Tax Law

NY state tax department reviewing Trump fraud allegations outlined in investigative report

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President Donald Trump./Shealah Craighead via White House and Wikimedia Commons.

The New York State Department of Taxation and Finance is reviewing allegations in a New York Times investigative article that concludes President Donald Trump participated in “dubious tax schemes” including “instances of outright fraud” during the 1990s.

James Gazzale, a department spokesman, said the agency “is reviewing the allegations” in the article “and is vigorously pursuing all appropriate avenues of investigation.” The Wall Street Journal, Bloomberg News and CNBC have stories.

According to the Times, Trump received during his lifetime $413 million in today’s dollars from the real estate empire of his father, Fred Trump. “President Trump participated in dubious tax schemes during the 1990s, including instances of outright fraud, that greatly increased the fortune he received from his parents,” the Times reports.

In a tweet, Trump said the newspaper “used the concept of ‘time value of money’ in doing a very old, boring and often told hit piece on me.”

White House Press Secretary Sarah Huckabee Sanders said in a statement reported by Bloomberg that the Internal Revenue Service “reviewed and signed off on these transactions” many decades ago. Charles Harder, a lawyer for the president, also issued a statement to the Times saying, “There was no fraud or tax evasion by anyone. The facts upon which the Times bases its false allegations are extremely inaccurate.”

Harder also said Trump delegated responsibility for tax issues to relatives and tax professionals, and the relatives had also relied on the professionals.

According to the investigative report, Trump “helped his parents dodge taxes” by setting up a sham corporation with his siblings to disguise millions of dollars in gifts from their parents. Trump “also helped formulate a strategy to undervalue his parents’ real estate holdings by hundreds of millions of dollars on tax returns, sharply reducing the tax bill when those properties were transferred to him and his siblings”

Trump’s parents “transferred well over $1 billion in wealth to their children,” the Times reported, “which could have produced a tax bill of at least $550 million under the 55 percent tax rate then imposed on gifts and inheritances. The Trumps paid a total of $52.2 million, or about 5 percent.”

Trump’s father, Fred Trump, gave Donald Trump three trust funds; made him an employee, a property manager and a consultant; and “gave him loan after loan, many never repaid.” The Times says it documented 295 revenue streams created over several decades by Fred Trump that flowed to Donald Trump.

The sham corporation was called All County Building Supply & Maintenance, and was designated as the purchasing agent for Fred Trump’s buildings. “Instead All County siphoned millions of dollars from Fred Trump’s empire by simply marking up purchases already made by his employees,” the article says. “Those millions, effectively untaxed gifts, then flowed to All County’s owners—Donald Trump, his siblings and a cousin.” Fred Trump also set up partnerships and corporations to transfer gradually apartment buildings to his children “without public trace,” the Times says.

When Donald Trump and his siblings gained control of their father’s holdings a year and a half before his death in June 1999, they lowered their gift taxes by claiming the property was worth $41.4 million. The buildings were sold over the next decade for 16 times amount, according to the Times.

The article says the statute of limitations would likely protect Trump from any criminal prosecution, but there is no time limit on civil fines for tax fraud.

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