In order to avoid conflicts of interest, Donald Trump will need to confront some major tax issues when determining what to do with his real estate empire. If Trump decides to outright gift his businesses to his children, it will come with a hefty tax bill—gifts have a 40% tax rate over the lifetime exemption. The practical decision would be to put his business assets into a blind trust in which he still has beneficial ownership without control. If Trump decides to not “materially participate” in his real estate businesses, the passive loss rules could apply to him—rules that treat real estate professionals as having active real estate activities rather than passive. However, some suspect that these rules will not affect our future president because he can use loss carryforwards. Trump could also sell or divest his businesses, which would allow him to receive a significant tax break. All of these issues regarding his business holdings will be addressed at a December 15 news conference.
See Allyson Versprille, Tax Implications of Trump’s Business Decisions: A Primer, Big Law Business, December 9, 2016.
Special thanks to Richard Behrendt (Director of Estate Planning, Annex Wealth Management) for bringing this article to my attention.
