On Friday morning, Donald Trump stepped in front of the cameras—in the midst of his presidential campaign, at the heart of a moment when world events are shifting the structure of relationships in a way that will alter vital United States interests—and explained how the third hole at his golf course was going to be the “greatest par three.” It was a bizarre moment. It was a perfect summary. It was Trump.
By any measure, Donald Trump is doing a pitiful job as the presumptive GOP nominee. He’s literally phoning it in, running a schedule that mixes the occasional rally with kicking back in his office to dial a friend or two among American’s talking heads. He’s not doing the rounds of fundraising expected of a would-be president. He’s not doing down-ticket meet and greets to boost other GOP candidates. He’s not putting in place the infrastructure to drag iffy voters to the polls, or building connections to bring in outside funds, or even creating a media organization to lend some details to his fact-free spluttering.
Many have looked at this and wondered if there's some secret scheme behind the incompetence. Does Trump have a hidden agenda? Why else is his treatment of topics so flippant? Why is his campaign so not there?
But the truth is simpler. Donald Trump is running a fraction of a campaign because he’s just a part-time nominee. For all his fist-pumping speeches, Trump’s candidacy and his line of of tacky campaign mementos are no more important to him than one of his vanished magazines, or his dried out line of gristly steaks, or his grounded airlines. Other people might see being president as the most important job they could possibly have. Trump sees it as a sideline.
Donald Trump has a day job. And he’s not about to let something as trivial as the presidency get in the way.
Many people were surprised to see that Donald Trump took days off from his already lax campaign schedule to spend time driving a cart around his money pit of a golf club in Scotland. It seems like one helluva distraction to leave the campaign behind, fly across the Atlantic, and spend the weekend trying to snare investors for homes on the back nine, rather than dollars in his campaign war chest. Only that’s actually backwards. The golf course isn’t a distraction, that’s who Trump is.
Donald Trump got more than a “small loan” from his father. He got a company. Elizabeth Trump & Son was started in 1923 by Trump’s grandmother as a gift to her teenage middle-child. That “& son” was Donald Trump’s father, Fred. He gave the company to Donald. Elizabeth Trump & Son is now The Trump Organization, and Donald Trump owns it 100 percent. He doesn’t have partners. He doesn’t have stockholders. He has a company handed down from mother, to son, to son.
That company came with a lot of real estate. That’s what Donald Trump is, a real estate investor. Sometimes he builds buildings, sometimes he sells the right for someone else to slap that valuable, high Q-rating name on one of their buildings. Mostly he rents space in buildings and collects the money from tenants. Just like his father did. Just like his grandmother did. Some of those buildings, a good number of them, are even the same buildings that Elizabeth Trump & Son owned.
It’s easy to see that while Donald Trump’s mouth is committed to his campaign, the rest of him—especially his pocketbook—are strictly part time employees. Donald Trump isn’t just starving his campaign of everything else it needs, he’s depriving it of Trump. He has to.
Because Donald Trump isn’t just a real estate guy. He’s a real estate professional. And being a real estate professional is way more important than anything else Trump is up to for a very good reason.
Under the general rule of Section 469, all rental activities are treated as passive, regardless of the individual owner’s extent of participation.
What does that mean? It means that the ability to record losses against all that real estate Trump owns is limited in ways that could be very costly to The Trump Organization. Likewise, income earned from rental property is subject to additional taxation as a form of “passive” or “unearned” income. For a guy like Trump, involved in all sorts of businesses, not being able to bury his profits and losses by entangling them in his real estate activities could mean a difference of millions a year in taxes. Having to pay those additional taxes on income from his properties is millions more.
Fortunately for Trump, there’s a very special class of people who are free from these limits.
An exception is carved out, however, for so-called “real estate professionals,” the idea being that someone who truly earns their living in real estate trades or businesses should be free to use rental losses without limitation.
Well sure. Donald Trump earns his living in real estate. So he’s a professional. Only, that’s not where the rules end.
To ensure that the benefit of the exception is preserved for those who truly deserve it, Section 469(c)(7) requires that two quantitative tests be satisfied in order for a taxpayer to qualify as a real estate professional. Here are the tests, with my plain English definition in the parenthetical:
1. More than one-half of the personal services you perform in all trades or businesses for the tax year must be performed in real property trades or businesses in which you materially participate (you must spend more hours on real estate activities than non-real estate activities, to prove that you earn your living in the real estate world).
Donald Trump has to spend more time on his real estate work than on his campaign. Has to. Why is Trump in Scotland? He’s racking up the hours. Why does Trump have so many of his events at Trump properties? It’s not just so that Trump can route dollars back to his single-owner company. It’s also so that every speech, fundraiser, and overnight spent in a Trump facility can be put on the scales.
There’s a minimum of 750 hours a year that a real estate professional has to invest in the area. But it doesn’t matter if Trump passes that number or not.
The real squeeze is that Trump is a half-time candidate. A less than half-time candidate. One whose first thought is always for the golf course, the casino, the hotel, the apartment building, the parking garage, and somewhere … way down there … the people and the nation.
Trump’s the 45 percent candidate. If that much. Do you think he told Republican voters that they’re literally not worth his full attention?
Tip of the hat to Daily Kos members yashko and plumbobb who put me on the path of what it means to be a real estate professional. As a non-real estate, non-CPA, non-tax guy, I’m ready to take my lumps on any errors in this story, and the blame is completely mine, not theirs.
