Tax records also reveal that at the peak of Mr. Trump’s financial distress, in 1990, his father extracted an extraordinary sum — nearly $50 million — from his empire. While The Times could find no evidence that Fred Trump made any significant debt payments, charitable donations or personal expenditures, there are indications that he wanted plenty of cash on hand to bail out his son if need be.
That was what happened at Trump’s Castle casino, where an $18.4 million bond payment was due in December 1990. Fred Trump dispatched a trusted bookkeeper to Atlantic City with checks to buy $3.5 million in casino chips without placing a bet. With this ruse — an illegal loan under New Jersey gaming laws, resulting in a $65,000 civil penalty — Donald Trump narrowly avoided defaulting on his bonds.
The Trumps turned an $11 million loan debt into a legally questionable tax write-off
By 1987, Donald Trump’s loan debt to his father had grown to at least $11 million. Had Fred Trump simply forgiven the debt, his son would have owed millions in income taxes. They found another solution — one that appears to constitute both an unreported multimillion-dollar gift and an illegal tax write-off.
That December, records show, Fred Trump spent $15.5 million to buy a 7.5 percent stake in Trump Palace, his son’s condo tower rising on the Upper East Side of Manhattan. Four years later, tax returns and financial statements show, Fred Trump sold that stake for just $10,000. The buyer, other documents indicate, was his son.
According to tax experts, with Trump Palace condos selling briskly, selling shares worth $15.5 million to your son for a mere sliver of that would constitute a multimillion-dollar gift under I.R.S. rules. But Fred Trump’s tax returns show no such gift to Donald Trump. What they do reveal is that he used the transaction to declare an enormous tax write-off. That appears to violate federal tax law that prohibits deducting any loss from the sale or exchange of property between family members.
In all, Fred Trump dodged roughly $8 million in gift taxes and $5 million in income taxes on the transaction.
Father and son set out to create the myth of a self-made billionaire
All told, The Times documented 295 distinct streams of revenue Fred Trump created over five decades to channel wealth to his son.