Say Fred Trump and partners bought a building for $1 billion and put 10% down borrowing the other $900 million, say Fred gets 1/3rd of the profits for managing the deal. He's now got assets that secured $900 million in loans and since he's the developer, he may well be personally guaranteeing the loan. But if he dies, the IRS is going to look at it as he owns 1/3rd of a $1 Billion building and has $300 in assets. Add in the fact that that his agreement with his 10 partners says a partnership interest can't be sold outside the partnership. .The only people on earth who can legally buy Trump's 1/3rd are those 10 people, that knocks the value down signficantly from the original $300 Million since the pool of potential buyers is now miniscule.
A bank/lender is mainly going to care that assets generate cash flow to pay back the loan. A lot of Trump, Sr. (and any real estate investors) assets aren't going to be straight up ownership, it's going to be owning a portion of a property, long term leases, or holding a management contract that allows them to run the show and get a percentage of the profits that may not be the same as their ownership stake in the property. Lenders are going to value these higher due to the cash flow they throw off, they tend to value stuff more as a going concern, but these things are going to be hard to sell as there isn't a tremendous pool of buyers for them.
For estate tax purposes the IRS values is supposed ot value stuff at what it would bring in a quick sale. Minority ownership stakes and management contracts aren't going to be valued that high as since they don't allow the purchaser to exercise control over the asset. Add in the fact that a lot of real estate partnerships will have language in their governing documents that an interest can't be sold for a certain number of years or can only be sold to certain people and a quick sale price is going to be even lower since there's a smaller pool of potential buyers (banks usually don't car about this as the docs will have language that it doesn't apply to lenders on the project).
Add in the fact that when the valuations were made is going to have a huge effect as well. A good portion of Trump Sr's career was spent in a very volatile market such as when NYC just about went bankrupt in the 70s you couldn't give buildings away, by the late 1980s it was back in style but by the time Fred Trump died in 1999 everyone wanted dot com investments intead of bricks and mortar.
That was really well written. You must be in the business.
