Chicago tower was worthless, setting off the series of maneuvers that would lead to the IRS inquiry. The IRS, in a 2011 memorandum, called the maneuver “an abusive tax shelter,” according to a congressional report. The agency had been scrutinizing such maneuvers for years and had issued regulations to prevent them. The IRS challenged Trump’s claim that his investment was worthless, arguing that his debt did not make the tower worthless because it could still generate cash flow. Just because Trump might not see a profit did not mean the tower had no value. The agency also disputed Trump’s classification of the project as a trade or business, a requirement for the tax breaks he was seeking. The IRS had significant resources at its disposal to fight Trump’s claim. It could disallow the losses he had claimed and impose penalties and interest. It could also argue that Trump had committed fraud, which could lead to criminal charges. The agency did not pursue criminal charges, but it could have. The audit could have implications for the broader tax system. If Trump’s aggressive accounting maneuvers are allowed to stand, it could embolden other wealthy individuals to push the boundaries of the tax code. It could also prompt lawmakers to revisit the rules governing partnerships and other complex tax structures. In the meantime, Trump’s legal battles continue to mount. The audit is just one of several financial threats he faces as he prepares for a potential run for the presidency in 2024. And as the audit battle drags on, Trump’s Chicago tower stands as a monument to the risks and rewards of his business career.”
