Since we reported last month that Donald Trump downgraded to a regular private jet, likely his Cessna Citation X, CNN tracked down his more famous VIP Boeing 757 parked at a remote airport north of New York City. Its seemingly in a state of disrepair. Very sad! Articles speculated that the 45th president either couldnt or wouldnt spend an estimated $6 million making it airworthy to carry passengers.
His least favorite cable news network slyly reasoned, Though the current state of his finances aren't public, the Covid-19 pandemic has taken a toll on the hospitality industry home to so many of his businesses.
If youre a hater, dont snicker too loudly. Without spending a nickel on repairs, Trump may well be able to turn the grounded airliner into a cash machine, generating millions of dollars per year in profits.
Here's how a former president of the United States could turn a grounded VIP 757 into millions of ... [+] dollars in annual profits. (Photo by Joaquin Gomez Sastre/NurPhoto via Getty Images)
For months Ive been asking people who might know about the luxury jets future, once owned by Microsoft co-founder Paul Allen, and before that a defunct Danish budget airline. Some thought it could end up on the charter market. VIP airliners fetch $15,000 to $40,000 per hour when rented out. Others suggested it was destined to be the centerpiece of a future presidential library. Expensive repairs seem to rule out the former. It turns out the latter wouldnt have much in the way of tax benefits and could cost 45 huge lost profits.
According to an attorney who specializes in UHNW tax strategies, the bigly issue with Trump donating his 757 to his presidential library is the way they are set-up. He says, setting up a library typically involves the outgoing president forming a 501(c)(3) charitable foundation bearing their namesake, which will be directly tied to their presidential library (i.e., the George Bush Presidential Library Foundation) or a broader charitable mission that includes funding the construction and management of the library (i.e., The Barack Obama Foundation, The Clinton Foundation, among others). All libraries dating back to Reagan's are 501(c)(3) organizations (or formed under broader 501(c)(3) organizations) for tax purposes.
In terms of valuing a potential deduction for the donation of Trumps parked airplane, the attorney references IRS guidance (Pub. 526). It states if the donor donates a qualified vehicle with a claimed fair market value in excess of $500, the donor may deduct the smaller of: the gross proceeds from the sale of the vehicle by the organization, or the vehicle's fair market value on the date of the contribution.
NEWBURGH, NY - MARCH 22: Donald Trump's personal 757 airplane sits at the edge of a runway in need ... [+] of repairs, where it has been unused since Joe Biden's inauguration, on March 22, 2021 at Stewart Airport outside Newburgh, New York. (Photo by Andrew Lichtenstein/Corbis via Getty Images)
A memo on the subject he forwarded to me states if the fair market value is more than your cost (or other) basis, the donor may have to reduce the fair market value to arrive at the deductible amount.For property used in a trade or business that is ordinary income propertyto the extent of any gain that would have been treated as ordinary income because of depreciation had the property been sold at its fair market value at the time of contributionthe amount the donor can deduct for a contribution of such property is its fair market value minus the amount that would be ordinary income if the donor sold the property for its fair market value.
This rule limits the deduction to the donor's basis in the property. Thus, he says, if Trump now has an adjusted basis of zero dollars in the plane, any charitable deduction would also be zero dollars. If the plane had a fair market value of $5 million dollars at the time of donation, and Trump would have $5 million of ordinary income (adjusted basis of zero dollars after depreciation and all income would be ordinary), his charitable deduction would be zero dollars.
If the now Palm Beach, Florida resident contributes property with a fair market value that is less than his basis in it, the deduction is limited to fair market value. A deduction cannot be claimed for the difference between the property's basis and its fair market value, he says.
A key factor complicating a museum donation is the fair market value of Trump's plane. In its current condition, it is a difficult task with a lot of variables. It could be worth far more than its average counterpart given the history attached and its opulent interior, or it could be worth virtually nothing because it is a 30-year-old plane stuck on the runway, say experts
I think it is certainly possible, if not likely, that the fair market value of his plane is greater than his basis - after depreciation, in which case he would probably be limited to basis for purposes of a charitable deduction. However, if Trump does have a cost basis left, it's theoretically possible the plane's current fair market value is less than his adjusted basis. In that case, the deduction would likely be limited to current fair market value.
In case you are like me and are not an UHNW tax expert and dont have experience donating cars and airplanes to non-profits, the bottom line Im told by the two specialists is they dont see a financial benefit for Trump donating his 757 to his presidential library or another non-profit. They did come to the same conclusion. The former presidents acumen for marketing and sales means the jet is likely not headed for the scrap heap.
The art of the deal. With Trumps loyal MAGA followers, the aircraft could end up being a highly profitable tourist attraction. For example, grounded Concorde supersonic jet displays are popular draws. A Concorde display in Manchester, England pre-pandemic attracted 250,000 visitors per year.
One resting spot that could make sense is Las Vegas, where Trump is already partners with fellow billionaire Phillip Ruffin in a Trump International Hotel. Best friend Ruffin owns nearby Circus Circus and Treasure Island.
According to a report by Forbes, Ruffins 2019 acquisition of Circus Circus for $825 includes the Adventuredome, a five-acre indoor theme park. Tickets go for $40. In 2014, the most recent statistics we could find, it drew 3.2 million visitors.
Needless to say Vegas has an array of paid attractions with a wide range of admission fees. Access to the Eiffel Tower Viewing Deck at Paris Las Vegas starts at $22.59. The Las Vegas Mob Museum is $29.50. For $36.99 you can see artifacts of the RMS Titanic at The Luxor. The SkyJump at the Stratosphere will set you back $133 for the time it takes to plummet 829 feet.
So how much could the former president pocket by sending his 757 on a one-way flight to the entertainment capital of the world?
Flowing 1,000 visitors a day through an airplane exhibit between 10 am and 6 pm would be no problem, says one former theme park executive. Multiply that by $20 per ticket and 365 days, and you end up with $7.3 million. Trumps 757 could make money after hours as event space for private parties. Renting it out for $10,000 on 100 nights would generate another million dollars. Souvenirs, including miniatures, add more cash.
Oh, and in case you are wondering, how will Trump get the airplane to Vegas when it needs millions of dollars in repairs? One aviation insider tells us all he needs is to get a ferry flight waiver from the FAA. Its something that happens at a low level in the agency and is routine, allowing airlines and owners to fly their broken aircraft to an MRO for fixes.
If Trump partners with Ruffin, another perk could be an upgrade back to the type of VIP private jet hes used to. Ruffin related companies own at least three private jets, including a 1999 Boeing Business Jet, which Trump used during his 2016 run to The White House.
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