Three heirs: Ivanka, Eric, and Donald Trump Jr. pose in this 2012 photo inside Trump Tower, their father’s most famous property.
Photo by ©Jennifer S. Altman/For The Washington Post via Getty Images
The real-estate billionaire used loans with rock-bottom interest rates to shift some of his fortune to his kids—and he may have employed savvy tax techniques to ensure it all happened legally.
Donald Trump’s tax returns show he extended sweetheart loans to his three eldest children—Don Jr., Ivanka and Eric—saving them a small fortune while adding to the intrigue surrounding the former president’s tax maneuvers.
Congressional investigators flagged the loans last month in a report, questioning whether they constituted “disguised gifts” and suggesting they deserved further investigation. Shortly thereafter, the House Committee on Ways and Means released Trump’s tax returns. That allowed Forbes to analyze the documents alongside Donald Trump’s personal balance sheets and figure out the interest rates of the loans, revealing how generous they were and why investigators may have taken an interest in them.
The younger Trumps owed their father a collective $4.55 million and paid him roughly $50,000 in annual interest from 2015 to 2020, according to the documents. That figure suggests the heirs paid an overall interest rate of about 1.1%.
Such a low rate could raise concerns for those familiar with the intricacies of the tax code, since the Internal Revenue Service polices the rates that parents can offer their heirs, as a way of preventing people from transferring piles of money via sham loans. Every month, the IRS publishes something akin to minimum acceptable rates, which, over most of the period in question, stayed well above 1.1% for long-term loans, defined as those set to last more than nine years.
Donald Trump’s balance sheets suggest that his kids owed him money for more than nine years. So how did the Trumps manage to pay so little interest? Borrowers are allowed to pay lower rates on shorter loans. If the loans technically came with abbreviated terms, but were repeatedly refinanced to effectively extend them, Don Jr., Ivanka and Eric could have theoretically borrowed from their father over a long period while still taking advantage of lower rates.
In emails to Forbes, Eric Trump seemed to hint at such a play, responding to questions about how he and his siblings could have legally paid so little interest by sending tables of historical rates for mid-term loans—those set to last three to nine years—and long-term loans. He then added, in a separate message, “Please don’t assume they were long-term.”
The history of the loans dates back a couple of decades. In 2004, Ivanka Trump told Oprah Winfrey that her father was giving her a condo when she left the University of Pennsylvania. “A great gift that my dad gave me recently is an apartment because I’m graduating, and I don’t want to live at home anymore,” she said. That fall, however, a deed showed up in New York City records saying that Ivanka had purchased the apartment—and had not received it as a gift. She paid $1.5 million, more than $1 million less than the place was worth, according to an analysis of comparable sales.
Donald Trump’s personal balance sheets suggest that Ivanka borrowed all the money she needed from him and that she did not have to make regular principal payments on the loan. At the time of the purchase, 30-year bank mortgages came with rates of roughly 6%. Over the period for which Trump’s tax returns are available, from 2015 to 2020, Ivanka handed her father just $18,000 annually, paying a 1.2% interest rate.
Nonetheless, Ivanka used the purchase to boast about how independent she was from her father. “I own a two-bedroom apartment in a Trump building, but no one gave it to me,” she wrote in her book The Trump Card. “Nor did I benefit from an insider price.” In addition to ignoring the fact that she in fact did benefit from an insider price, Ivanka also glossed over the details of the financing, suggesting her loan was similar to one that others could get from traditional lenders. “I’m paying a mortgage on my apartment, just as my brothers, Don and Eric, pay mortgages on their apartments in other Trump buildings. Admittedly, I pay my mortgage directly to my father instead of to a bank, but it’s a mortgage just the same.”
Eric Trump also received terms that a bank likely would not have offered. In 2007, he purchased a $2.04 million apartment from his father, apparently borrowing $2 million from his dad. The elder Trump’s personal balance sheets suggest that Eric, like Ivanka, did not have to make regular principal payments. When Eric bought his apartment, typical 30-year mortgages came with interest rates of more than 6%. Yet Donald Trump’s tax returns show Eric paid $24,000 of annual interest, in line with a 1.2% rate, from 2015 to 2019. In 2020, with Donald Trump in office and Eric running the family business, his interest payments dropped to $19,605, less than 1% of the principal on the loan.
Don Jr. followed a slightly different path than his siblings, buying apartments in multiple New York City buildings. In 2010, he wiped out the debt on one of the units when he sold it for $855,000 more than it cost him to buy. He retained $1.05 million of debt, however, that his father appears to have given him against another property. Don Jr. paid the lowest interest of any of the three Trump kids, according to an analysis of his father’s tax returns and balance sheets, just 0.8%, adding up to $8,715 a year.
Assuming the Trumps structured their loans properly, all these sweetheart deals could have been entirely legal. “I tell my law students there’s two tax regimes out there—one for the informed and one for the uniformed,” says Jill Miller, a tax attorney and professor at Cornell University. “The people that are informed have the ability to make the best decisions for their family.”