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article imageOp-Ed: Is Trump broke? Weird numbers ask big questions

By Paul Wallis     Sep 27, 2020 in World
New York City - According to The New York Times, Trump paid $750 in income tax in 2016. It’s the sort of money rich people pay themselves to minimize tax. That’s the 10% tax rate for that year. The numbers are meanwhile telling a story which doesn’t fit the image.
The New York Times has two pieces which examine Trump’s finances in considerable depth. You do need to read these articles to get the full context and complexity of the information. Just grab a crucifix or something and a cup of coffee.
The lead article is the synopsis. It’s a tale of corporate losses, personal spruiking, and complex business and financial structuring.
The companion piece, “Charting an Empire” is a more detailed study. Expect some revelations, and to be asking more questions after reading.
(Before we go any further – Whatever you think of Trump, much of the information in The New York Times includes numbers which might suggest breaches of law to some people. These numbers should be considered “implied allegations”, rather than proven facts. They’re not proven; this information is more of a preliminary audit overview than definitive financial status. The presumption of innocence applies.)
A strange tale of money in motion
It’s hard to avoid noticing, though, implied or whatever, that the numbers look very much like a train wreck. There are mountain ranges of debt, failed ventures, and the issues of Trump going guarantor on several hundred million dollars’ worth of major debt, due in the next few years.
The debt seems to have built up over a period of decades. By United States financial sector standards, it’s not huge money. It’s a few hundred million here and there at various times, accumulating over that time.
What’s odd about it is the obsolete, antiquarian nature of the very tangled debt and asset structuring. Back circa Father Knows Best, complex personal finances were considered smart. Now, it’s barely considered to be at Flintstones level.
Assets were held by companies to minimize personal tax liabilities. Income was strictly controlled to manage tax obligations. Debt, also, was held by companies, not individuals, for the same reason. Pretty simple, really.
So why and how would a guy who inherited $400 million or so be in the financial situation he’s in, as described by The New York Times?
There are plenty of indicators and collateral damage:
• Frequent big losses by Trump corporate entities. Those losses could be called chronic over a long period of time.
• Multiple failed ventures, costing and losing more money.
• Multiple large loans, costing more money plus interest.
• Asset valuations, debatable or otherwise, to cover debt
• Sourcing additional finance issues, like Russian money, legally or otherwise
Analysis
The overall financial picture, if accurate, is appalling. Based on the very large amounts of visible debt alone, the break-even point has to be based on asset values. A rather hefty chunk of this debt is personal debt, due to the guarantor obligations. Revenue is a very mixed bag, some good, but hardly impressive relative to debt.
I come from a family of tax accountants, multiple generations of them. My grandfather had a client who called himself Jesus Christ. (Interesting deductions.) I have my own business qualifications. I’ve done financial writing, including US ETFs and a short and not-very-fun week or two at The Motley Fool.
…Meaning I’ve seen and reported on some pretty whacko stuff over the years, including the 2008 sub-primes meltdown. The amateur hour accountancy numbers found by The New York Times articles are simply staggering. The debt structuring alone, and the amounts involved are horrifying.
If Trump was getting financial advice to do this level of debt this way, the advisors must have been living in a terrarium. There’s something downright reptilian about the big chunks of debt, for example. The responsibility is still his, but wow.
The structures as depicted wouldn’t survive a second’s scrutiny by real analysts. To give you some idea of the standards of accounting - If you’ve ever read Barbarians At The Gate, which includes very educational hardhead valuations in large numbers by private equity heavyweights KKR, you’ll know what I mean. They do hard money asset valuation the way other people eat cornflakes. They’d pull it apart in seconds, LEGO brick by brick.
Sooner or later, all this book-entry-level kerfuffle translates down to solvency or insolvency. No professional accountant would settle for “Maybe” as an answer to that issue. Nor would regulators, Congress, or creditors. There are huge questions here, all of which need definitive answers.
The US financial sector paints a pretty rosy picture of itself, but the reality is very different. It’s brutal. Nobody could bring numbers like this to a creditors’ meeting and expect to have a good time. If these figures are even half right, walking on hot coals would be more fun.
Expect to hear a lot more about this, ASAP. The fan is now very close, just over a month away, and a lot of stuff will be flying around.
This opinion article was written by an independent writer. The opinions and views expressed herein are those of the author and are not necessarily intended to reflect those of DigitalJournal.com
More about Trump personal finances, Trump debt, New York Times Trump taxes, Trump finance sourcing, Trump debt structuring
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