As a seasoned tax attorney, I’ve seen my fair share of complex tax evasion cases. One such case that has recently caught my attention involves former President Donald Trump and his troubled Chicago tower. According to an IRS inquiry uncovered by ProPublica and The New York Times, Trump used a dubious accounting maneuver to claim improper tax breaks from his Chicago tower. If he loses the ongoing audit battle over this claim, he could face a tax bill of more than $100 million.
The 92-story skyscraper along the Chicago River was Trump’s last major construction project. Despite being a significant money loser due to cost overruns and the unfortunate timing of opening during the Great Recession, Trump sought to reap tax benefits from his losses. The IRS argues that he went too far and effectively wrote off the same losses twice.
The first write-off occurred on Trump’s 2008 tax return. He claimed that his investment in the condo-hotel tower was ‘worthless’ due to his debt on the project, resulting in reported losses as high as $651 million for the year. In 2010, Trump and his tax advisers sought to extract further benefits from the Chicago project, executing a maneuver that would draw years of inquiry from the IRS. He shifted the company that owned the tower into a new partnership, then used the shift to declare $168 million in additional losses over the next decade.
The IRS undertook a high-level legal review during Trump’s presidency before pursuing the case. ProPublica and the Times, in consultation with tax experts, calculated that the revision sought by the IRS would create a new tax bill of more than $100 million, plus interest and potential penalties.
Trump’s tax records have been a matter of intense speculation since the 2016 presidential campaign, when he refused to release his returns, citing a long-running audit. The IRS is also disputing a $72.9 million tax refund that Trump had claimed starting in 2010, based on his reporting of vast losses from his long-failing casinos.
The outcome of Trump’s dispute could set a precedent for wealthy individuals seeking tax benefits from the laws governing partnerships. These laws are notoriously complex and under constant assault by lawyers pushing boundaries for their clients. The IRS has inadvertently invited aggressive positions by rarely auditing partnership tax returns.
As this case unfolds, it serves as a stark reminder of the consequences of tax evasion. It’s crucial to remember that while tax laws may be complex, they are in place to ensure a fair and equitable financial system. As responsible citizens, it’s our duty to comply with these laws and contribute to the well-being of our communities.