This Trump real estate deal looks awfully like criminal tax fraud..

[HipChick]

President Trump clearly doesn’t want to release his income tax returns to the public. Members of the public and commentators have progressed through stages of outrage, speculation and acceptance that they’ll never see the goods, while others have made attempts to pry the documents free (such as proposed legislation in New York and other states that would require presidential candidates to release their returns). But Trump’s most pressing tax problem may come from somewhere else entirely: a pre-election transfer of property to a company controlled by his son that could run afoul of the IRS.

According to a recent story by ProPublica and the Real Deal, in April 2016 a limited liability company managed by Trump sold two condominium apartments to a limited liability company managed by Eric Trump. They were on the 13th and 14th floors of a 14-story, full-service, doorman building at 100 Central Park South in Manhattan. This is a prime Midtown neighborhood, yet the sale price for each condo was just $350,000. Although the condition and square footage of apartments 13G and 14G are not readily known, a popular real estate website shows that G-line apartments on both the fifth and eighth floors are one-bedroom, one-bath units of just over 500 square feet. Two years before the Trump transaction, apartment 5G sold for $690,000. Maybe the two units in question were in terrible shape, but two months before the sale to Eric Trump’s LLC, they were advertised for $790,000 (on the 13th floor) and $800,000 (on the 14th floor), according to ProPublica.

<snip>
So if Donald Trump sold the apartments to his son’s company for less than fair market value, he needed to file a gift tax return, even if he wanted to claim that the sale was not taxable because of the exemption. The government wants to know what gifts people make, because gifts are taken into account when determining the value of a person’s taxable estate at death. If Trump had already used his exemption, he would owe gift tax on the difference between the fair market value of the apartments and the amount paid by Eric Trump.

FULL STORY: https://www.washingtonpost.com/amphtml/outlook/this-trump-real-estate-deal-looks-awfully-like-criminal-tax-fraud/2017/08/03/653055fe-786e-11e7-8839-ec48ec4cae25_story.html

[Justice]

1. This is a really well researched piece. Absolutely reveals how easy it is for people to manipulate

real estate when transactions are cash.

Usually, no one is going to go back and look at what the market prices were compared to sale price. But realtors will know - and I bet they have lots to tell about this practice. I know they would explain away the sale to the LLC managed by Eric Trump as an insider transaction - family transaction - when talking with sellers and buyers about comparables.

The loser here is us - because Trump transaction resulted in significantly lower tax revenue to City and State of New York. Local taxpayers - his friends and neighbors.

The sad part about this is it will lead to increased costs for the average person buying a house. We will have to have additional evidence of value or another form or something to attest value.

Usually have to anyway - obtaining a mortgage where a fair market appraisal is done for the value. So even if you are buying it from mom and dad for a sweet deal - you can't do what Eric and his Dad did. Bank would make seller provide gift letter so it is treated as gift.

[HipChick]

2. This is good information..

[Kensan]

4. The use of the LLC is the issue here...

For gift tax purposes, he could transfer the real estate into an LLC and give Eric a % of the LLC. The operating agreement would also have restrictions on Eric's ability to sale the property. That would allow Trump's accountants to claim valuation discounts for minority interest/control and marketability.

This practice of using valuation discounts is used by everyone with large estates. It's perfectly legal, but the IRS has been challenging the %'s claimed. The IRS has even tinkered with trying to get Congress to disallow the discounts, but that will never happen. The best they can hope for is a realistic standard range of %'s (15-20% each).

The fact that Trump not only claimed total discounts in excess of 50% of the potential fair market value (based on the comparables) is already a huge red flag for tax abuse. Add to that his failure to properly disclose the sale as either a less than full transfer to a related party, and there absolutely should be federal/state examiners combing through all the transaction details.

We'll get to hear Trump whine about how he can't release any tax records because he will be under another IRS audit soon.

[PJMcK]

3. What was the condo's board of directors view of the prices paid?

Most high-end condominiums and cooperative apartments in New York City have boards that are very conservative in protecting the value of their buildings. In many cases, the board has approval of the prices for any units sold. This oversight is done in order to maintain the value of the owners' investments and to prevent exactly what Trump appears to have done in this case.

Was the board compromised? If I were an owner in that building, I sure as hell would want to know.

Incidentally, those are really small apartments at 500 square feet priced between $690,000 and $800,000. Manhattan real estate prices are astronomical!