A tax audit that President Trump has been fighting since his peak earning days as a television celebrity was most likely wiped away in this week’s settlement with the Justice and Treasury Departments.
The agreement, part of a resolution to an unusual lawsuit that Mr. Trump and his sons filed against the Internal Revenue Service, frees the president from a potential adverse ruling that could have cost him more than $100 million, according to an analysis of his tax returns in 2020 by The New York Times.
Two years ago, Mr. Trump’s middle son, Eric Trump, acknowledged to The Times that the audit remained active. During his father’s first term in office, the matter was put on hold, records obtained by The Times showed.
It is unclear whether the matter was placed on hold again during the president’s current term or was resolved. If it was still pending until this week, the increased interest and penalties would have grown significantly.
Mr. Trump has always argued that he did nothing wrong in the way he filed his tax returns.
The audit dated back to a $72.9 million tax refund that Mr. Trump claimed, and received, starting in about 2010. The total reflected all the federal income tax he had paid, plus interest, for 2005 through 2008, his greatest earning years as the star of his reality show, “The Apprentice.”
Mr. Trump justified the refund claim by declaring huge business losses — a total of $1.4 billion from his core businesses for 2008 and 2009 — that tax laws had prevented him from using in prior years, The Times previously reported.
Records obtained by The Times did not itemize the business losses. But two of the largest-scale projects of Mr. Trump’s career — his long-failing casinos and his money-losing tower in Chicago — appeared to be behind the biggest numbers. In both cases, Mr. Trump made the argument that his interest in those projects met the tax code definition of worthlessness.
In 2008, with sales on his new Chicago condo-hotel tower lagging far behind projections, Mr. Trump claimed that he had so much debt on the project that he would never see a profit. That move resulted in Mr. Trump reporting losses as high as $651 million for the year, The Times and ProPublica found.
The I.R.S. has argued that he, in effect, tried to write off the same losses on the Chicago tower twice.
In 2009, the Trump casinos were headed toward another bankruptcy. After the casino bondholders rebuffed Mr. Trump’s offer to buy them out, he notified the Securities and Exchange Commission that he had “determined that his partnership interests are worthless and lack potential to regain value” and was “hereby abandoning” his stake.
That notice used the exact precise wording of what tax laws refer to as abandonment, which opened the door to Mr. Trump suddenly declaring all the losses on the business that he had not been allowed to use in prior years.
Those findings by The Times and ProPublica resulted from the leak of Trump tax information over which the president, as well as two of his sons, sued the I.R.S. for $10 billion, accusing the agency of not doing enough to prevent the disclosures.
The I.R.S. had successfully fought similar lawsuits brought by others.
The agreement to end the Trumps’ lawsuit, while sidestepping judicial review, also puts an end to any other audit by the I.R.S. pertaining to tax returns they or their businesses have already filed.
That is another potential benefit of an unquantifiable amount, given that neither the I.R.S. nor the Trumps have divulged whether more recent issues have been raised. I.R.S. procedures call for the mandatory audit of the president’s tax returns annually.
The White House did not immediately respond to questions asking whether audits of Mr. Trump or his business remained active at the time the settlement agreement was reached.
The ongoing audit became a regular feature of Mr. Trump’s first campaign for president. He regularly cited an audit as the basis for refusing to release his tax returns, a departure from the tradition that most major-party candidates have upheld for decades to reveal potential conflicts of interest.
During his failed 2020 re-election campaign, Mr. Trump seemed quite agitated about the continuing audit.
“It’s a disgrace what’s happened,” he told Sean Hannity of Fox News. “We had a deal done. In fact, it was — I guess it was signed even. And once I ran, or once I won, or somewhere back a long time ago, everything was like, ‘Well, let’s start all over again.’ It’s a disgrace.”
In 2024, Eric Trump, who has run the family business since his father entered politics, struck a similar note in response to questions from The Times: “This matter was settled years ago, only to be brought back to life once my father ran for office.”
Russ Buettner is an investigative reporter. He has written extensively about the finances of Donald J. Trump.
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