An Internal Revenue Service (IRS) audit has revealed that former President Donald Trump may owe an astonishing $100 million in taxes due to alleged 'double dipping' on deductions.
The investigation, disclosed by The New York Times and ProPublica, focuses on Trump's iconic skyscraper in Chicago.
The 92-story building, which opened over budget and amidst a recession, incurred significant losses that Trump sought to recoup. However, the IRS and several tax experts suspect that he may have effectively claimed the same losses twice, resulting in substantial tax benefits.
Walter Schwidetzky, a law professor at the University of Baltimore and an expert on partnership taxation, told the Times, "I think he ripped off the tax system."
In 2008, Trump first wrote off the $847 million condo-hotel, asserting that it met the tax threshold of 'worthless' due to spiraling debts that prevented him from making a profit. Trump had acquired the former site of the Chicago-Sun Tribune in 2001 and featured it prominently on his TV show, The Apprentice.
Originally scheduled to open in 2007 with a budget of $650 million, various setbacks led to increased costs and delayed deadlines. The recession further slowed condo sales, and Trump began defaulting on his loans. This enabled him to report losses of up to $651 million for the year, according to The Times and ProPublica.
Trump later sued his lenders, Deutsche Bank, over the loans, arguing that the recession was a force majeure, which the bank and its contemporaries had a role in creating. His 2008 tax return reported business losses of $697 million, with experts suggesting that the majority of this stemmed from the tower, although this information is not publicly disclosed.
In 2010, Trump's accountants seemingly attempted to gain additional tax benefits from the losses by transferring the company that owned the tower into a new partnership. This move reportedly allowed him to declare $168 million more losses over the next decade, according to the Times.
If he had maintained the 2008 set-up, he would not have been able to claim the deficit as losses again. Continued losses allegedly enabled him to avoid tax liability for income from other sources, such as his entertainment career and the unpaid debt from the tower.
In 2010, his lenders forgave approximately $270 million of these debts. However, Trump was able to use a stimulus bill introduced by Obama post-recession to spread this over five years.
The 2010 merger maneuver is believed to have attracted the IRS's attention and was mentioned in a memo by the federal agency examining the legality of the strategy. Trump was not named in the memo, but the Times identified him using details from New York attorney Letitia James' 2022 lawsuit against Trump and several Trump Organization executives for alleged financial fraud.
The Technical Advice Memorandum, which outlines the IRS's position where the law is unclear, states that the agency believes the merger violated laws to prevent double dipping on tax-reducing losses.
The audit was mentioned in a congressional report in December of that year, but details on its progress would not be publicly available unless Trump chooses to challenge the findings in open court.
The 'worthless' classification used by Trump occupies a gray area of tax law that allows it to be partly determined by its owner. However, several tax experts have criticized the tactics employed by the Republican nominee.
IRS veteran Monte Jackel stated that including the debt in the deduction was "just not right."
"This matter was settled years ago, only to be brought back to life once my father ran for office," said Trump's son Eric, executive vice president of the Trump Organization. "We are confident in our position, which is supported by opinion letters from various tax experts, including the former general counsel of the IRS."
Interest in Trump's tax returns peaked in 2016 during his run for the White House when he became the first candidate to defy tradition by refusing to publish them, citing an ongoing audit.
This revelation is the latest threat to the presidential hopeful's finances and follows several costly legal rulings, including a $454 bill from James' civil fraud case and $83 million in damages for defaming sexual assault accuser E. Jean Carroll.
Trump is also currently facing a criminal trial in Manhattan over alleged hush money payments he made to adult actress Stormy Daniels in the lead-up to the 2016 election.
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