President-elect Donald Trump’s unwillingness to give up his far-flung real estate empire by selling it off or giving it outright to his children may be driven by a factor he has yet to mention publicly: a potentially staggering tax bill triggered by such a transaction.

“It could be billions,” said David Herzig, a tax law professor at Valparaiso University. “People are saying, ‘Oh well, don’t worry,’ but you could be looking at the potential of billions of dollars in tax liability.”


Trump — who, with his army of lawyers, is examining his options ahead of a mid-December promised rollout of a plan to clarify the blurred lines between his business and political interests — could put off paying part of those taxes by taking advantage of a law permitting a tax-free trade to comply with federal conflict-of-interest rules, but there are legal questions about whether Trump is eligible for it.

To take advantage of the provision, he might have to sign an executive order qualifying himself — an action that would surely generate a barrage of criticism that he was giving himself a big tax break.

“I don’t think anyone had really thought through how you go from running an active real estate business to being president, without having any income, estate and gift tax problems,” Herzig said. “They say, ‘We’ll work it out,’ but saying you’ll work it out and figuring out how you’ll work it out are two different things. … This is a huge problem to try to solve in just two or three weeks.”

The temporary waiver of capital gains taxes to comply with ethics rules was put into law in 1989 with the goal of limiting the tax impact on incoming government officials who sell assets in order to assume federal posts.

Several prominent ethics experts pushing Trump to actually divest himself of his company say he should qualify for the tax certificate, typically issued by the U.S. Office of Government Ethics, but they acknowledge some legal uncertainty.

“No president ever asked for one. We don’t know whether a president can get one,” said C. Boyden Gray, White House counsel under President George H.W. Bush. “It’s never happened before because no one has ever asked for it before.”

One potential problem is that the law authorizing such tax-free sales says the certificates should be issued only when “reasonably necessary to comply with any Federal conflict of interest statute, regulation, rule, judicial canon, or executive order … or requested by a congressional committee as a condition of confirmation.”

Since the main federal conflict-of-interest law doesn’t apply to the president, it’s unclear how the ethics office would justify issuing a certificate to Trump.

“There’s a possible legal objection because the same law which exempts him and VP from criminal penalties is also the same law used to describe who qualifies,” Gray said. “I do believe the president would qualify if he were to divest, would qualify for tax treatment allowing him to postpone the tax.”

Trump could put himself within the sweep of the statute by issuing an executive order requiring him to divest, but critics could frame that as an unsavory form of slashing his own tax bill.

Even if Trump could get a certificate allowing him to sell his company without immediately paying capital gains tax, there are other wrinkles that could cause problems.

Such certificates don’t cover gift taxes, so giving the company or any other assets to his children or selling to them at less than market value would still leave him with a hefty gift tax bill — up to 40 percent of the value over about $11 million. (Trump has proposed eliminating this tax altogether, but the prospects for such legislation are uncertain.)

Gray has proposed that Trump sell the company to his children, perhaps with outside financing or a buyout, assuming they don’t have enough money on hand to buy the firm. But if outsiders give such loans, they’ll be scrutinized for signs of favor-seeking. And if Trump were to finance the sale himself, his former business would presumably be the collateral, an arrangement that would seem to produce the same conflicts of interest that it would be trying to solve.

Former Obama White House ethics lawyer Norm Eisen says he’d support issuing the tax waiver to Trump in order to solve the conflicts but would like to see more of a traditional blind trust, with a trustee authorized to conduct an orderly sale of Trump’s business interests — perhaps through a public stock offering.

The Trump children could stay involved with the company if they are “firewalled” from government business, but trying to sell the company to the Trump kids would risk a “tax calamity,” Eisen said. “Even if you got the certificate, there’s a question of whether the IRS would honor it with a novel arrangement. … When you’re looking at a $500 million potential tax bill, maybe that’s not the place you want to be.”

Experts say the precise tax impact of a sale on Trump is impossible to know without a more detailed picture of his holdings and his current tax bills. Federal financial disclosure forms indicate he has a net worth of over $1.4 billion. He has claimed to be worth $10 billion, while Forbes has estimated his net worth at $4 billion.

Unlike all major presidential candidates in recent decades, Trump refused to release his tax returns during the campaign.The law does not require such disclosure.

One example of the hard-to-assess effects is that the special dispensation for resolving conflicts of interest also doesn’t apply to ordinary income, something that could further complicate the sale because selling certain kinds of assets that have been largely written off in past years can produce big income tax bills not covered by the law addressing conflicts of interest.

Trump’s plans to retreat from his businesses have engendered both criticism and confusion in recent days, but it appears he’s not actively considering the sale of his core businesses, even to his children.

In an interview late last month, Trump was asked why he didn’t simply sell his company.

“That’s a very hard thing to do, you know what, because I have real estate. I have real estate all over the world,” Trump told The New York Times. “Selling real estate isn’t like selling stock. Selling real estate is much different. It’s in a much different world.”

On Wednesday, he tweeted out a series of messages that seemed intended to quiet complaints about his business holdings complicating the incoming administration’s work, particularly overseas.

“I will be leaving my great business in total in order to fully focus on running the country in order to MAKE AMERICA GREAT AGAIN!” Trump wrote, saying he’d have a press conference on Dec. 15 to explain the details.

“Legal documents are being crafted which take me completely out of business operations. The Presidency is a far more important task!”

Officials at the Office of Government Ethics responded effusively, hailing Trump for pledging to put his assets into a blind trust.

“OGE applauds the ‘total’ divestiture decision. Bravo!” the agency wrote on its Twitter account. “OGE is delighted that you've decided to divest your businesses. … This divestiture does what handing over control could never have done.”

However, Trump’s Twitter statements never said he was ceding ownership of his businesses. OGE said in a subsequent statement that it had no information beyond what Trump posted on social media.

After the election last month, the Trump Organization issued a statement that seemed to indicate the president-elect planned to hand over control of his company — but not ownership — to his children.

“We are in the process of vetting various structures with the goal of the immediate transfer of management of The Trump Organization and its portfolio of businesses to Donald Jr., Ivanka and Eric Trump along with a team of highly skilled executives,” a Trump Organization spokeswoman said.

Yet, even the step-back arrangement Trump seems to be favoring could have tax consequences for him. He’s likely been treated as an active investor for tax purposes in recent decades because he’s personally involved in managing his real estate portfolio. If he retreats completely from his businesses, he becomes a passive investor. Experts say the change would affect Trump’s tax bill, but it’s unclear how significantly.

Some experts say that whatever tax bill Trump would face for selling off his company, he should simply accept it as a cost of assuming his weighty new duties in the Oval Office.

“There could be sticker shock,” said Dan Shaviro, a professor of tax law at New York University. “But most people would say, 'You just became president, if you’re transitioning to thinking about being a public servant as president, that’s just trivial.'”