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Following a bomb reported by The New York Times, the New York State Department of Taxation and Finance announced Tuesday the opening of an investigation into the fortune of Donald Donald's family. Trump, as well as allegations of dubious business practices, including what the Times calls "pure and simple". fraud."
"The Tax Department is reviewing the allegations contained in the New York Times article and vigorously pursuing all investigative leads," said a representative to Business Insider in an e-mail.
But given the findings of a complex series of transfers and Trump's family-run companies to make it easier for the Times, what could the investigators do?
According to tax experts, investigators in the state of New York and the IRS have little recourse for many of the allegations in the Times report. But an avenue could open Trump to possible penalties.
The experts warned, however, that even if there was a legal remedy, it was unlikely that an investigation would have significant consequences.
The question of prescription
Many of the practices detailed in the Times report, such as aggressively undervaluing properties on tax forms, would not open Trump or his family to an investigation, as tax officials from the IRS and the state New York had already had the opportunity to review them through an audit.
"Whether the properties are undervalued or not, as long as their properties have been disclosed to the IRS in a declaration of gift or inheritance, after the law has come into force, they can no longer reopen it", says Corey Glass, a partner specializing in inheritance tax. planning for wealthy individuals within the law firm Arnold & Porter, told Business Insider. "They got the apple bite when he was audited."
A three-year limitation period applies to estate and gift tax audits at the federal and New York levels. The assets of the president's parents, Fred and Mary Trump, were audited in 2000 and various tax returns were verified in the 1990s, so officials could not reopen these records.
But in some circumstances, the statute of limitations may not apply, said Beth Kaufman, a member of the law firm Caplin & Drysdale, experienced in estate planning.
"For many federal tax issues, the question would be whether the government could prove fraud because there is no statute of limitations that applies if there is fraud," Kaufman told Business Insider by email.
In the same way, any intentional misstatement or omission in a declaration of succession or gift would mean that New York would never have had an "apple bite," said Glass, which would allow investigators to 39 to evaluate possible criminal sanctions.
Among the transactions likely to be closely examined are a series of loans given to Fred Trump by Donald Trump, which, according to the Times, were never repaid or were considered to have been repaid after Fred Trump had made a deal to take a position on his son's property.
"The loans from Fred to Donald that were deemed paid when Fred took a stake in one of Donald's entities, which he then resold to Donald at a bargain price – this series of transactions raises issues. Important gift tax issues, "said Kaufman.
Glass said it would depend on how these loans were reported in Fred Trump's tax return.
In the absence of repayment or interest, the loans should have been considered donations and subject to higher taxes. In turn, these donations should have been disclosed in his tax return.
"If you take out a loan and you forgive it, it's diverting the government from the potential tax on donations," Glass said. "It's something that no counselor or lawyer would ever advise or encourage."
For example:
- According to the Times, Fred Trump has been awarded a $ 15.5 million stake in the development of Donald's Trump Palace, mainly in exchange for the cancellation of loans given to his son by his elder.
- But according to the Times, Fred Trump sold his bet four years later for only $ 10,000, probably to his son.
- Legally, this would give a gift of $ 15.4 million subject to a 55% donation tax rate.
Fred Trump has never reported such a gift, according to the Times. If the estate tax return was also omitted, it could open Donald Trump, an executor, to an investigation.
The declaration of succession states that you must file "all tax returns from previous donations and disclose all donations already made," said Glass. "So, if all those canceled loans were not disclosed to the statement, that could amount to a false statement."
An investigation by the IRS is unlikely, but New York is another matter
The experts said that they thought that if investigators decided the possibility of imposing sanctions on Donald Trump and his family, the IRS would not carry him out.
"The probability that this IRS goes after [Trump]? "Said Glass." Probably not. "
But they said New York could step in and watch the return of the Trump family.
Federal and state authorities in New York have investigated various Trump commercial entities, including the Trump organization. And the New York State Department of Tax and Finance has already opened an investigation into the Trump Foundation, the non-profit organization of the president.
But it is unlikely that an investigation will be sanctioned significantly by an investigation.
"In such an old case, the government would have a hard time overcoming this hurdle," said Kaufman.
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