Report: Trump May Be Committing Tax Fraud Through Debt Parking

Donald Trump owes more than $50 million to a company that exists simply on paper, with no assets of its own.

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Report: Trump May Be Committing Tax Fraud Through Debt Parking

Darren.Woon

Nov 19, 2019

Donald Trump’s debt has been the subject of continuous congressional and journalistic scrutiny, and a debt of more than $50 million to a Trump-owned company raises flags that he could be committing tax fraud through debt parking, according to Mother Jones. 

As president, Trump must file personal financial disclosure forms annually, and has publicly stated that he owes “over $50 million” to a company called Chicago Unit Acquisition LLC, an entity fully owned by Trump. 

The loan is connected to Trump’s hotel and tower in Chicago, according to the disclosures, yet it earns no revenue and Trump assigns virtually no value to his company. He told the New York Times in a 2016 interview that, “We don’t assess any value to [Chicago Unit Acquisition] because we don’t care. I have the mortgage. That is all there is. Very simple. I am the bank,” he said. 

In order to construct his Chicago project, Trump received a $640 million loan from Deutsche Bank, as well as $130 million in financing from Fortress Investment Group, a New York City-based hedge fund. 

When the financial crisis struck in 2008, Trump sued Deutsche Bank and took out a new loan through Deutsche’s private bank to cover his debt to the firm’s commercial lending side. However, Fortress agreed to accept about $48 million and provided Trump was a “discounted payoff” in which the debt was considered repaid and the loan was canceled by the lender. 

When a lender forgives a portion of a loan, the IRS considers the unpaid portion taxable income, which can be taxed as high as 39 percent. 

Borrowers devised a tactic to forestall paying taxes by purchasing the debt through a corporation, then placing it within the entity to avoid realizing income. Debt parking is legal so long as the borrower intends to repay the loan. According to tax experts, parking debt indefinitely with no intentions to repay it violates federal tax law. 

The release of Trump’s returns alone will not solve the Chicago Unit Acquisition mystery, nor would a standard IRS audit. 

“It would take a forensic audit,” said Martin Lobel, a prominent tax lawyer in Washington, DC. “It is very labor intensive, and it takes someone who has years of experience to spot the problem areas...The IRS is not going to look too closely at Trump’s tax returns.” Congressional Democrats, however, intend to do just that. 

Read more.

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