This story first appeared at ProPublica and The New York Times and is reprinted here under a Creative Commons license. ProPublica is a Pulitzer Prize-winning investigative newsroom. Sign up for The Big Story newsletter to receive stories like this one in your inbox.
Former President Donald Trump used a dubious accounting maneuver to claim improper tax breaks from his troubled Chicago tower, according to an IRS inquiry uncovered by ProPublica and The New York Times. Losing a yearslong audit battle over the claim could mean a tax bill of more than $100 million.
The 92-story, glass-sheathed skyscraper along the Chicago River is the tallest and, at least for now, the last major construction project by Trump. Through a combination of cost overruns and the bad luck of opening in the teeth of the Great Recession, it was also a vast money loser.
But when Trump sought to reap tax benefits from his losses, the IRS has argued, he went too far and in effect wrote off the same losses twice.
The first write-off came on Trump’s tax return for 2008. With sales lagging far behind projections, he claimed that his investment in the condo-hotel tower met the tax code definition of “worthless,” because his debt on the project meant he would never see a profit. That move resulted in Trump reporting losses as high as $651 million for the year, ProPublica and the Times found.
There is no indication the IRS challenged that initial claim, though that lack of scrutiny surprised tax experts consulted for this article. But in 2010, Trump and his tax advisers sought to extract further benefits from the Chicago project, executing a maneuver that would draw years of inquiry from the IRS. First, he shifted the company that owned the tower into a new partnership. Because he controlled both companies, it was like moving coins from one pocket to another. Then he used the shift as justification to declare $168 million in additional losses over the next decade.
The issues around Trump’s case were novel enough that, during his presidency, the IRS undertook a high-level legal review before pursuing it. ProPublica and the Times, in consultation with tax experts, calculated that the revision sought by the IRS would create a new tax bill of more than $100 million, plus interest and potential penalties.
Trump’s tax records have been a matter of intense speculation since the 2016 presidential campaign, when he defied decades of precedent and refused to release his returns, citing a long-running audit. A first, partial revelation of the substance of the audit came in 2020, when the Times reported that the IRS was disputing a $72.9 million tax refund that Trump had claimed starting in 2010. That refund, which appeared to be based on Trump’s reporting of vast losses from his long-failing casinos, equaled every dollar of federal income tax he had paid during his first flush of television riches, from 2005 through 2008, plus interest.
The reporting by ProPublica and the Times about the Chicago tower reveals a second component of Trump’s quarrel with the IRS. This account was pieced together from a collection of public documents, including filings from the New York attorney general’s suit against Trump in 2022, a passing reference to the audit in a congressional report that same year and an obscure 2019 IRS memorandum that explored the legitimacy of the accounting maneuver. The memorandum did not identify Trump, but the documents, along with tax records previously obtained by the Times and additional reporting, indicated that the former president was the focus of the inquiry.
It is unclear how the audit battle has progressed since December 2022, when it was mentioned in the congressional report. Audits often drag on for years, and taxpayers have a right to appeal the IRS’ conclusions. The case would typically become public only if Trump chose to challenge a ruling in court.
In response to questions for this article, Trump’s son Eric, executive vice president of the Trump Organization, said: “This matter was settled years ago, only to be brought back to life once my father ran for office. We are confident in our position, which is supported by opinion letters from various tax experts, including the former general counsel of the IRS.”
An IRS spokesperson said federal law prohibited the agency from discussing private taxpayer information.
The outcome of Trump’s dispute could set a precedent for wealthy people seeking tax benefits from the laws governing partnerships. Those laws are notoriously complex, riddled with uncertainty and under constant assault by lawyers pushing boundaries for their clients. The IRS has