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By Allan Drury
The Journal News -- Business Section
May 9, 2006
When Donald Trump starred in a press conference to announce his donation of 436 acres to the state last month, he got to do some of the things he does best.
The billionaire publicity machine known as The Donald mugged for the cameras, spewed pithy quotes and schmoozed political power brokers.
By donating the land for a state park he showed another strength that's as much his signature as his brusque manner and unique coif: the ability to make a great deal.
Trump will be able to take advantage of the benefits the tax code provides for big charitable gifts and save millions of dollars with his donation of land in Putnam Valley and Yorktown near the Taconic State Parkway for the Donald J. Trump State Park.
"It's a subtle kind of subsidy to charitable giving," said Charles Beaudrot, a tax lawyer at Morris, Manning & Martin LLP in Atlanta, of those benefits
Tax experts said it's impossible to determine exactly how much Trump will save without knowing all the details of his income and fortune, which is estimated by Forbes magazine to be $2.7 billion. But it's clear he'll save in two ways.
First, and most simply, he won't have to pay capital gains taxes because he didn't sell the land, which includes 282 acres at Indian Hill in Yorktown and Putnam Valley and 154 acres at French Hill in the middle of Yorktown.
Barbara Lane, a certified public accountant at Citrin Cooperman & Co. LLP in White Plains, said that given the $3 million Trump paid for the land in the late 1990s and assuming the land is now worth $100 million — that's the estimate the Trump Organization gave columnist Phil Reisman of The Journal News — the capital gains taxes would have amounted to about $20 million to Uncle Sam and the state of New York.
He'll also get a large tax deduction, but not before doing some serious haggling with the Internal Revenue Service, Lane said. With such large dollars at stake, the IRS is sure to challenge whatever appraisal of the land's value Trump claims, she said.
The IRS, which has its own appraisers on staff, will come up with its own number — almost certainly a lower one — and the sides will negotiate and probably agree on a figure in the middle, Lane said. The appraisal is supposed to be the amount that a reasonable buyer would pay a reasonable seller.
For a donation of property to a government for public use, the giver can claim a tax deduction equal to 50 percent of the giver's adjusted gross income, Beaudrot said.
Trump makes out better by donating the property than he would have if he'd sold the land and donated the money to the state, Beaudrot said.
If he had sold the property for $100 million he would have had to pay federal taxes on the $97 million capital gain and then been able to claim a deduction on the gift. But he would have been able to claim a deduction for only 80 percent of the $97 million, Beaudrot said.
The estimates assume the land is worth $100 million and not everybody thinks it is. Trump's philosophy of thinking big and talking big may have gotten a little out of hand on this one.
Jennifer Grossman, vice president of land acquisition for the Open Space Institute, which tries to protect natural landscapes, said she looked at portions of the land several years ago when Trump was considering development alternatives. The land is heavy with wetlands, which greatly limits its development potential, she said.
"He would be seriously restricted from doing what any of his various plans included, some of which were clustered condo development, a golf course, townhouses and large estate lots," she said.
She said the land might be worth $10 million to $15 million in its undeveloped state. It might be worth considerably more if Trump spent a lot of money on improvements to the land. But Grossman said that only about half of the land may have been developable.
"You could say, 'Yeah, he could sell it for $10 million or $15 million as vacant land right now,' " she said. "But if he developed it and subdivided it and put his own $50 million in, then maybe it's worth $100 million."
Attempts to develop both sites generated opposition in recent years. Planners in Putnam Valley were concerned about traffic on the road to Indian Hill. Others were concerned a golf course at French Hill would pollute a reservoir.
The tax breaks and questions about the land's value do not detract from the generosity of the gift. Though the tax benefits are considerable, he could have made money by selling the land to another developer.
He's also not the only member of the well-heeled celebrity set to milk tax benefits out of a donation. And it's not as if he's the only one who will benefit. The state will keep the land as open space and a place for folks to hike.
Trump, through a spokesman, confirmed that he uses New York, the state where he was born and where he has amassed much of his empire, as his state of residence for tax purposes but would not comment on the tax implications of the gift.
The image-savvy Trump also gets a huge public relations bump out of the donation.
Mike Paul, the president of MGP & Associates PR in Manhattan, said The Donald gets "a quadruple hit" of public relations benefit out of the gift.
The first two public relations benefits Paul listed are obvious ones.
First, Trump got the benefit of the publicity from announcement last month. Once the park is open, it'll be known as the Donald J. Trump State Park, a fact that nobody driving by on the Taconic will be able to miss since there will signs along the side of the road and at the entrances.
The other two benefits Paul mentioned might offend idealists. He said the donation gives Trump an edge with state and local public officials, including Gov. George Pataki and whoever turns out to be the next governor.
That won't hurt his chances of getting the approvals he needs next time he wants to put a shovel in the ground for a big project, Paul said.
"Nobody likes to discuss a quid pro quo in relationships with the government but you can be sure there's a credit there," Paul said. "It means something that he's done this. It means something to an ongoing relationship with the current governor until he's gone and the new governor coming in.
"It also means something to the community," Paul said. "In that community, if he is planning on doing something else commercially, he can say 'Remember me. I gave you this.' "
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