Paul L. Caron
Dean





Saturday, September 24, 2022

Chodorow: Why Trump’s Alleged Real-Estate Shenanigans Went Too Far

Slate:  Why Trump’s Alleged Real-Estate Shenanigans Went Too Far, by Adam Chodorow (Arizona State; Google Scholar):

Slate (2022)There’s an old saying that pigs get fat and hogs get slaughtered—that is, while there’s room for some playing around in the pen, the consequences could be quite severe if you go too far. Former President Donald Trump, his organization, and his three oldest children have just been accused some of some very hog-like behavior: allegedly inflating the value of his properties and overall net worth to potential lenders and insurers to get preferential interest rates. This is a civil, not criminal, suit, but New York State Attorney General Letitia James has referred the case to those responsible for enforcing federal criminal laws. Until now—with a few exceptions, like Trump University—Trump has avoided consequences for a variety of supposed wrongs. But the sheer scope of his allegedly false claims, and the documentary proof contained in James’ complaint, may finally have crossed that line. It should serve as an object lesson for all who are tempted to cheat the system.

Property values are difficult to assess absent a sale. Appraisers are notorious for valuing properties in ways that benefit their clients. Practically speaking, there’s some wiggle room. But at some point, valuations can be so high or low that no reasonable person could believe them to be accurate. ...

As I like to tell my law students, there is always a tax angle, and this case is no exception. As detailed in the complaint, some of the strongest evidence that Trump intentionally inflated the value of his properties—and hence his net worth—are found in claims he contemporaneously made for state property tax purposes. Not surprisingly, he gave low valuations to tax authorities, while giving much higher ones to his possible lenders. As the attorney general sees it, either he committed tax fraud by using unreasonably low valuations when dealing with tax authorities, or he committed fraud on his lenders and insurers by using valuations significantly higher than those he reported to the state and federal governments. ...

Tax issues also come into play with his Trump Seven Springs property in Westchester County, New York. He represented that estate was worth almost $300 million, based on the notion that the property could be developed into a number of $23 million estates, despite the fact that he did not have approval from various towns to do that. At the same time, he was working on creating a conservation easement for the land that would preclude the very development he described in his valuation. ...

While the vagaries of valuation create some wiggle room in either direction, submitting radically different valuations for different purposes at the same time falls more on the hog side of the spectrum than the pig one. New York’s civil complaint may only be the beginning. Tax and criminal actions may be in the offing. In this case no one is talking about slaughter, but the defendants could earn a ticket to a different kind of pen.

https://taxprof.typepad.com/taxprof_blog/2022/09/chodorow-why-trumps-alleged-real-estate-shenanigans-went-too-far.html

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