Special Report: How Trump Scored a Big Tax Break for Conserving a Golf Range – News 24-7 Live News 24-7 Live
Special Report: How Trump Scored a Big Tax Break for Conserving a Golf Range

Special Report: How Trump Scored a Big Tax Break for Conserving a Golf Range

LOS ANGELES (Reuters) – When Donald Trump bought his seaside golf course in a wealthy Los Angeles suburb in 2002, he vowed to surround it with “some of the most beautiful houses in California.” But the 261-acre property on the Palos Verdes Peninsula had a problem.

Geologists working for the city would not clear part of it for home-building because of unstable soil underlying the course, built on a landslide-prone bluff overlooking the Pacific Ocean.

The denials infuriated Trump, who lobbied and litigated for eight years in a failed effort to reverse the geologists’ findings and secure development approvals, according to interviews with planners and geologists and a Reuters review of public records and court filings.

Trump eventually abandoned a plan to build 16 homes and turned instead to the tax code to offset the lost profits – securing a $25 million tax deduction in exchange for a promise not to develop the land. The agreement with a nonprofit conservancy allowed him to continue using the land as a driving range for the Trump National Golf Course.

That 2014 agreement, known as a conservation easement, is now one focus of a broader investigation by New York Attorney General Letitia James into whether Trump improperly manipulated real-estate values for tax and other economic benefits, court records filed by her office show. “Information regarding the valuation of Trump Golf LA is significant to the Attorney General’s investigation,” the office said in a filing.

The attorney general is also investigating a $21.1 million tax deduction claimed on Trump’s Seven Springs estate in New York through another conservation easement. The office declined to comment on its investigations into the easements.

An attorney for the Trump Organization, Jill Martin – who worked on the California easement and whose office is on the golf course – declined to comment. Other lawyers representing Trump and his business did not respond to requests for comment.

Conservation easements are usually agreements between property owners and nonprofit organizations dedicated to preserving open space. In return for foregoing development rights, property owners can take a charitable tax deduction based on a real-estate appraiser’s estimate of lost value. The agreements are under growing scrutiny by tax authorities and Congress members who contend wealthy developers often get huge tax breaks for easements providing little public benefit. The Internal Revenue Service has been particularly skeptical of values of easements on golf courses.

Some tax specialists questioned whether Trump could have earned $25 million from developing the seaside land because he hadn’t been able to win approvals despite years of trying. Even if he could get those approvals, Trump would have faced a costly investment in engineering to stabilize home foundations on the shifting soils, raising questions about the value of the land and its development potential, according to local officials, geologic consultants and tax specialists.

Trump’s troubled effort to develop the land, and its continued use as part of his golf business, also casts doubt on the public benefit of protecting it.

“What conservation value is there in an urban golf range that can’t be developed anyway because of foundational problems?” said Steve Rosenthal, senior fellow at the Urban-Brookings Tax Policy Center in Washington.

Trump made his easement agreement, for 11.5 acres, with the Palos Verdes Peninsula Land Conservancy. Allen Franz, a longtime conservancy board member and former president, acknowledged in an interview that the easement had little public value compared to most of the organization’s agreements. The conservancy typically focuses on areas with a public use such as parks or hiking trails. The driving range, by contrast, was just a part of Trump’s business.

“It doesn’t do us a whole lot of good to have a conservation easement over a driving range,” Franz said.

The conservancy and some local residents did value preventing home construction there, however, in part because they believed homes on the site would obstruct the area’s ocean views. Franz said the conservancy had “no role in assigning any value” to Trump’s driving range easement, which is typical in such conservation agreements.

DETERMINING PUBLIC VALUE

Pinpointing the value of Trump’s lost development rights is a central challenge facing the New York investigators in proving that Trump took an improper or inflated tax deduction.

That may not be easy, and hinges on the question of whether a builder could have profited from development despite the lack of approvals and the engineering costs. Developers and engineers said builders sometimes do spend large sums on engineering to stabilize land for construction on high-value oceanfront lots. Before making the easement agreement, Trump continued to insist he could build on the land despite the unstable soil and his struggles to win local approvals.

“It would be worth at least that,” said Scott Wellman, a lawyer who represented Trump in his fight against the city, of the $25 million deduction.

Yet Trump himself valued a parcel covering most of the driving range at just $900,000 in a 2013 property tax appeal, just a year before signing the conservation agreement, Los Angeles County assessment records show. Trump was seeking to lower his taxes after a county assessor pegged the value at $1.1 million.

Trump has a history of assigning widely varying values to the course. An attorney general’s legal filing shows that Trump’s appraisers on the conservation easement assigned a value of $107 million to the entire property in December of 2014, including the driving range.

In 2005, the Trump organization valued the property at $360 million in a financial statement, according to testimony in a defamation lawsuit filed by Trump that involved his claims about his wealth.

Appraisals to support Trump’s tax breaks for the California and New York easements were done by the firm of Cushman & Wakefield Plc. Cushman did not respond to requests for comment on how it arrived at the $25 million figure. Trump, his appraiser and the conservancy declined to disclose the appraisal to Reuters.

Lots around the course that can be developed have proven to be valuable. Trump sold more than 25 vacant lots bordering the course from 2007 through 2019, for a total of $48.2 million, with a median price of about $1.6 million each, according to property records.

THREATS, INSULTS, LAWSUITS

The Trump National course is in a spectacular spot, perched on cliffs overlooking Catalina Island.

But unlike Trump’s ultra-exclusive golf resorts in Palm Beach and New York – where membership fees can be hundreds of thousands of dollars – he was required to keep Trump National open to the public by the California Coastal Commission, as part of a deal that the previous owners made with local residents to maintain open space.

To boost profits, Trump sought to develop expensive homes around the course. The previous developers had drawn up plans for 75 houses on its borders.

The risk of unstable soils was apparent when Trump bought the course in 2002. When another developer was close to opening the course in 1999, most of the 18th hole and parts of the 9th and 12th holes collapsed, trapping a man and his dog, who were rescued by helicopter. The owners then tried but failed to run it as a 15-hole course. Three years later, after the owners declared bankruptcy, Trump bought it from banking giant Credit Suisse at the bargain price of $27 million.

The landslide raised doubts among local officials that Trump could safely develop the area. The city of Rancho Palos Verdes began extensive geological tests. Although the developers who sold to Trump blamed a leaky sewer pipe for the 1999 collapse, the city’s geologists believed the main culprit was a thin layer of slippery volcanic ash called bentonite that ran under parts of the property, according to interviews and city documents.

“We wanted to make damn sure that anybody who thought about building a house with conventional foundations wouldn’t have to worry about the house sliding into the ocean,” said Bill Cotton, one of the city’s consulting geologists.

News Source: US News

Leave a Reply

Your email address will not be published. Required fields are marked *

Report News
Google