As The New York Times and ProPublica reported, former President Donald J. Trump faces potential tax liabilities exceeding $100 million following an Internal Revenue Service (IRS) inquiry into a controversial accounting tactic involving his Chicago tower.
Trump’s 92-story skyscraper in Chicago, a project fraught with cost overruns and financial setbacks, became a focus of IRS scrutiny when Trump sought tax benefits from its losses.
In 2008, he claimed his investment in the tower was “worthless” because projected sales fell far short of expectations, resulting in reported losses of up to $651 million for that year.
Subsequently, in 2010, Trump and his tax advisers executed a maneuver to extract further tax benefits from the project. They shifted ownership of the tower into a new partnership, justifying an additional $168 million in losses over the following decade.
Tax Authorities Eye Trump for $100 Million in Disputed Tax Breaks
The IRS challenged this maneuver, arguing that it constituted improper double-dipping on tax deductions. The agency estimated that rejecting Trump’s claim could lead to a tax bill exceeding $100 million, plus interest and penalties.
Trump’s tax records, a subject of intense speculation since his 2016 presidential campaign, revealed this second component of his dispute with the IRS. Although the audit battle’s current status remains unclear, it underscores potential financial threats to Trump, including recent judgments against him in defamation and fraud cases.
The outcome of Trump’s case could establish a precedent regarding tax benefits sought by wealthy individuals through partnership laws, an area fraught with complexity and subject to aggressive tax planning.
While Trump’s son, Eric Trump, maintains confidence in their position, tax experts view the accounting maneuvers skeptically, suggesting they may not withstand IRS scrutiny. The case highlights broader issues in tax law, signaling a need for congressional reforms to address loopholes and prevent exploitation.
