Midtown Manhattan is one of the most expensive places to buy a condo in the United States. As such, in a report by the Washington Post, tax lawyers David Herzig and Bridget Crawford are wondering how Eric Trump managed to get two at half price.
In April of 2016, two one-bedroom condominiums at 100 Central Park South overlooking the world-famous park and just a short walk from Trump Tower itself were sold for $350,000 to Eric Trump’s limited liability company (LLC) by an LLC owned by Donald Trump himself. According to records unearthed by Propublica, this was well below what one unit had sold for two years prior, when apartment 5G went for $690,000.
Why the 50 percent discount? While it’s perfectly legal to give a friends and family discount to buyers, the seller must notify the IRS that they’re doing so as a gift, which can be subject to a gift tax.
According to Herzig and Crawford, there’s no evidence that Trump did so. Failing to file such paperwork would be considered fraud. Short of Trump releasing his returns, it’s impossible to know if Trump did so.
However, Herzig and Crawford do note that Trump’s tax records for New York State indicate that he paid the right amount of taxes — $13,000 — but then fails to note that this was a gift to a family member.
“In our combined 40 years of experience as tax lawyers, we are unaware of a situation in which a taxpayer would report a transaction as a fair market value between strangers on the state level (and thus incur real estate taxes) but treat it as a gift at the federal level (and thus incur an additional tax). It’s fair to infer that Trump didn’t follow the rules,” they write.
It may be that Trump paid the correct taxes to New York State, knowing those records would be public, while failing to report the correct taxes to the federal government, knowing those records could be kept secret. The IRS conducts mandatory audits of presidential tax returns, so it’s possible the IRS decides to impose fines or even attempts criminal penalties. Willful failure to report a gift can be a misdemeanor or a felony, depending on how the IRS interprets the action. If a felony, it would result in up to five years in a jail and/or a fine of $100,000.
Herzig and Crawford find it hard to believe that Trump would allow such a prosecution since the president must consent to an indictment by a prosecutor who technically works for him. However, a prosecutor could add to the scandals already plaguing the administration by trying.
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