No Taxes........Taxes

Real estate tycoons get a host of special breaks not available to most other investors.

- Eric Gelman

Real estate is a cyclical business. Markets crash. Deals sour. But hard landings are rare for a savvy property mogul, thanks to the U.S. tax code.

Take Harry Macklowe, a New York City developer. Macklowe, 81, hasn’t paid income tax since the 1980s, according to a court opinion in his divorce proceedings issued in December. The ruling, which also divided luxury homes and an art collection worth more than $650 million between Macklowe and his ex-wife, Linda, doesn’t suggest the couple did anything wrong to avoid paying income taxes. Rather, it highlights the special perks available to property investors in the U.S.— advantages that have expanded under the tax law signed in 2017 by Donald Trump, America’s real estate developer president. “The real estate industry is notorious for throwing off lots of deductions, and real estate developers are notorious for paying very few taxes,” says Steven Rosenthal, a senior fellow with the Urban-Brookings Tax Policy Center. “As Leona Helmsley said, ‘Only the little people pay taxes.’ ”

As Democrats in Congress seek Trump’s tax returns, Macklowe’s divorce case provides a hint at what they might find. Real estate moguls have a range of strategies available to reduce or postpone their tax liabilities. Harry Macklowe didn’t respond to a list of questions forwarded to him by his spokesman. Linda Macklowe declined to comment.

Over more than a half-century of investing in New York real estate, Macklowe built a reputation as a dealmaker willing to take big risks. With Linda, he spun real estate profits into an art collection with hundreds of pieces, including Andy Warhol’s