impact of a company is very, very significant.

And most of the stuff that is discussed here in a story like this is in some ways a sleight of hand because everything that's discussed is simply the basic nature of the tax code. The tax code is designed to incentivize investment. The tax code is designed to protect businesses from losses of income.

It's designed to make it palatable for businessmen to invest money and grow businesses because of what's considered to be the good, the net positive good, the net effect of an organization that's productive in that way. Now, before we get to more of the details, I wanna make one basic point.

The first argument that this article is making is primarily this idea that President Trump's business success is a mirage. That's what the editors or the writers are trying to say. They're trying to say that his business success is a mirage. I think there are ways that you can fairly make that argument.

There'll be people who say, well, he just inherited all kinds of money from his parents and his father. He would've done better if he put in an index fund. I'm not sure. But what I wanna point out is actually, from a business guy's perspective, what I see is I don't see a mirage.

I see, forgive me, a touch of genius in the sense that the exact things that you see, the New York Times article, within the article, the exact things that you see the article talk about how these are wrong things, it actually has paid off in spades for Trump in the creation of his image.

So let me read the article, what the editors say here, and then we'll discuss this lesson. Together with related financial documents and legal filings, the records offer the most detailed look yet inside the president's business empire. They reveal the hollowness, but also the wizardry behind the self-made billionaire image, honed through his star turn on The Apprentice, that helped propel him to the White House and that still undergirds the loyalty of many in his base.

Ultimately, Mr. Trump has been more successful playing a business mogul than being one in real life. Listen very carefully to that sentence. Ultimately, Mr. Trump has been more successful playing a business mogul than being one in real life. Now listen to the very next sentence. The Apprentice, along with the licensing and endorsement deals that flowed from his expanding celebrity, brought Mr.

Trump a total of $427.4 million, the Times analysis of the records found. When I read that, and I'll give you some other evidence and quotes throughout the article, I thought to myself, how can you write that he's been more successful in playing a business mogul than being one in real life, when in the very next sentence you say that he made $427.4 million from his work on The Apprentice?

Now The Apprentice is an interesting part of President Trump's business structure, because it's the part at which he's been the most heavily taxed, due to it not being real estate. And that's an important point when we get to the actual numbers of the taxes he's paid. You have to understand that The Apprentice, while I think was a fabulously successful endeavor for him, he made a lot of money, he built a massive reputation, he was able to cultivate an image of himself as being this super hot shot businessman from it, it was extremely highly taxed, due to it not being real estate.

But I'm a bit cynical, and I just thought to myself, the editors of this article, the writers here, the three writers of this article and the teams of people supporting them, I don't know, 'cause I don't know anything about them, but I would guess that they probably make, you would think probably an average income would be somewhere in the, $150,000-ish.

It wouldn't surprise me if that was a standard income. Maybe if these are very senior reporters with The New York Times, maybe they're making $250,000. Somewhere in that range of $150,000-$300,000 would be my guess of what a writer at The New York Times would probably make in this kind of context.

Which means that the total lifetime earnings of that someone, depending on how old they are and how senior they are, total lifetime earnings of somebody in that situation would be, I would guess, $3-6 million, if you were sitting down and calculating all of their lifetime earnings from getting a journalism degree and then winding up going on to working through maybe a normal retirement age at age 65.

It'd probably be $3-6 million, something in that range. It's quite interesting to have somebody with a lifetime income of, say, $3-6 million write, "Ultimately, Mr. Trump has been more successful "playing a business mogul than being one in real life. "The Apprentice, along with the licensing "and endorsement deals that flowed "from his expanding celebrity, "brought Mr.

Trump a total of $427.4 million." I would very much like to earn $427.4 million in five to 10 years. I would very much like to earn $427.4 million in my lifetime. When you recognize that that is a small component of the taxpayer in question and his overall financial life, it's very hard to make that argument in it with a straight face.

I think one of the most valuable things about what I have learned from Mr. Trump's business life is just the truth of the old saying that perception is reality. Years ago, I worked with a guy who hammered this into my head. And the guy was, he wasn't a fraud, but he was a boss of mine that lived by the phrase that perception is reality.

And that's always been hard for me because I've always been a reality matters guy. I've never been a smoke and mirrors guy and a perception guy. I've always been a reality matters guy. But one of the things that you see with President Trump, he is shameless, absolutely shameless in saying, this is the image that I'm going to project.

And as I project this image, people will now believe it. People are going to believe it again and again and again. And I'll show you throughout this article as we go through it linearly, I'll show you how this comes out to be true. But one of the things that Mr.

Trump is a master of is saying, I'm gonna see something, I'm gonna create this vision of something, and then I'm gonna speak this vision so clearly that he personally seems to believe it at its heart. And then it brings people along with it, along with him. And so when Trump says, Trump is a luxury brand and we're gonna be the luxury brand, he essentially willed it into existence.

And he did the same thing with The Apprentice. He basically had this idea that I'm gonna play this hotshot business guy role. And he willed this reality into existence and made a whole lot of money along the way. Now what I see immediately, let me read the whole paragraph to you.

The Apprentice, along with the licensing and endorsement deals that flowed from his expanding celebrity, brought Mr. Trump a total of $427.4 million, the Times analysis of the records found. He invested much of that in a collection of businesses, mostly golf courses, that in the years since have steadily devoured cash, much as the money he secretly received from his father financed a spree of quixotic overspending that led to his collapse in the early 1990s.

Now, as a financial planner, I wrote in my marking up of this article, when it says he invested much of that in a collection of businesses, mostly golf courses, that in the years since have steadily devoured cash and created tax deductions, much as the money received. The whole point, when any person creates a lot of earned income, what you immediately have to do is you have to figure out how can I shelter that income?

And that's one of the perspectives that I would bring to this kind of analysis of financial planner that would be different from the New York Times writers, is that when you create income, you immediately need to look and say, how can I shelter this? What can I do? Because the single biggest expense that you're going to face is when you create income is the tax man.

The tax rates on earned income are stunningly horrific, approaching and exceeding 50%, depending on where you are in the United States, depending on your federal tax rates, depending on your state tax rates, et cetera. And so it's very, very problematic. And in a situation like the apprentice, although he could still try to massage the earnings and say, well, I need to figure out how to protect some of this, and maybe it's not all gonna be classified as earned income, it's hard.

Because that kind of money is very, very heavily taxed, and you don't have a lot of good deductions associated with it. And so what somebody who's trying to save on tax will do is immediately go and look for businesses that will generate growth that's not tax, which is primarily gonna be capital gains growth rather than current income, and that are gonna create lifestyle opportunities, and that are gonna enhance the brand.

And so to me, this sounds totally normal. It's the same advice that your accountant would give you, right? Let's say that you run a small business, maybe you make $200,000 a year. And at the end of the year, you're going and you're meeting with your accountant on December 1st, and the accountant is saying to you, all right, listen, buddy, you made 200 grand this year, you're gonna pay 50 grand or 70 grand or something of taxes, can you spend some money?

Is there something that you can spend money on? The first thing that you look for in that situation is, can I spend money profitably? And so you look for something like buying equipment, maybe your business could use an expansion, and if you expanded something beyond where you are now, you could make more money in the future, but that would wipe out 50 grand of profit.

So you look, can I invest money profitably? You look at, can I invest money early? Can I move expenses forward into something that I would do later, but I don't know. And so the classic is marketing expenses. You look and say, well, our marketing budget for the next fiscal year is going to be $50,000, but can I just prepay that right at the end of the year and go ahead and prepay those marketing expenses so I save on the taxes?

You might look and say, can I invest this money into Goodwill? Can I give a small bonus to my employees? Or can I hire another employee? Once you reach a certain point in the tax rate, you basically start hiring employees simply to enhance your lifestyle. You look at it and you say, the government's gonna steal half of this anyway, so why don't I just go ahead and hire an employee who makes my life easier?

Someone who, even if they do relatively unproductive things, just gives you a better lifestyle. I'm gonna hire a personal assistant whose job is to fix me drinks and bring me lunch in the office. I'm using a bit of a hyperbolic example, but you reach a point where you say, I'm just gonna invest it into something that may not truly be necessary because the tax cut is so steep.

Or you look and say, is there a way that I can enhance my lifestyle with a big purchase? And so the common kind of relatively small business approach to this is, well, we had $200,000, so I went ahead and bought a car, or I went ahead and bought a new truck for the business.

I didn't need one. I could have made the old one go, but I was gonna spend all this money at the taxman anyway, so I went ahead and bought a nicer truck. Well, that's the small business approach to this kind of planning. I would bet you that the billionaire business approach to this, if you were inside Donald Trump's brain, that you would just say, I'm gonna buy another golf course, right?

Because what do you do? What benefit do you get when you buy a golf course? Well, first of all, you're enhancing your global brand, right, you're building this brand of being a luxury, a purveyor of luxury goods, luxury lifestyles. When you're investing in a golf course, you're buying a massive quantity of hard assets.

You're buying a massive quantity of land. Oftentimes it's land that is extraordinarily valuable in a valuable location sometimes, but that land only has, usually, a relatively small number of buildings on it, right? You've got a clubhouse, you might have some condos or something associated with that, but it's nothing like buying a skyscraper.

So you're buying a bunch of land, you're buying a clubhouse, you have a relatively small staff compared to the overall investment, but you have a probably, and I don't know anything about the golf business, I'm just analyzing it, I've never even been part of a golf club, I'm just looking at it from the outside and saying, you have probably relatively low expenses compared to the potential.

I used to drive past in West Palm Beach, the Trump Golf, whatever it's called, in West Palm Beach, the big golf resort that he has there. I mean, the membership fees on a business like that are obscene, it's, I think, probably about $300,000 to join the club, plus you have all the other fees, but yet to service that is relatively simple.

You have a staff of groundskeepers, you have a basic maintenance staff for the buildings, you have a hospitality staff. It's not a very complex business, but it can be very profitable if you have that image, if you have a nice place, et cetera. But from a tax perspective, this is a really good use of business because you're acquiring a hard asset like land that doesn't have a lot of maintenance costs associated with it that generates income, and then you can hold that land for a long time, plus it gives you a great lifestyle.

You always have to say to your buddies, hey, listen, we'll go to my club, and you get to hobnob with it, and it creates this incredible network for you, build a network for yourself. In a minute, I'll tell you the story of when President Trump started Mar-a-Lago in Palm Beach and kind of the gossip about it on Palm Beach at the time.

But to me, that just sounds to me like a lifestyle tax deduction. So I compare it to say, is it true that he is losing money on it? Sure, right? There's no reason to say that, but not all losses are equal in the same way that if at the end of the year, you go out and you decide to put money into your business and buy a nicer car, that might turn one of your businesses into a loss for the year, but in your mind, you're still happy to drive the car.

We'll talk more about multiple businesses in a moment. So goes on, talks about the legal battles, and the New York Times says this. In fact, those public filings, referring to the public disclosure requirements, those public filings offer a distorted picture of his financial state, since they simply report revenue, not profit.

In 2018, for example, Mr. Trump announced in his disclosure that he had made at least $434.9 million. The tax records deliver a very different portrait of his bottom line, $47.4 million in losses. Now, the lesson here that you always need to remember is first of all, you need to always remember there's a difference between revenue and profit, but there are two kinds of profit, right?

There's paper profit, and there's real profit, right? In the same way that there's losses and there's paper losses. And what I tried to explain with the example of the car is that you might very well have a business that loses money, and it's not a lie. It genuinely loses money.

You genuinely spent more money than the business brought in, but you may do that purposely for any number of reasons. And an article like this doesn't tell us. Now, I'm not trying in this analysis to defend and say, well, actually, the New York Times is totally wrong. And actually what's happening is that President Trump is making $8.7 billion, and he's just got the world's best tax attorney.

I'm not making that claim at all. What I'm saying is that articles like this, they're not very persuasive one way or the other, which is why what you see in the political sphere is you see each camp is basically saying, hey, this is what I believe, this is what I believe, and people go in different ways.

And so I wanna explain the concepts, the financial concepts to you so you can consider. When the New York Times writes here, "The tax records deliver a very different portrait "of his bottom line, $47.4 million of losses." What we don't know is are those losses on paper, meaning they are accounting for depreciation expense?

Are they accounting for financing expense? Or are those losses real losses that are actually sucking cash out of your pocket, and it's actually a real loss? And let me illustrate this with an example. Back to my real estate example. You bought the house for $150,000. You improved the value of the house with some renovation money.

Then you refinanced the house for $300,000. You thus, because you refinanced it, you put $150,000 of tax-free money in your pocket. But that $150,000 of tax-free money is not income, it's debt. So now you have $300,000 of debt on your $300,000 property. And then a hurricane blows in, or a coronavirus pandemic hits, and now your tenant doesn't pay you any money for an entire year.

Well, now you're going to have significant losses to report on that property. You're going to have $1,500 a month of a mortgage payment that you're paying. So there's $18,000 of loss right there. Plus you're gonna have other expenses. You're gonna have property expenses. You might've had to fix up the property or do some repairs along the way while that tenant was living in there.

You might have some legal expenses for that property. Plus you'll have some depreciation expenses. And then you might have some accounting expenses and some other things related to the property. So it's very conceivable that in that simple example, you lost $25,000 in 2020 based upon that $150,000 property that you bought.

But your bank account can tell a very different story because your bank account, while you may have lost $25,000 on your tax returns, your bank account has an extra $125,000 in it at the end of the year that it didn't have at the beginning of the year because you took out that $125,000 in the form of debt.

And that's one of the things that makes a real estate empire so difficult to poke your way through from a tax perspective is the use of debt. Because real estate is so leverageable, you'll have most real estate investors constantly moving their debt around. And they'll take the mortgages, they'll move them over here, they'll refinance there, refinance there.

And if you have good properties that are increasing in value, you can do that throughout an entire lifetime. And I'm not exaggerating, you can do that for an entire lifetime. But that would just be a simple example to say that the tax records saying that in 2018, he made $434.9 million and he had $47.4 million in losses actually tells us nothing about the real profitability of his business.

Now, let me enhance my house example to illustrate this point still further. You bought the house for $150,000, you improved it, you brought the appraisal value up to $300,000, you refinanced it for $300,000. But then in that year when your tenant didn't pay you anything and yet you had to pay those mortgage payments every single year, thus you're losing in my example, $30,000.

In that year, a developer moved in next door and bought out all of the other houses and started this new big, beautiful gulf development. And now that's increased the value of your property even more. I know we're getting some good increases here, but it serves to illustrate the accounting point that I need you to understand.

You've increased the value of your property now and it's actually $500,000. So not only do you have an extra $125,000 in your pocket, but on your balance sheet, you can fairly reflect that that property is now worth $500,000. So you have cash to spend from the mortgage and you have unrealized appreciation in the value of your portfolio.

And that unrealized appreciation is the most valuable tool in an investor's portfolio for avoiding tax. Because that unrealized appreciation is actually spendable money, especially if you get it out with a mortgage, and you can defer that tax through a like-kind exchange with real property. So you can now take that property that's worth $500,000, you've already taken $125,000 of money in your pocket because you refinanced it at 300.

Now you can sell it to the developer for $500,000. You can go and you can buy another property somewhere else for $500,000. And on that one, you can put a $500,000 mortgage on it. And now you have 200 and what did I do? $325,000 in your pocket over and above what you've done.

And not a penny of it has ever been taxed because you have unrealized appreciation. And then again, you can defer that appreciation for a very long time because you control when you sell. So this also comes into the lumping of income. What does an investor do? An investor looks at when they create income.

And what you wanna do is you want to bring your losses and you wanna realize your losses on your assets when you can pay, when you have income that you can't otherwise avoid or otherwise offset. So let's continue on. Tax records do not have the specificity to evaluate the legitimacy of every business expense Mr.

Trump claims to reduce his taxable income. For instance, without any explanation in his returns, general and administrative expenses, blah, blah, blah. But the returns by his own account undercut his claims of financial acumen, showing that he is simply pouring more money into many businesses than he is taking out.

Now, what I would say is that this is one of those statements that is one of those things that's very true, but you can't actually know even from the tax returns because of what I just tried to discuss about the unrealized appreciation. If Mr. Trump were realizing income, then he would owe tax.

But it's the fact that he's not realizing income, that's why he doesn't owe tax. That's why his, allegedly, his tax return, his debt, his total tax due was $750 because he's not realizing income. Now, if President Trump had simply taken his $400,000 salary and instead of donating it to charity, which is getting him now $400,000 of additional deductions that he can use, if instead of taking that, he simply took it and put it in the bank, now he would owe income tax on the $400,000 and being a resident of, I assume he's taxed as a resident of Washington, D.C., although his official residency, I think, is in Florida, but he would owe, what, $170,000, say, on that $400,000 of tax, $140,000 to $170,000, something in there.

So now, of course, everything would change immediately, but he's not doing that. And here's the next thing that you need to understand. Once you are wealthy, you can live very, very well, and you can increase your wealth without paying tax, especially if you've invested into businesses that are providing you with lifestyle benefits associated with them.

Now, there are many aspects of this that are clear in the IRS tax laws. There are many components of this that are genuinely clear. You know, for example, you can't say, this is my business and I've got to get all these personal benefits out of it. But if you think about a business like Mr.

Trump is involved in, as far as his businesses, hotels and golf courses, et cetera, virtually everything that he does in terms of all of his personal expenses are legitimately ordinary and necessary business expenses. If you have a hotel and you spend a night in the hotel, you don't have to count that night in the hotel as far as saying, well, look, this night in the hotel is a personal expense because I don't normally do that.

That is very defensible as simply saying, it's a quality control mechanism. I own a hotel business. There's a reason why corporations have corporate suites all around the world, or corporate apartments, where when our employees are in that city, we go and stay in that corporate apartment. And so when you recognize the fact that I own a private club, that I also have private rooms at, I own hotels, I have an airplane to manage my affairs, I do business on the airplane, virtually everything that someone like President Trump does, virtually everything like that is either a genuine part of the business, is a genuine business expense, or it's simply a de minimis fringe benefit.

If you go and you take a meal at your hotel and that meal has a value of $50, but you technically didn't perform business at that meal, you technically sat there by yourself and you ate it, well, technically speaking, that's one of those things where is that a personal expense or is that a business expense?

Well, in a situation like this, when you have a life that has that many people involved in it, every meal you take is gonna have somebody with you doing some kind of business deal, researching something, and a $50 meal or a bottle of champagne that you order up from your hotel, that's just de minimis stuff that disappears.

In the same way that the local landscaping guy, when he drives his landscaping truck to the grocery store to get groceries, technically he's responsible now to the IRS for three miles of personal use of the vehicle, and he should account for that, and at the end of the year, he should just deduct that $1.65 of personal use of the vehicle because he was using a business vehicle for a personal vehicle.

Come on, right? It's impossible to prove that stuff. That stuff disappears in the wash, even though the law is clear on what is personal use of a vehicle and what's not. So in this situation, these arguments, while I believe that probably the New York Times is right, 'cause I think that how I'd guess this worked if I were a reporter, I would take it, then I would hire a bunch of tax attorneys, accountants, et cetera, and I would say, help me digest this stuff and help explain it to me so I can write a fair report.

It's true, but it doesn't mean that he's a terrible businessman because the businesses are taking money out currently. The two other points I need to make on this before we go on. Once you have a lot of wealth, you can live on your accumulated wealth and not pay tax.

So imagine that you have $10 million and you have a million dollars of cash in the bank. You have businesses, you have $9 million of investment assets, and those investment assets are not cashflow generating assets. Maybe you're, what's the guy who started CNN who bought all the ranches, blanking on his name, but the guy who famously bought all the ranches and one of the biggest private landowners in the United States has all this basically unproductive land.

In a situation like that, you've bought all this land, you have $9 million worth of land. Now that land may be appreciating, it may not be, but the land is just sitting out there. But meanwhile, you have a business over on the side and that business is a good lifestyle oriented business, Ted Turner, that's who it was.

Thank you from the live chat here, Ted Turner, Montana Ted, the grills. So you have this lifestyle business that provides you with a way to shelter most of your lifestyle expenses, your travel, your movements, some of your dining expenses, you have a hotel here, a restaurant there, a couple of glamor businesses that you enjoy being involved in that give you something interesting to do, but you still have $30,000 of annual just personal expenses.

Well, you can easily have $9 million of investment assets sitting there, growing without any tax because they're capital gains assets. You can easily have businesses that are providing you with a lifestyle of $250,000 a year through genuine, legitimate, ordinary business expenses in those businesses. While meanwhile, you just simply take $30,000 a year from your million dollars of savings and use that to spend on personal expenses.

So someone in that situation could go for 30 years, never make a profit on any of their businesses, never make a profit and live like a multimillionaire, genuinely legitimately having a great lifestyle and not owe a dime of income tax in that situation. So these taxes are not a tell-all is the basic point.

Taxes don't, the tax returns are not what you need. What you need is the income statement. What you need is the balance sheet. And so when you see how the balance sheet and the income statement are working together, that tells you the story, but the tax returns do not tell you that accounting story.

They don't give you the details that you need to actually understand what's going on. So when the New York Times quote says this, the picture that perhaps emerges most starkly from the mountain of figures and tax schedules prepared by Mr. Trump's accountants is of a businessman president in a tightening financial vice.

Is the New York Times right? I would say probably, right, possibly, although I'll show why I don't think that's the case. Any president that leaves office is destined for unlimited amounts of wealth due to the way that politics works in the United States, is destined for unlimited amounts of wealth.

And so if President Trump leaves office today, his stint as the President of the United States will have been one of the best, most profitable uses of his four years in terms of his financial situation. He will never have problems with dealing with these details ever again. And I'm not alleging corruption.

I'm not alleging backdoor deals or anything like that. That's just the way the presidency works, right? You go and you give $400,000 speeches. You go and you're invited into all, it's just, that's the way the modern presidency works. So you can't learn this though from tax returns. You need the full picture to actually understand this.

Now, let's go on to talk about one of the things that I think is very interesting here due to the discussion of Mar-a-Lago. The New York Times talks about an audit on his apprentice income. Most of Mr. Trump's core enterprises from his constellation of golf courses to his conservative magnet hotel in Washington report losing millions, if not tens of millions of dollars year after year.

His revenue from the apprentice and from licensing deals is drying up. And several years ago, he sold nearly all the stocks that now might have helped him plug holes in his struggling properties. The tax audit looms. And within the next four years, more than $300 million in loan obligations for which he is personally responsible will come due.

One of the things that you see in this article from a financial planner's perspective is an abundance of numbers that don't actually tell you anything that you need to know. And that's what's frustrating about this. Because the New York Times is certainly engaging in journalism, right? They're certainly working to make their journalistic point and to clearly say, here's what you need to know.

But without the context of the balance sheet and the income statement, you can't know. Is $300 million in loans coming due a lot or a little? Well, the answer depends on the value of the properties and the cashflow of those properties and his overall willingness to fund them. You don't know that.

$300 million on a property portfolio worth $100 million, that could be a problem. $300 million on a property portfolio worth $900 million is not a problem, even if the cashflow is low. Excuse me. One of the things that's fascinating to me is the conversation and discussion about just the nature of Mr.

Trump's businesses. They go through and they talk about how none of the scandalous things are actually listed in the tax returns. So we don't know is the point that they make. For example, did President Trump write off the hush money payment to Stormy Daniels? It's not listed. We don't know any of that information.

But the most important section to me from a business perspective is this. To delve into the records is to see, quoting from the story, "To delve into the records is to see up close "the complex structure of the president's business interests "and the depths of his entanglements. "What is popularly known as the Trump Organization "is in fact a collection of more than 500 entities, "virtually all of them wholly owned by Mr.

Trump, "many carrying his name. "For example, 105 of them are a variation "of the name Trump Marks, "which he uses for licensing deals. "Fragments of Mr. Trump's tax returns "have leaked out before. "Transcripts of his main federal tax form, "the 1040 from 1985 to 1994, "were obtained by the Times in 2019.

"They showed that in many years, "Mr. Trump lost more money "than nearly any other individual American taxpayer." And I would point out to you that the reason, if you understand these basic lessons that I have said, from a tax planning perspective, Trump is doing everything that you're supposed to do to save on taxes.

And the reason that he owes no taxes, basically, in terms of the way that they've arranged it so far, although it's not technically true when we go back to some of those five out of the 10 years, is simply that he has lost, that he's lost money on the businesses.

But if you understand the nature of why do you have 500 businesses, you have 500 businesses so that you can spread your income across those businesses in the best way, and also so that you can spread your expenses across those businesses in the most efficient way. And it's exactly the same reason why, if you're a private client of mine and you're a newly minted multimillionaire, the first thing that you do, and you say, "I wanna save on taxes," we look at your current business, we look and say, "How can you get the maximum legal benefits "from that business?" And then we look at the rest of your lifestyle, and we say, "How can we start additional businesses "that are going to defray the tax obligations "that you have from these over here?" Now, the New York Times talked a little bit here about the overseas taxes that he has paid.

Now, certainly this is one of those things that sounds very scandalous from the basic perspective of you have the US president who's paying, allegedly, more money in overseas tax payments for his businesses abroad than he is in the United States. And I can't find that in the article here.

That's interesting, but it actually is entirely to be expected with the nature of overseas engagements as well. So let me skip past that point. We go now to the section here of loser and winner. And here's the headline of this section. Losses reported by businesses Mr. Trump Mr. Trump owns and runs helped wipe out tax bills on hundreds of millions of dollars in celebrity income.

My notes, my marginalia on this article says, "Duh." Right? "Duh." That is the entire point. When you generate large amounts of income that's not otherwise shelterable, because taxes are such a ridiculous, brutal expense for business, you have to shelter that. And so you immediately need to create losses to offset against that income.

That's tax planning 101. What do we say at a normal level? You have a client, client comes in and says, "I'm a lawyer and I'm trying to, "I'm a lawyer and I'm gonna have a big settlement. "I'm gonna have $10 million of income "from this big settlement this year." Well, if that lawyer is sitting in my office, then I say, "Buddy, you got a problem.

"You can't show $10 million of income. "The IRS is gonna wipe out four of that 10 million." And so what are you gonna do? You immediately need to figure out where can you create losses. So can you buy some investments? That's one choice. Can you buy a business, a building that's gonna need renovation expenses or repairs?

Can we find a business that's gonna have tons of repairs associated with it, where we can fix it up, but it not cross the line into actual improvement so that we can deduct in the current year all those repairs and generate losses from that? Can you take your race car hobby and can we turn that into a business?

Because maybe you're gonna start a race car business in the future. So can we go ahead and move that now and then use those startup expenses for that business to offset this $10 million tax bill this year? That's what you do as a tax planner. The other thing that you see Trump doing is you see him managing his personal brand in a comprehensive way.

And this is, to me, what is fascinating. I'm gonna read to you three and a half related paragraphs, and I want you to watch how this pays off. Remember that the earlier allegation in the story was that the New York Times reporters said that Mr. Trump's image is primarily flash rather than substance, but then later they write this.

Mr. Trump's net income from his fame, his 50% share of The Apprentice, together with the riches showered upon him by the scores of suitors paying to use his name, totaled $427.4 million through 2018. A further $176.5 million in profit came to him through his investment in two highly successful office buildings.

Now you can make the argument that, well, Trump was given a lot of money by his father and he could have invested it better in some other way. It's fine to make that argument, I think. But what I would point out is that Trump leveraged his high profile, his buildings, his image, to move himself into an obscenely profitable business deal, The Apprentice, that made him a lot of money.

For most people, making $400 million, or in this case, $600 million with these two named things, that's the win of a lifetime. Most people, if they made $400 million, would immediately stop and not engage in anything else. Now, continuing on, quoting, "So how did he escape nearly all taxes on that fortune?" There's your lesson for you.

"Even the effective tax rate paid by the wealthiest 1% "of Americans could have caused him "to pay more than $100 million." The answer rests in a third category of Mr. Trump's endeavors, businesses that he owns and runs himself. Duh, I've been teaching you this on Radical Personal Finance for years.

"The collective and persistent losses he reported from them "largely absolved him from paying federal income taxes "on the $600 million from The Apprentice "branding deals and investments." Again, it's what I've been teaching you for years. If you have income and you can't avoid it, what you need is losses to offset that income.

So you do that with assets where you can grow your value and capital gains, which is not currently taxable, rather than generating current income. That equate, continuing, quote, "That equation is a key element "of the alchemy of Mr. Trump's finances. "Use the proceeds of his celebrity "to purchase and prop up risky businesses, "then wielding their losses to avoid taxes." What I would point out to you is that that goes right back to the previous paragraphs.

What do you do? You build a brand with buildings, with renovating Central Park and Trump Tower in downtown. Go back to his story in the '80s and the '90s. You build a brand. Then what he did is he's taken that brand and expanded that brand into many things, some things that succeeded, some things that didn't succeed, Trump Stakes and Trump University and all these failures.

You isolate, as I teach you, you isolate all of your business dealings so that when something fails, like Trump University or Trump Stakes or whatever, you cut it off, those businesses go into bankruptcy, you segregate the losses on those businesses, but then all of this enhances your personal image.

And so in this case, then he takes his personal image, he leverages it into The Apprentice, which was a cash cow for him. Then you take that fame, and in this case, he leveraged that fame eventually to the presidency, going into politics, but you take that and you leverage it back in.

"Look, I have all these luxury golf courses. "I have all this other luxury stuff." And you build the brand. He is obsessed with the brand, the gold-plated brand all the way across, continuing from the New York Times story. That equation is a key element of the alchemy of Mr.

Trump's finances, using the proceeds of his celebrity to purchase and prop up risky businesses, then wielding their losses to avoid taxes. Throughout his career, Mr. Trump's business losses have often accumulated in sums larger than could be used to reduce taxes on other income in a single year, but the tax code offers a workaround.

With some restrictions, business owners can carry forward leftover losses to reduce taxes in future years. My comment, exactly. This is why you want lumpy income and lumpy deductions, and this is why you take risks on things, because if you have other income that you can offset, if something doesn't work out, you take the risk on it, and then you can bring it over, and you lump those deductions against your other income.

The tax code incentivizes risk-taking, and you need to understand that. The tax code incentivizes risk-taking. As I have, in the years that I've taught tax planning to you, here on Radical Personal Finance, what I've tried to emphasize is that there are not two tax codes, one for the poor and one for the rich.

There's not a special tax code for the poor and a special tax code for the rich. There are two tax codes in this way. There's one for employees, and there's one for business owners, and the employee tax code has basically nothing good in it. Basically, if you are an employee, you get screwed by the tax code every single time.

You get screwed every single way. You pay through the nose. You lose more than half your income in some states. Just think about that, how obscene that is. You lose more than half your income if you're living in certain states and combining state income taxes and federal taxes and employment taxes.

It's utterly obscene. Employees get skinned every which way by the tax code. Why? Because employees bring very little value to the economy. Employees don't generally create something that grows. Employees don't employ people. All employees do is serve as one individual body, and that's why they get skinned by the tax code every single time.

So there are two tax codes, but it's not a tax code for the poor and a tax code for the rich. It's a tax code for employees and a tax code for business owners and investors incumbent in that, business owners. And that tax code is where all the good stuff is.

And so why do I say that everybody needs a business? Because that tax code is where all the good stuff is. And you have every right to use that tax code whether you're totally broke or whether you're a multi-billionaire. It's exactly the same. The same rules that apply to President Trump apply to you and to me.

But it takes risk for us to go out and get involved in business. It's hard. It takes a lot of hours. It takes a lot of work, but it's available to you exactly the same way. So continuing on here. The newer tax returns show that Mr. Trump burned through the last of the tax-reducing power of that $1 billion, which was a previous loss, a $1 billion in 2005, just as a torrent of entertainment riches began coming his way following the debut of "The Apprentice" the year before.

Now, listen to the next two paragraphs in light of what I've said. If you generate income, you need deductions. For 2005 through 2007, cash from licensing deals and endorsements filled Mr. Trump's bank accounts with $120 million in pure profit, i.e. taxable profit, Joshua's comment. With no prior year losses left to reduce his taxable income, he paid substantial federal income taxes for the first time in his life, a total of $70.1 million.

As his celebrity income swelled, Mr. Trump went on a buying spree, unlike any he had had since the 1980s when eager banks and his father's wealth allowed him to buy or build the casinos, airplanes, yacht, and old hotel that would soon lay him low. Now, in the light of tax planning, are you surprised that when someone generates a whole bunch of taxable income, they go on a buying spree?

When "The Apprentice" premiered, Mr. Trump had opened only two golf courses and was renovating two more. By the end of 2015, he had 15 courses and was transforming the old post office building in Washington into a Trump International Hotel. But rather than making him wealthier, the tax records reveal, as never before, each new acquisition only fed the downward draft on his bottom line.

I wanna point out is that might be true, but we don't know that it's true because you cannot pull that out of a tax record. You don't know what has happened to the capital, the value of the asset. It may very well be that that asset has become very valuable, but you don't know.

You also don't know where you are in the trajectory of a business. Most businesses lose money in the beginning. Now, that, ideally, there are some business structures that naturally lend themselves well to not doing that, but most businesses, especially businesses that require tremendous capital expense, like buildings and equipment and thousands of mattresses and thousands of plates and all that stuff, like hotels and real estate, they lose money in the beginning.

So you have to look and say, where is this business in its life cycle? So pretend, let me give you an example. Pretend that you decide to start a gym. That can be a very expensive proposition. And here I'm thinking not of a CrossFit style gym with minimal equipment.

I'm thinking of a gym with hundreds of thousands of dollars of expensive machines and infrastructure and et cetera. You start the gym. Well, at what point in time does your gym become profitable? I don't know, but many businesses like that, it'd be three years, four years, five years. And so where are you in that life cycle?

So what we don't know here is it's 2020. And what we know is that in 2007, President Trump, from 2005 to 2007, he made a lot of cash. Then he went on a buying spree, evidently sometime between 2007 and 2015. By the end of 2015, he had 15 courses and was transforming the old post office building into a hotel.

But where are we in the business cycle of the business? Once you have a golf course, and if it's in demand, it can be very profitable. But if you have to renovate it, it can be expensive. So I feel like I'm giving too many disclaimers. My point is not to say that President Trump is a brilliant businessman.

I don't know if he is or isn't. I haven't seen his balance sheet. I haven't seen his income statement. It hasn't been done in the fullness of time. I would say my instinct is that he has a killer, my opinion is that he has a killer instinct for how to leverage a brand into increasingly profitable things, which is what I think he'll do after the presidency, whether the presidency for him ends in 2020 or 2024, he will continue to leverage that brand and he'll build it again and again.

I don't expect him to have financial trouble ever again in the rest of his life. But the tax, so my point is not to make a comment on his business acumen. My point is to make a comment that this article, unless they have the income statements and the balance sheets, you can't know this purely from tax returns, in my opinion, because the tax returns do not reflect unrealized depreciation, unrealized capital gains.

You may very well suck up cash. And these numbers, for example, the story is full of numbers. Consider the results of his latest golf resort, Trump National Doral near Miami. Mr. Trump bought the resort for $150 million in 2012. Through 2018, his losses have totaled $162.3 million. He's pumped $213 million of fresh cash into Doral, tax records show, and has a $125 million mortgage balance coming due in three years.

Question is how much income? We don't know, because we can't know that. The fact that he has losses don't tell us that he's a bad businessman. It just tells us that he has losses, or at least tax losses. Quote, "Even so, the rules do hold," talking about depreciation, "Depreciation, though, is not a magic wand.

"It involves real money spent or borrowed "to buy buildings or other assets "that are expected to last years. "Those costs must be spread out as expenses "and deducted over to the useful life of the asset. "Even so, the rules do hold particular advantages "for real estate developers like Mr.

Trump, "who are allowed to use their real estate losses "to reduce their taxable income from other activities." And that is the key tax planning tip. As a full-time real estate businessman, Trump can use his losses from real estate to offset his other income, because he's a full-time, he's in the business of real estate.

And that has been one of his powerful tools. That's one of the reasons why real estate is always such a powerful tool in a tax planner's arsenal. Many years ago, in the tax code, there were many other useful tools. But over the last 30 years, the tax code has been tightened up so much that the vast majority of loopholes that were previously available are now gone.

I have looked for years as a tax planner, trying to find where are all the good loopholes, right? Where are the loopholes for the rich? The vast majority of them are gone. And things like this with real estate, they're not a loophole. They're just simply a feature that you can do with a scale of $100,000 properties, or you can do with a scale of $300 million properties.

Let's talk about some of the other controversies in it. I wanna read three quotes here. There's some stupid New York Times commentary. Again, I'm not a basher of newspapers, but it's interesting that the New York Times, and most modern newspapers, right? There's really not any, they can't help. Their perspective, their bias is so, their bias is so endemic that they can't help it.

They can't help but see through it. And so the article is full of all kinds of little quips and whatnot that are clearly negative. I think the authors did a good job of trying to report the facts. I mean, they know that this article is gonna be the most viewed of all time, but it's still full of it.

But let me, I don't wanna get into the politics. Quote, "Once again, his businesses losses "mostly absolved his tax responsibilities. "He paid no federal income taxes for 2014." One of the points I wanna make that's important is that just because somebody does not have any current tax due does not mean that they won't pay tax.

So let's go back to my example, where you bought the house for $150,000, you fixed it up, and you have $300,000, and then you flipped it to the developer for $500,000. Maybe you were just the world's greatest real estate picker, and you picked that house that you bought for 500, and now it's worth $2.5 million.

Now, the question is this. You have reported $0, let's assume it's land and not even creating rents. You've reported $0 of income from that property, but you have $2.5 million asset. Is that asset owned by you tax-free? The answer is so far, yes, but not forever. And that's one of the other key things about anything related here to the New York Times article.

Taxes and tax returns give you a snapshot in time, but they don't give you the full understanding of whether somebody is a net tax contributor or not. So if we were trying to really do this from a tax perspective, and you would say, well, is President Trump, what is the total lifetime value of President Trump's business activities to the coffers of the US Treasury?

That would be a fair and interesting question. But the answer is we don't know yet. Now, we will know in the fullness of time, but that fullness of time has to be that President Trump is dead, because that's the point in time at which the US government will stop taxing him.

And until President Trump is dead, we won't understand what his total lifetime contributions are to the coffers of the US Treasury. Will he be a net negative on the tax code? Not in any way, which is why earlier I mentioned about the productivity of the businesses, the salaries that are paid, the employment taxes, et cetera.

Not in any way will he be a net negative. His contribution, even with everything in the New York Times article, his contribution to the tax rolls of the United States will be far bigger than the average professional in the United States. Excuse me. His contributions will be far bigger than the average professional in the United States.

There'll be many, many multiples of that because of him being a businessman. But what we don't know is we don't know what the total cost is, because everything has to be marked to market, either at the sale of the properties, at the transfer of the properties, or at his death when the estate taxes are due.

Because in the United States, you cannot go forever without paying taxes. You simply can't. Now, you can go for a very long time in a very few circumstances. For example, it is possible that somebody could put some property into a trust, into some kind of dynasty trust, right? Maybe a trust in Florida, the dynasty trust in Florida for 360 years.

And you can transfer this property into the trust and the property generates no income, no income whatsoever. It could be whatever kind of asset that has no income. And it sits in the trust for 300 years. Well, it's generating no income. Thus, the trust is not paying any taxes on the money.

But at some point in time, 300 years from now, when that property is sold, the taxes are gonna be due. And it'll be taxed 300 years from now. That's about as far as you can possibly go, is that kind of dynasty trust in the US tax system. But you have to have no income in the property for it to not be taxed for that long period of time.

Now, could that be a massive tax savings? Yeah, for 300 years, the newspapers could write about how there's $100 million of property sitting here in this trust, and it's paying $0 of tax. Why? Because it's not taxing income. There's no tax on wealth at the moment in the United States of America.

There's only a tax on income. So in the same way, President Trump's property can sit here for year after year after year. They may or may not be appreciating. He'll owe taxes on the current profits due, but if there are losses, he won't owe taxes. But he will eventually.

So if President Trump owns Trump Tower, whichever, or Trump Hotel, whichever one you want, or Trump Golf Course, if he owns it, and he decides in the year 2030 that he wants to sell that property, when that property is sold, he will now owe tax. And so it's conceivable that he could lose $20 million per year on a property for 20 years, and then sell the property in the 20th year for a $500 million profit, and have a massive tax bill in that 20th year because of the nature of real estate.

So once again, tax returns don't tell us much. All they tell us is that he doesn't currently owe taxes because he currently doesn't have taxable income from his business affairs. And so you need to keep that in mind, that he will eventually pay the tax. Now, what can you do as an individual to eliminate tax?

As long as you don't get into the world of estate taxes, then you can actually own property totally tax-free. I gave you this earlier, but I wanna repeat it now. You buy a property, you buy a million dollars worth of property. You own the property personally, you have some income from the property.

Maybe you don't. Maybe you go and buy one of Ted Turner's ranches, and it's totally unproductive from a financial perspective, but you love it because it gives you a place to ride your horses and see the buffalo. You own that property, you own it for 50 years, and it goes in value from $1 million to $10 million 50 years from now, and you just leave it outright to your children.

Well, your children can inherit the property for $10 million, and they'll inherit it free and clear as long as your estate doesn't owe taxes. Now, if you start to get into a place where you have an estate that has a taxable value beyond the 20-something million-ish dollars right now in the United States, then now all of a sudden, when you died, your estate would owe taxes.

But the most you can do is do this with 10-ish million dollars for you, 10-ish million dollars for your spouse, up to about $20 million for the family before you start to have to do estate tax planning. And so the point is that just because taxes are not paid currently doesn't mean that taxes are not paid.

So always keep that in mind. This is clearly a politically inflammatory piece, and nobody in the United States understands taxes. I've been studying it for years, and I am scared to do a show like this because I'm sure I'll get something wrong. But the argument is basically, well, President Trump doesn't pay taxes.

My answer would be he isn't currently owing taxes because his businesses are not currently generating income, but that doesn't mean he won't owe taxes. Next. I'm belaboring some of these points too much. I just wanted you to know that taxes cannot be avoided forever. That's the argument for estate taxes.

I don't like estate taxes, but that's the argument for estate taxes is that eventually the taxes need to be paid because rich people can simply live on their money in the bank. They don't have to incur taxes. And so if there's not estate taxes there to eventually force the taxation of property, then we've got a problem.

That's the argument for estate taxes, but you need to understand that. All right, let's talk about the $72.9 million maneuver. Quote, "The apprentice created what was probably the biggest income tax bite of Mr. Trump's life. During the Great Recession bailout, he asked for the money back." Now, by now you should hear, as I hear, hey, the apprentice created a big income tax bite.

Why? Because it wasn't real estate. It was just pure taxable income. It was pure profits on the business of the apprentice. And so he couldn't successfully offset it legally. He couldn't generate enough deductions to offset it with other investment in order for him to cover all of it. So he had to pay tens of millions of dollars in tax, on income tax, on the profits.

Then in 2010, he claimed and received an income tax refund totaling $72.9 million, all the federal income tax he had paid for 2005 through 2008 plus interest. The records, so there's an ongoing audit, and the story basically affirms that on this particular piece, evidently President Trump has been truthful, to all of our surprise, right?

"The records at the Times Reviewed square with the way Mr. Trump has repeatedly cited without explanation an ongoing audit as grounds for refusing to release his tax returns. He alluded to it as recently as July on Fox News when he told Sean Hannity, "They treat me horribly, the IRS horribly." And while the records do not lay out all the details of the audit, they match his lawyer's statement during the 2016 campaign that audits of his returns for 2009 and subsequent years remained open and involved transactions or activities that were also reported on returns for 2008 or earlier.

So basically this worked like this, that as part of the bailout package in 2009, the US government removed the two-year look-back rule for deducting business losses. And so under that part of the legislation at that time, then Trump was able to go back and use those losses to offset his previous income.

And so Mr. Trump had paid no income taxes in 2008, but the change meant that when he filed his taxes for 2009, he could seek a refund of not just the $13.3 million he had paid in 2007, but also the combined $56.9 million paid in 2005 and 2006, when the apprentice created what was likely the biggest income tax bite of his life.

And so he applied for the refund under the legislation, under the bailout legislation, and that started the rounds of auditing. Now what the story explained was that these kinds of refunds require the approval of IRS auditors and an opinion of the Congressional Joint Committee on Taxation, a bipartisan panel better known for reviewing the impact of tax legislation.

Tax law requires the committee to weigh in on all refunds larger than $2 million to individuals. So that was interesting. I didn't know that that existed. I didn't know about that rule. But in short, for the last 10 years, Trump filed for the refund, but because it was so large, everything had to be reviewed, and it's basically been stuck in the committee for the last 10 years.

Now, evidently there was a resolution expected in about 2014 of this audit process, but then when Mr. Trump started to become politically prominent during the 2016 Republican nomination process, then everything got kicked back to committee. And so according to the New York Times, it's not clear why the case has stalled, but according to the New York Times, quote, "Experts say it suggests that the gap "between the sides remains wide.

"If negotiations were to deadlock, "the case would move to federal court "or it would become a matter of public record." Who knows? And so this is the most interesting part of it, where basically they are, the IRS and the Trump Organization have come to loggerheads, and it's basically sitting, probably because of its political sensitivity, which would be my guess.

Now, people are saying, was this fraudulent? I don't see any evidence from this New York Times article that it's fraudulent. Let's talk about what it means to file for something. First of all, there's never a reason for you as an individual not to be aggressive in your tax reporting to the IRS.

There is no downside to being aggressive. You cannot be fraudulent. If you try to do something that is outright fraud, that's extremely dangerous to, that's extremely dangerous to your, well, to your freedom, right? They can lock you up for that. But in the situation where you put yourself in, in a situation where you wanna be aggressive with something and file for it, there's no reason not to, because the only thing that the IRS will say is no, and the deduction will be disallowed, or in this case, the refund request would be disallowed.

So think about it from the Trump Organization perspective. Trump paid, we'll call it $70 million of taxes. Then Congress passed this bailout bill, which allowed you to carry back your, go back more than two years to your losses and deduct them against your previous tax bills paid. So now that puts you in a situation where you're not in any way committing fraud by applying for it.

You go ahead and apply for it, and now you get a $70 million refund, or you make the request to the IRS of the $70 million refund. The worst that the IRS can say is no, right? That's the worst that they can say. If they say no, you're not in any worse place than you were previously.

If they say yes, you're $70 million richer. If they say, well, we're not sure, we're gonna fight about it, depending on who has the money, and it's not clear to me from the article who has the money currently, whether the IRS has the $70 million, or Mr. Trump has it.

Actually, I think that Trump has it, because the article says that if he loses the dispute, then he'll owe the IRS $100 million, which is $70 million plus penalties and fees. So in that situation, as a businessman, you have use of the $70 million while you're fighting the audit with the IRS.

You have the use of the $70 million. You can use it however you want. And then eventually, if you lose your audit fight, then you'll have to pay it back, which is, of course, potentially a cashflow problem. But in this scale, it should be handleable if you're wise and prudent with the money.

So that's, I think, the most interesting part of what's aware of it. But I think to say that it's clearly fraudulent would be far too far. To say that it's not, I wouldn't say that it's fraudulent. If it were fraudulent, it would have been thrown out, is my opinion, as that anything that would be genuinely fraudulent, the tax, the judge would have ruled on it, the IRS would have ruled on it, the committee would have ruled, and everything would have been settled.

According to what Trump said in public, evidently he had reached some kind of agreement with them, which means that it was probably a questionable case where it could go either way, and they'd reach some kind of settlement between them. And then he became politically prominent, and then everybody backed off of that.

Now we go to the 20%, which is the consultant's fees. And let me explain to you the basic argument, and then we'll talk about how you can use this for yourself. The New York Times headline, "The 20% Solution, Helping to Reduce Mr. Trump's Tax Bills Are Unidentified Consultant's Fees, Some of Which Can Be Matched to Payments Received by Ivanka Trump." Examining the Trump Organization's tax records, a curious pattern emerges.

Between 2010 and 2018, Mr. Trump wrote off some $26 million in unexplained consulting fees as a business expense across nearly all of his projects. They explain a little bit about where they are, but there is no evidence that Mr. Trump, who mostly licenses his name, mysterious big payments, talk about foreign business deals, mysterious big payments and business deals can raise red flags, particularly in places where bribes or kickbacks to middlemen are routine.

But there is no evidence that Mr. Trump, who mostly licenses his name to other people's projects and is not involved in securing government approvals, has engaged in such practices. We'll talk about the Foreign Practices Act in a moment, but this is one of those areas where the New York Times just can't help themselves, right?

You raise a suspicion, and then you say, "Well, there's no evidence of it." It's like if I say, people who, I have children, right? And you say, you come, and you're writing a newspaper article about Joshua. And you say, "Joshua has children, and people who have children have been known to abuse their children." There's no evidence that Joshua is abusing his children, right?

But people who have children have been known to abuse their children. That's what this is. It's this stupid stuff that raises the suspicion. And then you go on to say, "Well, there's no evidence of this." But now you've planted the seeds of doubt that people who have children abuse children, which is certainly technically true, that there are some people who have children who abuse children.

Well, it's also true that the overwhelming majority of people who have children fight tooth and nail to protect their children from every harm that could possibly accrue to them. And so that kind of stuff annoys me, but we'll move on. Quote, "Rather, there appears to be a closer-to-home explanation for at least some of the fees.

Mr. Trump reduced his taxable income by treating a family member as a consultant and then deducting the fee as a cost of doing business." Now, this particular scenario is raised as, "Is this questionable?" But from my perspective, I see no way that you can say that this is questionable.

This is standard practice. Let me bring this back from the billionaire perspective to talk about you and me. Let's pretend that I run an accounting office. I have an accounting office, and I look around and I say, "You know what? I need someone to clean my office." And I could hire a commercial cleaning company to come and do it and pay them $1,000 a month for the privilege, but I could also hire my 15-year-old son to come and pay him $1,000 a month for the privilege.

I talked to my son and I say, "Would you like to come and clean my office for $1,000?" And he says, "I'll do it." "Yeah, absolutely." So what I have just done is I've done what's called income shifting. It's one of the three basic techniques of income tax planning.

It's an income shifting strategy. Where you're trying to shift income from a higher bracket taxpayer to a lower bracket taxpayer. You're trying to shift income from one party to another party within a family bound. And there's nothing illegal about it. It's entirely legal for you to hire your son $1,000 a month to clean your office.

Now, you want to make sure to properly account for that deduction. You wanna make sure that there is a method of keeping track on him, that he's got a checklist of what he's supposed to do. You wanna make sure that there's some kind of way to prove his attendance, that he's actually cleaning the office, et cetera.

But if he's coming in and cleaning the office and a commercial cleaner would charge you $1,000, you can pay him $1,000 as well. So let's talk about the tax effect of this. Did the taxes disappear? No, and yes, in a way. So the first thing is they didn't disappear.

What you did was you took income, what would have been $12,000 for the year from your business, and you've shifted it to your son. Now he has $12,000 of income. And in this situation, evidently, that's what President Trump has done by shifting the income from the Trump Organization to his daughter, Ivanka Trump, in the form of consulting fees.

And so it's some tens of millions of dollars over a period of time, the numbers are unclear, but the money that was gonna be taxable income to the Trump Organization is now taxable income to Ivanka Trump. So when I say that, did the taxes disappear? The answer is no, they didn't.

They've just changed parties. So now Ivanka Trump has paid in taxes, and there's no allegations that she's not reported the income. Evidently, she's reported it, she's paid taxes on it. It's just simply been that Ivanka Trump has paid the taxes on the income rather than the Trump Organization, rather than President Trump himself.

Just like if you, in your accounting business, pay your son $12,000, he will pay the tax on $12,000, and you will not. Now that's advantageous at the smaller level because you might very well be making $400,000 as an accountant running a large accounting firm, and your tax rate may be approaching 50%, maybe it's 40%.

So therefore, you, with that $12,000, would perhaps lose, I'm gonna use 50% for clear math, you would lose $6,000 in taxes. Whereas your son, if he has no other income, your son would wind up not owing any money on the $12,000 because it's below the taxable threshold in that situation.

And so you've sheltered $12,000 from taxes by shifting it within the family. As long as he's doing the work, and as long as there's a record there to prove it, it's entirely legal. And so the same thing is the case with Ivanka's business expenses. To me, I see nothing questionable about this from a perspective.

Let me quote from the article. There is no quote, "There is no indication "that the IRS has questioned Mr. Trump's practice "of deducting millions of dollars in consulting fees. "If the payments to his daughter were compensation for work, "it is not clear why Mr. Trump would do it in this form "other than to reduce his own tax liability." Now, there is a IRS doctrine that says that you cannot do something for the sole purposes of reducing taxes.

Forget the name of the doctrine at the moment, but you can't just do something for the sole purposes of reducing taxes. But these are areas where there's a broad leeway, where something can have the side benefit of reducing taxes. And to say that I'm gonna pay consulting fees to Ivanka on a number of, you know, on a hotel in Azerbaijan or a hotel in Turkey or whatever, you could probably justify that in many ways.

So I don't buy the IRS saying that it's not clear why Mr. Trump would do it in this form other than to reduce his own tax liability. Why not? Why not do that? Another more legally perilous possibility is that the fees were a way to transfer assets to his children without incurring a gift tax.

A Times investigation in 2018 found that Mr. Trump's late father, Fred Trump, employed a number of legally dubious schemes decades ago to evade gift taxes on millions of dollars he transferred to his children. Now, I struggle with that word dubious. What does dubious mean, right? Dubious means questionable or uncertain or, you know, it could go right or could go wrong.

Well, that's certainly an emotionally loaded word, but everything, many, many things in the tax code are dubious. There are many times where you look at something and say, "I could go two ways on this." And so by that case, it's dubious. And there are clear ways of resolving it.

There is an audit process. And so if you are audited, then the issue will come before the tax court. The judge and the court will consider previous precedent. They'll consider what you've done. If you've done something fraudulent, they will charge you for doing something fraudulent, even up to the point of criminal penalties in a very egregious case, but they'll charge you with something.

They'll take the money, and then they'll take your property to pay for it. So that word dubious is a very loaded word, but it doesn't exist. Now, is he transferring money to his children without a gift tax? You could make that argument very clearly if his children were not engaged in the business.

And this is why it's so advantageous to have a family business where your children are engaged in the business. Is the net effect that Mr. Trump is transferring wealth to his children without paying gift taxes? Yes, but he's transferring wealth to his children at the price of income taxes.

Ivanka is receiving consulting fees, and she's paying taxes on those consulting fees. So the money is still being taxed. It's not a tax fee transfer. That's the first point. Second point, that in a situation like this, I don't think you could make an argument that this is not an appropriate payment because Ivanka is clearly very involved in the business organization.

She's involved in the White House currently. She was involved in "The Apprentice." She's involved in the hotel organization. Now, if your daughter was sitting at home and never came into the office and was receiving millions of dollars a year of consulting fees, but she never came into the office, then certainly that would be fraudulent, and that would be denied.

The deduction would be denied. The income would be charged to the Trump organization, and there would probably be some kind of penalties. But in a situation where Ivanka is clearly involved, she's clearly earning the millions of dollars in consulting fees. The fact that it might be a little bit generous, these are the areas where there's a huge degree of subjectivity.

And so it's one thing for you to say, my 15-year-old boy, I'm gonna get a $1,000 estimate from a cleaning company and use that. It's another thing when you're running a multi-hundred-million-dollar or billion-dollar organization, and you're paying million-dollar consulting fees. Now, I wanna talk for just a moment about the Foreign Corrupt Practices Act because this actually really impresses me.

Quoting from the article, "On the failed hotel deal in Azerbaijan, "which was plagued by suspicions of corruption," again, kind of that underground argument of, okay, suspicions of corruption, it has an effect in the reader's mind. It's probably factually, totally factually true, but it has the net effect that The New York Times is hoping for.

"On the failed hotel deal in Azerbaijan, "which was plagued by suspicions of corruption, "a Trump organization lawyer told The New Yorker "the company was blameless because it was merely a licensure "and had no substantive role, adding, "We did not pay any money to anyone. "Yet the tax records for the three Trump LLCs "involved in that project "show deductions for consulting fees "totaling $1.1 million that were paid to someone." The thing that's interesting to me about this is that I think the Trump organization has probably worked very, very hard to keep their hands clean around the world.

I'm not a Trumpist nor an anti-Trumper. I've got, as with most times, complex opinions that many of which are in some ways contradictory, but it doesn't really matter, right? 'Cause I'm not him, I'm not in any position of authority. But one of the things that's the most difficult for US Americans is years ago, the US Foreign Corrupt Practices Act was passed.

And the US Foreign Corrupt Practices Act bans the use of briberies or kickbacks to foreign officials in business deals. And it comes with very, very severe penalties. And this has made American companies extremely uncompetitive around the world in the past decade, since it was passed, because the penalties on this are very, very substantial.

If you as a US company are caught paying a bribe to a foreign official, that can be really, really damaging and personally, legally, very problematic. And so it's interesting that Trump's strategy of just simply licensing his name is a really impressive strategy where it allows him to make money from these deals, but it allows his local partners to do whatever needs to be done in order to make the deal happen.

Now, I don't care much for the subject of paying bribes. I think that accepting bribes is immoral and offensive. And I think that paying bribes is very unwise, bordering on immoral in many circumstances, but certainly unwise. Unfortunately, there's a very big difference between countries and between cultures in the way that many places work.

And so it's very easy to sit in the United States and say, "Wow, I can't believe that so-and-so paid a bribe for such and such." Once you've spent some time traveling and doing business around the world, you learn that if some extra money doesn't change hands, then often you never get what you need done.

There's just simply no way to run a business in many countries unless money changes hands. And this happens in the United States as well, but it happens in a different system. In the United States, it happens primarily in the form of political contributions. The United States is a deeply corrupt country, but the corruption happens in a different way than it does in some other places.

But I thought it was an interesting point here of how Trump has elegantly sidestepped those potential legal problems with his use of licensing. And it points out the power of building a brand because he's sunk so much money and attention and effort into building his gold-plated brand that then he could sell that brand around the world.

And it has a genuine value to local property developers. The next thing that, in the next section of the Times article is talking about write-offs. And this is the least interesting to me because it's all of what we know about. The allegation is that President Trump is taking excessive numbers of write-offs.

Is it true? I would say certainly not, because if it were true, the IRS audit would have taken care of this, would have found this. And this is fairly clear. When you're dealing with the companies, you're not dealing with President Trump personally. He doesn't prepare a tax return. The lawyers do it.

The lawyers and the accountants are following the rules and they are taking the write-offs that are appropriately allowed by law. I just don't buy for an instant that President Trump's buying extra table linens is somehow a big thing for him. Now, they talk about this in the New York Times article.

Take, for example, Mar-a-Lago, now the president's permanent residence as well as a private club and stage set on which Trump luxury plays out. As a business, it is also the source of millions of dollars in expenses deducted from taxable income. Among them, $109,433 for linens and silver and $197,829 for landscaping in 2017.

Also deducted as a business expense was the $210,000 paid to a Florida photographer over the years for shooting numerous events at the club, including a 2016 New Year's Eve party hosted by Mr. Trump. These are stupid details without any relevance whatsoever. If you wanted to understand how $109,433 for linens, whether that matters or not, what would you do?

Well, you would say, let's pool the finances and let's go down the street to the Breakers Hotel or let's go to the Everglades Club or to the Bath and Tennis Club, also private clubs here on Palm Beach, and let's ask them how much they pay in linens. And there's somehow, the article is trying to give this impression that somehow President Trump is enriching himself because he's overpaying on linens, which is just silly.

At the small level, then certainly at the smaller level, there are plenty of business owners who do this, right? You can imagine the guy who has a few thousand dollars of revenue and he takes and bills a couple extra $100 in linens or cost of business, and he sells them out the back of his store and doesn't report the income, sure.

But the idea that Mar-a-Lago is overspending because they spent $109,000 for linens is silly. I don't know anything about what they spend or don't spend. You would have to compare it again to Everglades Club or go to the breakers and see how does this compare. $197,829 for landscaping, to me, sounds about right, right?

I've worked with clients that had a private house and they have a full-time gardener with two part-time assistants. Well, right there, they've got $100,000 of annual landscaping bills for their estate in Palm Beach, and it's not an estate, it's a private club. So you have to have context for all of these things.

What to me is the most interesting from a lifestyle perspective is what I want you to learn from the next paragraph. Quote, "Mr. Trump has written off his business expense costs, "including fuel and meals associated with his aircraft "used to shuttle him among his various homes and properties. "Likewise, the cost of haircuts, "including the more than $70,000 paid "to style his hair during 'The Apprentice.' "Together, nine Trump entities have written off "at least $95,464 paid to a favorite hair "and makeup artist of Ivanka Trump." So there are multiple ways to look at that.

First of all, if you are a financially productive person, you can use your business as a form of influence, which is what people do. So if Mar-a-Lago has paid $200,000 to a photographer, right, that's a useful thing. You choose a photographer that you like, you choose a photographer that's kind to you, that's nice to you, that treats you well.

You may choose a photographer that's politically connected. You may choose a photographer that's the mayor's son, or something like that. But the brilliance of the Trump organization is that he's built a lifestyle business that allows him to live his life and to genuinely live a high-status, high-consumption lifestyle in a very tax-efficient way.

That's the power of it. And that's what's open to you and to me, which is why I've continually encouraged you that everybody should have a business and that businesses should not have a sole goal of producing profit. It should have and must, in order to be a legitimate business, have a goal of producing profit, but it should also provide for you a pleasant lifestyle, a lifestyle that you enjoy.

You can do this with your own company, right? You can do this with your own multinational company. If you have a multinational company that has business affairs in London and Australia and the Bahamas and New York City, well, now your business has every right for it to send you to those places and to pay for your expenses and to give you an entertainment budget and a dining budget and an appropriate budget for the things that you need.

Now, you can't deduct personal clothing, right? That would be an example of what you can't deduct. You can't buy custom bespoke suits just for you as a normal businessman and deduct it as personal clothing, unless that personal clothing relates some way to your actual brand, for example, like The Apprentice.

And the rules on some of this stuff get a little bit fuzzy, but if you're a TV personality, the cost of your makeup is certainly part of doing business. You don't expect, I don't even know who's on TV anymore. Is Katie Couric still on TV? You don't expect your morning news anchor to come to the, you don't have a problem with your morning news anchor on your TV show having a makeup person on staff that prepares their makeup.

And so if you build a business, like perhaps the Trumps have built, then you can do the same thing. And so there's an art to this, where you look at your lifestyle and you say, what kind of lifestyle do I want? And then how can I build this lifestyle in a tax-efficient way?

And so that's what Trump has done with his club, even along the way. And to me, let me tell a story about the Trump club. I don't know if this is true or not. This is just simply gossip that I heard. So a number of years ago, I was out at the Everglades Club with a friend of mine.

And so if you've never been to Palm Beach, Palm Beach is a very exclusive society, very hoity-toity, it always has been. And it's my hometown. And so I spent a lot of time on Palm Beach. I went to school right in downtown West Palm Beach. I would walk to the beach in Palm Beach when I was in college.

And so it's my hometown. Worth Avenue is where I would go to walk. It's where my friends went to ride skateboards. And so down the street. So a number of years ago, I was at the Everglades Club, which is a private exclusive club. It's like a country club, but a little bit, it is a country club, but it's a glorified country club.

And it's one of the places where during season, Palm Beach is a very seasonal town during the winter season, where that's where people go to hang out. And it's really nice. It's a lovely experience to go to any of these clubs. But the story that was told was that Donald Trump wanted to join the Everglades Club.

And again, I am not saying, I don't know if this is true, it's gossip that was told to me of the stories. Donald Trump wanted to join the Everglades Club. And unfortunately, nobody wanted him in the club because he was too vulgar, right? The Palm Beach society scene is very, very much about not being vulgar.

And he was so vulgar and brash and he was new money. He wasn't old money. And he's very, very vulgar and he's everywhere in the press and he's a playboy and all over the place. And so he wanted to join the Everglades Club, but he couldn't get people to sponsor him and they wouldn't approve him for membership.

And allegedly he tried multiple different clubs. And so he said, "Fine, you're not gonna have me. "I'm gonna start my own club." So he bought the, was it the Estee Lauder Estate, I think it was Mar-a-Lago. So he bought the house that is now Mar-a-Lago, the estate that is now Mar-a-Lago, and he started his own club.

But he was so stupid with his choice, again, the gossip of Palm Beach. He was so dumb with his choice that he didn't realize that the flight path for Palm Beach International Airport flies right over Mar-a-Lago. So he bought this big expensive house that is right in the path of the flight path of the airplanes.

So all day long, there's airplanes coming in from the Atlantic Ocean, right over the top of Mar-a-Lago to land at Palm Beach International Airport. And so he went and he tried to get the laws changed and everything to protect his club. Now, at the end of the day, nobody wanted to join his club.

So then he started to bring people down to join his club, et cetera, et cetera. But it has turned out to be a good investment for him. So that's the gossip about the Palm Beachers who don't like President Trump and have never liked him because he's vulgar. But along the way, if you think about the value of starting a private club, there's incredible value to that from a lifestyle perspective.

If you start a private club, you could have all of the benefits that President Trump has from his private club. Instead of having to pay fees to the Everglades Club, which in today's world, in today's tax code are basically not deductible, right? There was a time when you could deduct more country club dues than now, but that's a very hard one to get past.

So instead of paying your multi-six figure initiation fees to the club and your tens of thousands of dollars a year membership fees, Trump doesn't have that. He started his own club. And so instead of it being an expense source for him, it's a revenue source. And it gives him the ability to own real property, a very beautiful estate, right in a very valuable section of Palm Beach, and to do it in a very efficient way.

So don't hate him for these deductions. If the deductions are improper, the IRS will deal with that. Copy him from this perspective. And if there's a high consumption lifestyle thing that you wanna do, think about if you can just simply bring that into your life in some way. I've talked about, you know, at some point I might start a, not a coworking space, but a maker space.

Why? Well, I'd love my children to have a fully equipped workshop, but I'd rather have my children have a fully equipped workshop that they can work at, not only physically do the work, but also physically put yourself in a place where they can manage it. So I'd rather, if I'm gonna buy a bunch of expensive equipment for my children to learn, you know, woodworking equipment and metalworking equipment and computers and graphic design, et cetera, I'd rather do that in the form of business.

And I'll capitalize the business, but I'll have my children involved in picking it out and running it and helping manage it, et cetera. So now not only do they of course have the ability to use the equipment, but now it can be a source of revenue for the family and a source of business training, rather than just me buying $100,000 worth of equipment to put in a shed out behind my back, behind my house for my children to use.

And so you can do this on many levels. If you wanna start a maker space, because you wanna buy a 3D printer, there's no requirement that your business has to have 30,000 square feet. You can do that right there. You can just simply start a business and have that business buy a 3D printer and have the plan be to start a private club where you're gonna rent out time on that 3D printer for your children's friends.

And now you have the exact same thing that President Trump has with starting his own private club. There is a significant section on ethics in this article. The ethical quandaries, quote, "The ethical quandaries created by Mr. Trump's decision to keep his business while in the White House have been documented, but the full financial measure of his extraordinary confluence of interests, a president with a wealth of business entanglements at home and a myriad geopolitical hotspots has remained elusive.

The tax records for Mr. Trump and his hundreds of companies show precisely how much money he has received over the years and how heavily he has come to rely on leveraging his brand in ways that pose potential or direct conflicts of interest while he is president." This is an area that is very, very concerning, is the ethical discussions.

And I do not have a high opinion of President Trump's sense of ethics and morality. It's hard for me to believe that any honest person would look to him as a paragon of human virtue, as somebody who always plays it straight and who always does the right thing no matter what.

What's bothersome to me is that these ethical problems are major risks going forward for every single person, not only who inhabits the White House, but who inhabits any part of the governmental system. And I expect this to continue getting worse. I'll tell you why. If you have a society where the government is rather small and where the government is not involved in every form of society, the government might have a few basic functions.

And if then that society, the local government officials have very modest power over people's lives, then I think you have far fewer ethical problems. Imagine, for example, that you live in a county that's just a small rural county and you have a county commission of four or five people and everyone pays the same tax rate, et cetera.

There's not a lot of incentive for every normal individual citizen to go and to try to bribe or corrupt the county commissioners. Now, there is a big incentive for a mega real estate developer who wants to come in and open a casino in your county to try to bribe the county commission.

But there's not a lot of incentive for the normal person. Why? Well, because the county commission doesn't have that much power. They're just there. They're just part of the government and they're a functionary and they don't have a lot of power over the average person. And so when you have a small government, you have a very small risk of ethical, of people trying to buy influence because it's not worth it.

But when you have a very large government, now all of a sudden it becomes much more important to get the government on your side. And so as the US government has grown and has taken over more and more of the economy, and as we've transitioned from a small government, more of a libertarian oriented society, to the modern government, which is huge, where everybody's involved over the last century, this particular change means that the ethics problems are much, much more substantial.

And I expect that to continue to grow. As the government continues to grow in power and in scope, there's more incentive for normal people to influence the government and to try to buy influence. Most of the time this happens in political contributions. President Trump famously giving money to everybody, right?

That's normal for many business people to give money to the people who are involved. And then it happens in terms of employment opportunities. You see the revolving door between the government and Wall Street. You see the revolving door between lobbyist firms and government. And if you can succeed in getting into government at a high level, you basically can write your ticket to a very profitable life.

If you get elected to Congress for a few years, you can parlay that, if you're politically savvy, you can parlay that into becoming a lobbyist. At the moment, there's no real laws against that. And the role of a lobbyist, it's hard to think of a cushier job, right? If I said, I'll pay you $850,000 a year, and you need to live in a comfortable house in a great metropolitan area, Washington, DC is just a lovely place to live from a cultural perspective.

And your job is to talk to people. You're gonna have an entertainment and expense budget of $100,000 a year. You can use that going to all the finest restaurants, taking people around. I mean, to me, that's a dream job, right? That's the kind of thing that would be so fun.

And so if you don't have moral reservations about what you're doing, it's a really fun job. I've thought many times about, well, is there a cause that I could just get behind so much that I'd be willing to go and do it? It's a cushy job. And so that's an example of how legally you can leverage political power and exposure into a lifetime employment in a very fun and cushy type of work.

And so that temptation is there for all politicians now. You have to be really, either really straight, you have to be like a Ron Paul or a Thomas Massey or somebody really abrasive like that who has these really hardcore opinions, not to leverage that. And even in those situations, you'll still leverage your name, right?

Ron Paul has a successful TV organization where he opines on subjects that are important to him. And so you can leverage political businesses, political, excuse me, Freudian slip there. You can leverage political engagement and government service into a fortune. I did a show on that a year or so ago where I talked about how you can do that and even for your children.

Now you're connected, your children are connected. It's one of the, it's a really good investment. If you invest a few years of your life into getting that low salary of a congressman, you can then leverage that into a lifetime of ease and riches for yourself down the road. And from a presidential perspective, this is even more true, more powerful.

I think you could see this very clearly in President Bill Clinton. When he and Hillary Clinton left office, they said we're broke, right? We're totally broke. But then just a very short time later, they were once again doing very well financially, multi, multi, multi millionaires. And so you see this with expensive speeches.

You see this with all of the stuff. And it's almost impossible not to believe that the politicians who leave that don't continue to exercise their leverage. They just certainly do. And so there are enough ways for you to whitewash the money through handsome speaking fees, et cetera, book engagements, et cetera, that basically the ticket when you're a president, the presidency is a ticket to lifetime of wealth for anybody.

Even somebody without a business, a former business scenario, somebody like President Clinton or President Obama, it's a lifetime ticket to massive wealth forever. Now, when you take someone like President Trump who has all these business interests, I don't see how he, regardless of whether he wins or loses in the next election, I don't see how he doesn't transform this into untold wealth.

Whether that's in, it's rumored that he's gonna take over the news network or a TV network and have the Trump TV network, something like the One America News Network, maybe so, it'd be a smart move for him to do that financially. I don't know how he'll leverage it, but somebody like him who everything is built on brand will certainly leverage it.

And so I think the ethics concerns are without question, without question troubling because it's just a very, very big pot of money for anybody to have to walk away from. But there's no evidence in the story that President Trump has crossed any of the legal ethic lines, ethics lines.

There's no evidence of it. Wouldn't surprise me if there were, but I think it's notable that there's not. In all this story, after years of people saying, if we could just get access to his tax records, that'll show how dirty he is. In my opinion, he's cleaner than I expected.

Let's wrap it up with the final section of the article called "The Gathering Storm," the headline from the New York Times. Threats are converging, mounting business losses, the looming IRS audit, and personally guaranteed debts coming due. I think that case is unproven would be at best. I think that's more of a point of wishing.

I think it's unproven. And I would say that it's just gonna depend, right? There's not enough context here. We don't know enough, yes, okay, he's gonna have loans coming due. We don't know what the revenue is of those businesses. We don't know what the worth of those businesses are.

And so the idea here of the New York Times writers is Mr. Trump is likely to wield his influence unethically because he's in financial trouble, maybe so. I wouldn't say that's impossible, but I think that it's unproven. And if you understand the basic ideas of business, I think that this will be evidence.

Let me show you how I would analyze this through a business lens. Now his tax records, quote, "Now his tax records make clear "that he is facing a battery of threats to his business "and his own financial wellbeing. "Over the past decade, "he appears to have filled the cashflow gaps "with a series of one-shots "that may not be available again.

"In 2012, he took out a $100 million mortgage "on the commercial space in Trump Tower." Now the idea of the New York Times writer here is that this is a sign of financial distress, but we don't know if it's a sign of financial distress. It may be very well that he needed some cash, and so he took out the $100 million mortgage, and that's what you do when you wanna spend money from a real estate portfolio in a tax-efficient way, you use debt.

Money that you get from borrowing is not taxable income. But who knows? Then they go on, quote, "He took nearly the entire amount as a payout, "his tax records show. "His company has paid more than $15 million in interest "on the loan, but nothing on the principal. "The full $100 million comes due in 2022." So an example like this is supposed to say he's in financial trouble.

I look at it and I say, he wanted to spend money, he needed money, and so you take a loan out, that's tax-free income. The $15 million in interest is a deductible expense 'cause he's in the business of real estate. So with his wealth, that's a 50% discount. There's a good chance that the building has grown in value or is continuing to grow in value, so he can easily justify the interest expense on his balance sheet.

And the fact that the $100 million loan comes due in 2022 tells us nothing because we don't know what it's worth, we don't know what his lender is saying. If the lender is dealing with Donald Trump, who has a reputation for companies in bankruptcy, who's famously a billion dollars in debt in the 1990s, you would think that they would properly collateralize their loan.

But at the end of the day, that's their choice of what they do. And even if he was foreclosed on one property, as is abundantly clear from his past business dealings, he understands the benefit of having your risk segregated. And so if he couldn't pay the loan, what do you do?

If you're a billionaire and you can't pay a $100 million loan, well, you let the bank take the property and foreclose on the property. And if you're personally liable, you sell something else to pay the loan. It's not the same as an average person who's earning $50,000 at a job and has $100,000 of debt, of student loan debt or something like that.

So they go on and talk about his sales, but it's unclear. So why he is selling, it's unproven. So at the very best case, it's unproven. And I think that it's valuable to show that even in what the New York Times is talking about. So they're saying that, quote, "What's more, the tax records show that Mr.

Trump "has once again done what he says he regrets, "looking back on his early 1990s meltdown, "personally guaranteed hundreds of millions of dollars "in loans, a decision that led his lenders "to threaten to force him into personal bankruptcy. "This time around, he is personally responsible "for loans and other debts totaling $421 million, "with most of it coming due within four years.

"Should he win re-election, "his lenders could be placed in the unprecedented position "of weighing whether to foreclose on a sitting president. "There is, however, a tax benefit for Mr. Trump. "While business owners can use losses to avoid taxes, "they can do so only up to the amount "invested in the business.

"But by taking personal responsibility "for that $421 million in debt, "Mr. Trump would be able to declare that amount in losses "in future years." So at the very end of the article, we see that there are very good reasons to understand why he might have a $750 tax bill.

This article was a 32-page article in my PDF version of it from the website. I don't know what it was in the print edition. But what I would point here, I would point out to you here, is that let's assume that you have one set of facts. Right, you have one set of tax returns.

And let's assume that the IRS has the genuine tax returns. I don't know that President Trump is a great businessman. I'm not convinced he is. If I were making a list of the top 10 businessmen of all time, I don't think I would put him on that list. I think that his brand is a whole lot of flash and a whole lot of show.

And I really wonder about the substance behind it. But sometimes I look at all kinds of businesses and I think, how on earth did this happen? And you wonder, right, you wonder. What I'm personally convinced is that President Trump has phenomenal instincts. And he has the ability to wheel and deal in the midst of circumstances that would crush me and to trust his instincts in a way that to me is very inspiring.

I watched, I guess a couple months ago, I watched an interview, a long interview, I think it was PBS had done this long interview with Steve Bannon. And they released the entire uncut interview with Steve Bannon on YouTube. And it was two hours, two and a half hours of just uncut Steve Bannon talking very openly about his experiences with President Trump.

And it opened my eyes in a really remarkable way to some of the inside stuff that was happening during the 2016 presidential campaign. And the thing that I, just convinced me of is that President Trump was a fighter and that he just has these instincts. And he doesn't, he seemingly has no shame.

He's not controlled by the sense of propriety or dignity or the sense of reputation that I'm controlled by personally. And he seems to have been able just throughout his life to live this incredible, incredibly wealthy life without, and weathered things that would sink me. I mean, three marriages and bankruptcies here and business deals there, and the sheer amount of political abuse he gets is just stunning to me.

And so I think that in this article, you can view, assume everything is true in this article. You can view this article in either way. I don't think this is gonna convince anybody one way or the other. I don't think that this article is gonna convince any lefties that somehow President Trump is this brilliant businessman because Joshua explained all these tax details that show that actually, actually he's just really smart.

I think a lefty will read this and be convinced that he's in moral danger, that he's gonna commit all kinds of ethical breaches. I think a lefty says, well, look, he's lied constantly about his wealth. He's not as rich as he was. And there was all these shady deals and he's gonna have to pay the IRS $100 million.

And I think a lefty will see that. I think a righty will look at this and say, it's cleaner than I thought. This is cleaner than I expected. This is cleaner than I expected personally. So I think a righty will probably look at it and say, that's cleaner than I thought.

Look, he's not doing anything illegal. Look, the audit is not, it's just like he said. Plus we knew that all these other things about him. So I don't know that this will convince anything or move the political needle, who knows. The New York Times has promised that there are more articles coming, but I can't imagine that there's gonna be anything more explosive along the way.

Just more details that probably won't help at all. So my hope as I finish is that you will learn from this example. Because regardless of whether you admire somebody or despise somebody, we can all learn from people. And I think an intelligent, mature way to approach people that you have disagreements with is to look at what they're doing and learn from what they're doing.

And say, what can I take that I admire and what can I take from why someone is successful? And so what I would point out to you is there's a lot of tax lessons here. Number one, you see the value of real estate. Real estate, because of its ability to grow over time, to take significant depreciation expenses and to generate modest amounts of income, it can be a very tax-efficient thing to do.

For someone like a real estate developer, you can put together this dream life, right? Where you're at all the finest clubs 'cause you own them. You eat at all the finest hotels 'cause you own them, right? And everything is related. And you can do that with any number of businesses to build a very tax-efficient life.

And I hope that you will take that and you'll think about how you can apply that. I don't personally have any ambitions of being a billionaire real estate developer. But I do like to live a very tax-efficient life. And I'm proud of my low tax returns. One of the things that bothers me is on this subject, there is hypocrisy on all sides.

Nobody believes in paying taxes, even if they say they do. I have never had somebody prove to me, the most virulent, we need to increase tax people, I have never had somebody prove to me that they believed in paying taxes enough to send extra money to the government. Nobody does it.

Everybody pays the bare minimum. And so on this issue, everyone's a hypocrite, even the most loud mouth people that are public, right? You see someone like, what was the big debate five years ago? Warren Buffett says, we need to have a wealth tax. We need to have millionaires pay their fair share.

And after all, I, Warren Buffett, pay less money than my secretary does. And of course, that was a sleight of hand because what he meant was a lower rate on wealth because of dividends and capital gains versus earned income. But even in a situation like that, what does Buffett do?

Does Buffett say, well, I believe in paying taxes so much that I'm gonna stroke a check for an extra, $50 million a year to the US government? No, he doesn't. Does Buffett believe in taxes so much that he says, well, what I'm gonna do is when I die, I'm gonna give the money to my children and then I'll go ahead and allow the US government to get a few extra billion dollars in estate taxes?

Not a chance. What does Buffett do? Buffett says, I'm gonna give all my money to my buddy Bill Gates Foundation. And so in that situation, you have the most outspoken people and I'm using him as a public example, the most outspoken spoken people saying we need to re-improve taxes, but they never even take the first step of paying extra, which any of us can do, right?

The IRS publishes its voluntary contribution. You can designate your money to pay down the national debt. But we all know that it's a waste of time, that taxes are a rotten use of money. And so we all pay the least possible. So I believe you should pay your taxes.

I believe it's too big of a risk not to. And so if you don't wanna pay taxes and you're an American, I would encourage you to not become an American. That's a process that I have been, that's a process that I have been preparing for myself because I think it's absolutely insane that somebody would be an effective businessman and run a high profit business that, and then have 40% of the profits sucked up by a government organization.

And so you can't do it as American, but you can do it as a non-American. And so I think that's worth considering. But at the end of the day, you should follow these strategies and you should build a life that gives you the appropriate lifestyle, right? That provides you with everything that you and your family want, and that does it in a very efficient way.

And I hope that some of the details on some of the stuff that's in this article helps you. Very long show, but it was a 32 page article and I wanted to use it as an example. So thank you for listening to Radical Personal Finance. As I close, I would remind you that if you've enjoyed this, you may enjoy some of my other educational programs.

Let me point out, let me highlight for you two. I'd highlight number one is that I teach a course called How to Borrow Money Safely and Never Pay Interest Using Credit Cards. And you'll notice the importance of debt in what we've talked about. You'll notice that I've said several times that debt is not taxable income.

And so if you understand that, then you can use that knowledge to structure your life in a way that provides you with a very tax efficient lifestyle. So in the example I gave of the real estate investor, how would that real estate investor who buys that property for $150,000 and wants to fix it up, how would they live in the time that they're fixing it up?

Well, if they go get a job, they're gonna pay a lot of money in tax. But if they use credit cards for their personal living expenses, that's not income. And then if they fix their property up, then they can, and then they refinance it with a mortgage, they can pay off the credit card debt.

Now, this kind of game can be very risky. And there are a lot of people who have lost their shirt doing it. And so I don't wanna gloss over the importance of being very careful and thoughtful in how you do things like this. But it is absolutely doable. And so debt that you take out is never income.

And debt can be a way of providing for yourself while you're waiting for your deductions to become available. And so debt has a very valuable place in a good financial planner's arsenal. And so there have been times that I have used these strategies to help bridge the tax gap.

So I've consulted with clients and they wanted to retire early and they were gonna take money out of a retirement account, but they needed to bridge the gap with extra expenses. And so something like this, using credit cards can be, if you understand the game and understand how to moderate the risk, can be a way of doing that in a very tax efficient way.

So recognize that mortgages and credit cards, et cetera, are part of that. And so I would encourage, if you're interested in that course or any of the other courses that I share, that I have to share, go to radicalpersonalfinance.com/store. Go to radicalpersonalfinance.com/store and you'll find all those resources. Thank you for listening and I'll be back with you very soon.

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