Trump approved deal that skirted tax
LONDON • Donald Trump signed off on a controversial business deal that was designed to deprive the U.S. government of tens of millions of dollars in tax.
The billionaire approved a $50-million (all figures U.S.) investment in a company — only for the deal to be rewritten several weeks later as a “loan.” Experts say the effect was to skirt vast tax liabilities, and court papers allege the deal amounted to fraud.
Independent tax accountants and lawyers said the documents Trump signed contained “red flags” indicating the deal was irregular. But the Republican presumptive presidential nominee signed nonetheless.
Bob McIntyre, director of the U.S.-based Citizens for Tax Justice campaign group, said the disclosures raised serious questions about Trump’s judgment as well as that of his advisers.
The allegations centre on Trump’s business alliance with Bayrock Group, the property company that was building Trump SoHo, the mogul’s prized New York building — as well as two other projects to which he had licensed his name.
In 2007, Bayrock struck a deal with FL Group, an Icelandic company that had agreed to invest $50 million in four of Bayrock’s subsidiary partnerships. However, the deal was later relabelled as a loan.
In New York, the sale of a stake in a partnership would make the existing partners liable to pay more than 40 per cent tax on their gain, based on the highest tax rate. However, if the investment is classified as a loan, no tax would be payable.
Former employees of Bayrock have alleged in a case against the company that the deal was intended to fraudulently evade some $20 million in tax through a disguised sale of partnership interests.
They also claim the participants mislabelled the sale as a loan in order to avoid paying a further estimated $80-million tax on the projected profits from the real estate.
Howard Abrams, professor of law and director of tax at the University of San Diego, said: “Converting the original equity into debt improved their tax position dramatically. However they have changed the labels, but they didn’t really change the economics at all.
“It’s not a loan — it’s really equity. I don’t think they would survive a challenge (by the Internal Revenue Service).”
Meanwhile, one day after a Trump rally in Albuquerque, N.M., turned violent, police warned anti-Trump protesters against violence outside a daytime event in Anaheim, Calif.