How Trump Can Sell His Truth Social Stock Without Paying A Dime In Taxes

Forbes

The president-elect insists that he will not be selling his Truth Social shares. It could cost him over $700 million.  Kyle Khan Mullis Forbes reporter joins 'Forbes Talks' with Forbes reporter Brittany Lewis to discuss the latest with Donald Trump's Truth Social earnings.   Read the full story on Forbes: https://www.forbes.com/sites/kylemullins/2024/11/17/how-trump-can-sell-his-truth-social-stock-without-paying-a-dime-in-taxes/  Subscribe to FORBES: https://www.youtube.com/user/Forbes?sub_confirmation=1  Fuel your success with Forbes. Gain unlimited access to premium journalism, including breaking news, groundbreaking in-depth reported stories, daily digests and more. Plus, members get a front-row seat at members-only events with leading thinkers and doers, access to premium video that can help you get ahead, an ad-light experience, early access to select products including NFT drops and more:  https://account.forbes.com/membership/?utm_source=youtube&utm_medium=display&utm_campaign=growth_non-sub_paid_subscribe_ytdescript  Stay Connected Forbes newsletters: https://newsletters.editorial.forbes.com Forbes on Facebook: http://fb.com/forbes Forbes Video on Twitter: http://www.twitter.com/forbes Forbes Video on Instagram: http://instagram.com/forbes More From Forbes:  http://forbes.com  Forbes covers the intersection of entrepreneurship, wealth, technology, business and lifestyle with a focus on people and success.

Transcript

00:00Hi, everybody. I'm Brittany Lewis, a breaking news reporter here at Forbes. Joining me now

00:07is my Forbes colleague, money in politics reporter Kyle Kahn Mullins. Kyle, thanks so

00:12much for joining me. Great to be here, Brittany. Thanks for having me. You and I have talked

00:18about truth social now for months, and here's your most recent reporting. You report this,

00:24how Trump can sell his truth social stock without paying a dime in taxes. So the first

00:29question I have when I read that headline is, is Trump selling his truth social stock?

00:36So he says he's not. I want to make that super clear right here at the outset. Trump says

00:40he is not selling his true social stock. He makes that clear in all caps on truth social.

00:46You know, as recently as like a week or so ago, he said that. So outward appearances,

00:52he is not intending to sell. But with that said, we sketch out a path here that it could

00:59be very beneficial for him if he does end up trying to sell. You lay out a very clear

01:04path, which I will quote you on in a little bit. But how much does Donald Trump have in

01:08truth social stock? I'm just going to check my number here. He has one hundred and fourteen

01:16million seven hundred and fifty thousand shares of DJT, which is the ticker for Trump Media

01:22and Technology Group, which owns true social. That is an extensive amount of that stock

01:28to over half of the outstanding stock that's available there. He is the majority owner

01:33and it is the majority of his network at this point.

01:36And he vows he's not selling. He says it in all caps. But you and I have talked about

01:40the volatility of truth social within the past months. So is the company right now doing

01:45well?

01:47Well, it depends on how you look at it. If you base that on its stock price, it's doing

01:52very well. The company is trading at over a thousand times its sales. For context, a

01:56typical tech company is probably going to sell for probably going to have a stock price

02:00between five and twenty times its sales. So it's really through the roof there when it

02:04comes to its share price. On the other hand, the company lost nineteen million dollars

02:09last quarter. It's lost over one hundred million dollars this year. And it doesn't appear to

02:15have a pretty strong path to profitability. So from that perspective, no, the company

02:20is not doing well.

02:21Well, you lay out a path for Donald Trump's profitability, but he says he's not selling

02:25like we keep saying. But remind us, did he divest from his businesses in his first term?

02:31No, he did not. Despite pretty extensive pressure from ethics officials and from the

02:37media, Trump did not divest from his business empire, which, of course, led to years of

02:43lawsuits and scrutiny over who exactly was staying at his hotels, who was paying him

02:49money by going to his golf courses, who was buying memberships at his clubs.

02:53There were all these different opportunities to essentially funnel money into the pocket

02:57of the former president and at that point the sitting president and now the future

03:01president. Something that we've all been doing the past two weeks has been looking at

03:07Donald Trump's first term for any indication of how he's going to lead in his second

03:13term. So is there any indication that he's going to divest from his businesses this time

03:17around? He has made pretty clear, at least when he's been asked about it, which it

03:24seems like he hasn't been asked about it quite as much as he was back in 2016, he's

03:29made pretty clear he's not interested in doing that.

03:31And I don't see any reason to think that he intends to change his tune unless, of

03:37course, it's beneficial for him and if it's beneficial for him, which is, again, the

03:41path that we sketch out here with through social, maybe he will.

03:43We'll think we'll see.

03:45Well, let's talk about that beneficial path.

03:47I'll quote you and then break it down for us.

03:49You write this, quote, There is a clear path for him to unload his shares that would

03:54allow him to quiet ethics concerns, diversify his net worth away from one volatile stock

03:59and avoid a massive capital gains tax bill, saving him hundreds of millions of dollars.

04:05That sounds like a best case scenario for Trump.

04:07So how exactly does he do all that?

04:11It's actually somewhat straightforward.

04:14So when a wealthy person or actually really with anyone comes into the executive

04:18branch and they own something that could present a conflict of interest for them,

04:24they can get what's called a certificate of divestiture.

04:27And basically what that means is you get a form that says the government made me sell

04:32this thing because I because it would create a conflict with my executive branch

04:37position. And you give that form to the IRS and you tell them I sold all my stock.

04:43I put it or whatever the asset is.

04:46And I put that money into a non-conflicted holding that could be a diversified mutual

04:51fund. It could be an index fund.

04:52It could be Treasury bonds, any of these.

04:54There's lots of different options for you to put your money into that are not going to

04:58create conflicts of interest.

05:00And then you don't have to pay capital gains taxes on that that that sale.

05:06So the best example here is Hank Paulson was the.

05:13He was nominated to be secretary of the Treasury under George W.

05:15Bush. He was the CEO of Goldman Sachs and he owned some something like 600 million

05:20dollars of Goldman Sachs stock at the time he came in and he got to sell all of that

05:26stock. He paid no capital gains tax on it for the time being.

05:30He does. You do have to pay it eventually, but not at the time you sell it.

05:34He got to put it all into a diversified portfolio of investments.

05:37And then, of course, two years later, 2008, the stock market crashed and Goldman Sachs

05:41was hit pretty hard in that. So I bet Hank was looking back thinking, OK, this this

05:45worked out pretty well for me.

05:47So essentially what you're reporting is that a CD can be a win win for all involved,

05:52correct? So for the government, the win is that the person is not conflicted anymore.

06:02They don't have there's not this potential question over whether or not they're

06:05acting because they think it's a good idea versus because it's going to personally

06:09financially benefit them.

06:11That's really important. You don't want the guy who I'm just making something up,

06:14but you don't want the guy who is regulating crypto to also own a bunch of crypto

06:19because that might lead to questions about whether or not he's doing so out of his

06:24own financial benefit or whether he's doing it because he thinks it's good policy.

06:28But for the nominee, the other thing that it benefits the government is it enables

06:33them to access a wider pool of potential candidates for to bring to bring into

06:37government. So, again, Hank Paulson, you know, if he hadn't been able to get this

06:42bonus, maybe he wouldn't have been as interested because, you know, he's got a

06:45good job as the CEO of Goldman Sachs.

06:47Maybe he wouldn't have been as interested in going in to become treasury secretary

06:49because it would have been hit with a massive tax bill immediately upon coming into

06:53office. And then flip the, you know, flip it around for the nominee.

06:57They get this little perk. They don't have to pay the capital gains tax immediately.

07:00Instead, they can defer that capital gains tax to when they sell the non-conflicted

07:04assets, which could be years, decades down the road.

07:07Maybe they've grown a bunch more and that that could work out a lot better.

07:12So let's say Donald Trump did sell.

07:14He wouldn't have to pay taxes on this.

07:16So how much would he be saving right now?

07:19We calculate that based on what we published the article, which was over the

07:22weekend, he would save about 700 million dollars in capital gains taxes.

07:27That's an enormous amount of money that he could turn right around and plow it

07:30into an S&P 500 index fund or a diversified, other diversified mutual fund,

07:36anything like that, or just treasury bonds and make a good return on that.

07:40And so and that those investments would be probably significantly more stable than

07:45true social, which swings up and down with Trump's political prospects on any given

07:50day. And so overall, that 700 million dollars could be a real boon.

07:56Now, that is not to say he doesn't have to pay the taxes eventually.

07:59Eventually, he does have to pay the taxes when he sells the non-conflicted assets.

08:03But that could be, again, years down the road.

08:05And one of the experts I talked to pointed out, if you pass away before you sell the

08:11non-conflicted assets, then you get the stepped up basis at death and you don't have

08:17to pay capital gains taxes on that gain at all.

08:20I want to read another line from your reporting because I think it's really important.

08:24You write this. The consequences of Trump holding onto his stock could be serious and

08:29stretch beyond just his own finances.

08:31Talk to us about these other repercussions.

08:35A couple of conflicts of interest questions here that are really raised when a public

08:41official holds assets that could create, again, conflicts of interest.

08:45The first is that Trump is going to be appointing the regulators that are going to be

08:49overlooking true social. He's going to be appointing the head of the FCC, for example,

08:53that regulates communications in this country.

08:57And then you also have the question of whether people who want to curry favor with Trump,

09:03why don't they buy a million dollars worth of ads on true social?

09:06That could be a foreign government. That could be domestic special interest groups.

09:10It could be anyone who, again, is just looking to curry favor with him.

09:14They could buy ads on true social.

09:16They could invest in the company.

09:18And I will also note that some of the ethics experts I talked to pointed out all of these

09:22concerns apply to his newfound crypto business, which is still kind of vaguely defined,

09:28applies there, too.

09:30He's going to be appointing, presumably, a new head of the FCC that is going to be

09:33regulating crypto.

09:36And that head of the FCC is going to be making decisions that in turn impact the

09:40president's cryptocurrency business.

09:43Same thing. If there are investors who want to invest in that cryptocurrency business,

09:47drive that company's value up, that is money going into the pocket of the president.

09:55And that is a way to potentially, again, curry favor.

09:57So you have all of these potential conflicts of interest that the ethics experts I talked

10:00to were very, very concerned about, both with true social and with crypto.

10:03And let's not forget his hotel empire.

10:07Has Donald Trump ever responded to claims that his businesses could pose a conflict of

10:11interest? And at least recently, because we know the conflict of interest question has been

10:16swirling around him since he jumped into the political sphere over a decade ago.

10:22So the last example I found, he talked a little bit about this in Fox News Town Hall back

10:27in January, so almost a year ago now.

10:30He was asked whether he would divest from his businesses, and he didn't really seem

10:34particularly interested in that.

10:36And he said that, you know, if a Chinese businessman or a Chinese official were to come

10:41to one of my hotels, it's not that much money for me.

10:44So it's not really a conflict of interest.

10:46That is how he looks at it. He is wealthy enough that the conflicts of interest don't

10:50actually matter. And so that that is that's the approach that he might be able to take as

10:56president again.

10:57Well, Kyle, per usual, I appreciate the conversation.

11:01I'm sure there are going to be plenty more between now and when Trump goes into office, as

11:06well as the next four years.

11:08So I can hope you can join me through them all.

11:10Kyle Conn-Mellons, thanks so much.

11:14Thanks for chatting, Brittany. Always great to be here.

Category

Transcript

Recommended