The technique is simple. The taxes due immediately because a debt is forgiven can be exchanged for relinquishing future real-estate tax deductions. Trump agreed to forgo his future right to take about $1 billion worth of depreciation on his casino hotels.
This exchange created a future problem for Trump. Real estate that cannot be depreciated is worth a lot less. Indeed, generous tax benefits drive real-estate investment. So while Trump escaped an immediate income-tax bill, the future tax benefits he gave up would mean that he would likely have to pay income taxes on his salary, fees for licensing his name, and other income.
To solve this problem, Trump sold stock for the first time in 1995. He founded Trump Hotels and Casino Resorts, which which then took ownership of his casino hotels.
That meant Trump got money for selling his casino hotels, while the investors got real estate with greatly diminished tax benefits.
Join the conversation as a VIP Member