Newly obtained tax information reveals that from 1985 to 1994, Donald J. Trump's businesses were in far bleaker condition than was previously known. Russ Buettner and Susanne Craig from The New York Times investigate.
By the time his master-of-the-universe memoir Trump: The Art of the Deal hit bookstores in 1987, Donald Trump was already in deep financial distress, losing tens of millions of dollars on troubled business deals, according to previously unrevealed figures from his federal income tax returns.
Trump was propelled to the presidency, in part, by a self-spun narrative of business success and of setbacks triumphantly overcome. He has attributed his first run of reversals and bankruptcies to the recession that took hold in 1990. But 10 years of tax information obtained by The New York Times paints a different, and far bleaker, picture of his deal-making abilities and financial condition.
The data — printouts from Trump's official Internal Revenue Service tax transcripts, with the figures from his federal tax form, the 1040, for the years 1985 to 1994 — represents the fullest and most detailed look to date at the president's taxes, information he has kept from public view. Though the information does not cover the tax years at the center of an escalating battle between the Trump administration and Congress, it traces the most tumultuous chapter in a long business career — an era of fevered acquisition and spectacular collapse.
The numbers show that in 1985, Trump reported losses of US$46.1 million (NZ$69.8 million) from his core businesses — largely casinos, hotels and retail space in apartment buildings. They continued to lose money every year, totalling US$1.17 billion in losses for the decade.
In fact, year after year, Trump appears to have lost more money than nearly any other individual American taxpayer, The Times found when it compared his results with detailed information the IRS compiles on an annual sampling of high-income earners. His core business losses in 1990 and 1991 — more than US$250 million each year — were more than double those of the nearest taxpayers in the IRS information for those years.
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Overall, Trump lost so much money that he was able to avoid paying income taxes for eight of the 10 years. It is not known whether the IRS later required changes after audits.
While The Times did not obtain the president's actual tax returns, it received the information contained in the returns from someone who had legal access to it. The Times was then able to find matching results in the IRS information on top earners — a publicly available database that each year comprises a one-third sampling of those taxpayers, with identifying details removed. It also confirmed significant findings using other public documents, along with confidential Trump family tax and financial records from the newspaper's 2018 investigation into the origin of the president's wealth.
The White House's response to the new findings has shifted over time.
Several weeks ago, a senior official issued a statement saying: "The president got massive depreciation and tax shelter because of large-scale construction and subsidised developments. That is why the president has always scoffed at the tax system and said you need to change the tax laws. You can make a large income and not have to pay large amount of taxes."
On Saturday, after further inquiries from The Times, a lawyer for the president, Charles J. Harder, wrote that the tax information was "demonstrably false," and that the paper's statements "about the president's tax returns and business from 30 years ago are highly inaccurate." He cited no specific errors, but on Tuesday added that "IRS transcripts, particularly before the days of electronic filing, are notoriously inaccurate" and "would not be able to provide a reasonable picture of any taxpayer's return."
Mark J. Mazur, a former director of research, analysis and statistics at the IRS, said that, far from being considered unreliable, data used to create such transcripts had undergone quality control for decades and had been used to analyse economic trends and set national policy. IRS auditors often refer to the transcripts as "handy" summaries of tax returns, said Mazur, now director of the nonpartisan Urban-Brookings Tax Policy Center in Washington.
In fact, the source of The Times' newly obtained information was able to provide several years of unpublished tax figures from the president's father, the builder Fred C. Trump. They matched up precisely with Fred Trump's actual returns, which had been obtained by The Times in the earlier investigation.
Donald Trump built a business licensing his name, became a television celebrity and ran for the White House by branding himself a self-made billionaire. Yet the actual extent of his wealth has been the subject of much doubt and debate. He broke with precedent in refusing to release any of his tax returns as a presidential candidate, and until now only a few pages of his returns have become public. Last year's Times investigation found that he had received at least US$413 million in 2018 dollars from his father.
The new tax information does not answer questions raised by House Democrats in their pursuit of the last six years of Trump's tax returns — about his recent business dealings and possible foreign sources of financing.
But in the granular detail of tax results, it gives a precise accounting of the president's financial failures and of the constantly shifting focus that would characterise his decades in business. In contrast to his father's stable and profitable empire of rental apartments, Donald Trump's primary sources of income changed year after year, from big stock earnings, to a single year of more than US$67.1 million in salary, to a mysterious US$52.9 million windfall in interest income. But always, those gains were overwhelmed by losses on his casinos and other projects.
The Art of Losing Money
In 1985, Trump appeared to be on top of the world.
He was still riding high from the completion of his first few projects — the Grand Hyatt Hotel, Trump Tower and another Manhattan apartment building, and one Atlantic City casino. He also owned the New Jersey Generals of the United States Football League.
As the year played out, he borrowed hundreds of millions of dollars to fuel a wave of purchases, acquiring a second casino (US$351.8 million), a Manhattan hotel (US$80 million), the Mar-a-Lago property in Florida (US$10 million), a New York hospital he intended to replace with an apartment building (US$60 million) and an undeveloped expanse of railroad yards on the West Side of Manhattan (US$85 million).
But what the newly revealed tax information makes clear is that, with his vast debt and other expenses on those properties, Trump's fortunes were already on the way down.
His yearly carrying costs on the rail yards would rise to US$18.7 million. He would not be able to convert Mar-a-Lago into a moneymaking club for another decade. The apartments on the hospital site would not be ready for sale, as Trump Palace, until 1990, and another residential project would be stalled for years. The football league would soon fold.
Because his businesses were generally created as partnerships, the companies themselves did not pay federal income taxes. Instead their results wound up on Trump's personal ledger.
Beyond the US$46.1 million loss that his core businesses logged in 1985, Trump's tax information shows that he carried over US$5.6 million in losses from prior years. The IRS data on one-third of high-income tax returns that year lists only three taxpayers with greater losses.
The next years were a time of continued empire building. The information also documents, year by year, a time of gathering loss.
In 1986, he bought out his partners in Trump Tower and the Trump Plaza Hotel and Casino. He bought an apartment building in West Palm Beach for US$43 million. His business losses for the year: US$68.7 million.
About two weeks before the stock market crash of October 19, 1987, he spent US$29 million on a 282-foot yacht. Months later he bought the Plaza Hotel for US$407 million. He recorded US$42.2 million in core business losses for 1987, and US$30.4 million for 1988.
In 1989, he bought a shuttle operation from Eastern Airlines for US$365 million. It never made a profit, and Trump would soon pump in more than US$7 million a month to keep it airborne, New Jersey casino regulators found.
Trump's business losses that year soared to US$181.7 million.
Then came the Trump Taj Mahal Hotel and Casino, which opened in April 1990 saddled with more than US$800 million in debt, most at very high interest rates. It did not generate enough revenue to cover that debt, and sucked revenue from his other casinos, Trump's Castle and Trump Plaza, pulling them deep into the red.
As a result, 1990 and 1991 represented the worst years of the period reviewed by The Times, with combined losses of US$517.6 million. And over the next three years, as Trump turned over properties to his lenders to stave off bankruptcy, his core businesses lost an additional US$286.9 million.
The 10-year total: US$1.17 billion in losses.
Trump was able to lose all that money in part because most of it belonged to the banks and bond investors who had supplied the cash. And as The Times' earlier investigation showed, Trump secretly leaned on his father's wealth to continue living like a winner and to stage a comeback.
This is not to say that Trump never made money on a deal. One that turned out quite well came in 1985, when he bought the Hotel St. Moritz in Manhattan for US$73.7 million. Trump has said he sold it for US$180 million in 1989. His tax information showed long-term capital gains of US$99.8 million, accounting for the vast majority of such gains in the 10 years reviewed by The Times.
But that rich payday was overwhelmed by his business losses, and Trump still paid no federal income taxes that year.
The newly revealed tax information sheds light on how those net operating losses snowballed. By 1991, they had grown to nearly US$418 million, accounting for fully 1% of all the losses that the IRS reported had been declared by individual taxpayers that year.
One Huge Payday
As would be expected for a business owner, the line on Trump's tax returns showing regular wages and salary does not represent the bulk of his income. But one year stands out: 1988, when he recorded US$67.1 million in salary — 90 per cent of his total regular wages for the 10 years.
The figure appears to include a payment he received as part of a deal to buy the unfinished Taj Mahal casino from Merv Griffin, the talk show host turned businessman. Griffin's company had agreed to pay Trump to manage construction of the casino, among other services, and the resolution of a bitter dispute between the two included Griffin's company paying Trump US$63 million to buy out that contract.
That windfall contributed to Trump's making his biggest income tax payment of the 10 years reviewed by The Times. Even so, his overwhelming business losses meant that he paid only US$1.4 million in alternative minimum tax that year.
At Trump's nadir, in the post-recession autumn of 1991, he testified before a congressional task force, calling for changes in the tax code to benefit his industry.
"The real estate business — we're in an absolute depression," Trump told the lawmakers, adding: "I see no sign of any kind of upturn at all. There is no incentive to invest. Everyone is doing badly, everyone."
Everyone, perhaps, except his father, Fred Trump.
While Donald Trump reported hundreds of millions of dollars in losses for 1990 and 1991, Fred Trump's returns showed a positive income of US$53.9 million, with only one major loss: US$15 million invested in his son's latest apartment project.