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Trump in Tax Trouble with Ties to Iceland

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Trump in Tax Trouble with Ties to Iceland

Donald Trump

Photo: commons.wikimedia.org/Wikipedia

Today, the Telegraph published a story about presidential hopeful Donald Trump and his business dealings with the international real estate company Bayrock Group and the Icelandic investment company FL Group in 2007. FL Group’s USD 50 million investment in Bayrock in 2007 is said to have been rewritten as a loan only a few weeks after the investment was made, in order to avoid taxation amounting to tens of millions of dollars in the US. Trump is said to have signed off on the deal. Tax on investments in New York is 40 percent, whereas there is no tax on loans.

RÚV reports that in 2007, FL Group invested in four real estate projects in the US in cooperation with Bayrock Group, three of them using the Trump brand.

The Telegraph’s timeline shows that in January, 2007, Bayrock began negotiations with FL Group regarding the investment. On April 19 that same year, Trump announced the deal between Bayrock and FL Group. The arrangement is structured as an equity investment. FL Group will pay USD 50 million for a 49 percent profit participation in Bayrock’s four investments. On April 27, Trump consented to the deal as an equity investment. Three days later, Bayrock and FL Group agreed to restructure the deal as a loan. On May 16, Trump signs a letter indicating his consent to the new arrangement to restructure the funding as a loan.

The Telegraph notes that Bob McIntyre, director of the US-based Citizens for Tax Justice campaign group, believes the disclosures raise serious questions about Trump’s and his advisors’ judgment.

By February of 2008, FL Group had pulled out of most real estate investments in the US, according to RÚV. In 2010, it was reported that the company’s subsidiary FL Bayrock had lost ISK 18 billion (USD 144 million, EUR 129 million) on real estate deals in the US. FL Bayrock was declared bankrupt two years ago.

Update: In response to the Telegraph story referred to above, Bayrock has issued a statement, calling the Telegraph story “misleading and inaccurate.”

The statement reads, “An extensive field audit by the Internal Revenue Service of materials referenced in the Telegraph article, including loan documents and letters from Bayrock to the Trump entities, concluded in an eight-page report dated December 20, 2013, that classification of the transaction as a loan was appropriate and lawful.” The statement also states that “allegations of tax fraud made in a lawsuit that was the basis of the Telegraph story were withdrawn.”

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