Trump in tax scam, paper says
R780m deal disguised as loan
US presidential hopeful Donald Trump signed off on a controversial business deal that was designed to deprive the US government of tens of millions of dollars in tax, The Telegraph in London has reported.
The billionaire approved a $50-million (about R780-million) investment in a company – only for the deal to be rewritten weeks later as a loan.
Experts say that the effect of this move was to skirt vast tax liabilities, and court papers seen by The Telegraph allege that the deal amounted to fraud.
Independent tax accountants and lawyers said that the documents Trump signed – copies of which were obtained by the newspaper as part of a three-month investigation – had contained “red flags” indicating the deal was irregular.
But the Republican presumptive presidential nominee signed nonetheless.
US Citizens for Tax Justice campaign group director Bob McIntyre said the disclosures raised serious questions about Trump’s judgment as well as that of his advisers.
Trump’s tax affairs have come under scrutiny in recent weeks when he broke with US political convention and refused to disclose his tax returns before November’s presidential election.
The outspoken tycoon – who revealed last week that he had earned more than $500-million (R7.8- billion) in the last year – has previously boasted of how he pays as little tax as possible.
Tax Justice Network chairman Jack Blum said Trump was a “poster child” for tax avoidance property schemes, which ultimately harmed middleincome Americans. The allegations centre on Trump’s business alliance with Bayrock Group, the property company 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% in tax on their gain. But, 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 (R310million) in tax through a disguised sale of partnership interests.
They also claim the participants mislabelled the sale as a loan to avoid paying a further estimated $80-million (about R1.2-billion) in taxes on the projected profits. Trump’s lawyer, Alan Garten, claimed that the billionaire “had nothing to do with that transaction” and by signing the letters was simply acknowledging the deal as a limited partner.
“He was not signing off on the deal,” Garten insisted.
But copies of the final agreement, seen by The Telegraph, reveal that the deal required Trump’s approval because he was a key player in Bayrock’s investments. He had a 15% stake in Trump SoHo. Independent experts who have reviewed copies of the final agreement have said the documents appear to be an equity investment disguised as a loan to avoid tax.