Former President Donald J. Trump used a questionable accounting maneuver to claim improper tax breaks from his Chicago tower, leading to an IRS inquiry potentially resulting in a tax bill exceeding $100 million. The 92-story tower was Mr. Trump’s last major construction project and a significant money loser due to cost overruns and timing, opening during the Great Recession. The IRS challenged Trump’s attempt to extract tax benefits from his losses by claiming them twice. The first claim in 2008 resulted in him reporting losses as high as $651 million, and a second maneuver in 2010 sought to declare $168 million in additional losses over the next decade, leading to the current audit battle.
Trump’s tax records have been a subject of intense speculation since his 2016 presidential campaign, with the IRS disputing a $72.9 million tax refund he claimed in 2010. The recent report from The New York Times and ProPublica reveals a second component of Trump’s quarrel with the IRS related to his Chicago tower. This ongoing audit could result in a tax bill of over $100 million for Mr. Trump, plus interest and potential penalties. The outcome could set a precedent related to tax benefits for wealthy individuals exploiting loopholes in partnership tax laws, which are complex and subject to manipulation by aggressive tax practices.
The Chicago tower development history illustrates how Trump claimed a worthlessness deduction in 2008, declaring losses of $697 million due to the project’s financial challenges. Trump later tried to benefit further by merging entities and shifting finances in 2010, resulting in additional losses of $168 million from the Chicago investment over the following years. These maneuvers allowed Trump to avoid tax liabilities on his entertainment earnings and unpaid debts related to the tower. The IRS later challenged the 2010 merger, which could greatly impact Trump’s tax returns from 2011 to 2017, potentially creating a tax bill exceeding $100 million.
The audit battle with the IRS poses a financial threat to Trump, including other significant legal cases he is facing, such as defamation and fraud charges. Trump’s use of aggressive accounting maneuvers throughout his business career has been scrutinized for potentially manipulating tax laws to avoid paying taxes. The Chicago tower audit highlights Trump’s questionable tax practices, as experts believe that his accounting maneuvers were aggressive and likely to be challenged by the IRS. The IRS’s struggle to keep up with Trump’s tax strategies underscores the need for lawmakers to revise partnership tax laws to prevent exploitation by wealthy individuals.
The ongoing audit of Trump’s Chicago tower project represents a significant financial challenge for the former president, potentially impacting his tax returns from several years. The complex nature of partnership tax laws creates opportunities for wealthy individuals like Trump to exploit loopholes and avoid paying taxes through questionable maneuvers. The dispute with the IRS could result in significant revisions to Trump’s tax returns, potentially creating a substantial tax bill exceeding $100 million. The outcome of the audit could set a precedent for how tax benefits are claimed and scrutinized by the IRS, highlighting the need for reforms to prevent tax avoidance through aggressive accounting practices.
