Trump's children borrow money from him and pay him with interest
So what's up with Trump's interest? Why do his children pay him interest? Is he really such a miser that he forces his children to pay him interest on loans? Or maybe his accountant is a genius tax strategist and things aren't that simple? Don't rush to conclusions and let's figure it out.
First of all, you need to understand that in the USA there is an inheritance tax, in English it is death tax or inheritance tax. This tax applies only to millionaires and is paid only on inheritances that exceed $12.92 million (in 2023, but the amount changes constantly due to inflation and changes in legislation). We will assume that Trump's inheritance exceeds this amount.
“So let him give everything to his children throughout his life,” you say. In order to avoid such opportunities to give away the entire inheritance, there is a gift tax. In English this is called gift tax. This tax is paid by the donor, not the recipient, and applies to annual gifts that exceed $16,000 per year (in 2023, but the amount changes due to inflation). So if Trump wants to distribute most of his inheritance directly to his children, he must pay a gift tax.
So to get around the death tax, Trump's accountant developed a rather interesting scheme. Trump's children borrow money from him and pay him interest on this debt. Please note that payment of interest in this situation is required to confirm the fact that the loan was real and not fictitious. After a certain number of years, the loan is forgiven, and since it is a personal transaction, there is no statutory tax on the forgiven loan.
Brilliant? I don’t know yet, time and the audit will tell. Let me remind you that not all of Trump’s returns were audited, as required by law, which requires all presidents of the country, without exception, to undergo a tax audit.
Author Elina Linderman
