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Could Trump Lose Trump Tower Chicago?

On paper, he owes more than $50 million to his own LLC affiliated with the building. It’ll take a court to crack open the reason why, but that could happen now with the New York AG circling.

The letters go up in 2014.   Photo: John J. Kim/Chicago Tribune

By January 20, Donald Trump will not be president. Perhaps he will, as has been rumored since he ran for the office, start a more conservative (or at least more Trump-devoted) cable channel. Or perhaps he’ll do what he’s always done: put his name on stuff and see what sticks.

Speaking of which, when do we get his name off that otherwise-handsome Adrian Smith building?

There are no guarantees, but it could happen, depending on the answers to some of the biggest questions surrounding his post-presidency. It’s mostly gotten lost in the election chaos, but just two weeks ago the New York Times’s deep look at Trump’s taxes revealed how the developer got through the Great Recession and its squeeze on real estate.

Mostly, he told his lenders to take a hike, leaving them to settle for pennies on the dollar, or at least quarters on the dollar. The Times found that Trump has had $287 million forgiven by lenders since 2010, the majority involving Trump Tower Chicago loans. It’s not illegal; lots of lenders gave a lot of dumb money to builders in the 2000s, and a lot of them had to eat it when the market went upside-down.

Where it gets complicated is that forgiven loans are supposed to be counted as income. That’s why, in August, the attorney general of New York alleged that the Trumps hadn’t paid taxes on $100 million in forgiven loans — specifically a high-interest loan from a hedge fund called Fortress, which sold that debt to other funds, including one run by current Treasury secretary Steven Mnuchin. The Times investigation, however, explains how Trump may have legally avoided paying taxes on that money: taking depreciation write-offs early, spreading out the forgiven-loan income over a number of years, and declaring losses that exceeded it. All this might be kosher, if distasteful, but the recent involvement of the New York AG suggests that at the very least the story’s not over.

That story could bring more revelations about one of the greatest mysteries of Donald Trump’s business life: Chicago Unit Acquisition LLC. David Farenthold, the Washington Post reporter who has devoted the past few years to investigating Trump’s finances, told Slate that it’s his white whale:

Trump says, on his financial statements that he has to file as president, he owes a loan of more than $50 million to a company called Chicago Unit Acquisition LLC. Now, Chicago Unit Acquisition LLC is basically a shell company. It has no employees, has no offices, and its headquarters is Trump Tower. Trump owns it, so he owes a $50 million–plus loan to himself. Now, why would you do that? He says it started in 2012 and has to do with Trump’s hotel in Chicago…. What would be the tax benefits to doing that? And even more intriguing, the only thing Trump has said about that loan is that he bought his own loan back from his creditors. I can’t find any evidence that’s true. So that wouldn’t be the key to all of his finances, but if I could understand what happened there, I’d at least unlock a pretty important portion of his finances.

Russ Choma of Mother Jones revealed some even weirder details about Chicago Unit Acquisition late last year: the LLC has no assigned value, even though Trump theoretically owes $50 million to it, so it should be worth at least $50 million. The loan is also a high-risk “springing” loan, with punitive terms… but punitive, of course, to Trump himself. And, like Farenthold, Choma couldn’t find any evidence that Trump had purchased that $50 million in debt from a lender. So where did it come from?

One possibility Choma lays out is that he fabricated it in order to offset taxes. The other is that he simply didn’t file the paperwork. Asked about the loan and the LLC in 2016, Trump told the New York Times that, since he’s serving as his own bank he gets to value the LLC, and he doesn’t care what the value is, so its value is zero. His lawyer said it was “personal corporate trade secrets.” So that doesn’t clarify anything.

Farenthold laid out the questions about Chicago Unit Acquisition to WNYC: why would you set up a company to hold a loan you owe to yourself? If you did that, why wouldn’t you pay it off? If you were paying it off, why would you list that company as having no assets or income? It could also be a paperwork error, which would also be unusual for an LLC of that size.

That $50 million is a fairly small piece of the Trump empire, but it’s been an itch that financial journalists can’t quite scratch, even with the Times’s big score. It’ll take a court to crack it open, but that could happen now with the New York attorney general circling. As Farenthold noted to Slate, Trump’s maneuverings were possible in part due to the size of his business: big enough to muscle lenders around, not big enough for a government to expend many resources chasing for potential wrongdoing in his finances. Now that he’s a soon-to-be ex-president, he’s a much bigger trophy for an ambitious AG — perhaps the biggest in the country.

What the Times’s investigation has also revealed is that Trump carries a substantial amount of debt, some $400 million personally guaranteed, much of it due soon. In the past, this hasn’t been a problem. As the paper’s investigation into Trump Tower Chicago shows, Trump owed a similar amount of money to Deutsche Bank and Fortress, and not only did he get some of that debt forgiven and some of it extended to give him a better chance to pay it back as the economy improved, he got a new loan from one arm of Deutsche to pay another.

But that was also a different era, when Trump’s brand was that of a famous businessman instead of a divisive and relatively unpopular president, though with a devout base of fans. How long Trump Tower Chicago keeps its name in lights depends on what the New York attorney general finds, how much patience banks will continue to have with him, and whether its presence hurts the bottom line. Then he’ll have to make the decision he struggles with most: his wallet or his ego.

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